Creating High-Impact Nonprofits

In fewer than two decades, Teach for America has gone from a struggling start-up to a powerful force for education
reform in the United States. Launched in 1989 by college
senior Wendy Kopp on a shoestring budget in a borrowed office,
the organization now attracts many of the country’s best and
brightest college graduates, who spend two years teaching in
America’s neediest public schools in exchange for a modest salary.
In the last decade alone, Teach for America has more than quintupled
in size, growing its budget from $10 million to $70 million
and its number of teachers from 500 to 4,400. And it aims to double
in size again in the next few years.¹

But rapid growth is only part of New York-based Teach for
America’s story. Although its success can be measured by such tangibles
as the number of teachers it places or the amount of money
it raises, perhaps the organization’s most significant accomplishment
is the movement for education reform it has created. Although
some education leaders are critical of the nonprofit’s teacher-training program, and how long these teachers stay in the classroom,
using such measures misses the larger, intangible impact the
organization has had. Teach for America has challenged how
many Americans think about teacher credentialing, shaken up
the education establishment, and, most important, created a
committed vanguard of education reformers.

Teach for America has been so effective that it is now the
recruiter of choice on many Ivy League campuses, often outcompeting
elite firms like McKinsey & Company.² Graduates
who went through the program in the 1990s are now launching
charter schools, running for political office, managing foundations,
and working as school principals across the country. In
these capacities, they can effect change at the systemic level –
not just child by child or classroom by classroom, but at the
school, district, and state levels.

How has Teach for America accomplished so much in such
a relatively short period of time? And how have other similarly
successful nonprofits had such significant social impact? Our
answers to this second question are the subject of this article
and the focus of our forthcoming book, Forces for Good: The Six Practices of High-Impact Nonprofits (Jossey-Bass, October 2007).

We grounded our findings in several years of research on
12 of the most successful nonprofits in recent U.S. history,
including the well-known (Habitat for Humanity), the less wellknown
(Self-Help), and the surprising (the Exploratorium).
One nonprofit, Environmental Defense, has helped reduce
acid rain in the northeastern United States and created new solutions
to global warming. Another, City Year, has
helped thousands of young people serve their country
and changed how we think about volunteerism.
Collectively, these high-impact nonprofits have
pressed corporations to adopt sustainable business
practices and mobilized citizens to act on such issues
as hunger, education reform, and the environment.

What we discovered after closely examining
these 12 high-impact nonprofits came as a bit of a
surprise. We had assumed that there was something
inherent in these organizations that helped
them have great impact – and that their success was directly tied
to their growth or management approach. Instead, we learned
that becoming a high-impact nonprofit is not just about building
a great organization and then expanding it to reach more
people. Rather, high-impact nonprofits work with and through
organizations and individuals outside themselves to create more
impact than they ever could have achieved alone. They build
social movements and fields; they transform business, government,
other nonprofits, and individuals; and they change
the world around them.

Myths of Nonprofit Management

We first examined the 12 organizations through the lens of traditional
nonprofit management, studying their leadership, governance,
strategies, programs, fundraising, and marketing. (See
p. 40 for details on how we selected and studied these nonprofits.)
We thought we would find that their success was due to timetested
management habits like brilliant marketing, well-tuned
operations, or rigorously developed strategic plans.

But instead what we found flew in the face of conventional
wisdom. Achieving high impact is not just about building a great
organization and then scaling it up site by site, or dollar by dollar.
As we got further into our research, we saw that many commonly
held beliefs about what makes nonprofits successful
were falling by the wayside. In fact, the vast majority of nonprofit
literature focuses on issues that, although important,
don’t determine whether an organization has impact, such as:

Myth #1: Perfect Management. Some of the organizations
we studied are not exemplary models of generally accepted
management principles. Although adequate management is
necessary, it is not sufficient for creating significant social impact.

