A newly released report by the Social Impact Exchange reveals important findings and implications for nonprofits and funders alike. The State of Scaling Social Impact: Results of a National Study of Nonprofitsconfirms that even the most effective mission-driven nonprofit organizations are facing the daunting challenge of achieving widespread impact, unable to reach their full potential. Yet nonprofit leaders state that scaling impact is one of the most important activities to address the social problems they are working to solve. Out of more than 400 nonprofits who were part of the research, 79% say they are motivated to scale in order to increase the number of people served, while 58% are motivated to facilitate system change, demonstrating a movement towards more ambitious plans with longer horizons.
For the first time, the sector has detailed information about how practitioners view scaling, their motivations and readiness to grow, the strategies they are deploying to achieve scaled impact, and the challenges they face in moving forward with their plans. Chief among the challenges is nonprofits’ inability to secure sufficient capital for scaling. Only 24% of nonprofits contacted for the study have initiated growth capital campaigns and raised just an average of 17% of the funds needed. Individual donors represent the most common source of funding for scaling initiatives, with funds often coming from 10 or more donors. Nonprofits say that only 37% of their growth funding comes from government, the traditional source of capital for scaling.
“Data from the research reinforces the point that we lack an effective system for financing initiatives that are scaling,” says Cynthia W. Massarsky, vice president of the Social Impact Exchange and designer and co-author of the study. “The nonprofit sector has developed many promising solutions to our most intractable social problems – now we must continue to work together to build an efficient capital market system to spread those solutions so that millions can benefit.”
The research also reveals that securing funding to evaluate the impact of nonprofits’ work is another key challenge. Only 39% of nonprofits with plans to grow have evaluated the impact of their work, though this number is greater (54%) among larger organizations. “Relatively few nonprofits conduct rigorous, third-party evaluations,” says John F. Gillespie, managing director of Veris Consulting and co-author of the report. “If we need evidence-based solutions and if nonprofits are looking to create systemic change, we need to have more people in the industry willing to fund those studies.”
Nevertheless, nonprofits are heavily engaged in scaling impact and realize it takes a significant amount of visioning, evaluation, planning, and financing. They know it requires bringing in new management with the talent for handling an expansion plan, coupled with the understanding that implementing such a plan takes time. Yet, even though many have defined their strategies – most by expanding their audience or replicating their models – others are interested in learning more about specific strategies that will work best for them. One approach that has strong potential to help nonprofits scale the impact of their initiatives is the use of intermediaries. Intermediaries can play an important role in ensuring that funding is effectively invested and practices are in place to maximize the potential of the organizations.
In conducting this research among nonprofit leaders, the authors chose not to define ‘scaling impact’ but rather asked how they think about it. Sector leaders generally agree on a definition – that ultimately it is about helping more people in need. The initiatives they’re scaling are diverse – from childhood obesity programs, summer camps for foster youth, and affordable housing development in impoverished communities; to healthcare programs for the uninsured, life skills training for the formerly incarcerated, and literacy curricula for low-income adults.
To learn more, view the full report at www.siex.us/nonprofit-scaling-study.