Most for-profit businesses rely on scale. Nonprofit business models struggle to achieve scale. Funders, deciding on the viability of their non-profit grantees, should ask the question. Is scale a precondition for long term sustainability? Should it be?

The issue is more poignant and pressing today than ever. The viability of many in the non-profit sector, the conceptual and capacity challenges to funders everywhere, the recognition that philanthropy can never be separated from public policy all converge to raise questions about whether the operative business models for non-profits of the last period of time can still be valid.

For the last couple of decades, the assumptions about non-profit viability has been heavily informed by b-school thinking. Funders of established organizations have pushed organizations to be less dependent on philanthropic giving and more on earned income as a measure of long-term viability. Start-ups are often rated by their likelihood of achieving disruptive scale.

Scale does matter: one needs look no further than the US embarrassment regarding COVID-19 testing. Literally millions of people have found it difficult to get tested – and when tested to get timely results. The inability to provide testing at scale has limited the ability of many in the USA to make safe and reasonable plans for their own behavior, and businesses, schools and communities have been handcuffed in knowing how or if to develop a new normal.

The same will be true when a genuine scientifically reliable vaccine or treatment becomes available. We will return to normal, whatever that will mean, only when they are available at scale.

The last 6 months have challenged those assumptions of what success should mean. Organizations that had built their business model around fees-for -service or government reimbursables have suffered greatly. The higher the percentage of reliance on those income sources, the harder it has hit. Organizations that relied more heavily on traditional grants and contributions had more reliable income, even if more variable than in “typical” years.

Moreover, as funders have become more committed to responding to a radically changed reality, many of us have frontloaded our giving, reduced our reporting requirements, and eliminated our restrictions. [How permanent those changes remains an open question – but for another time.] Locally/placed based grantmaking has resurfaced as a high priority for many, especially to direct service organizations.

What is evident in these changes is that scale can no longer be the primary driver.

Read the full article about scale and sustainability by c at Wise Philanthropy.