Similar to human development, there are stages through which an organization passes with foreseeable features and characteristics. Although the borders between stages are often blurred, a nonprofit must navigate the transitions from one stage to another.
In this article I will define the stages and basic distinctions. In follow on articles I plan to discuss the stage differences more specifically. The stages are:
start-up stage ( to begin)
- adolescent stage ( to grow)
- mature stage ( to sustain)
- stagnant stage ( to renew)
- defunct stage ( to dissolve)
The Start-Up Stage: A start-up may function in the beginning as an all volunteer organization, with a lot of passion and a strong mission. They may attract equally motivated friends from their network who fund the work almost independently of grants, fundraising, etc. The new chief executive in this environment has a fine line to walk. He/She must give the organization structure (hiring staff, job descriptions, personnel policies, etc.), but be distracted by the habits of founder and loyal followers who have a difficult time giving up control. Not all nonprofits go through every stage. Start-ups may not even get off the ground, while others may jump right to adolescence. Keep in mind that the predominant determinant of the lifecycle phase is the capacity of a nonprofit to achieve its mission through delivery of effective programs.
The Adolescent Stage: A nonprofit is ready for the adolescent stage when it is effectively delivering core programs. This is accomplished by building leadership capacity (a strong Board with mission, vision, and strategies identified ), then management capacity ( paid and qualified staff) and technical capacity ( increasing the breadth of service delivery with respect to the numbers served and quantity of programs and services offered per client).The chief executive and staff may still struggle for control at this stage. I know of one nonprofit where a family member of the Board does the audit and another Board member writes small grants when the chief executive is a professional grant writer. It is important, at this stage, to remember that the visionary founder of the start-up is often not the best choice for a management position.
The Mature Stage: As a nonprofit enters maturity, the Board typically further reduces its operational role and increases its policy, oversight, and fundraising functions. For a typical nonprofit this will normally occur sometime after five or six years in operation. The chief executive must be able to successfully manage a trained staff, manage complex finances, and communicate the organization’s vision and inspire staff with it. A capacity to adapt will enable the nonprofit to consistently improve the quantity and quality of programs and services, and to develop the resources to support them.
The Stagnant Stage: The clearest indication of a nonprofit’s slip into stagnancy is when it loses it’s capacity to adapt. This can happen for many reasons: for example, troubles with the board or with executive leadership. Board members may lose enthusiasm and fail to participate, and/or programs stagnate, or the audience changes, or funding is curtailed. The stage of stagnation can occur at any developmental stage of the lifecycle. It is time to renew vigilance and be reflective about what worked and didn’t work, so that the nonprofit either survives or is dissolved.
The Defunct Stage: There are responsibilities that go with dissolving a nonprofit. The organization still needs adaptive capacity to wind down operations responsibly. Appropriate staff members will need to assess the needs of remaining clients, refer them to other organizations. The organization has obligations to staff, to creditors, to founders, and to keeping the public’s trust. Organizational leaders need to be strategic in shifting remaining resources to other nonprofits.
The lifecycle of organizations and the required capacity building are complex subjects. I am indebted to the BoardSource publication,’ Navigating the Organizational Lifecycle’ for insight into these subjects.