Our organisations need to reach out in new directions to grow. But growing in too many directions pulls us out of shape.
When organisations need to change to survive (which they do), they reach out in new directions, growing new projects like tentacles, in search of new opportunities.
Equally, most organisations would like to reduce risk and increase sustainability by diversifying their sources of income. But because non-profit funding is typically focused on activity, and many funders only support new or ‘innovative’ activity, organisations wanting to diversify their income need to diversify their activities.
And diversifying activity can result in organisations becoming octopus-shaped, reaching out a tentacle towards this funding pot over here, reaching out another to that field of work over there.
For example, when I managed a volunteering programme, the city in which I worked developed a programme to invest millions of pounds in employability projects. It was very tempting to reach out a tentacle (i.e. a project) in that direction – we could evidence the links between our volunteering programme and people’s employability. But volunteering is also about people wanting to give something back to communities, to be among other people, or to maintain a level of health and fitness. If we grew a tentacle in each of these directions, seeking support from funders in the employability, community development and health sectors, we might grow for a time. But we would also risk spreading ourselves too thinly and diluting our core purpose. Long term we would probably regret stretching so far.
Over time as organisations grow organically in response to opportunities that come their way, organisational tentacles grow further apart from the body – and away from each other.
This leads to projects or services feeling separate from or forgotten by the organisation that hosts them, or organisations feeling they’ve lost ‘control’.
These aren’t necessarily bad things. Dispersed teams can generate a lot of learning and intelligence to help organisations adapt and respond to the complex world around them. But instead, teams often end up opposing or competing with each other (or the host organisation) because they are looking and moving in different directions. In the volunteering example above, a team focused on employability would have quite different goals and priorities to a team supporting community development.
One of the problems is that as the tentacles grow, the head and body get smaller. They might get smaller purely in proportion to the tentacles, or they might actually shrink because there is less funding available for core overhead costs like administration, management, personnel support etc.
One way or another, many organisations report having less capacity at the centre to manage and administer their increasingly diverse projects. There comes a time when this becomes unsustainable. That’s when organisations need to step back and review their core purpose, to pull in their tentacles. This is the most common strategy non-profits have taken in the years since the financial crisis in 2008. Sustainable organisations know what they do best, and they know what to let go of.
The Octopus paradox: Organisations need to reach out in new directions to grow. But growing in too many directions pulls them out of shape.
Principle: Diversified income does not necessarily mean reduced risk.
Practice: Focus on your organisation’s core purpose and structure.
This is an adapted excerpt from my new book, Making a Lasting Difference. Buy now