It’s a familiar sentiment expressed by a local donor: The charity she supports is asking for money with increasing frequency. Yet nothing changes for the better, and now duplicate groups are popping up, all of them requesting funds to address the same problem. To her, the requests seem endless. She wonders whether the nonprofit organization should use less money for administrative costs, if it’s possible they run more like a business and if disparate groups addressing the same issue is truly efficient.
This donor’s concerns illustrate a bigger question: Can nonprofits scale sufficiently to solve — rather than simply treat — the community problems they were created to address without exhausting their supporters?
Before we talk about scaling strategies, let’s consider an adaptation of a story from Kellie McElhaney’s book, Just Good Business, which illustrates the choices. Four parents sit by the river when suddenly a large number of young children starts floating by, struggling to swim against the current, with more and more coming rapidly behind them. One parent jumps in and immediately hoists one child after another onto the shore (think of this as charity assistance). Another parent jumps in and starts teaching each child how to swim (empowerment). The third goes upstream to find out how and why the children are being put into the river and to stop that from happening in the first place (root cause solutions). Finally, the fourth parent goes upstream to collect data on the conditions under which the children got into the water, frequency and other factors, so a plan can be developed to control the problem and create new solutions as needed (advocacy).
This story illustrates how scaling and solving a community problem can be difficult unless all aspects are addressed. However, it’s rare to find any one organization that can effectively attend to all aspects of a solution and at the scale required to complete the job. So, what are some options?
Option No. 1: Form Collaborations
One approach involves forming collaborations among nonprofits. First, define the scale of the problem, determine the solution and set a goal. Gather the most effective nonprofits to contribute by doing what they each do best. Next, create a plan, budget and timetable. The cooperating nonprofits then invite their combined pool of donors to participate. Lastly, they publish regular reports to show their effectiveness, and make any required adjustments.
Getting groups of nonprofits to collaborate is no small task. Who has the time, resources and data to manage the development of a collaboration, set goals, record outcomes and guide inevitable course corrections along the way? Fortunately, local groups such as the Sacramento Region Community Foundation, Valley Vision, Social Venture Partners, the Impact Foundry and others can provide assistance.
Option No. 2: Merge or Acquire
Another option is for one nonprofit to acquire or merge with another. The track record is mixed when this happens; in general, mergers and acquisitions tend not to lower costs, but do help eliminate competition for donor dollars, consolidate expenses and increase impact when managed well. Several Sacramento organizations have been involved in mergers and acquisitions, including BloodSource and Senior Gleaners.
Option No. 3: Partner With Businesses
Newer options exist to help nonprofits with scaling, including partnerships with social enterprises, social entrepreneurs or forward-thinking corporations.
Social entrepreneurs produce disruptive, sustainable solutions to social and environmental problems in either the nonprofit or for-profit sectors, and are funded with either donations, public money, earned revenues or a combination of those sources. Social enterprises may or may not be disruptive, but are businesses that produce revenue to sustainably help solve community problems with earned income rather than donations. They also include revenue projects within a donor-driven organization, such as the sale of Girl Scout cookies to benefit that organization.
A well-known social entrepreneur is Muhammad Yunus, a Bangladeshi banker and economist who disrupted the limitations of banking by introducing micro-lending on a global scale.
PRIDE Industries is a local example of an effective social enterprise designed to maximize employment of people with disabilities. These new kinds of thinkers can potentially help the nonprofit sector scale to solve community problems.
Among the newer scaling partners are forward-thinking for-profit corporations that see the well-being of the community and environment as fundamental to their long-term existence and profitability. Such companies are building industry-related social and environmental problem-solving into their core value propositions, brand differentiation, risk mitigation, talent recruitment and business development as the market and regulatory environment reward sustainability in addition to quarterly returns. Scaling with such companies requires a clear, simple and mutually-beneficial problem on which to work.
Today, there is a focus on the “double bottom line” approach to business in the form of Flexible Benefit Corporations, L3C’s and B-Corporations, which include companies such as Patagonia, The Body Shop and Capsity, locally. More traditional companies like Coca-Cola, Walmart, Nike, Intel, Visa and many others are also taking big steps in the same direction. While many of these companies look first to improving their own internal operations, they also are potential scaling partners when their business priorities coincide with related nonprofit programs and community needs.
A final ingredient in going to scale, especially through collaborations, is the financial incentive provided by donors, foundations and government to do so. Solving the root causes of community problems requires more planning, staffing and management; in other words, higher administrative costs. So, donors and grant-makers can consider using their funds to help promote the creation of nonprofit collaborations to produce effective solutions at scale.
In the end, the frustrated donor and the seemingly endless persistence of social and environmental problems beg for scaling in the nonprofit sector. Why is this so important? Because the trend among donors today is to want immediate gratification with their financial donations, and their willingness to give tends to increase with a sense of accomplishment. Scaling is definitely a tough challenge — but it’s a worthy one to pursue.
Whether it’s how a funding windfall was used or the story of changing one person’s life, we are looking to celebrate the success of the Capital Region’s nonprofit organizations. Submit your story below for a chance be featured in the 2018-2019 edition of Capital Region Cares. Early submissions may also be featured in the pages of Comstock’s magazine.
When an earthquake struck Napa Valley in August 2014, destroying homes and businesses, injuring 200 people and killing one, residents rallied to support their neighbors, donating almost $11 million to the Napa Valley Community Foundation.