Charity Navigator recently identified 10 U.S.-based charities that have increased their donors, programs, and services by more than 35 percent a year over the past three years. Few nonprofits will experience such rapid, robust expansion — but many will grow significantly in coming years by adding new programs, enlarging existing ones, or serving new geographic regions.
Large or small, American or international, any organization contemplating significant growth needs to assess its readiness.
Here are six questions top executives and governing boards should ask themselves to determine if they’re ready to get bigger.
1. Is your organization doing quality work, and does it have the data to prove it?
Before expanding, nonprofits must be confident that their programs and services are high quality and deliver on their mission. How many deaths were prevented? How much more food is available to the hungry? How much did test scores rise? How much did infection rates fall?
As in the corporate world, measurable results are increasingly important for nonprofits. Before deciding to expand, make sure you can demonstrate, analytically as well as anecdotally, that current programs are effective and efficient and that they meet the goals you set for quality and impact.
2. Do you manage your costs effectively — and do you understand how they will change as you grow?
It’s important for executives and board members to know their organizations’ administrative, fundraising, and personnel expenses and to understand the added costs of growth. Costs per employee are likely to go up. Some functions — such as technology, finance, communications, strategy, and human resources — are easier to increase than others. Training, development, recruitment, placement, and community relations, on the other hand, typically require additional investment as organizations grow, especially into new regions.
3. Are the conditions ripe for success?
Before moving forward with an expansion plan, top managers must confirm that a need for more services or new programs truly exists. They should also make sure the necessary staff, partners, and perhaps government support are available; that the leadership team is committed to the plan; and that the expansion effort has a clear focus.
4. Can you afford the growth?
To achieve sustainable growth, nonprofits need a consistent source of financial support from governments, individuals, corporations, foundations, or a combination of the four. They also need an effective fundraising strategy.
Nonprofits operate under unusual circumstances: They may have committed funds that don’t arrive in predictable ways, are delivered over the course of multiple years, or arrive at the end of the year in a lump sum. In many cases, they are earmarked for specific programs. These restrictions reduce flexibility, so any funding strategy should include a 12-month assessment of the likelihood that money will come in when expected, as well as a budget with a cushion, such as 130 percent of estimated costs.
5. Do you have the right people and leadership?
The visionary, inspirational skills needed for the start-up phase are typically different from the skills needed to expand the organization. This goes for both leadership and staff. The smart founder recognizes when to step aside – or, at least, when to share management responsibilities with a team that has complementary skills. And when hiring staff members, the focus should be not only on education, experience, or expertise but also on creative thinking with big ideas, an eye for detail, and tolerance for ambiguity.
6. Is your organization scalable?
When you consider expansion, think about whether you have consistent processes for recruiting, training, coaching, and analyzing and reporting on your work. Consider, too, that growth can tax your employees and volunteers. The right systems and incentives must be in place to keep managers and employees engaged and motivated. You could grow within a region, expand to a new region, or both, but each of these courses of action has different implications for infrastructure, costs, and so forth.
If you’re considering expanding to another country, make sure you can replicate your operation there. The laws, culture, or funding structures might make it hard to open and run an office in some places.
Considered together, these six questions, combined with a clear growth strategy, can help an organization’s leadership team determine its readiness for growth. If the answers to all these questions are yes, you’re in a good position to grow. If not, there’s work to be done before an expansion begins.
Bruce Holley is a senior partner in the New York office of the Boston Consulting Group. Wendy Woods is a senior partner in the firm’s Boston office and global leader of its social-impact practice.For more details, visit bcg.perspectives.
