The Nonprofit Lifecycle: A Model for Making Smart Decisions

All nonprofit organizations have natural lifecycles, from a grassroots idea to peak vitality to a turnaround (or termination). For decades, books and research have focused on the lifecycle process as a way to describe different organizational opportunities and challenges.

By charting the lifecycle of the organization, leaders gain a frame of reference that helps them move away from missed opportunities and personality clashes. A clear understanding of your organization’s lifecycle stage can help frame critical conversations, inform strategic decisions, and offer a starting point for capacity-building.

For instance, most organizations in transition – critical junctures in the lifecycle process – need a change in management strategy, and maybe even an intervention to understand how to navigate. One way to recognize you’re in a transition is if the organization feels especially chaotic and challenging. Lifecycle analysis can help by providing order, clarity, and a path forward.

In his classic Harvard Business Review article, “Evolution and Revolution as Organizations Grow,” Larry Greiner argues that “the future of an organization may be less determined by outside forces than it is by the organization’s history [and structure],” and that their growth reflects this. In her book Nonprofit Lifecycles: Stage-Based Wisdom for Nonprofit Capacity, Susan Kenny Stevens echoes Greiner’s sentiment that nonprofits operate and grow within predictable (though not always sequential) lifecycle stages. But where Greiner focuses on the deterministic aspects of life stages, Stevens illuminates its diagnostic value.

In GCN’s Nonprofit Consulting Group, we find both to be true: Lifecycle analysis is one of the diagnostic tools we use to help an organization understand its challenges and enable its success. Knowing where you are provides a lens through which the board and management can see the organization’s position in context, and a framework for more focused conversation and successful problem-solving.

A Guide to the Lifecycle Stages

Considering five organizational dimensions – programs, leadership, governance, financial resources, and administrative systems – one can gain an understanding of an organization’s life stage. Once identified, that information can be used as a starting point to build capacity in the most appropriate ways for your nonprofit.

Check out this chart for a visualization of the lifecycle process, and note the arrow that points back toward the early phases: All organizations can take steps when approaching the “terminal” end to build a path back to growth. GCN’s Nonprofit Consulting Group frequently deploys a strategic planning process with our clients to build the bridge back to “growth.”

In Nonprofit Lifecycles, Stevens describes seven distinct lifecycle stages.

Idea: A solution or vision for a community need has been identified and developed, though a formal organization has not been established and programs are not well-defined. In addition:

  • Supporters – service volunteers and funders – are heavily relied upon and are likely comprised of friends and family. 
  • Many groups do not move beyond the idea stage into the formal “start-up” stage. 
  • Most people use a “kitchen cabinet,” or small group of trusted friends, as advisors. 
  • This is the place for a feasibility study or a business plan to determine viability and start-up steps.

Start-Up: Marked by high energy, limited funding, and a newly acquired 501c3 status, start-ups are out to prove their business case by experimenting with program design. In addition:

  • Start-ups are typically led by a technical expert, with a board comprised of close friends and trusted colleagues. 
  • There is always more work than people in this stage, meaning everyone does everything: Think a hands-on, working board that’s very engaged in doing, rather than governing. 
  • This is the place for a business plan, with annual implementation plans and a strong fundraising plan focused on implementation. 
  • Transitioning out of this phase requires a strategic plan to address growth, personnel and position descriptions, governance transition (from a working board to a governing board), and a strong focus on fundraising to secure the money needed.

Growth: As the organization hits its stride, becoming a growth-stage operation, it focuses on standardizing and deepening programs to meet the needs of its constituents, as well as formalizing its structure and processes to ensure organizational vitality. Growth always outpaces capacity, systems, and cash, so keep in mind:

  • Communication can be an issue at this stage, as everyone can no longer know everything.
  • Growth sees people seeking either formal policies and procedures that are written out explicitly or new ways of doing business. 
  • This phase requires a strategic plan that focuses on governance, capacity, development, and systems. 
  • When reaching this phase, a CEO must change their style and up their skill level.
  • Cash flow can be a challenge, prompting the need for larger, multi-year grants or contracts.

