Why Nonprofit Transitions Fail (FT Press Delivers Elements)


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The foundation sought not only to cultivate a broad membership base, but also to infuse conservativism into mainstream thought. To achieve its goals, Heritage realized that it needed to build a movement, not just an organization.

And so the foundation helped to seed and galvanize a vast network of conservative organizations at the local, state, and national levels. The Heritage Foundation helps leaders of these state and local nonprofits raise money and freely shares its donor list with like-minded groups.

To help people work together more effectively across departments or groups, start by identifying critical areas where such work takes place. Some nonprofits run their own small businesses, generating income that helps fund their programs. And how have other similarly successful nonprofits had such significant social impact? In fact, the organization's leaders believe that adopting this technology has been a major contributor to improved staff retention, increasing quality while reducing hiring and training costs. Our analysis indicates that while nonprofits have some tremendous organizational assets, weaknesses in other areas hold them back from achieving their full potential for impact. Clear priorities are the "north star" against which an organization can align its people, structure, and processes, and build its culture. In other cases, they keep their networks less formal and operate without official brand or funding ties, such as the Center on Budget and Policy Priorities or the Exploratorium.

It also offers extensive programs to train non-Heritage policy analysts on everything from conservative strategies to public speaking skills. And Heritage cultivates talent — not only for its own organization, but also for other leading conservative groups — by offering a prestigious internship program and job-placement service for its young acolytes. The nonprofit also frequently works in coalitions to promote conservative policy and to pass legislation.

Rather than seeing other conservative organizations as competitors, Heritage has helped build a much larger conservative movement over the last two decades, serving as a critical connector in this growing network of like-minded peers. Other high-impact nonprofits harness the power of networks. In other cases, they keep their networks less formal and operate without official brand or funding ties, such as the Center on Budget and Policy Priorities or the Exploratorium.

Regardless of whether they have formal or informal affiliates, all of these nonprofits help build their respective fields through collaboration rather than competition. They share financial resources and help other nonprofits succeed at fundraising. They give away their model and proprietary information in an open-source approach.

They cultivate leadership and talent for their larger network, rather than hoarding the best people. And they work in coalitions to influence legislation or conduct grassroots advocacy campaigns, without worrying too much about which organization gets the credit. These nonprofits recognize that they are more powerful together than alone, and that largescale social change often requires collaborative, collective action.

Sources Used for This Article

Master the Art of Adaptation: High-impact nonprofits are exceptionally adaptive, modifying their tactics as needed to increase their success. They have responded to changing circumstances with one innovation after another. But unlike many nonprofits, they have also mastered the ability to listen, learn, and modify their approach on the basis of external cues. Adaptability has allowed them to sustain their impact.

Other nonprofits are so mired in bureaucracy that they lack creativity. But high-impact nonprofits combine creativity with disciplined systems for evaluating, executing, and adapting ideas over time. Share Our Strength has been exceptionally adaptive. Bill Shore started the Washington, D. Although he received a few checks, he found that professional chefs were much more enthusiastic about donating their time and talent to a local tasting event.

After the success of a single event in Denver, Share Our Strength abandoned its direct mail campaign and launched the Taste of the Nation series — now a national success in more than 70 cities. It has raised millions of dollars for hunger relief, and many other nonprofits have copied it. Over time, Share Our Strength has experimented with a number of different innovations, from participatory events to cause-marketing campaigns. Not all of these events have been successful. After several less successful initiatives cost the nonprofit time and money, Share Our Strength developed a more rigorous approach to managing innovation.

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All of the nonprofits in our sample have mastered what we call the cycle of adaptation , which involves four critical steps. First, they listen to feedback from their external environments and seek opportunities for improvement or change. Next, they innovate and experiment, developing new ideas or improving upon older programs.

Then they evaluate and learn what works with the innovation, sharing information and best practices across their networks. They modify their plans and programs in a process of ongoing learning. They know that they must share power in order to be stronger forces for good.

The Effective Organization: Five Questions to Translate Leadership into Strong Management

They distribute leadership within their organizations and throughout their external nonprofit networks, empowering others to lead. Leaders of high-impact nonprofits cultivate a strong second-in-command, build enduring executive teams with long tenure, and develop large and powerful boards. Yzaguirre led the nonprofit for more than 30 years of extraordinary growth.

He quickly developed a cadre of strong and empowered senior executives, many of whom have been with the organization for decades and who have played critical leadership roles. Yzaguirre always had a second-in-command, or COO, who helped him with internal management while he focused on external leadership.

