The Life of a Nonprofit
I thought now might be a good time to share some observations about the life cycles of nonprofits from the perspective of someone who spent fifteen years working in nonprofits large and small, including three years' work for a "troubleshooter", a consultant hired to help small nonprofits with their crises.
A nonprofit is born with a group of friends sitting around a table who see a need. Someone says, "We could do that," and an organization is born. It's usually run on consensus, and that works at this stage. After all, all the participants are friends and they're all passionate about the idea. They often share the same backgrounds, the same age, the same race, the same level of education, the same political sentiments, the same basic belief systems. This may include a theoretical commitment to diversity, but it's usually very theoretical. There is rarely any socio-economic diversity on a founding board. That's how founding boards are. They are fairly homogenous groups of friends.
And they do a lot of good. They start an organization that does something useful. ALL NONPROFITS START THIS WAY. Whether you're talking about a small local group or International Red Cross, this is how it begins. It's part of the normal life cycle of a nonprofit.
Usually the founding board is comprised of one or two very strong personalities that do a lot of work and a number of sidekicks and peacemakers, friends who follow along in the wake of the strongest personalities. Again, this is completely functional. This is how cooperative groups of humans work. The alphas lead the pack and the betas follow along cooperatively doing the work.
However, at some point a small nonprofit hits a crisis precipitated by their own growth and success. The only way to avoid this is to deliberately limit growth, as, for example, some pagan covens do. If the group is never supposed to get larger than twelve people it will always remain a "pack." But most groups do want to grow, and most do. It's then that they hit the first crisis. Nonprofit consultants know that roughly 50% of organizations cease to exist at this point. So what is it?
They are too big and too diverse to run the way they have been. Actual diversity, incorporating people of different social statuses, means incorporating dissent. The leadership of the original pack leaders is resented because it does not meet the needs or goals of the wider community. That's not to say that it's bad, but it no longer serves the group well. Often it's perceived as elitist based on some social factor, but it doesn't matter what the factor is. The issue is that a small group of friends cannot essentially govern by consensus a group larger than a couple of hundred. Look at it this way -- when the pack becomes the village the governance has to change. (See also congregations! That horrible point in the life of a religious community when suddenly there is strife everywhere between "old" people and "new" people!)
This is the decision point where one of two things happens -- either the alphas step aside, or the organization ceases to exist. It's best if the alphas simply leave and peacefully recognize that the thing they built will now be used by other people for other purposes. They raised a baby and now it is adult. They gave a gift to the community. And now what happens to the gift is up to the recipients. If that doesn't happen, then either the alphas keep their power and everyone else quits and the entire thing collapses into a vanity project, or eventually they're ousted at the cost of so much damage that the organization cannot continue. This is the first crisis point in the life of a nonprofit, and 50% die at this point.
The 50% who continue go on to reach the second crisis point. They continue to grow and thrive, and eventually they reach a point where there is too much work for people to do on a volunteer basis. No one can volunteer thirty hours a week coding or lobbying or coordinating efforts at a soup kitchen. The organization has to come up with a way to pay people for their work because there is simply too much work to reasonably expect volunteers to do it! Again, there is a way to avoid this crisis -- to choose to limit growth to what volunteers can do, and some organizations consciously do this. The school PTA, for example, limits its programming to what parents can reasonably do in their spare time. It never intends to grow beyond serving the 400 kids at this elementary school, and they can be served on a part time volunteer basis.
However, if the organization wants to grow it must hire staff, and this is another huge crisis. Again, 50% OF ORGANIZATIONS FAIL at this point. The transition is this -- it can no longer be run on a consensus/open model because it is now a small business. People are depending on it for their livelihood. There are infinite rules and regulations about how a business must be run, about finances and taxes, payroll and insurance, and the entire change in relationship between peers volunteering together and employer and employee. For example, it may be part of the culture for volunteers to drink together and discuss their sex lives, but pressing alcohol on your employee and quizzing him or her about his or her sexual experiences is sexual harassment!
Also, often the original volunteers, particularly ones who consider themselves liberal or counterculture, do not like businesses and eschew "professional" behavior. But when you become an employer you must behave professionally. Professional behavior, like old chestnuts often rejected like Roberts Rules of Order, was designed to help people from wildly different backgrounds cooperate by getting everyone to adhere to artificially rigid standards, to create a common ritual framework for people coming from truly diverse traditions. When everyone lets it all hang out, everyone winds up angry and offended. It's possible for two or three people to talk it out, but when you've reached hundreds of people that is no longer possible. The only way for hundreds plus to cooperate is to create a ritual framework that they all agree to.
In other words, when the village becomes a town you have to rely on structure rather than individual relationships, because it's not possible for everyone to have meaningful individual relationships. Various writers on the subject of nonprofits (including religious ones like congregations) put this around 900 participants.
There are two main causes of collapse at this stage. First is finances. Many organizations fail to make the transition to paid staff (or clergy) because they just can't deal with the money. They can't manage to pay social security taxes on time. They can't consistently meet payroll. They can't stop arguing about money.
The second is that there is often an exposure of class issues that gets ugly. Often the board is dominated by the wealthiest people in the group, but the staff is not of that social class. They are younger, poorer, and less educated. They are not people that the wealthiest board members would see socially, though they are more like the rank and file of the members. In other words, the town's Council is made up of wealthy citizens and the police chief or town manager is blue collar and more like the average townsperson. Enormous conflict ensues!
If these crises are weathered successfully, what comes out of it is an organization that is both financially sound and more truly representative of the community.
