Leadership Insights: Scaling For Transformative Impact
Leadership Insights:Scaling forTransformative ImpactBy Shamal DassHead of Philanthropic ServicesApril 2017jbwere.com.au
Leadership Insights: Scaling for Transformative ImpactLeadership is not about a title or a designation.It’s about impact, influence and inspiration.Impact involves getting results.1We are lucky you and I. We are lucky because weserve in leadership positions in purpose-drivenorganisations and thus have the opportunity tohave an impact on things that matter to us – thingsthat are important for the broader community andsociety. But the price of this opportunity is that wemust honestly and continuously ask ourselves –are we having the right impact?Because impact is what matters at the end ofeach day – the activity undertaken and the outputsdelivered are irrelevant if they do not create lastingimpact for our beneficiaries – it is simply wastedmoney, time and energy. In our many conversationsand strategic consultations with clients throughoutthe last 12-18 months, it has become clear that thedelivery of impact is starting to take its rightful placeat the top of the agenda for non-profit boards andexecutives. To make the most of the opportunity weall have in front of us, we should always rememberthat whilst many use it as a noun, impact is in facta verb – it is a ‘doing’ word.This paper will recap the current non-profitlandscape, build a case for scaling around impactand provide a framework for Boards to think abouttheir own organisation and the options availableto them. And importantly, we will also explorethe critical role of the funder in deliveringmaximum impact.The current landscapeIn March last year, JBWere launched the CauseReport – an in-depth analysis of the long termtrends in growth and funding of the for-purposesector in Australia; providing a snapshot of howeach sub-sector, and the sector as a whole, lookstoday. The primary reason we produced this reportwas because in making strategic decisions, ourclients and colleagues – the leaders of for-purposeentities – needed to have a deeper understandingof the facts. In the context of this paper, the twomain challenges that became apparent werethose of scale and sustainability: Scale – the sector is very large and has grownsignificantly both in pure numbers but also incomparison to the economy. It can’t howevercontinue to grow quicker than the economy inperpetuity and as such we hope to see somemoderation in growth with the emergence ofthe ACNC, with the onus on the organisationsthemselves to deliver efficient outcomesand impact. Sustainability – the underlying issue with thelevel of growth is its lack of sustainability. Acrossthe sector as a whole, and generally within eachsub-sector (e.g. health, social services, artsand culture etc), the vast majority of assets andIdea in Brief T he Australian not-for-profit sector, like many internationally, is faced with fundamental issues regardingscale and sustainability. M any organisations, regardless of the excellent work they do, are not operating at a sufficient scaleto deliver transformative impact. L eaders of non-profits, particularly Board Directors, must deeply engage with their organisations and askthe hard questions regarding the real impact it is having – and consider if, and how, the initiatives shouldbe scaled. F unders must also thoughtfully consider how they can best support social enterprises through what theyactually need, specifically capacity funding, to create true lasting impact at scale.21Robin Sharma – leadership development author and consultant.
