Six Principles of Agencies and Nonprofits Built to Last

Governments and most NGOs and nonprofits are in it for the long, long haul. Yet most organizations today are not engineered to survive that long, long haul. What are the secrets of agencies and nonprofits built to last?

Many Organizations Face Shrinking Lifespans

In his TED talk, Martin Reeves states that publicly-traded businesses today have a life expectancy of 30 years. Many start-ups either fail or are acquired within just five years. The largest companies are not immune, either. According to Constellation Research, since 2000 more than half of the Fortune 500 companies have gone bankrupt, been acquired, or ceased to exist.

Governments endure in part because they have a continuing stream of revenue through taxation. But functions of government can come and go. Witness the federal departments of education, energy, and environmental protection in the U.S. Congress created these departments in the 1970s, making them relative newcomers to the federal cabinet. Today, politicians are proposing bills to shutter these agencies.

Data on nonprofit lifespans are hard to find. Some factors make it easier for nonprofits to stay in business compared to for-profit organizations. Exemption from some taxes helps. Donations and volunteer labor helps, too. However, barely hanging on through the kindness of strangers is no recipe for lasting long enough to realize your vision.

Organizations Need To Think Like Biologists

Reeves argues that organizations need biological thinking, not engineering thinking, to enjoy a long lifespan.  After all, biology is the business of life and death. Reeves uses the human immune system as a elegant example of six biological principles that benefit organizations:

  • Redundancy
  • Diversity
  • Modularity
  • Adaptation
  • Prudence
  • Embeddedness

Reeves labels these six principles biological thinking.

These concepts can be the opposite of organizational thinking today. For instance, redundancy plus diversity means you have lots of components, systems, and people. That’s the opposite of low-cost and efficient.

Interestingly, Reeves uses an example from Toyota to illustrate biological thinking. Toyota created Lean methodology, which is also called the Toyota way. Lean epitomizes the organizational logic of removing redundancy and inefficiency. As such, Toyota relied on a single supplier for brake valves. When a fired destroyed their brake valve supplier, all car production at Toyota stopped. This lack of redundancy in suppliers posed a major threat to Toyota’s production and revenues.

Five days later, Toyota was back building cars. They worked with other suppliers in their network to find new capacity to manufacture brake valves. To overcome their lack of redundancy, Toyota relied on the modularity of their product and their embeddedness in a network of suppliers to quickly recover.

Making Agencies and Nonprofits Built To Last

What are you doing to make your agency or nonprofit built to last? Here are points to consider:

  • Redundancy: Do you have a business recovery plan of disaster? Is all your vital data backed-up and secure? Are you developing new leaders to replace those who retire or leave?
  • Diversity: Are you too reliant on a single donor, geographic market, or government program? Are you developing multiple products and services to address the needs of your clients?
  • Modularity: Are you making the most of off-the-shelf products and solutions, or trying too hard to custom build everything yourself?
  • Adaptation: Do you have a clear business model and a method for actively reviewing and revising that model?
  • Prudence: Do you have adequate financial reserves? Are you meeting or beating benchmarks for finance and administration?
  • Embeddedness: How connected are you to your network of suppliers, donors, and volunteers? How do you participate in the broader community of public and social sector organizations?

In the short term, tackling any one of these questions will make your organization stronger. In the long term, using biological thinking helps your organization thrive and realize its vision.

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