Myth #2: Brand-Name Awareness. A handful of groups
we studied are household names, but a few hardly focus on marketing
at all. For some, traditional mass marketing is a critical
part of their impact strategy; for others, it’s unimportant.

Myth #3: A Breakthrough New Idea. Although some
groups come up with radical innovations, others take old ideas
and tweak them until they achieve success.

Myth #4: Textbook Mission Statements. All of these
nonprofits look to compelling missions, visions, and shared
values. But only a few of these groups spend time fine-tuning
their mission statement on paper; most of them are too busy
living it.

Myth #5: High Ratings on Conventional Metrics.When
we looked at traditional measures of nonprofit efficiency, many
of these groups didn’t score well, because they don’t adhere to
misleading metrics such as overhead ratios.

Myth #6: Large Budgets.We discovered that size doesn’t
correlate with impact. Some of these nonprofits have made
a big impact with large budgets; others have achieved similar
impact with much smaller budgets.
As we dismissed the conventional wisdom about what
makes high-impact nonprofits successful, we realized we had
discovered a new way of understanding this sector – and what
enables the best nonprofits to create lasting social change.³

Six Practices of High-Impact Nonprofits

The secret to their success lies in how high-impact nonprofits
mobilize every sector of society – government, business, nonprofits,
and the public – to be a force for good. In other words,
greatness has more to do with how nonprofits work outside the
boundaries of their organizations than with how they manage
their own internal operations. The high-impact nonprofits we
studied are satisfied with building a “good enough” organization
and then focusing their energy externally to catalyze largescale
change.

To paraphrase Archimedes, “Give me a lever long enough
and I alone can move the world.” These groups use the power
of leverage to create change. In physics, leverage is defined as
the mechanical advantage gained from using a lever. In business,
it means using a proportionately small initial investment to
gain a high return. The concept of leverage captures exactly what
high-impact nonprofits do. Like a man lifting a boulder three
times his weight with a lever and fulcrum, these nonprofits are
able to achieve greater social change than their mere size or structure
would suggest.

After a long process of studying these 12 nonprofits, we
began to see patterns in the ways they work. In the end, six patterns
crystallized into the form presented here – the six practices
that high-impact nonprofits use to achieve extraordinary impact:

1. Serve and Advocate: High-impact organizations may
start out providing great programs, but they eventually realize
that they cannot achieve large-scale social change through service
delivery alone. So they add policy advocacy to acquire
government resources and to change legislation. Other nonprofits
start out by doing advocacy and later add grassroots programs
to supercharge their strategy.

Ultimately, all high-impact organizations bridge the divide
between service and advocacy. They become good at both.
And the more they serve and advocate, the more they achieve
impact. A nonprofit’s grassroots work helps inform its policy
advocacy, making legislation more relevant. And advocacy at the
national level can help a nonprofit replicate its model, gain
credibility, and acquire funding for expansion.⁴

The nonprofit Self-Help, based in Durham, N.C., presents
an excellent example of how combining advocacy with service
can result in greater impact. Self-Help began by giving home
loans to clients – often poor, minority single mothers – who
did not qualify for traditional mortgages. Although its services
helped thousands of low-income families purchase a house,
Self-Help’s work was soon undermined by predatory lenders,
which took advantage of vulnerable borrowers by adding
excessive fees or charging exorbitant mortgage rates, virtually
ensuring that the borrower would default.

Eventually, Self-Help organized a statewide coalition in
North Carolina and lobbied to pass the first anti-predatory lending
law in the country. Later, the organization established the
subsidiary Center for Responsible Lending to help local nonprofits pass
similar legislation in 22 additional states. Through its direct services,
Self-Help has given more than $4.5 billion in home
loans to low-income families in the United States. But through
its advocacy efforts, it has created far more value for the country’s
most vulnerable populations by protecting them from
predatory lenders.