Leadership Insights: Scaling for Transformative Impactincome (92% on average) is controlled by a small numberof organisations (8%). This means a significant majorityof the sector does not have the scale to achieve any realimpact. And the real opportunity cost for society is twofold– the lost energy and effort of the individuals involved dueto the duplication of effort; and the lack of capacity toscale ideas that might make a real difference.The 2016 NFP Governance and Performance Study by theAustralian Institute of Company Directors (AICD) confirmsthat financial sustainability is the key issue challenging NFPDirectors. As a Treasurer and Director of a relatively youngsocial enterprise, I can certainly understand the focus onsustainability – however, it is interesting to observe that‘clarifying strategic direction’ was positioned third on the listof high priorities (28%), with ‘responding to changes in theexternal environment’ (40%) and ‘diversifying income sources’(30%), both ranked more highly.This focus on ‘financials’ and ‘changes to the externalenvironment’ are important. But what we find lacking in themultitude of discussions with Boards, is mission clarity. Notthe big, bold ‘light on the hill’ mission but rather what ProfessorKash Rangan, co-founder of the Social Enterprise Initiative atHarvard Business School, has termed the ‘operational mission’– it is the ‘by doing what exactly’ part of the mission statementwhich provides the strategic clarity to make clear, coherent andconsistent decisions. Mission clarity is critical in ensuring socialenterprises deliver quality social outcomes, and as such is afundamental pillar in a framework for scaling. Before we turnto that however, we will present a case for scaling.The case for scalingFirstly, let’s define scale and scaling so we have clarity on whatwe are trying to do. Scale is a mathematical term that refersessentially to the relative size of an object. More importantlyfor our purposes, scaling is a geometric term, borrowed bythe commercial sector, where it most commonly refers toreplication of a process, service or product in a new location,with as much conformity to the original as possible. Theexamples that leap to mind will be McDonald’s franchises,IKEA or Apple stores.In the for-purpose sector, scaling most commonly involvesimplementing an intervention at new sites, or expanding thecapacity of existing sites to serve more beneficiaries or clients(scaling by replication). However, the key difference in thefor-purpose sector is that scaling is not about market share,organisational and profit growth, but rather expanding impact– and this opens up many different strategic options andopportunities which will be explored in this paper.Before we move to the current landscape though, we will lookat the other challenge that is often mentioned when discussingthe for-purpose sector: innovation. With most organisationsfaced with finite resources, there is often a challenge tobalance scaling and innovation. This choice of investment isfurther skewed by a growing preponderance of funders (andnew social entrepreneurs) obsessing over innovation as thesilver bullet for many endemic social issues.In their recent (and excellent) contribution to the literature,Christian Seelos and Johanna Mair2, utilise four detailedcase studies to present a compelling framework thateffectively considers ‘innovation and scaling as processesover time’, where innovation is an investment and it is scalingthat creates impact from innovation (see Figure 1).Creating Social Impact: Innovation Plus VESTMENTFigure 1: Innovation and Scaling for Impact2I nnovation and Scaling for Impact: How effective Social Enterprises Do It (2017),Seelos and Mair, Stanford University Press.3
Leadership Insights: Scaling for Transformative ImpactInnovation, in and of itself, does not create impact – it createsan asset. It is the ‘ability and willingness of the organisationto work hard to standardize, routinize, fine-tune, andconstantly improve the new processes, products, servicesor interventions’ that creates impact.The authors also conclude that most organisations are bestserved by innovating in their ‘green zone’, that is, wherethe organisation has (1) a successful impact creation logic(similar to a proven theory of change); and (2) dynamics bywhich scaling further strengthens an organisation’s impactcreation logic. In short, the evidence says that organisationsshould stick to innovating where they have proven capacityand capability, rather than in significantly new and differentareas where they lack knowledge and skill. In this way, theorganisation continues to most effectively improve anddeliver better outcomes, whilst increasing scale.A framework for scalingMission clarityIn our ‘Measurement and Impact’ paper (2015) we exploredthe importance of the aforementioned ‘operational’ mission– that is, what is it that your organisation is specificallydoing, based on its strengths and resources, to address theproblem or issue? It is this level of clarity that delivers a deepunderstanding of the scale and scope of your organisation’sactivities.3 Only at this point can you measure what counts toensure you are creating the outcomes and impact that is thereason for your existence.3. ‘ No’ is not an option – because most, if not all, in the sectorcare very deeply, and are driven by compassion and love,making it very difficult to say no. Hence they continue to sayyes, leading to program proliferation and inefficiency.Downey goes on to articulate a seven step approach to gainmission