Organizational effectiveness

We’re Growing... But Not Yet

Growth makes for an inspiring organizational story. Boards of Directors and staff can be mobilized around growth. But if work must be done in the near term in order to prepare for growth later, the story may be less than inspiring. People may ask, "If we can't make growth happen now, why expect it in several years?" I faced just this situation recently. One of our clients had just come off a highly successful run of completing innovative projects and raising a large amount of funding to support general operations. However, most of their major projects were nearly complete, and a campaign for unrestricted revenue was ending. These efforts seeded a huge potential for new, innovative program work and an increase in revenue, but that potential was unlikely to be realized until after several years of less outwardly visible initiatives—to plan and begin working on new educational projects, to align work internally and to improve their internal functioning. This organization therefore faced a major challenge: how to communicate with their Board about why growth wouldn't be realized right away, while still telling an inspiring story.

This nonprofit found a way to mobilize their Board members. Rather than avoiding a discussion about two years of flat budgets, the Executive Director explained exactly how the organization was preparing for growth in the future. She shared their new fundraising tactics. She described how increased coordination among staff groups would leading to higher organizational effectiveness.  She worked with her staff to develop a balanced scorecard for the organization, and committed to sharing the results regularly with the Board. And, she asked her Board to help realize the growth by forming committees around a new set of products; reaching out to bring their friends to events; and helping to find new trustees with expertise in needed areas.

As a result, Board members were galvanized and excited. Rather than being disappointed that growth would wait for several years, they were inspired to help realize future success. They understood how they could contribute, and could see clear links between the organization’s plans and the outcomes predicted.

What is the Right Organizational Structure for Us?

Org chart 24Mar14-001
Org chart 24Mar14-001

Over the years, I have worked with Chief Executives seeking to get their organization's structure right. They have grappled with questions such as: Should we have a COO to oversee operations? Do we need Regional Directors to run areas of the country? What control should the national office have over local offices? To whom should the Development Director report? One way to answer such questions is to use objective criteria. For instance, a span of control greater than 6 or 7 is a stretch. Or, work conducted by senior people should be delegated down to those more junior wherever possible.

However, objective criteria alone cannot specify an organization's structure. There is the human factor to consider -- we all come with our idiosyncrasies. Take the case of a brilliant Program Director who is expecting a promotion to the COO position, but isn't strong in management and delegation skills. Moving someone else into the COO role could cause the Program Director to leave, while the promotion might cause him to flounder. A third option of assigning an excellent Project Manager to work with the Program Director in his new role could lead to success. Consideration of human factors -- the specific capabilities of the people involved -- leads to an improved solution.

An organizational structure solution may also be temporal -- its value having a shelf life. Because a given structure tends to optimize for some factors while attenuating others, using one structure for too long may cause problems to arise. To address this, organizations may alternate between different structural approaches. For instance, in a national organization with affiliates and a central office, a period of tighter central-office control aimed at reining in quality infractions may be followed by a more laissez-faire approach from the central office to stimulate local innovation. Organizational structures may oscillate over five-to-ten-year periods, first optimizing for one thing, then another. 

Finally, it is useful to remember that a structural solution can only go so far in solving an organization's problems.  People may need to be replaced, or training may be in order. Conversely, when an organization's staff is excellent, one of several different organizational structures may work just fine.

Five Points to Consider Regarding Organizational Structure

Are you reorganizing your organization? Are you seeking an organizational tune up? Here are five points to keep in mind:

  1. There is no "ideal" organization structure. Organizations often oscillate over time,first maximizing one thing then another. An organization may centralize its control for a while, then decentralize. It may establish regional offices, then eliminate them. It may use matrix management, then move to a simpler form of reporting. Look for the best structure at this moment in your organization's history, recognizing that every structure optimizes for some factors, and sub-optimizes for others.
  2. The right organization structure is always a combination between what you want in the abstract, and the people you've got. First specify your desired organizational characteristics, design an organization structure to achieve these, then factor in what is possible given the people on hand to do the work. 
  3. Organizations are inherently messy, chaotic entities. After all, they are not machines, but are made up of living beings. Don't expect to get everything running perfectly smoothly.
  4. Each individual in your organization has his or her own priorities that vary from the priorities of the organization as a whole. The trick is to align the two. The greater the overlap between the individuals' priorities and the organizations' priorities, the stronger the organization will be. But don't expect 100% overlap -- it doesn't happen
  5. Maintain a ratio of effort expended on external problem solving well in excess of internal problem solving. In other words -- spend a lot more effort meeting the needs of the people your organization serves vs. engaging in inter-departmental tussles. While keeping your house in order is important, the ultimate ends the organization is there to achieve are paramount, and should remain your first order of business.