In nearly every case we studied, the nonprofit combined
direct service programs and advocacy to enhance its impact
over time. Some groups, like America’s Second Harvest and
Habitat for Humanity, began by providing services, such as
feeding the hungry or housing the poor, and added advocacy
only after a decade or more. Other groups, like the Center on
Budget and Policy Priorities, the Heritage Foundation, and
Environmental Defense, began with advocacy and later added
grassroots programs or services to expand their impact to
the local and state level. Some groups, like City Year and the
National Council of La Raza, did both from the outset, despite
pressure to specialize, and recognized early that advocacy and
service reinforce each other.

2. Make Markets Work: High-impact nonprofits have
learned that tapping into the power of self-interest and the laws
of economics is far more effective than appealing to pure altruism.
No longer content to rely on traditional notions of charity,
or to see business as an enemy,
these nonprofits find ways to
work with markets and help
companies “do good while doing
well.” They influence business
practices, build corporate partnerships,
and develop earnedincome
ventures to achieve social
change on a grander scale.⁵

Environmental Defense was
one of the first nonprofits to
realize the power of harnessing
market forces for social change.
The New York-based organization
was founded in the late
1960s by a group of scientists
who lobbied to ban the use of
DDT, and its informal motto for
years was “sue the bastards.”
Over time, however, the nonprofit
became known for a different
– and initially more radical
– approach: working with corporations to change their
business processes and become more sustainable.

For example, even though other green groups criticized
Environmental Defense for “selling out” at the time, the nonprofit
worked with McDonald’s in the 1980s to make the fastfood
giant’s packaging more environmentally sound. Since
then, Environmental Defense has worked with hundreds of
companies – from FedEx to Wal-Mart Stores – often scaling
its innovations to change practices in an entire industry.
Although these partnerships are becoming more common
among environmental groups, Environmental Defense was an
early pioneer in this area.

But Environmental Defense didn’t just set out to change businesses’
behavior. It went a step further, harnessing market
forces to help solve larger environmental problems. Environmental
Defense has been a strong proponent of market-based
systems to control pollution, such as “cap and trade,” which
establishes overall emission limits (on carbon, for example),
and then creates economic incentives for companies to comply
and reduce their emissions. Cap and trade systems helped
reduce acid rain in the northeast United States and have become
an important tool in the effort to fight global warming. In fact,
this approach led to the passage of California’s Global Warming
Solutions Act of 2006, the first statewide legislation of its
kind and a model for more stringent federal emissions controls.

We found three primary ways in which high-impact nonprofits
use markets. They help change business behavior on a
large scale, as did Environmental Defense. Self-Help also followed
this path, creating a secondary loan market and expanding its
innovative lending models
through mainstream financial
players such as Wachovia and
Fannie Mae, thereby changing
the industry’s practices and helping
large companies reach historically
underserved markets.

Nonprofits also leverage
markets by partnering with corporations
to garner additional
resources for their cause, as have
America’s Second Harvest, City
Year, and Habitat for Humanity.
All three have established large
corporate partnerships through
which they obtain funding,
media relations, marketing support,
and in-kind donations.

Some nonprofits run their
own small businesses, generating
income that helps fund their
programs. Share Our Strength,
for instance, runs a nonprofit consulting business called Community
Wealth Ventures, whose revenue it redeploys toward
its social mission.

3. Inspire Evangelists: High-impact nonprofits build
strong communities of supporters who help them achieve their
larger goals. They value volunteers, donors, and advisers not only
for their time, money, and guidance, but also for their evangelism.
To inspire supporters’ commitment, these nonprofits create
emotional experiences that help connect supporters to the
group’s mission and core values. These experiences convert outsiders
to evangelists, who in turn recruit others in viral marketing
at its finest. High-impact nonprofits then nurture and sustain
these communities of supporters over time, recognizing that
they are not just means, but ends in themselves.⁶

Habitat for Humanity, located in Americus, Ga., exemplifies
this ability to create a larger community and inspire
evangelists for its cause. As founder Millard Fuller has said,
he didn’t set out to create an organization so much as a social
movement. From the outset, the nonprofit spread its model
through local church congregations and word of mouth,
building its brand from the grassroots up. That model includes
enlisting supporters in the very core of its work: building
homes for the poor. Participants work alongside the future
residents of the home, and in the process live out their values
while becoming advocates for the housing cause. These
evangelists, in turn, recruit their friends and colleagues,
expanding the circle of supporters outward.

