Challenges and Opportunities Mark Growth Stage

Nonprofit Life Cycle

Nonprofit organizations, in general, follow a standard life cycle. Their first “baby” steps are usually followed by a growth period, which, hopefully, is far less eventful and stressful than the early years. This growth stage — commencing two or three years following “birth” and continuing until “maturation” (approximately at age seven) — also presents its own challenges. However, this period also coincides with a real sense of accomplishment, as well as opportunities to diversify, hire new staff, and attract new donors as the organization comes into its own.

This stage is also characterized by many of the not-for-profit’s administrative and operational systems becoming more formalized as the organization evolves.

Evolution of the Mission

A nonprofit may modify its mission during the growth stage when faced with a new set of circumstances — a concept that may not have even been considered at the time the organization was in its developmental stages. Changing demographics, economic shifts, or simply increased knowledge might necessitate a revision to the organization’s purpose.

An organization can concentrate more closely on a certain aspect of the original mission, or it may shift its focus to another area. The organization could, for the first time, develop a strategic plan to implement the changes to the mission. Such changes might be critical for the not-for-profit to remain relevant and viable.

Evolution of the Board

The most common milestone of a nonprofit in the growth stage is when the board of directors changes its focus from day-to-day operations to governance. Although the board will still be somewhat active in operations, it should begin to work on strategic matters such as the policies, planning and evaluations needed to stay on the path to sustainability.

The board’s composition will probably change during this time as the founding board members move on. The resulting board could be a larger and more inclusive group of individuals, preferably possessing a wider range of skills, talents and backgrounds. Motivated by their passion for the organization’s cause, former or current volunteers may join the board.

Boards can also establish committees during this period of time. It’s wise not to form too many committees — especially those concerned with operations. Some organizations use a three-committee structure, with committees only for internal affairs (for example, finance, HR and facilities), external affairs (for example, fundraising, PR and marketing) and governance.

Evolution of the Staff

As demand for services builds and the board expands programming, the need for additional staff will arise. Much like the board, the staff should expand during the growth stage so as to avoid getting burned out. A clear organizational hierarchy should be developed and experienced managers should be hired.

Additionally, at this juncture, formal job descriptions for staff should be defined along with greater job specialization. The not-for-profit’s employees will now be expected to work according to formal systems, and follow policies and procedures more efficiently than previous to, during and after the organization’s launch. The executive director usually remains the primary decision maker, although his or her time may be too limited to be involved in every area of the organization.

Evolution of the Finances

Growth-stage organizations, on the whole, generally enjoy a more comfortable financial position, due to less uncertainty. However, that uncertainty never completely disappears for the nonprofit.

Although nonprofits in the growth stage have established relationships with their main funders, there remain challenges in securing the needed funds to support current programming.  Therefore, nonprofits in this stage should look at various ways of maintaining growth — or, preferably, expanding — such as diversifying their revenue sources, managing cash flow and developing solid budgets. Working with financial advisors to identify, monitor and respond to appropriate financial measurements, such as cost per primary outcome, cash reserves and working capital will help.

Keep Calm and Carry On

An organization that’s reached the growth stage has overcome challenging hurdles, but would make a mistake in becoming complacent. Instead, the growth stage is time to leverage knowledge gained and experience even greater success.

© 2016

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