Are social entrepreneurs too obsessed with scale?

There is a nice post on the Acumen Fund Blog recapping a panel discussion on scaling nonprofits at the recent NetImpact conference. The basic point of most of the panelists, it seems, was that not all that many nonprofits get very big and not many nonprofits achieve economies of scale where they can harness resources and implement programs more efficiently. The key line:

"“We need to talk about how we get foundations to stop giving inefficiently,” said Aaron [Hurst of the Taproot Foundation], who likened the multitude of nonprofits with similar missions to the hundreds of Chinese restaurants across New York City. “All the restaurants serve dumplings, lomein”…to be efficient, “they should all be one Panda Express.”

...His point in well taken.  The philanthropic sector could improve the net social impact by rewarding mergers and partnerships between nonprofits with similar competitive advantages who realize they could achieve economies of scale by working together."

I was just talking about in the context of a presentation on social entrepreneurship at a campusCatalyst class a few nights ago, and have a few thoughts.

1. There are good reasons why scale is hard for nonprofits

Most nonprofits and community organizations understand that local context matters. When you try to transplant a model from one place to another without going through the often time consuming democratic process of listening to and learning from the people you're trying to serve, even the best of programs flop. What's more, people want to be agents in their own change; as Paolo Freire might say, people want to create their destinies, not just be subject to someone else's vision for them, no matter what that vision is. For many nonprofits, this essential stakeholder engagement is one of the main impediments to scale.

That's the way it should be. The democratic organizing process is essential to civil society, and there are lots of great ways to improve efficiency without sacrificing it.

2. The greatest challenges to partnership tend to come from "upward" pressure, not a lack of "downward" understanding of complexity

By and large, nonprofits understand that problems are complex, and that one organization can't tackle everything. Whether that means understanding that fighting the AIDS pandemic means drug development, prevention education, contraception, treatment, and more, or understanding that community health and poverty are related issues, it forces us to recognize that whatever we're doing, its just one piece of the puzzle.

I believe that many times, even when nonprofits do recognize that they need (and have an opportunity) to partner with related pieces of whatever puzzle they're trying to solve, they feel immense upward pressure to think about where their next grant is coming from. If there are only so many AIDS funders in the room, and each institution has not only their social imperative but their institutional imperative to survive, it means pressure to stake a claim as the organization doing the best work. This is bad for nonprofits and bad for the world, so I completely agree with the above suggestion that foundations need to do more to reward partnership.

3. Do we need traditional institutional scaling at all?

The institutional forms rose in the industrial area around the difficulty of managing large pools of resources. Our foundation and nonprofit institutions mirrored those created to grow our economy. The times have changed, however, and internet technology is dramatically changing our ability to harness resources. This is the theme of Clay Shirky's wonderful "Here Comes Everybody: The Power of Organizing Without Organizations."

When it comes to scale, my question is why couldn't a lot of small nonprofits band together to achieve some of the same effect without losing their individual identities? Just like many small law firms come together to get better deals on office supplies, why couldn't nonprofits with similar inputs (whether its international flights, office space, material equipment, whatever) band together and use their group buying power to lower prices in return for the high volume of orders? Groups like The Point already offer the type of technology you'd need, someone just needs to organize it.

4. The Hull House model

One of the most important and illustrative models of a type of "scale" I think we should focus on is Jane Addams' Hull House. Jane Addams was a Progressive Era reformer who built the Hull House, one of the first settlement houses designed to offer social services to the urban poor.

As she became more and more refined in her approaches and convinced about her organizations model, she focused on scale. For her, however, that meant helping other socially concerned citizens found their own organizations with similar but locally appropriate models. She was far less concerned with franchising and branding the Hull House name, but cared that poor people in every city had access to the same quality of services with dignity that her organization offered. Indeed, when she wasn't building her own organization or helping other social entrepreneurs start theirs, she was writing about the relationship between philanthropy and a healthy democracy.

I believe that's a powerful approach.

If there is one overriding and fundamental difference between social and financial entrepreneurship it's this: our concern should not be solely the scale of our own organizations, but instead to the scale of the world's ability to solve the problem we're trying to solve. Our primary allegiance is not to institutions, but to impact.

I would love to hear responses from any one and everyone, but particularly from those who are immersed in the questions of scale and can offer a more experienced perspective.