Victims of Success: Reducing Complexity for Nonprofits

How nonprofit organizations can reduce complexity and increase their effectiveness by strategically choosing how to direct their efforts.

Many nonprofits are in trouble—and ironically, they may be victims of their own success. A 2004 survey of major U.S. nonprofits found that nearly 90 percent were experiencing some degree of fiscal distress, with 51 percent describing their distress as “severe.”

While the study blamed their financial problems on government budget cuts and the rising cost of employee benefits, we believe the deeper cause of their distress is the organizational complexity that’s grown up as nonprofits have met so many different needs and cultivated donors to support their ever-broadening missions.

To meet expanded mandates and service commitments, many nonprofits added capabilities and structure piecemeal, without considering the long-term implications of such ad hoc additions for their organization. At the same time, through a similarly improvised process, the piecemeal growth led to less focused and directed development programs as new marketing channels were created to reach donors to fund new services.

Fortunately, there is a solution. Executives in forprofit enterprises have struggled with similar issues of coping with scale for decades, and developed a number of techniques to mitigate this kind of creeping complexity. One of the best ways is through a technique we call Smart Customization. Although not well-known in the nonprofit world, we believe it can actually be adapted quite easily. But first, it’s worth examining the sources of complexity.

Booz Allen Hamilton's Andrew Clyde, Curt Bailey, and Karla Martin are the authors of "Victims of Success: Reducing Complexity for Nonprofits."

study posted August 30, 2006