How to Keep a University Alive

University bubble chart
University bubble chart

Several years back, we had the opportunity to work with a small, niche university.  The big question that they were trying to answer was about sustainability – what could they do to establish a more sustainable model for themselves? If they didn't resolve this question, they feared they would have to close.

As a part of their beliefs, they highly valued small class sizes, which was integral to the learning experience that they offered.  So, while increasing class size might have been an obvious first lever to pull, such cost efficiency through class size wasn't the answer for them.

To understand their positioning, we conducted some peer research, specifically of colleges and universities that prided themselves on small class sizes.  We looked at ones who were financially sound and sustainable and then looked for markers of their success.  All of the successful, sustainable  peers with small class sizes varied from our client on one (or more) of three key levers:  average tuition, overall student population, or endowment.  Our client didn't have a strong position in any of these levers, and thus was living in a no-man's land (see diagram above). The successful institutions didn't all have the same model, but they were all finding a way to support the costs of maintaining small class sizes by pulling one or more of these key levers.

What did this mean for our client?  It turned out they couldn't easily pull any single one of those levers strongly enough in short order to close their financial gap and stay open.  They valued providing access to college to a larger breadth of household incomes and couldn't jack their realized tuition way up. They couldn't dramatically increase their endowment in the short run given the fundraising challenges, and their overall student population could only grow incrementally over time.  As a result – they needed to pull all three of the levers – in smaller amounts and gradually. And that's what they did. By paying close attention to increasing tuition where they could, growing their endowment through well-planned fundraising, and increasing their student population while maintaining small class sizes, they were able to establish their sustainability. The thus moved from the no-man's land into a zone of success.

To state all of this in simple terms: if your organization is struggling to achieve financial sustainability it can be useful to look at peers (especially those with similar values) to see if you are operating in a “no-man’s land.”  And if you are – what combination of levers can you pull to get yourself out?

Should We Merge?

Merging road sign 2
Merging road sign 2

Recently, mergers and acquisitions have been a hot topic among my clients.  This concept has come up any number of times – almost always suggested by a Board member and motivated by for-profit corporate thinking.  Mergers and acquisitions do serve a purpose, but they are complicated and challenging to execute well in the for-profit sector, and potentially even more so in the non-profit sector.

First – I bristle when the concept comes up as a direct and solitary question, “Should we pursue a merger or acquisition?”  It is my firm belief that this question should only be an execution question to fulfill a strategic direction.  Why do you want to merge?  What goal are you trying to achieve?  Most non-profits run so lean that simply achieving cost savings is not a likely outcome of a merger and, therefore, shouldn't be a primary objective.

Of course, there are many strategic directions where a merger or acquisition could potentially be helpful – if an organization is seeking to build out complementary services, enter a new market, gain access to clients or donors that it can’t reach right now, etc.  And sometimes, foundations or other funders look so favorably on consolidation that they will provide additional support to organizations that are merging.

Having said that – there are a number of challenges relating to mergers that come to mind:

  • Even if two organizations offer similar services to similar clientele, the two organizations may have different models for how to provide their services.
    • Generally organizations have strong beliefs about their models of service, so major differences can be hard to bridge.
    • Fundraising does not often follow a simple 1+1 = 2 equation.  If an individual, foundation, or corporation is giving to both organizations – it is unlikely that they will give the total amount to a combined entity.  (Conversely, mergers and acquisitions can be useful when there is a dominant funder like the government. Working with a larger, combined entity might benefit that funder and the combined entity might be in a better position to capture greater amounts of funding.)
    • Culture fit matters even more in non-profits than in for-profit combinations
      • The Boards need to see eye-to-eye, and feel comfortable and aligned.
      • The staffs must feel that their cultures will mesh.  Oftentimes a non-profit's major assets are its people, and losing those people might greatly reduce the value of the combination.