clarity. Scaling is a strategic decision – its successrelies completely on mission clarity and clear goal setting.There are multiple strategies to achieve any single goal. Whenyou have the data and you know what works, and what youare exceptional at, then the appropriate strategy becomesmuch clearer. Thus, the first step to scaling is to ensure yourorganisation has mission clarity and a clearly articulatedpurpose.Scale and scopeBefore exploring scaling further it is worth taking a momentto reflect that delivering transformative impact5 is not justabout scaling, but rather it is about the confluence of scaleand scope. As part of the annual JBWere Social LeadershipProgram, Professor Rangan facilitates a full day program whichprovides insight into achieving transformative impact at scale.In these sessions he captures the available options to delivertransformative impact which are captured in figure 2.TRANSFORMATIVEIMPACTWe start this section with mission clarity because this is whatseparates your NFP leadership role from any commercial rolesyou might have. The imperative to deliver shareholder value inthe commercial sector, the mission if you will, provides a levelof strategic clarity that simply does not exist naturally in thefor-purpose sector.SCALExIn our roles, we have all witnessed mission creep or missionstretch. Mission creep occurs with the best of intentions andcompassion – but ultimately, it is an ineffective use of preciousresources and does little to address the underlying issue orcreate lasting impact in the lives of beneficiaries and clients.cbaSCOPE1. F unding – this applies to both large and small organisations.Larger organisations get asked or seek funding to runprograms that are associated with the broader mission,whereas small organisations stretch their mission to meetthe funder’s requirements to secure funding.Figure 2: Scale, Scope and Transformative Impact (Professor Kash Rangan,Harvard Business School Social Enterprise Initiative)34By ‘scope’ we mean range of activities being undertaken by an organisation.Mission Control – How nonprofits and Governments can focus, achieve more, andchange the world, Liana Downey (2016)54231In her book Mission Control,4 Liana Downey cites three keyreasons we see mission creep:2. Starting with the symptom, not the cause – most non-profitorganisations come into being to address a situation that thefounder feels strongly must be addressed. These organisationscontinue to grow and address symptoms, but only a few evolveto a size and level of maturity which allows them to address theroot cause of the social issue.zyBy ‘transformative impact’ we mean programs and interventions with proven,lasting and positive long term outcomes for the targeted beneficiary group.
Leadership Insights: Scaling for Transformative ImpactWhat figure 2 demonstrates is that there are many pathsto achieving transformative impact – some which involveexpanding scale before scope (x to y to z), others looking toexpand scope before scale (1 to 2 to 3) and combinations ofboth (a to b to c). What is important for a Board however isto have a robust discussion based on the desired purposeconsidering the strategic choices facing them in terms of scaleand scope – effectively they need to ask:1. Do we want to do:a. more in the same environment?b. replicate the same in more environments? orc. undertake complementary activities?2. Do we want to do it:a. by ourselves?b. with others? orc. through others?The answers to these questions will provide clarity onwhether your organisation should scale, and in fact howit should seek to scale – that is, the scaling model yourorganisation should adopt.Scaling ModelsSuccessful scaling is difficult. It is not an easy process. Itrequires a pragmatic and enabling leadership approach,sufficient resources, careful planning and a robustmeasurement and assessment framework.First and foremost, you must be convinced that the interventionor program you wish to scale has a robust evidence basethat supports a strong theory of change, which links theprogram inputs to the outcomes. Professor Rangan warnsthat scaling before you are ready carries significant risk, notjust to your organisation but for your beneficiaries. Importantly,your stakeholders, especially funders, need to be committedto the scaling process – ensuring that there is a sharedunderstanding of purpose, sustained commitment and supportto ensure the intervention is scaled in an appropriate mannerand evaluated for continual improvement.If scaling is clearly an appropriate strategy for an intervention,then the Board must understand and consider all of thescaling options so they can select the one that suits thatorganisation. Seelos and Johanna Mair,6 summarise thevarious scaling models available for social enterprises (seebox: Scaling Models).Scaling ModelsScaling through productivity increases: ongoing,relatively small improvements in the efficient use ofresources and productivity ion the core services beingdelivered. In effect this is about delivering greater impactfrom the available resources.Scaling through adding resources: the scaling ofcapacity through additional resources, be it staff,additional funds, additional income, or additionalinfrastructure. This model is ideally combined withproductivity increases to generate additional impactat scale.The addition of resources to unproductiveorganisations may not create any additional impact.Some organisations have grown to be vast andimpressive fundraising organisations, which wouldbe better served applying the same