Global Services Lesson 4 Non-profit Case-study
Global Services Lesson 4 Non-profit Case-study

Time: 30 minutes
Skills: Holistic Thinking and Technology Skills
Objective 3
Related Resources:
- The Bridgespan Group. (2005, March 1). Non-Profit Case Study: Growth of Youth-Serving Organizations. http://www.bridgespan.org/LearningCenter/ResourceDetail.aspx?id=1096

Students examine the role of non-profits in providing services to the community. Students should be assigned to read one of the case-studies before class. In groups, students assigned to the same case discuss the following questions:
1. What was the organization’s motivation for growth and to what extent?
2. How did the expansion take place?
3. How was the growth financed?
4. How did the organization’s programs change due to the growth?
5. What external factors contribute to the organizations growth

NGO Case Study Overview 

For most for-profit companies, steady growth is the surest path to success. How to grow—whether by opening new divisions, developing branches or franchising operations, acquiring other companies, or taking any number of other possible approaches—comes down to a matter of choice and opportunity for each individual company. Whichever path a company pursues, more often than not it can be assured it will have access to ample information about the benefits and risks of each option, talent to help execute its chosen strategy, and money to finance its growth.

In the nonprofit sector, the picture is much different. Few, if any, of those same resources are available to growth-minded nonprofits—especially organizations in the social-service sector that aspire to serve more people.

In January 2004, the Edna McConnell Clark Foundation commissioned the Bridgespan Group to study growth in U.S. youth-serving organizations: the prevalence of growth, the factors that were critical in shaping how these organizations grew, and the major consequences of growth. We hoped that by increasing our understanding of this phenomenon, we could become more effective in our own work. We also hoped that these efforts would be useful for other organizations committed to supporting nonprofits that serve young people.

One of the chief components of the study was an in-depth look at 20 youth-serving organizations that had experienced significant growth in recent years. This research produced a wealth of information about the experience and effects of growth in youth-serving organizations—far more than could be encompassed in a single document. As a result, we have chosen to present the material in two forms: a series of 20 case studies, which capture the particulars of each organization’s growth story, and a white paper, which calls out the observations that emerged most consistently across the interviews and data-gathering process.
Trends

Observation 1: Growth was more often a response to opportunity than the result of strategic choice.

All these organizations grew because their leaders saw—and seized—opportunities to acquire funding, talented staff, or both. The challenge lay in differentiating genuine opportunities from will-o-the-wisps, which could compromise or even undermine their missions. A few of the organizations in the study admitted to having to rationalize the addition of some programs retrospectively and, in some cases, changing the mission (as many as three times) to reflect the new direction. The experience of these organizations points to the importance of being deliberate about responding to growth opportunities. It also suggests the potential usefulness of viewing strategy not as an unchanging roadmap but more as a set of guardrails within which new opportunities can be pursued.
Observation 2: For organizations with multiple sites, finding the right balance between local autonomy and central control was a recurring challenge.

Nonprofits engaged in replicating programs in new geographic locations can be arrayed along a spectrum according to the level of control maintained by a central office or headquarters. At one end of the spectrum are organizations that try to expand their reach by sharing their model with other organizations, formally or informally. At the opposite end of the spectrum are organizations that choose to expand by building branches, with a single national office holding both ultimate decision-making power and the organization’s 501(c)(3) designation. Between these two extremes are nonprofits that have grown by creating some sort of partnership or affiliation with other independent 501(c)(3) organizations.

Observation 3: The financial condition of these organizations, even the best-known and fastest-growing, was remarkably fragile.
The organizations in this study are among the best known in the field of youth services. They take in average annual revenues of $7.3 million, and they have been in operation for an average of 26 years. Yet the degree to which they live on the edge financially might well stop for-profit executives dead in their tracks. Consider a few statistics: among the 16 organizations that provided data on this question, the average operating reserve was four-and-a-half months, and eight had two-month reserves or less. None had more than nine months of operating expenses on hand.

Observation 4: Economies of scale and experience were evident for some of the organizations in the study but not for others.
Growth in the for-profit sector is often motivated by the potential to achieve economies of scale (the ability to share indirect costs over more products) and/or economies of experience (the ability to turn out products at a lower unit cost over time thanks to “smarter” production practices). The ability to realize these economic effects has long been a critical success factor in manufacturing; and it is becoming increasingly important for many for-profit service providers as well.
Nevertheless, given the other issues highlighted above (i.e., program modifications, turnover, external forces, the pursuit of quality), continuing to question whether every youth-serving organization could, or even should, achieve economies of scale or experience effects comparable to those of corporations appears to be warranted.

Observation 5: Bringing in a chief operating officer was often essential, yet just as often proved challenging for the organization’s leader as well as for the staff.