A straight acquisition might be easier than a merger, as the acquiring organization can define the culture and the service model.  Mergers of two similarly sized organizations can be very challenging and time-consuming to execute. In these cases, true strategic value needs to be clearly identified to make it all worthwhile.

Adopt and Adapt: Setting up collaborative partnerships

Square peg into a round hole
Square peg into a round hole

There is an old saying that most of us know: “You can’t put a square peg into a round hole.” Well, what if youmake adjustments to the peg and/or to the hole. Eventually, it’s got to fit, right? This is the challenge facing many non-profit organizations that provide a robust service in somebody else’s space. For example, many early stage organizations in the youth development and educational enhancement space see early success working in a particular school or partner setting or two… or three. And, with the success, there is a desire – by staff, by Board members, by funders – to replicate the impact in other settings.  Two of my current clients are in such a situation – one in 5 sites and one in 7 sites. Each has outstanding leadership; each has outstanding staff; each has enthusiastic funders. However, as we peel the onion, it appears that each has had to make necessary choices to “adapt” their model to their partner’s context. Sometimes it is a simple dimension such as size, but other times, it is about providing autonomy and deferring judgment to the school’s principal or the partner non-profit’s executive director. As a staff person at one of my clients said: “We have a plan going in for how our program will work. And then once they ask for a change, we make it – our plans don’t matter as much as their wishes.” The result is that a program of 5 to 7 sites may have up to 7 variations that don’t lend themselves to ready replication. These organizations – like many others – need to come to terms with what they want their partners to “adopt” and where they are willing to “adapt.” If everything about a program is adapted from site to site, then quality and process reliability are hard to realize. Training becomes more expensive, and execution success may be more dependent on the leaders of the partner rather than on the organization success. It may be harder to have success let alone prove it. On the other hand, if an organization says “take it or leave it,” many partners may simply reject the model. The partners themselves have been successful – or are trying to be successful – by their own unique styles and approaches. For my clients and others to simply expect that others will “adopt” the program wholesale may reduce opportunities for partner buy-in and championing, and may limit the potential impact of the program because it doesn’t fit the place. Achieving this takes careful understanding of the “peg” organization to know what is really important and where site-to-site or partner-to-partner variation would, at the minimum, continue to allow for success and, where possible, add to the success. Figuring this out takes time and effort, and a discovery or codification process can help an organization figure out what can work to keep model fidelity while creating space for success. They should be clear on what they want to ask of their partners up-front, so that partners can make adjustments where possible to make the collaboration work. With clarity, they will be able to meet with potential new partners and say: “Here’s what we want you to adopt because of x/y/z, and here’s where adaptation works really well.” Agreeing on this upfront will help drive success later. So, while nonprofits wanting to work in others’ spaces many need to shave some corners off of that square peg, it would be useful if partners make their holes a little bigger. That will bridge the adopt-vs-adapt gap. Photo credit: rosipaw / Foter.com / CC BY-NC-SA

What “the best nonprofit in the world” sees as key to success

BRAC
BRAC

The Global Journalattempts to identify and rank the best nonprofits in the world. This year, they gave top honors to BRAC – a Bangladeshi anti-poverty nonprofit. (Photo courtesy of BRAC, caption below) Over the last few years, BRAC has fundamentally challenged my assumptions about the limits of what is possible from the nonprofit sector.

As they see it, the keys are:

They go big or go home. BRAC is big. It has a $572M budget and has been described as a “minigovernment.” It touches an estimated 135 million people in 11 countries, educates 11% of all Bangladeshi children, and disburses $1B annually in microloans. As founder Fazle Hasan Abed sees it, "If you want to do significant work, you have to be large. Otherwise we'd be tinkering around on the periphery."

They focus on solvable problems. Despite the wide range of activities they undertake, BRAC puts relentless focus on the problems it seeks to address. An example: One of BRAC’s first major undertakings was to train semi-literate women to fan out to villages across the country and teach people how to treat diarrhea, which in 1980 was claiming the lives of roughly 12% of all Bangladeshi children before their fifth birthdays. BRAC’s health workers taught people how to mix a simple solution (a fistful of sugar, a three-finger pinch of salt, and water measured in a local milk container) and based their modest salaries on the number of people who retained the knowledge weeks later. BRAC scaled the program, training thousands of workers who visited 12 million families. By 2005, child deaths from diarrhea had dropped by more than 80% nationwide,and countries around the world were replicating BRAC’s model.

