Scale as Financial Strength

    Large institutions such as museums and universities have achieved scale because they have visible institutional profiles and reputations for excellence across the nation, occupy large buildings or campuses, and possess the financial wherewithal to persist indefinitely.  Scale on this account is equivalent to financial strength and sustainability, often secured by endowment or by large operating budgets with dependable revenue streams.  In a sector in which financial crises are commonplace, scale means being able to withstand the test of time by being big enough to ride out the storms.  The number of nonprofits that have gone to scale under this definition remains small and many are concentrated in a few categories of nonprofit activity. 

    In principle, there are very few obstacles to taking any single organization to scale. Though philanthropic resources are limited, if concentrated on a small number of institutions, funds are now available to create a new cadre of very large and durable institutions. In practice, many of the organizations that have achieved financial scale have been and continue to be supported by individuals or family foundations with living donors. Many recipients of this sustained largesse, such as private colleges and cultural institutions, are the beneficiaries of support from elites and provide benefits to them in return. Interestingly, in the case of private educational and cultural institutions, it is often the visibility, prestige, and competition with other donors that encourages supporters to give, and give more, year after year.

    Large private foundations do not seem to embrace this notion of scale as readily as individuals, though there are some notable exceptions to this. Picking any single nonprofit organization as the one that will be taken to scale may appear unfair and capricious. It implies that a single donor should be able to disturb the competitive landscape and decide who wins and loses in the nonprofit arena.  While this may be precisely what an individual would like to achieve, few foundations want to be perceived as inequitable and heavy-handed. As a consequence, they shy away from tipping the scales completely in favor of one organization over another. Moreover, foundations may be less likely to bring an organization to scale because their interests are not in the organizations they fund per se, but in the specific programs and outcomes which these organizations deliver.  The foundations have priorities that overlap somewhat with the agendas of nonprofit organizations. When these priorities change, funders can and do find new organizations.

    Another reason that individual nonprofits are not often brought to scale through the infusion of large amounts of money may be connected to efficiency concerns.  While giving a nonprofit the ability to withstand the vicissitude of the nonprofit marketplace sounds reasonable, it may not be the most efficient way to use philanthropic resources.  Endowments are often established with a projected 4 or 5 percent draw rate.  Funding a large programmatic agenda from an endowment therefore becomes an expensive proposition.  There is also the concern that taking a single organization to scale will eliminate the leverage that funders have over nonprofits, because the funds will free the organization from the usual relationships of dependence. 

    After all, if a nonprofit has enough money to conduct its programs without the continuous input of new contributions, an important performance incentive may be removed.