Friday, February 04, 2011

Pushback on Going to Scale

We're all so trendy. We follow the leader and often let someone else decide what we should do; what color tie/dress/shoes/suit we should wear, what jargon/slang we should use. What's in is SO important to us.

And I'm as guilty as anyone in following the trends-well, except in fashion, where my daughter and wife will tell you I'm hopeless.

That aside, the trend I want to push back on today is the far too common one from funders (foundations, corporations and governments) about funding only ideas that can be "taken to scale".

On the surface, and from the funders point of view, this makes eminent sense: if I fund one project in one city and it can be replicated elsewhere, I get more bang for the buck. The problem with this, as with so many ideas generated at the 30,000 foot level, comes on the ground. Nonprofits seeking funding are forced (implicitly or explicitly) to favor ideas that can work broadly. This causes them turn away from going after more customized solutions to local (and often unique) problems that can help their community.

Moreover, in seeking "models" that can be duplicated elsewhere, the 30,000 foot view forgets that no model is replicable without exactly the right people. What causes a program or solution to work in one place is a potpourri of the location, the issue, the people, the timing, the politics, even the geography. To assume you can just replicate the model elsewhere is...naive, and not borne out by experience. It takes a ton of work (and money)--and adjustment to the local situation on the ground.

Further, by taking funding that urges them to go to scale with their idea, nonprofits (and the funders) often forget the truth on the ground: In rapid growth situations, the two things that an organization most easily runs out of are quality and cash. If growth is the priority, what do you do, take your worst manager to open your new expanded facility or location? No, you take your best person--and in doing so remove that best person from what she's doing now--awesome, high quality mission.

And, in many organizations that have been beaten down by funders' focus on low administrative costs, there aren't more managers to just plug into program that your best manager just left. So the funder may well have first left the nonprofit under-administered and now wants it to grow. Hmmm.

Speaking of under-administered, let's get under-funding in terms of the cash cost of growth. This is huge, and, again, mostly under-appreciated by funders. The funding options I often see in the nonprofit world are for a one time grant, with the desired outcome of a scalable, replicable idea. If the idea "fails", no more funding.

What happens in the for-profit, venture capital world? A great idea gets an initial round of funding with several more rounds of financing as the business grows. Why? Because growth sucks up cash like a giant vacuum cleaner. And, venture capitalists know the idea will morph and change over time as implementation experience is added to the mix. There's no model, just the current situation on the ground. Nonprofit funders could learn a lot from embedding themselves in a VC firm for a year.

The bottom line for me is to be very, very careful when someone tells you to go to scale. Look at all the costs of taking the money: the stress on your current program, the potential loss of focus, the cash cost of growth, and look at it all before you obligate your organization.