And the NCLR board has learned to share power with the executive director. Habitat for Humanity is one organization that went through a difficult leadership transition when Fuller left and started a competing housing organization. But almost all of the nonprofits we studied, like NCLR, exemplify a shared leadership model.

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They have strong leadership at the top, led by either a founder or a growth leader who has learned to share power. They all have long-tenured executive teams with significant responsibilities. And their boards are larger than average — with sizes ranging from 20 to more than 40 members — and share power with the executives.

The 12 high-impact nonprofits that we studied use a majority of these six practices. Some initially incorporated only a few practices and added others gradually. Others focus more on pulling certain levers and apply them to different degrees. Yet they all converge on using more of these practices, not fewer.

Creating High-Impact Nonprofits

And by working with and through others, they find levers long enough to increase their impact. In addition to employing these six practices, these 12 highimpact nonprofits have also mastered several basic management principles that are necessary to sustain their impact. They have all developed enduring, somewhat diversified sources of financial support, including large individual donor bases, government contracts, corporate donations, and foundation grants. Typically, they have aligned their fundraising strategy with their impact strategy.

Those that are the savviest about inspiring evangelists are also able to build a broad individual donor base. These nonprofits have also learned that they need to invest in their human resources, and so the majority of them compensate their executives very well compared to organizations of similar size. And these nonprofits have all figured out how to build reliable internal infrastructure, including sophisticated information technology systems.

When a nonprofit applies all these forces simultaneously — the six high-impact practices coupled with basic management skills — it creates momentum that fuels further success. But once it gets going, momentum builds and it starts rolling on its own. Why do these nonprofits harness multiple external forces, when it would be easier to focus only on growing their own organizations? These organizations and the people who lead them want to solve many of the biggest problems plaguing our world: They aspire to change the world. They seek to attack and eliminate the root causes of social ills.

But for each of these 12 organizations, audacious idealism is grounded in real pragmatism. These nonprofits are not so much ideological as they are focused on achieving greater impact. We will sue people, we will partner with business, we will lobby on the Hill or educate the public.

Every one of these tools is in our tool kit, and we deploy the one most likely to get us to our goal. Other sectors must also follow suit. For real change to occur, government and for-profit business leaders must learn from high-impact nonprofits and the six practices that they follow. Government leaders can begin to see nonprofits not just as a convenient place to outsource social services, but also as a valuable source of social innovation and policy ideas. Business leaders can partner with leading nonprofits to devise innovative systems that harness market forces for the greater good.

And individual donors and volunteers can increase the social return on their investments by supporting those nonprofits that have the most impact, rather than those that adhere to conventional, and misguided, ideas of efficiency. We believe that without more nonprofits, businesses, and government agencies following these six practices to achieve maximum impact, we are doomed to plod along with slow, incremental change. By closing this banner, scrolling this page, clicking a link or continuing to otherwise browse this site, you agree to the use of cookies. Myths of Nonprofit Management We first examined the 12 organizations through the lens of traditional nonprofit management, studying their leadership, governance, strategies, programs, fundraising, and marketing.

Creating High-Impact Nonprofits

In the end, six patterns crystallized into the form presented here — the six practices that high-impact nonprofits use to achieve extraordinary impact: Sustaining Impact Through Organization The 12 high-impact nonprofits that we studied use a majority of these six practices. The key to becoming more effective, then, is to invest in management capabilities—in short, to move to a place where the nonprofit is not only strongly led, but also strongly managed.

As noted, our research suggests that nonprofits need to take a holistic approach towards improving effectiveness, shoring up management capabilities across the board. A good place to start is with the areas our research has shown to be most prone to weakness. The following five sets of questions can help an organization's leadership team assess those areas and set a purposeful course towards improvement.

Given that many of the issues illuminated by our survey data link to unclear or poorly communicated strategic priorities, we recommend beginning with that challenge. Kirk Kramer is a partner at the Bridgespan Group and leads the firm's work on organizational effectiveness. Bridgespan partner Daniel Stid has written on the topic of leadership and management in nonprofit organizations. This work is licensed under a Creative Commons Attribution 4. Permissions beyond the scope of this license are available in our Terms and Conditions. Daniel Stid , Kirk Kramer.

The Link between Organizational Effectiveness and Results The lack of a common measurement of performance in the nonprofit sector makes it difficult to prove the link between organizational effectiveness and results quantitatively. In the for-profit world, however, barometers such as profitability and shareholder value make this assessment possible.

In , Bain surveyed more than companies about their organizational effectiveness and also measured the market performance of those companies. Eighty percent of the respondents from the "strongest financial performers" rated their companies "highly effective," while only 14 percent of the total pool of respondents did so.

