This article was inspired by two colleagues who recently had the courage to close down the nonprofit organisations they ran. Both happened independently of each other, one in Melbourne and one in Sydney, and for different reasons.
The first case came about through a realisation that the purpose of the organisation, while noble, was not making the impact it set out to achieve. It had been working project to project and producing fine work. There were by all reports wonderful achievements, and a lot of goodwill surrounding this organisation. Despite that, when impact is the main game and resourcing that is essential, there comes a time when one wonders whether something else could be done with those same resources to achieve impact (and resources mean more than money here).
The decision was perhaps a surprise to some stakeholders. Why close a business that essentially is doing some good? If it was a commercial business, there would have been little evidence to close it. In fact if profit was the main game, this business could potentially have moved into markets that exploited staff capabilities and maximized return. But this was not a commercial organisation, and the drivers were elsewhere. The people wanted to make an impact.
The second case was in many ways more surprising. It was a market leader in its industry or target group. They had been around for a long time,
much longer than many of the other players in the space. As ‘competition’ or other service providers entered the field around them, the space became saturated. This is a massive issue in the social service field. In some areas the number of people and organisations employed to ‘solve the problem’, far outweighing the number of people experiencing the problem.
Whereas in the first case the CEO actually wound up the company and completely dissolved the entity, the second case took a different approach. In the second case the CEO negotiated with ‘competitors’ to take on the organisations existing contracts and find work for its staff. The CEO then presented a strategy to the Board of Directors to use remaining assets to move the organisations activity into the ‘collective impact’ space. In this sense, the CEO did not euthanize the organisation so much as the current approach; which I don’t think should be viewed as less significant in terms of importance or difficult.
Now these case studies are deliberately brief and anonymous, and I have take some liberty in presenting the stories. They both warrant further examination and detailed study around the process and impact. The reason I have included these stories here is that they represent a different story to what we often hear about the non-profit sector.
For me it brings up some questions:
Why is closure the compelling option, rather than the default cultural option of GROW GROW GROW?
What kind of leadership does it take to do this? What are the qualities? How do you approach it?
What are the market forces that drive this?
Why frame this as euthanasia, rather than business closure or business turnaround?
I am hoping to answer these questions and others in upcoming posts.
This post is part of a series on business closure and euthanasia. If you are interested in following this series, you are welcome to sign up at the bottom of this page.