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Your Engine of Impact: Scaling

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Over the course of seven posts, we have argued that leaders who want their organization to achieve maximum impact must embrace the essentials of strategic leadership. We compare this kind of intentional leadership to a high-performance engine. In those seven posts, we have discussed the components of this engine: mission, strategy, impact evaluation, insight and courage, organization and talent, funding, and board governance. 

Now, in this final post in the series, we turn our attention to what is often the ultimate purpose of building, tuning, and fueling an engine of impact—namely, achieving impact at scale. 

Of the many issues that nonprofit leaders must consider, perhaps none is more topical than that of scaling. Indeed, in recent years, scaling has arguably become the most widely discussed subject in the nonprofit sector. This scaling fever even affects the aspiring social entrepreneurs whom we teach at Stanford Graduate School of Business. They, like many other people in the sector, assume that their mantra should be “Start up, then scale up.” 

For certain nonprofits under certain conditions, increasing the size of an organization can be a powerful way to increase impact. But we have seen far too many well-meaning nonprofit leaders approach scaling in ways that are misguided and even detrimental. All too often, they go straight to analyzing how to scale their organization, and they neglect the critical first step of assessing whether the organization is ready to scale. 

Before a nonprofit begins to scale up its operation and to widen its reach, it must attain a high level of performance in all seven components of strategic leadership. Only an organization that has successfully created an engine of impact, in other words, has “earned the right” to pursue impact at scale. We have devised a Readiness to Scale Matrix that will help you assess whether your organization has reached that point. We provide a full explanation of the matrix in our book, Engine of Impact. We also encourage you to take the Engine of Impact Diagnostic, an online assessment that will determine where your organization falls on the matrix. 

Pratham, the largest nongovernmental organization in India’s education sector, offers a good example of successfully earning the right to scale. It has a concise and focused mission statement—“Every child in school and learning well”—to which it strictly adheres. It has a thoughtful strategy that is grounded in a proven theory of change that aligns with the organization’s core capabilities. It has an abiding commitment to rigorous impact evaluation, with 11 randomized evaluations to its credit (as of this writing). Its leaders have demonstrated ample insight and courage, along with a strong ability to find fuel (in the form of solid talent management, adequate funding, and effective board governance) for the organization. To expand Pratham’s work into multiple states, for example, its leaders have employed a federation model that allows for strong local autonomy. By 2017, Pratham had successfully expanded to 23 states and union territories in India, and it had made a significant impact on the lives of almost six million children. 

Once an organization has established its readiness to scale, its leaders can proceed to the matter of how. From our decades of work with nonprofit organizations of nearly every type, we have derived several big-picture lessons that should guide every nonprofit that aims to achieve impact at scale. Here is a brief summary of those lessons. 

Start with your business model. Consider, in particular, how you will raise the revenue that you need for scaling. In most cases, the funding partners that will help you scale are the partners that you already have. If a local government is your major funder today, odds are that this entity (or similar entities) will be your best partner for scaling. 

Prioritize impact over cost. Cost-efficiency (which means cost per unit of service delivered) is important, but cost-effectiveness (that is, cost per unit of service delivered, as viewed in light of impact) is critical, too. Remember: Your intervention does not need to be the lowest-cost option in your field; achieving impact, rather than saving money, should be your priority. 

Clarify your structure. Most nonprofits that scale by establishing multiple sites, chapters, or programs have a hub-and-spoke structure in which a national (or international) headquarters serves as the hub and regional (or country-level) operations serve as spokes. Which functions will reside in each part of that structure depends on the activities that a nonprofit pursues and how it prioritizes those activities. Tensions often arise between the hub and the spokes, and nonprofits must strive to reduce such tensions by clarifying the degree of autonomy that each “spoke” entity should have. 

Build capacity from the start. Successful scaling requires leaders to build the skills, resources, and processes that will be necessary for long-term organizational growth. If scaling an organization is the goal, then those leaders must lay the groundwork for that effort early. 

Create a growth capital plan. An organization eases the way for ambitious scaling efforts by creating a growth capital plan—or at least a general plan that outlines capital requirements. Doing so will help the organization to raise committed funding over a long period and will position it to scale effectively. 

Use technology early and often. Scaling service delivery through technology, in our view, is the next frontier of increasing impact in the nonprofit sector. So we find it frustrating that this sector as a whole has done less to leverage technology than any other part of the U.S. economy. To be sure, it’s difficult to change how an organization operates and equally difficult (or more so) to raise money for investments in technology. But we are certain that the benefits in terms of expanded impact are well worth the effort. 

In implementing these lessons, nonprofit leaders should bear in mind that the purpose of scaling is not to grow in size, or even to reach more people, but to achieve the greatest possible impact.

Your Engine of Impact: Board GovernanceWilliam F. Meehan III and Kim Starkey Jonker are co-authors of Engine of Impact: Essentials of Strategic Leadership in the Nonprofit Sector. This post—the last of an eight-part series—is adapted from that book. Learn more about the book at engineofimpact.org.

The image at the beginning of this post is reproduced from Engine of Impact: Essentials of Strategic Leadership in the Nonprofit Sector, by William F. Meehan III and Kim Starkey Jonker, Forward by Jim Collins. Copyright © 2017 by the Board of Trustees of the Leland Stanford Jr. University. All rights reserved. No further reproduction is allowed without the publisher's prior permission, sup.org.

Topics: Engine of Impact Nonprofit Impact
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