In addition, Habitat for Humanity attracts what we call “super-evangelists” like former President Jimmy Carter – people
who by virtue of their personal accomplishments, famous
names, and vast social networks can help take a nonprofit to the
next level. By serving on the board and as a spokesperson for
the organization, Carter helped propel it from a grassroots
nonprofit to a global force for change.

Not all of the high-impact nonprofits we studied had an organizational
model that makes involving supporters easy. Yet
almost all of them found creative ways to convert core supporters
to evangelists and to mobilize super-evangelists.

4. Nurture Nonprofit Networks: Although most nonprofits
pay lip service to collaboration, many of them really see
other groups as competition for scarce resources. But highimpact
organizations help their peers succeed, building networks
of nonprofit allies and devoting remarkable time and energy to
advancing their fields. They freely share wealth, expertise, talent,
and power with other nonprofits not because they are
saints, but because it’s in their self-interest to do so.⁷

The Heritage Foundation exemplifies this network mind-set.
From its founding, this Washington, D.C.-based organization
defied the traditional notion of a think tank. The foundation
sought not only to cultivate a broad membership base, but
also to infuse conservativism into mainstream thought. To
achieve its goals, Heritage realized that it needed to build a movement,
not just an organization. And so the foundation helped
to seed and galvanize a vast network of conservative organizations
at the local, state, and national levels.

Today, Heritage’s Resource Bank – a network of state and
local nonprofits – includes more than 2,000 member organizations.
The Heritage Foundation helps leaders of these state
and local nonprofits raise money and freely shares its donor list
with like-minded groups. It also offers extensive programs to
train non-Heritage policy analysts on everything from conservative
strategies to public speaking skills. And Heritage cultivates
talent – not only for its own organization, but also for other leading
conservative groups – by offering a prestigious internship
program and job-placement service for its young acolytes. The
nonprofit also frequently works in coalitions to promote conservative
policy and to pass legislation. Rather than seeing
other conservative organizations as competitors, Heritage has
helped build a much larger conservative movement over the last
two decades, serving as a critical connector in this growing
network of like-minded peers.

Other high-impact nonprofits harness the power of networks.
In some cases, they formalize their networks through
an affiliation structure, such as YouthBuild USA or America’s
Second Harvest. In other cases, they keep their networks less
formal and operate without official brand or funding ties,
such as the Center on Budget and Policy Priorities or the
Exploratorium.

Regardless of whether they have formal or informal affiliates,
all of these nonprofits help build their respective fields through
collaboration rather than competition. They share financial
resources and help other nonprofits succeed at fundraising.
They give away their model and proprietary information in an
open-source approach. They cultivate leadership and talent for
their larger network, rather than hoarding the best people. And
they work in coalitions to influence legislation or conduct grassroots
advocacy campaigns, without worrying too much about
which organization gets the credit. These nonprofits recognize
that they are more powerful together than alone, and that largescale
social change often requires collaborative, collective action.

5. Master the Art of Adaptation: High-impact nonprofits
are exceptionally adaptive, modifying their tactics as
needed to increase their success. They have responded to changing
circumstances with one innovation after another. Along the
way, they’ve made mistakes and have even produced some flops.
But unlike many nonprofits, they have also mastered the ability
to listen, learn, and modify their approach on the basis of external
cues. Adaptability has allowed them to sustain their impact.⁸

Too many nonprofits are highly innovative but can’t execute
new ideas. Other nonprofits are so mired in bureaucracy that
they lack creativity. But high-impact nonprofits combine creativity
with disciplined systems for evaluating, executing, and
adapting ideas over time.

