NexThought Monday – Choosing Your End-Game : Alternatives to the fund-raising merry-go-round for impact-driven nonprofits
When we ask nonprofit founders about the most pressing challenges they face, the issue of scale inevitably rears its head. While many nonprofits are built on a seemingly winning combination of innovative products and services, smart delivery mechanisms, and talented leadership, few are becoming truly large – even after several years in operation. In a consolidated portfolio of more than 40 nonprofits supported by the leading social enterprise funders in the US, of those founded between 2000 and 2007 only 20 percent had broken $10 million in revenue by 2012. Scale, at least when measured in terms of funding, does not come quickly for most nonprofits.
Nonprofits typically set out on the “elusive quest for scale” with a desire to have greater impact. Does this mean that a failure to achieve scale in funding implies a failure to achieve scale in impact? Yes and no. Organizations need to reach a minimum level of scale to function effectively (e.g., there should be enough funding on hand to pay core staff and implement the programming needed to establish proof-of-concept and, hopefully, evidence of impact). Without that minimum level, the door to large-scale impact is essentially closed. However, beyond that level, it is not a given that additional funding translates to proportionately additional impact, or even that it is the appropriate route to impact for a nonprofit to pursue. There are myriad paths – or what Alice Gugelev and Andrew Stern refer to as “End-Games” in their recent article – that a nonprofit can choose to maximize impact, most of which do not entail sustained growth in annual funding year after year.
The Six End-Games for Nonprofits
According to Gugelev and Stern, only one of the six End-Games that maximize impact involve a nonprofit providing services on a sustained basis – and this the only one that requires an organization to continually scale up funding. The other End-Games involve achieving impact in different ways: encouraging uptake of ideas, products, or models through Open-Source or Replication; pursuing Government or Commercial Adoption; or Achieving a Stated Mission before re-purposing assets and capabilities towards a different cause or winding down entirely. Each of these End-Games requires less in the way of funding than choosing a path of Sustained Service provision (the sixth End-Game), suggesting that the pursuit of scale through limitless fundraising is not the most appropriate way to maximize impact for every nonprofit out there.
As a result, the concept of choosing an End-Game completely changes the conversation for impact-driven nonprofits. For a nonprofit that operates under the old mindset of “the more funding I can raise, the more impact I will have,” it is extremely difficult to see an end in sight. There is almost always more impact to be achieved, and thus more funding to be raised, and essentially, more of a reason for the organization to exist indefinitely. On the other hand, a nonprofit focused on its specific End-Game already has a clear idea of what its impact potential is – the end is in sight from the very beginning. Because the nonprofit leaders know where they want the organization to end up, they can focus their energy on acquiring just enough funding to get there, then turn time and attention to other equally important tasks necessary to achieve their End-Game (e.g., establishing an open-source online platform through which to share their approach, or lobbying the government to push for adoption of the service).
To that end, it is imperative that nonprofits truly pursuing impact to shift their thinking away from the old challenge of scaling up and towards the new challenge of choosing and committing to an End-Game instead. The reason for doing so is simple: if you know where you’re going before you get there, you’re more likely to actually get there.
Bhavana Chilukuri is a consultant in the Washington, D.C. office of Dalberg Global Development Advisors.