They don’t depend heavily on fundraising. In Bangladesh, you don’t reach this kind of scale on donations. BRAC covers 70-80% of its budget through microlending and social enterprises that link entrepreneurs and create economic opportunity for the poor all the way up the value chain.

They invest in learning. You also don’t reach this kind of scale and impact without an insatiable appetite and capacity for learning. David Korten, author of "When Corporations Rule the World", called BRAC "as near to a pure example of a learning organisation as one is likely to find."

BRAC challenges the nonprofit sector to reimagine what it is capable of by going big, focusing on solvable problems, developing a sustainable funding stream, and investing in learning.

Photo caption: BRAC Dairy collects milk from 40,000 rural farmers in poor regions of Bangladesh, holds the milk in one of 100 chilling stations, and processes 300,000 litres of milk per day in its factory, ensuring the farmers get a good price for a quality product.

How to influence your field? Be shaped like a “T”

The Letter T
The Letter T

If your organization wants to have broad impact on its field, consider this: Success often comes when an organization can use direct program experience to inform its position of thought leadership.

Here’s a case in point. Consider the Brazelton Touchpoints Center that helps improve care for very young children. They had a question: Should they continue to deliver in-person training and consulting to health care workers and parents, or should they focus on disseminating their ideas broadly to influence such people all over the country?

As we worked with the Center, it became clear they needed both. The direct interaction with those engaged with young children provided concrete experiences and a fertile ground for testing new ideas, which in turn informed the organization’s disseminations to the field. Moreover, such experience added credibility to their message.

You can picture this combination of direct service with broad ideas dissemination as the letter “T.”  The stem of the T represents in-depth direct-service work conducted in specific locations, going narrow and deep. Here the organization provides direct service to people, delivers training, conducts programs, or provides coaching and consulting. The organization can use these “laboratories” to develop innovative approaches, and evaluate its results.

We have seen a number of organizations use this T-shaped structure to advantage, including Frank Porter Graham Child Development Institute, a university think tank bringing innovative approaches to early child care, Garrison Institute, bringing the wisdom of meditation to social change efforts, Glynwood Center, a land-use organization helping to preserve farmland, and the Child Health and Development Institute, an advocate for high-quality children’s health care. In each case, the organization engages in direct-service program work, training health care practitioners, running a grass-fed beef operation, or hosting meditation retreats. These in turn strengthen the organization’s ability to develop and disseminate really useful ideas that others can employ.The cap of the T is the dissemination that brings proven ideas to the field, going broad and wide through publications, social media, or public presentations.

So, if you want to influence your field through well-founded, practical ideas that others will use, one good way is to be shaped like a T.

Musings on measurement

Recently I’ve been thinking about the role of measurement and quantification in the social sector.  Over the past decade or two there has been an increasing push to quantify and measure everything – and those calling for measurement are looking for outcomes, not just inputs.  Overall, I think this makes a lot of sense.  There are billions of dollars pouring into the social sector – it’s a good idea to have a sense that those dollars are spent wisely and, ideally, are creating as much good as possible. At the same time – I think there needs to remain room for the human side.  Yes – I’m a quant girl by background and experience – but I don’t think all things are measureable, or should be quantified.  I believe sometimes you just need to believe that something is a good thing, that it makes a difference, and that the difference is worthy of support.

I’ve had the great fortune to work with a wide variety of non-profit organizations.   One of my recent clients was an organization that brings joy and normalcy to seriously ill children.  Because of this organization, many of these children achieve amazing transformations. These children come to realize that they can fit in, that they can have hope and ambition.  One of the Board members was pushing for a way to measure the cost effectiveness of the organization’s approach – maybe there was a cheaper way to serve these children.  Interestingly, the strong majority of the Board was not energized by this call for measurements.  Rather, they were motivated by the individual stories of triumph and transformation.   And they understood that sometimes you can’t deconstruct magical experiences to their core components so as to replicate them at a lower cost.

