Bikkurim

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.

Eight Models for National Expansion

If you are looking to grow your organization on a national scale, make sure to choose the approach that best suits your needs for quality control, brand recognition, and growth. In a recent study by Bikkurim and Wellspring Consulting of organizations who have achieved national expansion, we identified the following eight models. Branch. In the branch model, an organization operates in different locations (or branches) under a single legal organizational entity that is overseen by a central headquarters. While national brand recognition can be strong, with consistent control of quality across all locations, this model requires comparatively high costs and staff time at the central office. The organization's growth rate may be limited by a need to raise money for funding and management capacity at the central headquarters.

Franchise. A franchise model is similar to a branch model except that operations in different locations are separately incorporated entities. Each entity has the same name and brand, and franchisees are legally bound to use the brand and deliver programming consistently, leading to higher quality control.  In the nonprofit setting, franchisees may be organized groups of volunteers who must abide by the organization’s protocol and are often called “chapters." Growth comes from adding new franchises and depends on the appetite of the originating organization and the availability of talent to lead franchises.

Affiliate. In the affiliate model, organizations with similar missions affiliate with a central originating organization. Affiliates may have different, but related, names and brands from the originating organization and other affiliates. The originating organization supports affiliates with a proven program approach. Quality may not be as consistent across affiliates because each affiliate is its own entity. Growth occurs through enrolling new affiliates and depends on the funding and management capacity of the originating organization.

Program Codification. In the program codification model, growth occurs when an originating organization codifies a program approach and provides this codification to other organizations. Such codification ensures that a program is delivered in a way that is faithful to the originating organization’s proven approach. This may include pre-packaged program materials, directions for instructors, videos, evaluation forms, etc. These materials may be accompanied by consulting. Since organizations using a codified approach may not publicize their ties to the originating organization, program codification is unlikely to support national brand recognition. At the same time, this approach offers a relatively low-cost way to grow the use programmatic content.

Dissemination. In the dissemination model, an organization shares ideas or new methods that it has developed with others, though the ideas have yet to be codified. If an idea or method is widely adopted by others, the potential growth rate is high despite the low-cost nature of this approach. However, the user is unlikely to publicly credit the originating organization, so for the originating organization national brand recognition and the ability to control program quality are both low.

Network. The network model is similar to the dissemination model in that ideas or methods are shared without codification, but it places more emphasis on webs of relationships and an open flow of information. The network model relies on leveraging connections between users who may or may not be connected to the originating organization. Some in the chain of transmission may use the idea or program being shared while others may simply pass it along. The idea or program may also be changed by users who communicate their changes through the network. As in the dissemination model, the cost to the originating organization is low, as are brand recognition and quality control, but the growth rate is potentially high.

Merger. Mergers can achieve growth by combining organizations with similar missions. A single-city organization with a highly effective program may decide to merge with a national organization seeking to deliver that program in new places. Mergers are effective when each organization adds something from which the other organization can benefit, and when the organizations have similar missions and compatible cultures. While a merger can lead to rapid programmatic growth, programs may need to be re-branded and may lose autonomy.

Partnership. Growth via partnership occurs when two organizations see an opportunity to increase their impact by working together. Partnerships can allow the participating non-profits to gain efficiency while maintaining independent authority over their programs. The two groups may work together informally or form a legal relationship, and the partnership may be temporary or long-term. As with a merger, a partnership is most effective when each organization brings something that the other organization can benefit from, and when missions and cultures align. Since each partner maintains its own brand and quality, partnerships can be a low risk way to expand, however successful upkeep of the relationships requires time and effort.