amount of effortinto improving productivity, as opposed to merelyincreasing the size of the organisation.Scaling through replication: organisations replicatea chosen program for different reasons. Usually thismodel is driven by expanding operations to a differentenvironment, or sometimes to keep operational unitsbelow a certain size for management reasons. Oftenreplication will involve going back to pilot mode toensure environmental differences are incorporated intothe program.Scaling through knowledge transfer: this is an indirectscaling model, where the organisation with the provenprogram may not be able to scale by replication itselfdue to resource scarcity. This approach to scalingrelies on engagement with third parties and onlycreates impact where the adopting organisation canintegrate the knowledge efficiently.An important distinction between the for-profit and for-purposesector is evident here – impact is about changes to society,not about your organisation. For instance, a proven effectiveway of scaling is allowing your ideas to be copied and adaptedto different settings by other organisations (i.e. scaling throughknowledge transfer) – just because something needs to bedone at a large scale, doesn’t mean the same organisationhas to do it all!Impact is about changes to society,not about your organisation.6I nnovation and Scaling for Impact: How effective Social Enterprises Do It (2017),Seelos and Mair, Stanford University Press.5
Leadership Insights: Scaling for Transformative Impactcontinuous learning and improvement; to inform any necessaryadjustments that need to be made. These adjustments arenot a sign of failure, because in many cases it might be verydifficult to anticipate all the nuances of the new location untilyou commence the intervention. This evaluation will producelearnings for future scaling strategies and to provide guidanceto others in the organisation. This should also be openlyutilised as an engagement opportunity with stakeholders andfunders – demonstrating the quality of the intervention andyour organisation.The challenge then lies with the Board to understand allthe potential options available – it isn’t a stark choice aboutdoing it yourself or merging with another organisation. Figure3 below articulates the available options in three spheres –collaboration, alliance, and strategic restructuring.7 As you cansee there are multitudes of ways in which your organisationmay be able to work with others and utilise your organisationskey strengths to deliver a leveraged impact. Of course, suchimportant decisions can only be made once you have clarityof purpose, clarity of strategy and a deep understanding ofyour own organisation and the broader sector within whichyou operate.Share everything you learn – good, and especially bad, bothacross your organisation and with those in your sector. Thoseworking in your sector are ultimately trying to achieve the sameoutcomes and impact that you are – everyone benefits if thoseorganisations that have had the courage and conviction to tryand scale, share their challenges, failures and successes.I will take a quick moment here to note the importance ofevaluation and knowledge sharing – two things all of us in thefor-purpose sector would benefit from.In addition to evaluating the intervention and measuring theoutcomes, the scaling process itself should be evaluated. Theevaluation of an implementation process will generally focus on CoordinatedActionNow, as I write, I can hear the thoughts going through yourmind as a leader in the sector – “that’s all good and well, but JointProgrammingFiscalSponsorship Joint Venture Corporation(Including MSOs)Join EarnedIncome VentureCollaborativeLearning COLLABORATIONAdministrativeConsolidation ALLIANCEParent-Subsidiary Structure AssociationAffinity Group STRATEGICRESTRUCTURINGMerger or Acquisition Consortium CoalitionJointAdvocacyNetworkFigure 3: Available partnership options for social enterprises76La Piana Consulting – NFP Merger Conference: Strategy for a Changing Sector(October 2015)
Leadership Insights: Scaling for Transformative Impactwhere are we going to get the resources to do all of this?”That is a very important question. There are the rare socialenterprises which have a fully self-funding model; althoughvery few of these operate at scale. The majority of for-purposeorganisations are beholden significantly, and in some casescompletely, to funders – be it government, corporate or privatephilanthropy. Each takes a different approach and oftenrequires different things from the organisation. Covering theapproaches taken by each of these funders, and how it mightevolve to support scaling is an entire thesis in and of itself, soin the next section we will concentrate primarily on the role ofprivate philanthropy in delivering transformative impact at scale.The Funder – what is good for thegoose is good for the ganderAs always, we turn our gaze to the funder and their frameworkfor achieving impact. If we accept that more can be achievedif for-purpose organisations achieve mission clarity and focuson specific goals and strategies, then quite clearly society isalso better served by funders who have clarity on what theyare seekin
effectively considers ‘innovation and scaling as processes over time’, where innovation is an investment and it is scaling that creates impact from innovation (see Figure 1). 2 Innovation and Scaling for Impact: How effective Social Enterprises Do It (2017), Seelos and Mair, Stanford University Press.
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