GREAT BY CHOICE: Twenty-mile Marching for Nonprofits
This is part two of my review of the book by Jim Collins and Morten Hansen — Great by Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All (See part one: Donor Pinging). My objective is to suggest a few ways the principles in Great by Choice can be applied to fundraising and nonprofit leadership. As we begin a new year or any time we are inspired to think about the pace and progress of our development efforts, 20-mile marching is great concept to review.
Collins and Hansen spent over a decade studying organizations that far exceeded the performance of their comparison companies amid extremely volatile business environments for each respective industry. The authors called them 10X companies because they typically outperformed the comparison companies by tenfold.
Southwest Airlines was profitable for 30 consecutive years and 10 years after 9/11, a period in which every other airline was seeking government assistance.
Progressive Insurance maintained an average ratio of premiums-to-claims below 96% and was profitable 27 out of 30 years.
From 1977 to 1998 Stryker, Inc., a medical technology company, achieved an annual 20% growth rate more than 90% the time.
Five other 10X companies had similar results.
Collins and Hansen identified three prominent characteristics of 10X companies. Any two characteristics without the third would be an incomplete picture. Nonetheless, I want to comment on one of those essential characteristics — Fanatical Discipline.
The principle of fanatical discipline is illustrated by an historic race to the South Pole in 1911 by two explorers, Roald Amundoen and Robert Scott. Amundoen’s strategy was to march twenty miles each day — regardless of the weather or the terrain. If the temperature dipped to 40 degrees below zero, the Amundoen team marched approximately 20 miles. If there was a blizzard, still 20 miles. If the weather was warm, winds were calm, and the going easy — again, they marched 20 miles and stopped. Twenty miles was always the objective, no more no less. Neither team knew where the other was or how close they were being first to reach to their goal. Nevertheless, even when an extended march of 25 miles would have enabled them to reach the South Pole, Amundoen stuck to his practice of 20-mile marching.
To an overwhelming degree, fanatical discipline (a.k.a., 20-mile marching) was a distinguishing factor that separated each 10X company from the comparison companies.
In contrast Robert Scott marched his team as far as they could go on calm days. If the terrain was difficult, he shortened the day’s march, and when the weather was bad, they remained in their tents. Robert Scott never reached the South Pole. The expedition was plagued by all sorts of calamities, most of them self-inflicted. Scott and most of his team starved to death or died from exposure in the Antarctic.
To an overwhelming degree, fanatical discipline (a.k.a., 20-mile marching) was a distinguishing factor that separated each 10X company from the comparison companies. To be a 20-mile marcher requires hitting specified performance markers with great consistency over a long period of time. It also requires holding back in good times when rapid expansion seems to be easily accomplished.
APPLICATION FOR NONPROFIT INSTITUTIONS
Here are a few applications of the twenty-mile marching concept for the nonprofit world:
Stewards of Results
That same fanatical discipline of 20-mile marching was a prominent characteristic of each 10X company. For example, Stryker’s CEO, John Brown, insisted on 20% growth each year from every sales associate — no matter the business environment, no matter the exchange rate, and no matter if the economy was growing or receding. No excuses. No lagging behind. However, when opportunities presented themselves for rapid expansion acquisition, Brown never gave into the temptation. He fanatically stuck to his discipline of 20% growth target.
In some companies and nonprofits, when things go badly, the first order of business is not fixing the problem but assigning blame. Designating a scapegoat never solved any funding problem, but neither did making excuses for lack of performance. Everyone at the table has to feel the responsibility for the problems and for the solution, as well as for the success and the victories.