Perhaps I sound heretical, and I certainly am not advocating against all measurement of outcomes.  I’m just saying that there still needs to be space for the simply human – for understanding that while providing a meal to a hungry individual might cost $3, and providing a college education to another might cost many thousands of dollars – that happiness, security, hope, ambition are all priceless – and there’s value in that.

Good Money or Bad?

I have been thinking about my work helping organizations resolve issues of revenue, funding and sustainability, a perennial issue among nonprofits. To support its mission sustainably, an organization’s impulse is often to “get funding from whoever will give it.” This reminds me of a theory developed by Clay Christensen of Harvard Business School, which asserts that good money comes from funding sources that are impatient for profit, and patient for growth, while bad money comes from sources impatient for growth, yet patient for profit. In business, profit can be an indication that a company provides value and its strategy is on target, suggesting a solid basis for growth. If a business scales before proving that its model will make money, it risks scaling a model that is not viable long-term. When a business accepts bad money, its decisions can be inordinately influenced by the funder, causing the business to scale rapidly before vetting the soundness of its model.

Nonprofits face similar pressures, and in many cases are more vulnerable to accepting funding from any willing provider. Additionally, due to many nonprofits’ shoestring budgets, they may lack the wherewithal to push back on funder influence. To avoid this pitfall, organizations would do well to distinguish between good money and bad before accepting funding. Similar to a business, it is often beneficial for a nonprofit organization to be clear about the value it provides and to whom – proof that its model works – before attempting to scale. Otherwise, the organization may not survive for the long-term.

I recently worked with an organization hoping to scale significantly in coming years.  I was impressed by this organization’s Board members who, when facing a substantial funding opportunity focused on growth, thought hard to determine if they had sufficient proof for the viability of the organization's model to be comfortable with scaling.

Given that a concrete predictor of viability is often hard to come by in the nonprofit sector, it is important that organizations accept major funding from those committed to proving the organization's strategic viability before investing in its growth. This in turn will help organizations avoid a potential boom and bust cycle created by focusing inordinately on growth.

Checklist for a Successful Leadership Transition

In our work, we've seen a number of top leaders move on to other jobs. The transition is not always smooth. If the Executive Director or CEO of your organization is planning to leave, use the following checklist to see if your organization is ready:

  • Shared identity. Does the Board and remaining senior staff share a clear and coherent understanding of the organization's identity and purpose?
  • Buy-in. Has the organization been sufficiently prepared for the transition, allowing it to develop buy-in for the leadership transition?
  • Mechanics. Are the mechanics and schedule of the transition well planned, including the timing of announcements to employees, Board, funders, and other stakeholders, and the process of hand-off from one leader to the next?
  • Bench strength. Are the staff just below the leader strong enough to carry the organization during the transition period until a new leader is solidly in place?
  • Institutional memory. Has the organization instituted a method to transfer knowledge and relationships held by the exiting leader to others in the organization?

For many organizations, it will take time to put these elements in place. To the extent possible, plan ahead for a successful leadership transition.

Do you have other points to add to this checklist? Please leave a comment. We'd love to hear your ideas.

Is Growth Always Good?

When I was an MBA student, I absorbed the message that growth is always good. And later at The Boston Consulting Group, working with corporate executives, I shared their assumption that a growing business is a successful business. "If you're not growing, you're dying," was an oft-cited phrase. But for nonprofit organizations it's not so simple. Of course, there are times for growth. Incubators like Blue Ridge Foundation New York, New Profit, and Bikkurim find and support nonprofits with high growth potential. And an organization like City Harvest that feeds the hungry of New York has a mandate for growth given all the unserved hungry people in the city. But an advocacy organization like the D.C. based Afterschool Alliance can fulfill its national role with a staff of around 25. Further growth is not required. And some organizations have found themselves over-sized for the funding available, or ungainly in their operations, and have chosen to downsize.

I have seen business executives on a nonprofit board confused when realizing that growth for the nonprofit will mean increased deficits. In business, growth in products sold or services delivered typically leads to increased profits, which can mean re-investment for more growth. It's a virtuous cycle. But for nonprofits, the equation is different. Given that most nonprofits require donations and grants to subsidize their work, growth in service delivery requires more fundraising to fill deficits.   And if the organization's funding is tapped out, growth may not be advisable even while the need served by the organization goes partly unfilled.

