Fighting the Symptoms of Aging

In our last post, we made the case for why it’s important to invest not only in scaling social innovation by building startups around new ideas, but also in social innovation at scale by helping mature, legacy nonprofits extend and reinvent their impact. We looked at the assets that these nonprofits bring to the sector: national distribution platforms, social networks of members, reliable revenue from loyal donors, well-known brands, and the heft to shape their broader ecosystem.

Just as there’s a pattern to the assets these organizations can leverage, so too is there a pattern to the typical challenges they encounter as they age. The downside of scale is, well, scale—organizations, whether for-profit or nonprofit, have to fight the creeping tendency towards bureaucratic sclerosis. It takes constant adaptation and innovation to stay relevant, and those muscles can wither if left unused for too long. The big difference in business is that companies face constant short-term pressure from the market to change or die. It should be no surprise that the business sector has paid much more attention to this issue of changing large-scale companies. Remember the “Reengineering the Corporation” manifesto back in the 1980s and 1990s? Or the “change management” wave in the ’90s, driven by technology innovation? Unfortunately, we haven’t had a similar large wave of “reinvention” or “social intrapreneurship” in the nonprofit sector. Funding has mainly focused on the front-end of the pipeline, supporting new ideas, while large organizations have largely been left to fend for themselves.

The time is now ripe to take up this charge for those who want to help drive greater impact through these legacy organizations, whether as leaders or funders. Some of these legacy organizations have tried incremental changes already, but these isolated attempts often fail because they are pursued in a one-off, fragmented way. Based on our experience working with these organizations, we’ve come to see how the entire organizational system may need to be realigned around a new higher-impact purpose. We’ve helped these groups clarify their theory of change and strategy for impact (including their program models in some cases), strengthen their organizational structures, reinvent their business models, and in so doing, reinvigorate their brand promise—either simultaneously or in rapid succession. This diagram illustrates the connections we see:

 

While some of these nonprofits are at an early stage of change, and lasting results remain to be seen, we’ve begun to see promising signs of progress when these challenges are tackled holistically. From our perspective, anything else is like attempting to rearrange the proverbial deck chairs on the Titanic. Turning the whole ship takes a concerted effort on multiple fronts. Here are some of the significant challenges and “signs of aging” that we’ve helped large nonprofits address in the past few years:

• Lack of strategic focus and diminished relevance: It’s a truism that every organization needs a north star around which to align action. This is particularly true for nonprofits, which don’t have the profitability metric to force focus. Over decades, many of these organizations succumb to mission drift: starting more new programs in search of new funding, pursuing the latest idea, and refusing to make the difficult choice to cut what is no longer having impact. (Sometimes they don’t even have enough quality data to know what is actually working.) We’ve seen many organizations buckle under the weight of their own complexity, having lost clarity on the fundamental problem they are trying to solve or which of their efforts actually work. We’ve helped our clients reconnect with their initial purpose, clarify their theory of change, and understand how the system around them has shifted and how they will need to adapt their program or “model” as a consequence. For example, The Association of Junior Leagues International (AJLI) refocused its efforts on adapting its membership model and making it fit the lifestyle of today’s busy women; it also went beyond promoting voluntarism to renew focus on women’s civic leadership. Similarly, UNCF shifted its historical mission from raising funds for its member colleges to increasing the college graduation rate of African-American students.
• Aging business models. Many new ideas are powerful not only for their content, but also for the business models they enable. However, it can be very hard for an established organization to take a risk on a new way to bring in revenue, even if its existing income streams are on the decline. A common challenge among these organizations is that their individual donor bases are large in volume but aging, and their ability to attract younger dues-paying members is dropping off. This creates an undeniable dilemma, since the organization is large enough that it can’t afford to abandon the current model. To find a path forward, we’ve helped these organizations become adept at multi-channel marketing, which requires them to build new sources of revenue that are designed to supplant the existing streams over time.
• Siloed structures and lagging organizational capabilities. Another part of these groups’ gradual calcification is the siloed structure that builds up over time and saps flexibility. Some of this is attributable to staff who have been in the same roles for many years, cultures that perpetuate themselves, and layer upon layer of administration, systems, and processes designed around personalities and old habits rather than current strategic needs. For those that operate in decentralized affiliated networks, this problem is compounded tenfold: often the affiliates fight the national headquarters, and there is frequently a failure to communicate, collaborate, or align action within and across these networks. These problems can be tackled systematically or one at a time: hiring new talent, updating business processes, redesigning organizational structures, clarifying roles and decision-rights, tackling outdated governance models, building greater lateral connections among staff and affiliates, and embedding knowledge transfer capabilities within the network. We’ve done variations on this kind of organizational redesign work with UNCF, AJLI, Enterprise Community Partners, Hillel’s Schusterman International Center, and Audubon.
• Dusty brands. These nonprofit brands may be well-known, but their image often doesn’t appeal to younger generations, like Burberry before its recent brand refresh. Groups like AJLI need a way to communicate a new value proposition and image to members they are trying to attract. This can be addressed with a brand refresh to communicate the organization’s current personality and promise, and to appeal to a new generation of members, funders, and partners. We’ve found it best to address this issue last. Communication and branding are essential to reenergize the organization, but they need to be backed up with real substance—per all of the above—or risk being seen as insincere.

What this looks like on the ground varies substantially from one organization to the next. In the next two posts, we will look at in-depth case studies where we’ve helped large nonprofits adapt and modify their strategy, organization, and business model.

Read more stories by Heather McLeod Grant.