The Nonprofit Operations Guide: Early Stage Organizations / Start-Ups
Early stage organizations are often characterized as “entrepreneurial” and “scrappy” with a “can-do” attitude that tackles every new problem expecting to solve it through pure energy and determination.
Organizations that are early stage can face unique challenges in their operations. They should remain aware of the importance of early stage flexibility and autonomy, as well as the ways in which flexibility and autonomy are impacted by operational decisions to standardize.
While many organizations remain early stage for long periods of time, individual departments and programs can reach later stages of the lifecycle more quickly. Operational improvements for early stage organizations should focus on departments and programs that are ready to begin to standardize.
Definitions
A visual representation of operational or capacity maturity from startup to well-established
Decisions
We all know what a decision is, and we all make a million decisions every day. For this series, we are focused on big decisions that have operational consequences. These are the kinds of decisions that might result in a project, or a technology purchase, or a management initiative.
Decision Volatility Over Time
When something is new, you are in very fast feedback loops of making a decision, trying it out, and assessing its success, and you have a high probability of changing your mind.
As you start to figure out what works and what doesn’t, your feedback loops slow down a little bit, making room to consider standardizing and, later, efficiencies and scale. The types, volume, and operational consequences of big decisions change as you progress through the maturation process.
Early Stage
An organization that is still figuring out key aspects of its service delivery — including refining its strategy/mission, learning to react to the environment, and establishing the core ways it adds value to its community — is an early stage organization.
An early stage organization is also one that is critically reliant on the knowledge, expertise and energy of individuals, and optimized to react to new information quickly.
Organizational Lifecycle / Maturation Process
To endure, an organization must be able to survive the loss of key personnel. To thrive, an organization must be able to understand and consistently deliver on the key things that make it great. The organizational lifecycle is a way of thinking about the types of changes an organization undergoes as it moves away from exclusively individualized efforts toward more systemic and repeatable efforts.
As organizations figure out how to reduce errors in their execution, they can start to become more efficient. Efficiency requires consistency, and consistency reduces flexibility. Over time most organizations become more consistent and less flexible.
Organizational Maturity Model / Organizational Capacity Model
Every organization goes through a process of maturation that begins when the founder has an idea of what problem they want to solve and how they think they’re going to solve it.
While there are several models of the organizational lifecycle that are tailored for leadership, investors, entrepreneurs and others, at Deep Why we gravitate toward models that help our clients understand how their activities — and therefore their technology decisions — are reflective of their lifecycle stage.
We take this one step further and focus on the types and frequency of decisions that staff and leadership are typically making at different stages, to help tailor our operating model and operating system work in ways that will enable the client to thrive no matter where they are.
Are you Early Stage?
A highlight from the operational maturity graph showing only the Startup phase
We have met many organizations that have been around for more than 10 years but are still early stage. In the nonprofit sector, it is not at all uncommon for small and mid-sized organizations to exhibit the characteristics of early stage organizations for a very long time. These characteristics are all about individual effort and reacting to new information.
Your organization is early stage if you meet several of these characteristics:
Your founder or CEO is heavily involved in daily decisions about program delivery
Important information about donors, key relationships, and how day-to-day work gets done is stored in people’s heads and is not written down anywhere (or is in spreadsheets or documents that aren’t referenced by anyone but the owner)
You are frequently re-assessing big picture questions about your strategy and theory of change, and may even be refining ideas about who you’re serving and exactly what services you’re providing
You don’t have written processes, procedures, or how-to guides
You don’t have staff dedicated to management, or if you do, they are mostly dealing with crises and escalations rather than monitoring for quality or consistent execution
Everyone is in “emergency mode” most of the time, from senior leadership to line staff
Staff might describe themselves and the organization as “entrepreneurial” or “scrappy”
It’s difficult and time-consuming to provide data about program activities and you can’t easily identify the key data elements that indicate success.
You fear the loss of key personnel will negatively impact your ability to provide services or raise funds
You have not yet defined any metrics or measurements that are routinely used for program evaluation
A department or program can be early stage even if the broader organization is more mature. A department or program can be in a later stage even if the broader organization is early stage. And maturing organizations can be pushed back to early stage activities due to major changes in the environment, such as the loss of a supporting funder, a change in government policy, or anything that happens to threaten the alignment between the services your organization is providing and the needs of the community.
Considerations for Early Stage Operations
Understanding how early stage organizations are impacted in their strategy, operating model, and operating system can help an organization target their energy and efforts more deliberately to make improvements where they can, and cut themselves a little slack by understanding that they may be right where they’re meant to be.
Strategy and Environment
Early stage organizations are working in an entrepreneurial environment. Few activities are standardized or systematized. You are changing your mind a lot, sometimes about very fundamental things like your strategy or theory of change. Very early stage organizations simply lack the structural framework and typically lack the capacity — in time and energy, if not in budget — to execute on an operations improvement initiative or sustain and manage the results.
Most organizations that are more than a few years old are actually a mix of later stage and early stage, with some departments being more standardized or well documented than others. This is due to how quickly different parts of the organization can get to clarity and commitment in their big-picture goals.
Financial systems tend to mature fastest, because their goals are actually set by external laws and regulations and their processes are very well understood and largely the same no matter where they’re applied. Some programs may have funder requirements or are delivered through a national or affiliate model that defines exactly what the day-to-day activities are and how to measure them, allowing them to be concerned with later stage operations even when the broader organization is more early stage.