Based on our experience, it is an open question if a nonprofit should grow. An organization can be long-lasting and sustainable by finding the right business model, right-sizing operations to fit revenue potential, and delivering services with excellence. Growth is not always good.

What do you think? I'd love to hear from you. Please leave a comment.

Did Your Strategic Plan Get Dirty, or Dusty?

Recently, I was in a meeting with a strategic planning team at the Village for Families and Children in Hartford, Connecticut. Gallo Rodriguez, the President of the Organization, said "Our strategic plan should get dirty, not dusty." He was calling upon the group to work towards a strategic plan that would lead to action, and change the way the organization works. We often hear people say, "We don't want our plan to just sit on a shelf and gather dust." Rather, they want the plan to guide their work and be actively used - in other words, to "get dirty." How can you assure that your strategic plan guides your work and "gets dirty?" We've found five elements that help this come true:

  1. Articulate your most important strategic questions, and focus your strategic planning process on providing answers to these questions.
  2. Collect the facts. Analyze them to generate insights about your environment, your competitors and collaborators, your revenue opportunities, and use these insights to arrive at well-founded decisions about the future.
  3. Assemble a planning team of your organization's key decision-makers and influencers. Engage this team to discuss fact-based insights and reach decisions about the organization's future. See that team members act as representatives of the various constituents of your organization -- staff departments, Board groups, external stakeholders -- and work towards a consensus that considers all views.
  4. Listen for what will work. Gather advice. Involve people. The naysayer, the visionary, and the pragmatist all have important contributions. Great outcomes emerge through careful listening and creative development of solutions that address what has been heard. And when people feel heard they are more likely to support the plan.
  5. Establish an unambiguous plan of action and use it to guide who does what, by when. Clearly describe each action step so anyone can tell when it has been accomplished, has one person ultimately responsible (not a group), and has a due date on the calendar.

By using these five elements, you will greatly increase the chances that your strategic plan will guide the work of your organization. You will have a plan that gets dirty, not dusty.

Advocacy: To Win, Play Offense as well as Defense

I was meeting recently with people at the The Brennan Center for Justice, a non-partisan public policy and law institute that focuses on the fundamental issues of democracy and justice. We were discussing the merits of advocacy oriented towards rapid response vs. proactively taking the offensive. In a world of limited resources, an advocacy organization must decide where it places its attention. If the majority of the organization's focus is on responding to issues and opportunities as they arise -- such as new bills introduced or emerging legal tussles -- it may not have the wherewithal to maintain focus where it can have the greatest wins.

Back in the 1980’s Ronald Reagan's former Attorney General Edwin Meese worked with the Heritage Foundation, a conservative think tank and advocacy organization, to create a vision for how to systematically move the legal climate in America further to the right. He drafted a document – now known as the “Meese Memo” – that outlined what it would take to fulfill that vision: appoint conservative judges, win key litigation and develop conservative constitutional scholarship among other ideas. The Meese Memo galvanized the conservative legal community and now, over 30 years later, much of the Meese Memo has come to pass.

Over the long haul, an advocacy organization will lose out if it biases too strongly towards fast response, playing the defensive role. The urgent will crowd out the important. For battles that can only be won through preparation and planning, the victor will be the one with a long-term vision and the discipline to achieve it.

The Brennan Center under its current leader Michael Waldman has shifted towards the offensive, and has set its sights on achieving a select few goals with the potential to create long-term, widespread impact. With this disciplined approach they have what it takes to win.

Yes, And...

There is great power in taking what someone offers, and expanding on it. Improvisational theater only works because of this approach. Whatever one person starts is continued by the next person. When children play together, they also do this. One says, “I’ll be a fireman.” The other adds, “I’ll drive the fire truck, and we’re going to a fire.”

When working with colleagues, I have found the usefulness of saying, “yes, and.” By affirming truth in what a person is saying, and finding ways to build on that truth, achievements flow. Contrast that with the times when argument arises. The path to the best, jointly held solution is often much longer.

For efficiency, creative spark, and successful forward motion, try practicing “Yes, And…”