The “Lean” Nonprofit

Ann Mei Cheng
Ann Mei Chang

Special to the Philanthropy Journal

By Ann Mei Chang

When I first introduce the notion of lean approaches to leaders in the social sector, I often hear barely suppressed snickering. After all, nonprofits know of nothing but lean, as they operate under excruciatingly tight budgets. Yet the usage of the term “lean” as coined by John Krafcik in his 1988 article, “Triumph of the Lean Production System,” and later expanded upon by The Lean Startup brings a subtly different connotation – the elimination of waste. Rather than “do more with less,” think “waste less to do more.” For manufacturing it means reducing production time and costs, for startups it means reducing risk by testing assumptions, and for nonprofits it means reducing societal ills by proactively seeking ways to deliver greater impact at greater scale.

The pressure for immediate results, stemming from a combination of pressing needs, limited resources, and impatient funders, can lead to a pernicious cycle of incrementalism. Few nonprofits believe they can carve out the time and energy to invest for the future. But in a world where problems continue to outpace solutions, we can ill afford to rest on our laurels.

Based on interviews with over 300 mission-driven leaders, Lean Impact distills three core principles for transformative change: think big, start small, and relentlessly seek impact. A new mindset, along with some practical tools, can help even small, low-resource organizations break out of a scarcity mentality.

  1. Think Big

Nonprofits tend to work within constraints: whether the dollars available, staff bandwidth, or the scope of a grant opportunity. Doubtless something positive can be done within existing resources, but it is rarely sufficient to make a sufficient dent on the problem at hand.

In contrast, the first principle for Lean Impact is to think big. Start with a long-term, measurable target for success based on the size of the need in the world. An audacious goal is the soil in which innovation can take root and thrive. It forces us to stretch, think outside the box, and take risks.

Now, embracing a big goal doesn’t mean an organization itself has to become big. Growing impact can look quite different from growing a business. Sometimes a market-based model makes sense. More often, scale may come through other avenues such as government adoption, policy change, or replication. A clear goal will force teams to reckon with whether the current path for growth is viable, or must become simpler, more cost effective, or more appealing to partners.

  1. Start Small

One reason it can seem daunting to take risks and innovate is that nonprofits are accustomed to taking big, deliberative steps. This should come as no surprise given funders typically require a detailed design that is faithfully executed. When we have a promising idea, we have an urge to plan it out and spread it wide.

But trying something new doesn’t necessarily require a big investment. All that planning could easily go to waste if things don’t work quite as expected – which is most of the time. By starting small we have the chance to try many different approaches, learn what works, improve what doesn’t, and save unnecessary time and money heading in the wrong direction.

Begin by identifying your biggest risks and assumptions, then run the smallest experiment possible (think days or at most weeks) to validate or invalidate them. The culture of encouragement across the social sector is both a source of strength and a critical weakness. Playing devil’s advocate might feel unsupportive. But, that’s how ideas get better.

In doing so, remember to test all three dimensions of a successful social innovation:

  • Value: Does this fill a deeply felt need for beneficiaries and key stakeholders? Will they not only want it, but demand it?
  • Impact: Does it work? Is the desired social benefit achieved to the degree necessary?
  • Growth: Will it scale? Is there an engine that will accelerate growth over time?
  1. Relentlessly Seek Impact

Despite being mission-driven, staying laser focused on impact is not as straightforward as it should be for nonprofits. Sadly, many pressures can distract from the true goal, whether the pressures of fundraising, pride of ownership, or the search for quick wins. Don’t forget to fall in love with your problem, not your solution.

One way to do so is to measure progress based on the metrics that matter. Leadership teams tend to look at aggregate measures such as the number of people reached or dollars raised. Such “vanity metrics” say little about whether the work is making things better, let alone doing more than other alternatives. Instead, track progress against the unit metrics for value, growth, and impact, such as adoption rate, success rate, and unit costs. Improved cost effectiveness matters more than mere reach.

Aim Higher

Companies are expected to not only deliver some profit, but to maximize shareholder value. In the same way, nonprofits must move beyond doing some good, to maximizing social impact and scale. To do so will require being more ambitious, taking measured risk, and investing for the long-term.

Ann Mei Chang is the author of Lean Impact: How to Innovate for Radically Greater Social Good. She served as the Chief Innovation Officer at both USAID and Mercy Corps. Prior to her pivot to social good, Ann Mei was a seasoned Silicon Valley executive, with more than 20 years’ experience at such leading companies as Google, Apple, and Intuit, as well as a number of startups.

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