The organizations in the study commonly found that as they grew, the demands of daily operations coupled with the need to communicate constantly with the board, the public, funders, and key partners, overwhelmed the capacity of even the most tireless leaders. Staff began to observe bottlenecks, with day-to-day operating decisions getting held up because only the executive director or CEO could make them.

Bringing in a chief operating officer or, alternatively, delegating COO-like responsibilities to a senior staff member, constituted a direct response to the complexity that comes with growth.

In talking about the contributions of their COOs, many participants in the study noted the implementation skills they brought with them and their ability to impose order on a disorderly world. When the pairing worked well, the COO could provide a balance to the visionary drive of the leader, producing the combination of inspiration and implementation that the organization needed to succeed.
COOs were instrumental in rationalizing programs and thinking about how to get the most impact from the leanest operations. They also had the energy to devote to critical internal functions, such as financial management, monitoring performance, and hiring and training staff, which many stretched-thin leaders had not previously been able to address. Perhaps the most important function the COO fulfilled, however, was freeing the leader from daily operations, so that he or she could fulfill the roles which only they could perform, chief among them fundraising and developing—and maintaining—strong board and external relationships.

Clarifying the COO role and explicitly dividing responsibilities between the leader and COO could also be a substantial challenge.

Many leaders were not only accustomed to being enmeshed in the organizations’ daily work but also had strong relationships with existing staff who were now being asked to report to someone else. Yielding these roles and relationships tended to be hard for everyone.

Observation 6: The complexity caused by growth gave rise to the need for formal systems and staff with more specialized skills. These, in turn, tended to create internal stress as well as a more professional organization.

To sustain growth, the organizations had to fill a number of management roles besides the COO. They also had to upgrade their systems as defined not only by the technology infrastructure but also by operating policies and procedures that would allow them to work more efficiently and insure them against liabilities (especially in the areas of human resources and finance).
Finance was another “invisible” function the organizations needed to upgrade, by adding more sophisticated financial managers and management systems. Similarly with development, adding staff with specialized skills and knowledge was one of the ways in which the organizations met the challenge of increasing and diversifying their sources of funding as they grew.

Good information technology was a necessary, and often under-funded, complement to all these functions.

From the perspective of existing staff, the increased professionalism that accompanied growth could be a plus or a minus. On the one hand, growth could help to curb staff turnover and develop new leaders. Turnover for several of the organizations was a constant challenge. Given the intensity of the work and the typically low pay, young people made attractive hires. The same reasons—coupled with life-stage events and general mobility—sometimes led to situations in which employees routinely departed after one or two years.

Observation 7: Growth almost always required redefining the role of the board and its members.

Growth often affected the boards of these organizations as profoundly as it did the staff. At virtually all of these organizations the board was moving (or had already moved) away from a hands-on programmatic role to one that emphasized fundraising and governance.

Observation 8: Foundation funds could propel growth, but they were unlikely to sustain it.

Foundations played a variety of roles in the growth of the organizations in this study. The most common, and most important, roles were propelling early growth and providing general operating support.

“For individuals you have to invest in the cultivation of people. Building a strong board and staff is key to raising more money from individuals. For the public sector, you need a talented person who can write great grants and do great research. You also need someone who can network. In the corporate world, a different type of networking is important. Conferences help build respect. There is no silver bullet. We aim to build a range of revenue flows, each of which covers 10 percent to 15 percent of the budget.”

Observation 9: These organizations believe program codification was essential in enabling them to expand without sacrificing quality.

Study participants struggled with questions about how much variation and program experimentation was healthy and at what point it impinged on the results they were trying to achieve. Ultimately, however, all of the organizations found that in order to expand successfully, they needed some degree of program codification. A number of factors drove in the direction of codification. One was the desire to ensure that the organization continued to have the same impact on all its participants. Another was a sense of responsibility to colleagues, to share wisdom gained from experience.

The process of codification went hand-in-hand with evaluation. Ensuring that a program is making a difference to its participants was the most compelling reason to measure outcomes. But measurement filled other functions as well, including establishing credibility with funders and allowing the organization to monitor outcomes and therefore establish arms-length accountability.

Observation 10: The later an organization made performance measurement part of its culture, the more disruptive the process was.

The influence of funders in getting people focused on performance measurement was unmistakable. In contrast, organizations that came late to performance measurement tended to find it organizationally taxing and at times divisive. Even when management had internalized the value of the new practices, program staff tended to be skeptical, viewing them as bureaucratic at best and antithetical to delivering quality services at worst.

Introducing data collection and performance evaluation into an organization that has operated without them requires significant investment, not just of money, but also of management time.

Observation 11: Funds for building infrastructure consistently lagged the need for them.
Organizations in the study coped with the scarcity of infrastructure funding in two primary ways. Those that relied heavily on government grants, which include an allowance for indirect costs, typically took a “build-as-you-go” approach.

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