There’s an old but important debate in the nonprofit world about measuring process (how many calls you made) verses measuring performance (how much money came in). Leaders have to rely on both unexpected miracles and established methods, but they cannot rely exclusively on either. The story of Stryker, Inc is that John Brown personally got involved with every under-performing team. Granted, that was probably not something a team welcomed and tried very hard to avoid. However, there is no benefit to fanatical discipline if that discipline and approach are no longer effective. In other words, don’t be fanatical about things that don’t produce results. Be fanatical about figuring out what does work. The point is that all executive, staff, and stakeholders must take personal responsibility for overall results. It is the clearest measure of performance. No ignoring the problems; no excuses; no finger pointing. Creative leadership requires constant evaluation and fine-tuning of your approach along with fanatical discipline in your implementation.
Too Many Tactical Responses
Why is it the companies that twenty-mile marched did so well while the ones with impressive but erratic spurts of growth did so poorly? It seems to me that the reason 20-mile marching (steady growth) companies perform so much better is that leadership teams at the erratic growth companies eventually make bad decisions. They have to respond to a year of phenomenal growth then respond in another year to a phenomenal loss.
Being force to react so often to unprecedented events, both good and bad, leaders eventually make mistakes — sometimes catastrophic mistakes.
Leaders are so frequently making tactical responses to extreme situations that they lose sight of long-term strategic objectives. See Strategic and Tactical Planning, Part 1. Being forced to react so often to unprecedented events, both good and bad, leaders frequently making radical changes eventually make mistakes — sometimes catastrophic mistakes. That seems to have been the case with the comparison companies’ leaders.
Self-imposed Volatility at Nonprofits
As prominent as a 20-mile marching discipline is among successful corporations, you would think the strategy would be more embraced among nonprofits. However, nonprofits executives and the team of fundraisers have adopted a way of measuring performance that almost guarantees increased volatility. Several years ago fundraising consultants began advising nonprofits to count unrestricted, restricted, and estate gifts together. Of course, this makes the consultant look good and, for that matter, nonprofit’s leadership as well. The problem is that estate gifts (which are typically an organization’s largest) do not arrive on a schedule. Not only do you not know when people will die, many times you don’t know what is in their will.
One year two people die, each leaving a million dollars to the institution. The next few years, no one dies. By counting bequests and general funds together, nonprofits are self-imposing a much higher degree of volatility. As the research of Collins and Hansen have shown, increased volatility at an institution is a breeding ground for bad decisions.
Volatility, bad decisions, excuses, and finger-pointing — not a very encouraging list of applications from an absence of fanatical discipline. What then are the positive takeaways from 20-mile marching?
By counting bequests and general funds together, nonprofits are self-imposing a much higher degree of volatility.
1. Take a Strategic Approach to Long-Range Planning. Think of strategic planning as a firm decision about the destination. In contrast, tactical planning involves the short-term tacks or maneuvers to respond to obstacles. For example, in order to reach their “strategic destination,” sailing ships must “tact” back and forth when sailing into a headwind. Executive leaders have to stay focused on the long-term strategic destination, lest they forget where they are going and follow the prevailing winds to wherever they are taken.
2. Stay Tuned into Strategic Limitations. A strategic plan serves as a governor to create limitations or boundaries for leadership decisions. A strategic plan enabled Stryker, Inc to demand a minimum level of performance while at the same time placing a firm limitation on growth.
3. Become a Learning Organization. Leaders cannot focus exclusively on process or performance. Successful organizations don’t make radical changes to their strategic plans. However, they are constantly evaluating, experimenting, and tweaking their tactics.
4. Face the Facts Head-On. There is always a temptation to sweep dirt under the carpet. Don’t set up metrics that obscure the true progress (i.e. counting estate gifts and regular giving together).
5. Focus on the Task at Hand by 20-Mile Marching. Fanatical discipline can be a handy tool for measuring standards of performance. Sometimes it does no good to think about how far you have to go or all that needs to be done. You just need to get busy and focus marching your 20 miles today.
As each of you are evaluating your accomplishments for 2012 and setting goals for 2013, read the book by Collins and Hansen and consider becoming a 20-mile marcher.
Eddie Thompson, Ed.D.