Doing more, For More, With Less

Posted by Laura Otten, Ph.D., Director on December 14th, 2018 in Thoughts & Commentary

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While I cannot do anything about our country’s obsession with the belief that bigger is always better, I can take umbrage with folks who prefer the maxim “bigger is better” over that of “quality, not quantity.”  Those who prefer the former over the latter may do well in the for-profit sector, but certainly do not serve the nonprofit sector well.

I was reminded of my dismay when reading a study released this past October by Community Brands.  “Nonprofit Finance Study:  The dynamics and challenges of growth,” gathered data from 321 nonprofit finance professionals from a cross section of organization.   Underwhelmed by the quality of this study, it nevertheless has a benefit:  it listens to a group of nonprofit employees who don’t generally get much, if any, air time, though they should:  finance folk.  And what they learned is revealing, though must be taken judiciously because of the poor nature of the research.

The initial question is a great one, as it tries to nail down an important point:  what does growth mean?  Whenever growth is talked about, there is an assumption that there is some shared, common understanding.  But is there really?

The most common response, given by 45% of the respondents, was that it means “giving more/expanding services;” yet, in third place, with 22% of respondents citing this, was “helping/serving more of the community.”  I’m hard pressed to understand the difference:  if an organization gives more services—whether it is by increasing the different kinds of services it offers or reaching into new areas to provide the same services—it is serving more of the community.

Interpreted this way, growth means doing more to 2/3 thirds of the respondents.  And there is a problem with this, because, sadly, only 34% said growth means increasing revenue and other resources, and only 17% said it meant adding more employees.  These numbers just have me hearing that dreaded piece of advice that too many like to spout:  do more, for more, with less.  And that is a formula for unsustainability.

According to these finance professionals’ responses to another question, half of them see the expansion of services as the best indicator of growth.  This best measure is endorsed by a majority of both Boomers and Gen Xers; Millennials, however, are torn on the best measure of growth:  41% say it is expansion of services, while an equal number say it is increased revenue.  If growth is perceived to be best understood as the expansion of services and not expansion of resources, we are very likely not creating sustainable growth.  In which case, what is the value of that growth if it is only temporary?

Another source of concern is the impetus for growth that the finance folk cite:  20% say growth in their organizations is proactive, while a very similar 21% say it happens reactively.  More than half (53%) say growth is a result of both:  some is reactive, some proactive.  The fact that so much growth in organizations is reactionary, rather than intentional and planned in response to needs assessments, market analysis, and careful study, is troubling.  Coupling the answers to this question with that of the question, above, on the best indicator of growth, is cause for even more concern for it suggests either the quality of finance staff is weak and/or finance staff have a very low degree of influence in the decision making process.

There is in the process of how growth occurs a chicken and egg scenario:  should growth drive the hiring of more staff or should hiring more staff drive growth?  Nearly three-quarters (74%) of the respondents say they follow the first course:  growth drives hiring more staff.  That aligns with growth being reactive rather than proactive.  Only 14% indicated that in their organizations the hiring of new staff comes first and the growth follows, aligning with proactive growth strategies.

Two asides in this study that I found quite bemusing.  The first is that 63% of the respondents are confident, and another 30% are very confident, that they can handle the additional risk that will come with any growth.  Given how many nonprofits are unaware or unconcerned about their current risks, I am struggling to understand such a high level of confidence in the ability to handle additional risk.  And, speaking of risk, these finance experts are split on whether growth will change how they report to funders:  44% believe it will change, while 46% see no need for change.  The particulars of those who see a pending change are, simply put:  scary.  61% said that with growth comes the need to be more transparent with funders.  Why does the obligation to be transparent—with funders or anyone—depend upon the size of an organization?  Adding to the horror of this is that 57% said that having to be more transparent would be a somewhat or “very much” of a burden.

This picture of growth—what it means, what drives it, how it is achieved, the “burden” of its success—is seen through the lens of finance professionals, theoretically those who are steeped in the ways of finance and accounting and things like the bottom line and cash flow, assets and liabilities, profit and loss statements and so much more.

These are the folks in a nonprofit that are supposed to be rational, less emotional and, yes, highly concerned with the financial viability of an organization.  As noted before, either the finance professionals in our sector are the weaker ones (which I do not believe), they are shy and retiring (which could be, though not the ones I know) and/or we don’t listen carefully enough to what they have to say.

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