Flip the calendar, start a new tax year. Double down on changing the world. That’s about the simplest New Year’s resolution for a social entrepreneur or nonprofit leader. Every January doesn’t require a new strategic plan. Sometimes you need to just keep things on track. But I’d still urge everyone who leads or supports a social enterprise in a major way to take a bit of time to re-examine the assumptions that underlay your definition of success.
For me, that’s going to start with vocabulary. I’m going to start with one word that makes virtually every powerpoint presentation, strategic planning document, and board retreat briefing book I’ve ever seen. It will appear in every hot nonprofit book title released this year, and will adorn every company’s plan for corporate social responsibility. Solo social entrepreneurs working in the philanthropic equivalent of the start-up garage will over-use it – and so will the heads of the world’s largest NGOs.
I speak of “scale.”
If there’s a single most over-used term in the social sector, this is it. Every business plan, every strategic plan, every five-year timeline talks about “reaching scale.” Usually, this simply means “size.” And that size is related to either a population, a geographic area, or a societal problem that “reaching scale” – aka size – will allow an enterprise to serve more completely. And let’s face it, size is really a euphemism for “budget” – which itself is just one click upstream from “fundraising.”
I’ve fallen victim to the blind pursuit of scale, and have found myself stranded on an endless and unattainable quest for a mythical philanthropic Valhalla. It’s not that scale is a bad concept; it’s that is endlessly misused. So here are five typical aspects of the scale conversation that I’m going to pay more attention to in 2013:
1. Scale doesn’t just mean gigantic. Great ideas are everywhere, exceeded only by the societal problems that need solving. But plenty of worthy nonprofits, start-ups, foundations, and social enterprises aren’t going to get to what the public commercial markets think of as scale. There will be very few Googles or Facebooks, and very few signs along the nonprofit freeway for “One billion served.” Small and impactful is fine. Changing lives in one town or city is great. Good work that is measurable – and fund-able – is the real Holy Grail, not getting to the status of Big-Ass Nonprofit Inc. So perhaps instead of thinking “big,” we should think “deep.”
2. Scale doesn’t always mean efficiency. Yeah, I know – there’s a guy on your board who works as the COO for a major multinational. His boss, the company’s founder, is in the Forbes 400. It’s all about efficiency for those guys. The bigger you get, the lower your cost-per-unit is. And the whole thing can be digital besides. They wrote it all down for you on a cocktail napkin at the holiday luncheon, right? Well, forget it. Yes, there will be a handful of social sector start-ups for whom vast efficiencies – ask their operational systems – are the special sauce. But in general, you’re not moving units. You’re serving human beings. You’re changing lives. You’re improving something. And quality matters. In my consulting work, I’ve counseled more than one nonprofit that grew more inefficient with scale – they added on programs based on opportunity until their mission became a jumble, and soon the year-to-year goal became more about preserving the institution instead moving the needle for the people it served.
3. Scale’s kissing cousin is fundraising. You can’t grow without funding. And unless I’ve missed something, the U.S. rate of supporting philanthropic ventures with donations has bobbed just south of two percent of GDP for about … well, forever really. Through good times, and bad times, and worse times. U.S. giving may be the highest in the world, but it’s steady. And social venture “investing” is still small as well, so even with a double bottom line, you’re looking at a potential capital pool that’s many times smaller than it is for a company making widgets, digital or otherwise. If you want to be the new Red Cross, you’re going to have to find a channel for raising tens of millions of dollars – even if your idea is the best in the world. Philanthropy and social enterprise are part of a marketplace. So remember, the sky is not the limit – there’s a ceiling up there. If you’re projecting “scale” in your strategic planning, keep those spreadsheets in the realm of reality. Gandalf’s not going to knock on your door.
4. Scale takes a long time. Like decades. Back in the 90s when I covered Internet start-ups, every founder seemed to have an “eBay of” plan – as in, “we’re going to be the eBay of pet supplies.” That was always closely followed by “….when we get to scale.” And sometimes, the combination of super-heated capital markets and well-executed ideas can indeed lead to the kind of overnight scale eBay represented. But I haven’t seen that in the social space – not even once. For nonprofits or social purpose companies, it takes longer – and for good reasons. For one, the main goal is to help people or change society – that’s both harder to accomplish and more difficult to measure than the sales of this year’s smart phone model. And for another, there is little institutional liquidity in the social capital marketplace – organizations rarely merge or acquire other organizations. What creates big hits quickly in the commercial world isn’t generally available ton nonprofits. So the real winners are the enterprises who stick it out, grow over time, weather the storm, and build a wider base of support.
5. Scale doesn’t guarantee real impact. Say what, you say? Surely, the larger and more widely accessed an organization’s services, the greater the impact, right? Not necessarily. That’s because impact is the slippery fish of the social sector. It’s too easy to be drawn into a one-dimensional measurement of success: straightforward metrics like poverty rates, homeless people on the streets, graduation rates, cure rates, and the like. And those standards are clearly important. But because the underlying reasons for those factors – aka the reasons why we’re measuring them in the first place – can be so manifold and multifaceted, it’s a challenge for every social enterprise to draw a true bead on the target of impact. That’s why a good social venture adjusts its measures over time – and resolutely closes down efforts that aren’t working, even while trying new solutions. The ground is always moving, after all. And the pursuit of quality should rate as highly as the race for size.
I’ll still speak often of scale in 2013 – to clients, in my writing and public speaking, and in my work. But I’m vowing here and now not to get caught up in its more mythical aspects. I’m giving those up this year. And it’s a lot easier than another new diet, anyway.