Share Our Strength has been exceptionally adaptive. Bill
Shore started the Washington, D.C.-based nonprofit by mailing
letters to food industry celebrities to raise money for
hunger relief. Although he received a few checks, he found that
professional chefs were much more enthusiastic about donating
their time and talent to a local tasting event. After the success
of a single event in Denver, Share Our Strength abandoned
its direct mail campaign and launched the Taste of the Nation
series – now a national success in more than 70 cities. It has
raised millions of dollars for hunger relief, and many other nonprofits
have copied it.

Over time, Share Our Strength has experimented with a
number of different innovations, from participatory events to
cause-marketing campaigns. Not all of these events have been
successful. One failed experiment was its attempt to extend the
Taste concept into the sports arena, through a program called
“Taste of the Game.” Share Our Strength solicited celebrity athletes
to coach young people in a sport and asked parents to buy
tickets to demonstration games – with all proceeds going to
hunger relief. But the passion for antihunger issues wasn’t as
strong among athletes and coaches as it was among the restaurant
community. After several less successful initiatives cost
the nonprofit time and money, Share Our Strength developed
a more rigorous approach to managing innovation. Today, the
nonprofit’s staff develops business plans and conducts more
research before diving into new programs.

All of the nonprofits in our sample have mastered what we
call the cycle of adaptation, which involves four critical steps. First,
they listen to feedback from their external environments and
seek opportunities for improvement or change. Next, they
innovate and experiment, developing new ideas or improving
upon older programs. Then they evaluate and learn what works
with the innovation, sharing information and best practices
across their networks. They modify their plans and programs
in a process of ongoing learning. It’s a never-ending cycle that
helps these nonprofits increase and sustain their impact.

6. Share Leadership: The leaders of these 12 organizations
all exhibit charisma, but they don’t have oversized egos. They
know that they must share power in order to be stronger forces
for good. They distribute leadership within their organizations
and throughout their external nonprofit networks, empowering
others to lead. Leaders of high-impact nonprofits cultivate
a strong second-in-command, build enduring executive teams
with long tenure, and develop large and powerful boards.⁹

The National Council of La Raza (NCLR) is a great example
of collective leadership in action. The Washington, D.C.-
based nonprofit was founded in 1968 by a group of Hispanic
leaders, and within its first decade it appointed Raul Yzaguirre
as CEO. Yzaguirre led the nonprofit for more than 30 years of
extraordinary growth. He quickly developed a cadre of strong
and empowered senior executives, many of whom have been
with the organization for decades and who have played critical
leadership roles. Yzaguirre always had a second-in-command,
or COO, who helped him with internal management while he
focused on external leadership. And the NCLR board has
learned to share power with the executive director. Even when
Yzaguirre retired and was replaced by Janet Murguía, the organization
maintained its leadership practices.

Habitat for Humanity is one organization that went
through a difficult leadership transition when Fuller left and
started a competing housing organization. But almost all of
the nonprofits we studied, like NCLR, exemplify a shared
leadership model. They have strong leadership at the top, led
by either a founder or a growth leader who has learned to share
power. They all have long-tenured executive teams with significant
responsibilities. And their boards are larger than average
– with sizes ranging from 20 to more than 40 members –
and share power with the executives.

Sustaining Impact Through Organization

The 12 high-impact nonprofits that we studied use a majority
of these six practices. But they didn’t always, and they don’t all
employ them in the same ways. Some initially incorporated only
a few practices and added others gradually. Others focus more
on pulling certain levers and apply them to different degrees.
Yet they all converge on using more of these practices, not
fewer. Rather than doing what they’ve always done, high-impact
nonprofits continuously move in new directions. And by working
with and through others, they find levers long enough to
increase their impact.

