Scaling Impact: A Summary of the Pathways to Growth Report Part 1

Social Finance - Tue, 06/25/2013 - 07:01

By Sara Bartolomeo

In February 2013, Grantmakers for Effective Organizations (GEO) published Pathways to Growth, a heavily researched report as part of their Scaling What Works initiative.

The publication was a collaborative effort between Ashoka, TCC Group, Social Impact Exchange and Taproot Foundation that identified the key activities undertaken by non-profits that are scaling impact, as well as the key grantmaker practices that are universally beneficial and effective in supporting a non-profit's efforts to achieve this impact.

As the report is expansive and highlights numerous non-profits who have demonstrated impact along with many grantmaking institutions, Part 1 of this post will serve merely as a summary of the report.
Scale is defined as growth in impact, which is not limited to financial impact (i.e. scaling the programs delivered by non-profits or the size of the organization itself). Non-profits can also achieve growth in the impact of their ideas/innovation, technology/skills, and policy.

In terms of financial impact, the type most commonly pursued by non-profits, there were statistically significant variations between organizations that have grown financially and those that have remained stagnant or have shrunk. These three attributes were revealed to matter the most:

Research and Design

Non-profits must be capable of not only gathering and interpreting data from their clients, but also using these findings to inform the design and implementation of their programs. This requires engaging key leaders in the organization in the analysis process and deciding upon metrics only after documenting client successes stories and results.

When formalized and institutionalized into an organization's performance management system, these research and design activities enable a non-profit to move from measuring outputs to measuring outcomes. As a result, non-profits that invest in research and design activities are almost two and a half times more likely than other organizations to grow faster than the rate of inflation.

Revenue Independence

Revenue dependence is inarguably one of the greatest barriers nonprofits face to scaling their operations. When non-profits rely on only a handful of organizations or customers for income, their ability to make strategic decisions and invest in critical infrastructure is limited by the restrictions that grantmakers may place on how funds can be spent. 

Non-profits can avoid these restrictions by generating diverse and sustainable revenue streams, which in turn allow an organization to refuse funding that comes with too many caveats. Diluting any one funder’s influence on program delivery can be achieved by acquiring numerous repeat donors or customers, while also solidifying sources of unrestricted revenue, such as individual donations and program fees. Non-profits can also achieve this independence by building an internal capacity to collect outcome data and then using this date to report on their achievements shortly after securing grants. 

Program Reliability

Non-profits also need to have quality assurance capabilities in place to ensure that their programs are being delivered consistently, regardless of location. This entails codifying their program model by documenting processes in operating manuals, and delivering consistent training on program delivery to both staff and volunteers. Once employees are trained, ensuring that program delivery is up to standard then requires incorporating program data and client results into staff assessments and performance measurement systems.

So what can grantmakers do to help non-profits develop these characteristics? While the report offers various suggestions and best practices, the overarching theme is that grantmakers can best support high-performing non-profits by providing funding that is flexible over the long term, and funding that supports investments in data and performance measurement.

This entails offering general operating support (unrestricted funding) as opposed to insisting on providing funding directly to a non-profit’s programs. While most grantmakers believe that placing limits on the use of their funds implies greater fiscal responsibility, in reality, such restrictions can significantly increase the challenge for organisations seeking to maximize the effectiveness of their allocation of resources. Providing general operating and multiyear support enables non-profits to invest in crucial technology and infrastructure that they could not otherwise secure, especially for those in the start-up phase.

In addition, while grantmakers are increasingly demanding that non-profits demonstrate their impact with metrics, few are willing to invest directly in the resources required to measure performance. Supporting these investments is critical, as is the willingness of grantmakers to interpret data that indicates weak performance as an opportunity for learning rather than an indication of failure. Embracing past failures may be common practice for traditional venture capitalists, but in the non-profit world, many grantmakers still fear it and view it as a predictor of future poor performance.  

My next post will identify the progress being made by the Canadian non-profit community to scale impact and support the activities above identified by GEO that make this possible.