Maturity: Mature organizations have a reputation among their constituents. They have established formal organizational structures and processes, managed by an executive leader and led by a governing board of directors. Programs are outcomes-based and are aligned with the strategic plan. Funding is diversified and supports the organization’s needs. The CEO is often getting more involved in external community relations, including major donor fundraising. 

This can be a happy place, but complacency must be avoided: 

  • Things work, systems are in place, and people know their jobs – however, they often begin the process of creating the problems found in the next phase. 
  • This transition calls for policies and procedures to be followed, and more upgrades in software for HR, data collection, development, and more. 
  • Organizations can get too set in their ways, developing silos, becoming rigid in their policies, and putting a stop to risk-taking. 
  • Though the board is governing, they may also be feeling more set in their ways and more limited in their sense of engagement.
  • In the early part of this stage, organizations need a strategic plan that focuses on managing the organization and deepening programs. In the latter part, it must examine options for changing up programs and integrating people, programs, and money. 

Decline: Organizations in decline have settled into a prescribed way of doing things, subtly losing touch with clients and resisting the programmatic adaptations necessary to meet changing community needs. The formal systems and budgets that once spurred growth now hinder evolution. In particular: 

  • Decline often sets in through genuine or willful ignorance among leaders. This is the organization where the CEO may “retire in place,” and the board comes to meetings complacent and unengaged. 
  • Those that love the way things have always been done may be happy, but those asking questions probably do not stay long; this applies to the board as well, where a member who starts asking tough questions may be ostracized rather than listened to. 
  • Organizations in this stage need an organizational assessment and a crisis plan, or recommendations for changes in leadership, board, and programs. 
  • Those in charge will need to recognize and address the organization’s problems, and then build a crisis plan for addressing the issues.

Turnaround: This pivotal stage finds organizations in the process of regaining the market. Strong leadership and a committed board lead the restoration, in which programs are redesigned to meet community and constituent needs, budgets are cut to meet cash flow demands, and formal processes are simplified to enable the transformation. As the bridge back to “growth,” this stage often involves: 

  • The crisis plan referenced above, which helps define the bridge and determine how to cross it. 
  • A subsequent plan that repositions the organization for growth at the end of the bridge.
  • A chief executive who is willing to do very tough things with the organization, up to and including replacing the existing chief executive (themselves) with a new or interim leader. 
  • A board ready to work closely with the chief executive and follow a turnaround plan that will inevitably cause waves, disrupting the organization’s culture and people.

Terminal: When an organization has declined too far, a turnaround is unsuccessful, or a start-up never finds its place, an organization enters the terminal stage. Once leadership has lost interest and motivation, and funding and staff have dwindled, this organization faces three options: closing, merging, or giving programs to another nonprofit. Often, the board (with a limited number of members remaining) is left to keep the organization alive through the decision-making process. To keep in mind: 

  • This stage requires an organizational assessment to frame the options and make recommendations to the board.
  • Options might include a “soft” or “hard” close. 
  • It is best to take action prior to a forced bankruptcy.

Understanding Your Stage and What’s Next

GCN’s Nonprofit Consulting Group has extensive experience working with nonprofits to determine lifecycle stages, plan effective next steps, and assist in taking action. (We even developed a short quiz as a way to assess your organization yourself: You can take the five-question lifecycle state assessment now.)

In our work, we often find that when an organization is experiencing internal conflict, this framework can help redirect the conversation by focusing strategic issues, defining opportunity, and illuminating your organization’s “normal.” Try out a dialogue about nonprofit lifecycle stages among your colleagues – we’ll look forward to helping you advance that discussion.

Contact Us

Find out more about the nonprofit lifecycle, and what it means for your organization, by contacting GCN’s Nonprofit Consulting Group at consulting@gcn.org or 678-916-3082.

Kathy Keeley is the former executive vice president of programs at GCN, and a former senior consultant in GCN’s Nonprofit Consulting Group.

Tommy Pearce is the ED of Neighborhood Nexus and a former consultant in GCN’s Nonprofit Consulting Group.

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