The big takeaway here is that these things are normal. These are part of the normal life of a nonprofit, just like any cooperative social structure created by people! Facing these two crises is inevitable, and the outcomes are malleable based on the choices of the individuals involved.
A nonprofit is born with a group of friends sitting around a table who see a need. Someone says, "We could do that," and an organization is born. It's usually run on consensus, and that works at this stage. After all, all the participants are friends and they're all passionate about the idea. They often share the same backgrounds, the same age, the same race, the same level of education, the same political sentiments, the same basic belief systems. This may include a theoretical commitment to diversity, but it's usually very theoretical. There is rarely any socio-economic diversity on a founding board. That's how founding boards are. They are fairly homogenous groups of friends.
And they do a lot of good. They start an organization that does something useful. ALL NONPROFITS START THIS WAY. Whether you're talking about a small local group or International Red Cross, this is how it begins. It's part of the normal life cycle of a nonprofit.
Usually the founding board is comprised of one or two very strong personalities that do a lot of work and a number of sidekicks and peacemakers, friends who follow along in the wake of the strongest personalities. Again, this is completely functional. This is how cooperative groups of humans work. The alphas lead the pack and the betas follow along cooperatively doing the work.
However, at some point a small nonprofit hits a crisis precipitated by their own growth and success. The only way to avoid this is to deliberately limit growth, as, for example, some pagan covens do. If the group is never supposed to get larger than twelve people it will always remain a "pack." But most groups do want to grow, and most do. It's then that they hit the first crisis. Nonprofit consultants know that roughly 50% of organizations cease to exist at this point. So what is it?
They are too big and too diverse to run the way they have been. Actual diversity, incorporating people of different social statuses, means incorporating dissent. The leadership of the original pack leaders is resented because it does not meet the needs or goals of the wider community. That's not to say that it's bad, but it no longer serves the group well. Often it's perceived as elitist based on some social factor, but it doesn't matter what the factor is. The issue is that a small group of friends cannot essentially govern by consensus a group larger than a couple of hundred. Look at it this way -- when the pack becomes the village the governance has to change. (See also congregations! That horrible point in the life of a religious community when suddenly there is strife everywhere between "old" people and "new" people!)
This is the decision point where one of two things happens -- either the alphas step aside, or the organization ceases to exist. It's best if the alphas simply leave and peacefully recognize that the thing they built will now be used by other people for other purposes. They raised a baby and now it is adult. They gave a gift to the community. And now what happens to the gift is up to the recipients. If that doesn't happen, then either the alphas keep their power and everyone else quits and the entire thing collapses into a vanity project, or eventually they're ousted at the cost of so much damage that the organization cannot continue. This is the first crisis point in the life of a nonprofit, and 50% die at this point.
The 50% who continue go on to reach the second crisis point. They continue to grow and thrive, and eventually they reach a point where there is too much work for people to do on a volunteer basis. No one can volunteer thirty hours a week coding or lobbying or coordinating efforts at a soup kitchen. The organization has to come up with a way to pay people for their work because there is simply too much work to reasonably expect volunteers to do it! Again, there is a way to avoid this crisis -- to choose to limit growth to what volunteers can do, and some organizations consciously do this. The school PTA, for example, limits its programming to what parents can reasonably do in their spare time. It never intends to grow beyond serving the 400 kids at this elementary school, and they can be served on a part time volunteer basis.
However, if the organization wants to grow it must hire staff, and this is another huge crisis. Again, 50% OF ORGANIZATIONS FAIL at this point. The transition is this -- it can no longer be run on a consensus/open model because it is now a small business. People are depending on it for their livelihood. There are infinite rules and regulations about how a business must be run, about finances and taxes, payroll and insurance, and the entire change in relationship between peers volunteering together and employer and employee. For example, it may be part of the culture for volunteers to drink together and discuss their sex lives, but pressing alcohol on your employee and quizzing him or her about his or her sexual experiences is sexual harassment!
Also, often the original volunteers, particularly ones who consider themselves liberal or counterculture, do not like businesses and eschew "professional" behavior. But when you become an employer you must behave professionally. Professional behavior, like old chestnuts often rejected like Roberts Rules of Order, was designed to help people from wildly different backgrounds cooperate by getting everyone to adhere to artificially rigid standards, to create a common ritual framework for people coming from truly diverse traditions. When everyone lets it all hang out, everyone winds up angry and offended. It's possible for two or three people to talk it out, but when you've reached hundreds of people that is no longer possible. The only way for hundreds plus to cooperate is to create a ritual framework that they all agree to.
In other words, when the village becomes a town you have to rely on structure rather than individual relationships, because it's not possible for everyone to have meaningful individual relationships. Various writers on the subject of nonprofits (including religious ones like congregations) put this around 900 participants.
There are two main causes of collapse at this stage. First is finances. Many organizations fail to make the transition to paid staff (or clergy) because they just can't deal with the money. They can't manage to pay social security taxes on time. They can't consistently meet payroll. They can't stop arguing about money.
The second is that there is often an exposure of class issues that gets ugly. Often the board is dominated by the wealthiest people in the group, but the staff is not of that social class. They are younger, poorer, and less educated. They are not people that the wealthiest board members would see socially, though they are more like the rank and file of the members. In other words, the town's Council is made up of wealthy citizens and the police chief or town manager is blue collar and more like the average townsperson. Enormous conflict ensues!
If these crises are weathered successfully, what comes out of it is an organization that is both financially sound and more truly representative of the community.
The big takeaway here is that these things are normal. These are part of the normal life of a nonprofit, just like any cooperative social structure created by people! Facing these two crises is inevitable, and the outcomes are malleable based on the choices of the individuals involved.