In addition to employing these six practices, these 12 highimpact
nonprofits have also mastered several basic management
principles that are necessary to sustain their impact. They have
all developed enduring, somewhat diversified sources of financial
support, including large individual donor bases, government
contracts, corporate donations, and foundation grants. Typically,
they have aligned their fundraising strategy with their
impact strategy. Those that are the savviest about inspiring evangelists
are also able to build a broad individual donor base.

These nonprofits have also learned that they need to invest
in their human resources, and so the majority of them compensate
their executives very well compared to organizations
of similar size. And these nonprofits have all figured out how
to build reliable internal infrastructure, including sophisticated
information technology systems. They aren’t afraid to invest in
their own capacity – despite the countervailing public pressure
to keep administrative ratios low.¹⁰ Although none of these
basic management practices alone leads to breakthrough impact,
a solid organizational foundation is essential to sustaining
impact over time.

When a nonprofit applies all these forces simultaneously –
the six high-impact practices coupled with basic management
skills – it creates momentum that fuels further success. “It’s like
pushing a snowball down a hill,” says one Habitat for Humanity
volunteer. “At first you have to work at it and it takes a lot
of energy. But once it gets going, momentum builds and it starts
rolling on its own.”

Using Leverage to Advance Social Change

Why do these nonprofits harness multiple external forces,
when it would be easier to focus only on growing their own
organizations? It’s because of their unwavering commitment
to creating real impact. These organizations and the people who
lead them want to solve many of the biggest problems plaguing
our world: hunger, poverty, failing education, climate
change. They aspire to change the world. They don’t want to
apply social Band-Aids. They seek to attack and eliminate the
root causes of social ills.

It’s not enough for Teach for America to raise the test
scores of students in its classrooms; the organization also
wants to transform the entire educational system in America.
It’s not enough for Habitat for Humanity to build houses; the
organization also aspires to eliminate poverty housing and
homelessness from the face of the earth. It’s not enough for
City Year to build a few successful
youth corps; the organization
also wants all young
people to spend a year serving
their community.

But for each of these 12
organizations, audacious idealism
is grounded in real pragmatism.
These nonprofits are
not so much ideological as
they are focused on achieving
greater impact. As Self-Help
founder Martin Eakes says, “I
need to have impact more
than I need to be right.” If that
means checking their egos at
the door, or even putting their
individual or organizational
needs second at times, these social entrepreneurs will do whatever
it takes – within reason.

“We are extremely pragmatic,” says Gwen Ruta, program
director of alliances at Environmental Defense. “We’re all about
results. It doesn’t matter who we work with if we can get credible
results. And we’ll use whatever tool it takes to make
progress: We will sue people, we will partner with business, we
will lobby on the Hill or educate the public. Every one of these
tools is in our tool kit, and we deploy the one most likely to get
us to our goal.”

Even if nonprofits master and use all six practices, they still
won’t be able to solve the world’s largest problems. Other sectors
must also follow suit. For real change to occur, government
and for-profit business leaders must learn from high-impact nonprofits
and the six practices that they follow. Government leaders
can begin to see nonprofits not just as a convenient place to
outsource social services, but also as a valuable source of social
innovation and policy ideas. Business leaders can partner with
leading nonprofits to devise innovative systems that harness market
forces for the greater good. And individual donors and volunteers
can increase the social return on their investments by
supporting those nonprofits that have the most impact, rather
than those that adhere to conventional, and misguided, ideas
of efficiency.

We believe that without more nonprofits, businesses, and
government agencies following these six practices to achieve
maximum impact, we are doomed to plod along with slow, incremental
change. We’ll barely make a dent in global warming.
We’ll meagerly fund programs that only perpetuate the cycle
of poverty. We’ll continue to allow millions of children to grow
up without healthcare. And we’ll continue to make one of the
biggest mistakes of all: focusing too much on process rather than
on impact.

Read more stories by Heather McLeod Grant & Leslie R. Crutchfield.