The bulk of respondents from the smaller, high-performing group gave their companies much better marks across the board than did their more average-performing peers. The lessons emerging from Bain's research are clear: Our experience working with nonprofit organizations has borne this out repeatedly. Room for Improvement The link between organizational effectiveness and results puts a premium on understanding how nonprofits function organizationally.

Responses to the diagnostic survey painted the following picture: Nonprofit leaders tend to establish strong visions and build strong teams. These same leaders, however, seem to be less effective at translating a compelling vision into a set of explicit goals and corresponding priorities. They're even less effective at communicating priorities throughout their organizations.

Decision making and structure: The ability of people to coordinate and work well together across organizational boundaries is an area where nonprofits tend to run into difficulties. Decision-making roles and processes also appear to be a significant weakness. Nonprofits appear to attract good talent and do well placing the right people in the right jobs. However, these employees do not feel that their work is well aligned to the priorities of the organization.

What's more, organizations on average have some difficulty evaluating, developing, and rewarding staff consistent with the organizations' priorities. This finding is not surprising, given leadership scores on setting and communicating priorities. Further, nonprofits in general do not appear to prepare adequately for leadership transitions and succession; this area emerged as the biggest weakness overall.

Work processes and systems: Nonprofit employees, on both the program and administrative sides, appear to be skilled and motivated. Working conditions, however, hamper their effectiveness. In particular, work processes are not well defined and resources are scarce.

While this last point did not emerge strongly in the survey data, in our work with nonprofit organizations working conditions crop up repeatedly as a major impediment. Culture is a clear strength. Interestingly, however, ability to execute change is a weakness.

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This finding may also correlate to the relatively low leadership score in setting priorities. Nonprofit leaders cannot effectively change the direction of their organizations if they do not know what their priorities are and what they want the change to accomplish. Becoming More Effective The key to becoming more effective, then, is to invest in management capabilities—in short, to move to a place where the nonprofit is not only strongly led, but also strongly managed.

Are we clear on the strategic priorities that will enable our organization to achieve our desired impact over the next several years? Have we communicated our strategy clearly enough that everyone within the organization understands where we are going, why, and how we will get there? Clear priorities are the "north star" against which an organization can align its people, structure, and processes, and build its culture. When an organization's leader has established clear priorities, he or she has essentially defined what "success" will look like. Against that goal, it becomes easier to determine which programs or initiatives are essential, and which are not, and to allocate resources accordingly.

Take, for example, an organization that serves students who are at-risk for dropping out of high school. Where does that organization draw the line in terms of serving these young people? What if an opportunity arises to help recent dropouts get back into school? Or to help younger students move out of the "at-risk" category before they enter high school? Or to strengthen the home lives of these students?

Unless the leadership team has established and communicated what matters most it can be difficult to chart a course in the face of such options. One way to determine if your organization has clear priorities is to ask each member of the senior management team to make a list of its top five priorities for the next one to three years. Once you've compared the lists, you'll be able to see whether the team members are on the same page.

If they are, you'll next want to determine whether the priorities are well communicated throughout the organization. To begin to find out, ask a representative sample of managers at the next level down to engage in the same exercise. These simple exercises will help you determine if your challenge is clarifying priorities or if you need to work to on communicating the priorities to enable alignment to them.

Given the organization's priorities, what decisions are truly critical? Is it clear who is responsible and who has the authority to make those decisions? With clearly communicated priorities come more consistent decisions, given that decision makers throughout the organization are guiding their choices with the same compass.

That said, ample room often remains for refinement of the decision-making process itself. A well-defined decision-making process leads to more efficient, responsive, and transparent decisions, with less role confusion and therefore less conflict. Establishing and implementing a strong decision-making process is a complex endeavor—one that is hard to do well.

So it may be valuable to use a management tool specifically designed to help an organization's leaders unravel the decision-making process, clarify roles and responsibilities, and set clear expectations for decision making going forward. The process of using such a tool can help leaders get past preconceived notions of structure and more fully engage in a holistic approach to their organization. As Boys Town continued to expand its services, though, that approach no longer worked well. With input from managers throughout the organization, an internal project team worked with national office management to draft a matrix that classified the types of decisions Boys Town site-based leaders faced, and set boundaries of authority and responsibility for decision making going forward.

This process helped the organization push decision making down to the right level and clarify when and how the national office should be involved. Who in our organization must work closely together to achieve these priorities, and does our structure enable them to do so? Identifying the work that's critical to achieving the organization's priorities, who does that work, and how it delivers the desired outcomes helps reveal which people need to work together and, ultimately, whether the current structure facilitates their work. Organizational design experts in the for-profit and nonprofit sectors alike talk about the "grouping and linking" of work.