After working with hundreds of nonprofits over a couple of decades, helpful patterns emerge.
My firm creates partnerships with nonprofits to help them grow, so we need to quickly discern the performers from the pretenders, or otherwise we would waste our time and get bad results. So we’ve developed the framework below to keep the confusion and attrition low and our results great.
The categories here segment the non-profit sector into its major phyla, but further speciation is as varied as nature itself. We claim no scientific validity. It’s an opinionated, tongue-in-cheek attempt to make sense of a sector as varied and diverse as the human condition.
1. Social Clubs — the most common type: small groups, under a few hundred K in revenue, that get together to help people as a foundation for friendship and community. Groups like this plan activity and raise money among themselves and their friends and families to deliver neighborhood-level impact. At their best, they are honest about their aims and intended benefits. They aren’t businesses and don’t pretend to be– no delusions of grandeur here.
- Examples: PTAs; The Awesome Foundation.
- These groups offer tremendous collective richness and benefit to the world. We applaud them and even participate in them ourselves.
2. Feel Goods — these orgs use the rhetoric of solving larger problems but lack enterprise-class tools, grit, discipline, risk tolerance and a basket of other assets necessary to get their programs beyond a marginal or symbolic effort. Talk and reflection are more important than action. It’s about personality, not process.
- Political campaigns are the worst offenders here. Sadly, too many groups working in spaces like animal rights, homeless shelters, and environmental preservation fall into this category. They are idealists who care more about their own tribe then about scaling impact.
- On the surface, these groups appear to be doing valuable work, but they have cultural or performance barriers to achieving significant levels of impact. They are pretenders, not performers.
3. Enduring CBOs (Community Based Organizations)— these wonderful organizations are the meat and potatoes of the non-profit sector. There are tens of thousands, among the best threads in the fabric of American society. They have clear bounds for their services and seek to deliver quality at an intentional and well defined scale, typically at the neighborhood, municipal or at most a regional level. They often have significant unrealized organizational potential.
- Examples: day care centers, independent schools; clinics, homeless shelters & food banks; regional theater, art, museums; farmers markets.
- They often suffer from performance or revenue pain, and they would do well to learn enterprise-class business modeling and execution. They should look outside the nonprofit sector and learn how all high performing businesses function if they wish to reach their full promise and potential.
4. Dysfunction Junctions — an ugly miscellany numbering in the tens of thousands, each unhappy in its own way. Victims of everything from Founder’s Syndrome to incompetent staff and/or leadership to micro-managing or tourist-class board members to inadequate financial processes to what is perhaps most common: a focus on who, not what and how. Also includes a segment of liars and thieves, a disturbing minority. Together, they blight far too much acreage in the non-profit landscape.
- Ken Stern’s brilliant muckraking With Charity for All exposes this dark side of the non-profit sector.
- Nonprofits aren’t alone in suffering from dysfunction—all organizational types, including private sector businesses and government agencies—fall prey to poor leadership. But nonprofits appear to have an unusually high percentage of struggling organizations due to their historical disconnect from proven organizational best practice.
- The worst example in the sector is probably the Red Cross.
5. Gutsy Aspirants — we think there are about 100,000 of these, and they represent the most promising, scalable organizations in the sector. They range from start-ups to $10-$20m annually. They have a proven or highly promising program model and are willing to work hard to get it to scale. There’s passion, yes, but also evidence of discipline and focus. Decent teamwork and committed leadership.
- Social impact investors, savvy philanthropists, intelligent corporations, and critically minded individuals look to these orgs as their primary means of creating social impact.
- We love working with these shops. We get to die happy because of our experiences helping them grow and solve problems at scale.
6. Staid Institutions — These are established regional orgs or affiliates of a strong national brand, but they are running on momentum. Great looking trees but they are hollow on the inside. They need moderate to serious triage before they come down in the next storm.
- Includes publicly funded larger institutions, like some community colleges; many hospitals; museums, community foundations, etc.
- New leadership—at the exec and board level—is frequently required to inject these organizations with the necessary go-go juice to deliver maximum SROI (Social Return on Investment).
7. Big Business — major research institutions; in some cases, similar to large F500 enterprises, except for the blessings of their legacy tax status that every one of them should be thankful for and vociferously protective of.
- Major universities. Large hospital systems. The top museums and largest arts organizations. But beware: some of them, like the Red Cross, look good on the outside but are rotten on the inside.
- These organizations prove that its possible to make tons of money, run effectively and efficiently, and maintain integrity and social purpose (except if you are the Red Cross, in which case your leadership and board should be prosecuted with the RICO statutes). Smaller nonprofits averse to scale and business practice often don’t understand that these organizations provide a growth model for them—they, too, were once small.
It’s not a comprehensive list—anything that I missed? Please share your critiques and comments.