Operating Model
Because the ability to standardize is reliant on commitment and clarity of goals, it can be most effective to focus on functional areas (as opposed to the whole organization) for early stage operations work.
When any one department or program can afford the time and energy to write down their processes, agree on some standardization in those processes, and agree on some shared understanding of how they know over time that they’re doing a good job, then that department or program can begin to move out of over-reliance on individual knowledge and problem solving. This department or program has the capacity to construct a working operating model, so they can start improving their operating system.
Operating System
Funders who demand extensive data or metrics are a major pressure point for early stage organizations. Technologies that are purpose built to do fundraising or program management impose a set of processes and decisions on an organization.
Early stage organizations should understand that they can’t achieve efficiency until they’re able to commit to consistency, so their energy and effort is quite rightly put into using more flexible tools like spreadsheets and shared documents. These tools can very easily accommodate the individual efforts and need for changes characteristic of an early stage organization. Put another way, the potential for failure in bringing in the wrong technology too early far outweighs the time and energy you have to spend compiling reports from spreadsheets until you have the capacity to engage in the operating model work outlined above.
Similarly, early stage organizations have not yet defined and written down their processes because they’re still reacting to new information and rethinking how they do things.
It is important to name the stress that being an early stage organization places on its people, but also the incredible value that entrepreneurial problem solvers bring to early stage organizations. For an early stage organization, the pressure to standardize processes most often shows up when a key employee is leaving. While it’s stressful to lose a key employee at this stage, you can use the transition to document what the outgoing employee has been doing so that the next person to fill the vacant seat is better equipped to do what’s needed.
Myths about Early Stage Operations
Myth #1: Getting the right technology will fix our problems
All early stage organizations reach a point where they struggle with technology. In the beginning, off-the-shelf productivity tools like Google Apps usually work well enough because most of the day-to-day work is still being explored, revised, and improvised. Over time, these tools continue to do a great job supporting individual effort, but aren’t designed to enforce business decisions or generate reports. When they begin to feel pain from inconsistent data, many organizations invest in technology to solve their problems, and are often disappointed in their purchase.
Technology is nothing more than a tool that lets people do their work, only faster, more consistently, or both. If you don’t yet know exactly what you expect people to do, having them do it faster will not solve your problems and may make them worse. If you haven’t yet defined what consistency is, or how you’ll know when you’ve achieved it, technology is only of minimal use to you. To quote Bill Gates, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”
By definition, early stage organizations are still figuring things out. Investing in technology at this stage is likely unavoidable, but be prepared that your new technology can only reflect how well you understand and manage your processes.
Myth #2: Improving operations will save money
Every move toward consistency or efficiency requires an investment of time, energy, and (usually) money to enact the change, and an investment of time, energy, and money to maintain the results of that change. There are certainly times when taking a close look at processes exposes inefficiencies that can result in cost savings, but that is more common in later-stage organizations that have accumulated rules and technology over time that is no longer relevant. Early stage organizations typically haven’t had time to gather cobwebs, so there aren’t any to sweep away.
Early stage organizations are often surprised that it may cost them more than they’re currently spending to move away from highly individualized effort toward more structure and consistency. New technologies can bring efficiency, but they also have costs for setup and maintenance. Process improvement initiatives that lay the foundation for impact management will require people’s time and energy on an ongoing basis, and early stage organizations often make their first management hires for this reason.
Over time, this investment pays off in an improved ability to consistently gather and report on data, which is typically required to access large grants. It pays off in the ability to onboard new staff quickly and with confidence, so that you can serve more people while maintaining quality. But these things take time and don’t immediately result in cost savings. If you’re an early stage organization, think of an investment in operational improvement as just that — an investment that will grow over time, but may not yield dividends immediately.
Myth #3: We can jump directly from start-up to mature and sustainable with enough cash
There will always be significant pressure to move quickly from early stage to mature. However, you can’t skip the scale-up/maturation phase any more than you can become an adult without being a teenager first.
As an early stage organization, you are making foundational decisions about who you are and how you’ll know when you’ve succeeded. The next phase — maturation — comes after you’ve committed to those decisions. Maturation is when you actually test out whether it is sustainable to measure certain things, or ask people to enforce certain processes. Mature organizations know very clearly what they’re measuring, managing, and what their processes are, so they can focus on efficiency or decide to keep growing.
To try to skip from experimenting with strategy- and ecosystem-level questions directly to gaining efficiency or scaling means that you’re cutting out vital experimentation of what you should measure, what people can actually deliver reliably over time, what works to maintain quality and what doesn’t. You may develop management guidelines but won’t know how effective they are or if they’re managing the right activities.
So while you can certainly add people quickly in order to scale quickly, you can’t skip the part where you need to figure out how to manage those people beyond individualized contributions. If you add too many people before you know how you’ll manage them at scale, you will scramble to figure that out while risking burnout of your staff due to unclear roles and expectations, or service quality reduction due to a lack of proven supports.
All organizations will ultimately experiment with and decide what metrics and processes are required to manage at scale. If you are early stage, expect to spend some time on the maturation phase and know that you’re still experimenting for awhile.