What is the typical lifecycle for a nonprofit organization?

Nonprofit organizations often are categorized by the phase in their lifecycle. This evolutionary pattern clarifies the organization’s capacity to deal with change, transitions, and crises. By understanding the kinds of challenges a young or a mature organization usually has to deal with, an organization may better learn how to overcome obstacles or even better prepare for them in a more constructive manner. The typical organizational lifecycle has five basic stages.

Startup. Many nonprofit organizations get started when a small group of people rallies around a common cause or a charismatic, visionary leader who can articulate what needs to be done and why. Read the histories of most nonprofits and you’ll find stories of conversations around kitchen tables, chance encounters, and phone calls across town or across the country, all of which galvanized a group into action.

A sense of haphazardness, even controlled chaos, may characterize some groups in their early days, as people roll up their sleeves and do whatever needs to be done to fulfill and advance the mission. Board members may have hands-on management responsibilities in addition to oversight responsibilities, because most startup organizations rely completely on volunteers to accomplish the work.

Adolescence. In time, processes and procedures develop to ensure consistency as the ranks of volunteers expand. The organization becomes a legal entity, a board of directors is chosen, and programs and projects are formalized in a budget. Recognizing that they can’t do it all, board members hire one staff member who, in turn, hires others. Revenues start to grow, and activities expand accordingly.

At this stage, it’s important for the board to remove itself from operational issues and focus on strategic planning and the organization’s long-term viability. It must put policies in place to provide stability to the organization as it experiences the highs and lows of the teenage years.

Adulthood. The organization grows in size, stature, and sophistication. Programs, procedures, and activities become formalized to the extent that staff, the board, constituents, and the public know what to expect from the organization. During this phase, organizations typically flourish they have hit their stride.

By adulthood, the chief executive and the board have developed a clear understanding of their respective roles. The board naturally takes on more oversight responsibilities and becomes more sophisticated and proficient in fundraising and self-evaluation.

Old age. In this stage, the organization begins to show the wear and tear of being around for a while. It may have difficulty attracting board members or charitable contributions, experience a decrease in people using its services or buying its products, and see an increase in staff turnover (often accompanied by a decrease in staff morale). The general lack of enthusiasm about the organization may carry over to the board, resulting in lower participation in meetings and a greater tendency to rubber stamp decisions.

Death. The organization stops moving forward and stalls out, followed by a precipitous decline and probable closure. This stage typically is characterized by a poor perception of the organization among the public, a chief executive who is unwilling to make significant changes, and a board that is merely going through the motions of governing.

It is critical to remember that each of these stages can last a few months, a few years, or for the organization’s entire existence. All five stages may never happen; some nonprofits skip a stage or two. It is perfectly acceptable for an organization to remain in one specific stage as long as it continues to pursue its mission and accomplish its desired work.

Combating Stagnation

If the board becomes too distant from its own responsibilities and the organization itself, stagnation may occur of ideas, priorities, initiatives, leadership, and so forth. This can happen at any point in the lifecycle.

At the point of stagnation, however, a cycle of renewal can begin. If an organization monitors itself carefully and makes a commitment to taking action, it is possible for it to renew the vision and goals, change the direction of the downward curve, and begin another cycle of growth and energy. These situations are not necessarily the result of poor board or staff leadership; often, the world simply has changed faster than the organization.

Staying on top of emerging trends and shifts in the external environment can help a board steer the organization through the inevitable waves of change. When the needs of the communities, clients, or members served by the organization change whether due to technological advances, world events, or socioeconomic developments the organization must be prepared and positioned to change to remain relevant. As strategic opportunities present themselves, your organization can reshape its products, benefits, and services accordingly, reinventing itself in the process. Then stagnation never sets in.

Although a natural part of the organizational lifecycle, renewal doesn’t happen by chance. It takes courage and a positive, realistic philosophy. Sometimes organizational renewal calls for drastic action for example, the dismissal of a chair who has served for twenty years or the release of the visionary founder who cannot see the need to change. Whatever it takes, it may be worth keeping the name, constituency, staff, and programs in place.

Is your organization due for renewal? That might be the case if it has already experienced the wobbly steps of infancy, the rapid growth associated with adolescence, and the stability of maturity. For example, if participation rates, revenue, staff turnover, and other important indicators are heading in the wrong direction, they signal the need for change for adopting a “more youthful” outlook on the organization and how its mission can be accomplished.

Still, not all nonprofit organizations experience every stage of the typical lifecycle, nor does each stage last a particular number of years. An organization can zoom from infancy through adolescence in less than one year, then begin a rapid descent to closure before ever reaching full maturity. Conversely, years may pass before an organization finds its financial and programmatic footing and begins to develop into a confident and mature adult. Being aware of which lifecycle stage your organization is currently in will help you identify areas for improvement and potential growth.

SUQQESTED ACTION STEPS

1. Board chair, distribute a summary of the organizational lifecycle to board members and ask them to identify the organization’s current location. Discuss the implications for governance.

2. Board members, identify the challenges inherent in the organization’s stage, and discuss how the board can help the organization respond.

3. Chief executive, possibly as a prelude to the strategic planning process, invite a futurist to a board meeting for a presentation on emerging trends and their implications for the organization.