Many different types of organizations develop digital products and services. While network- and partnership-based organizations are highlighted in Key Partnerships, it is important to consider key aspects for independent organization structures, specifically:
- Registration: Should your sustainable business model be as a nonprofit, for-profit, or social enterprise organization? What factors should you consider in making that decision?
- Governance: What form should your governance be: a formal board, an advisory board, or a form of secretariat?
- Management and teams: What are the key elements to be aware of as your organization adapts and grows?
We will discuss potential pitfalls for an intrapreneurial team working within an established organization and how to manage and navigate through them (see 6.2 Key Activities).
Organizations often face the decision of whether to establish their sustainable business model as a nonprofit, for-profit, or social enterprise (e.g., B Corp) organization in order to reach their goals. The first step is to determine the merits of each type of structure and then decide which aligns best with the overall mission and vision of your organization.
Traditionally, the divide between a nonprofit and for-profit entity was quite clear. Nonprofits engage in philanthropic work to solve social issues and access funding through grants and fundraising from the public, while for-profits engage in income-generating activities with the goal of making a profit. With the rise of social enterprises, this distinction has become less clear. Social entrepreneurs have challenged traditional thinking by developing economically sustainable models (like a for-profit does) in order to solve social issues (as a nonprofit does).
In some countries, you can register as a specific social enterprise. For example, in the United States registering as a B Corp requires that you be certified by B Lab, a nonprofit that evaluates how your organization creates value for its employees, the community, and the environment. Identifying as a B Corp allows you to distinguish yourself not only as committed to a broader purpose or set of values, but also as distinct from traditional for-profit firms.1
The diagram below is a helpful way of thinking through what the primary purpose of your organization is. Locating where you aim to be on this spectrum will help you figure out the best registration option for your sustainability.2
(Source: Dawans, 2010. See footnote for full description.3)
Once you have identified where you want your organization to be on that spectrum, ask yourself the following questions to further explore the best type of registration for your organization:
- What types of registration are allowed in the country where you are seeking to register?
- How will registration in that country affect your ability to register in other countries if you scale?
- Where will your revenue mainly be sourced from? For example, some institutional donors and foundations will not provide grants to for-profit businesses, while in some countries nonprofit organizations are not allowed to provide services for a fee.
- Which key activities will you be undertaking? There may be tax implications arising from your activities.
Warning: Choosing the wrong structure may end up putting your organization at financial and legal risk or be detrimental to your scalability.
Having a robust approach to governance may mean the difference between success and failure for your digital solution and organization. Many challenges will inevitably arise—both internal (e.g., staff turnover) and external (e.g., competitors, contextual risks)—but a clear governance structure will help overcome these potential roadblocks.
Organizational governance dictates what is governed, who does the governing, and how the governance is executed. Implementing good governance through effective policies, practices, and structures is important for a number of reasons, including:4
- Helps reduce overreliance on a few key people in an organization.
- Provides critical stewardship, strategic direction, and connections for sustainable growth.
- Helps reassure regulators and investors that there is accountability, both for nonprofits and for-profits.
- Helps ensure there are checks and balances on leadership and systems, which enables accountability for staff on key issues such as DEI, and embeds systems for whistleblowing and other feedback measures.
The first step is to determine which governance structure (e.g., a formal board, an advisory board, or a form of secretariat) is right for your organization. This will depend not only on what stage of your business journey you are in, but also on what type of support you are looking to receive. There are two key types of board structures that you may want to consider: a formal board of directors and an advisory board.
A formal board consists of a governing body appointed by an organization to manage, direct, and supervise the organization. Members of the board of directors are liable for their actions, since they must act in the best interest of the organization, and have the power to direct management and make decisions.
An advisory board consists of people selected by an organization to provide defined advice in an informal and flexible manner, but have no authority to make decisions for an organization. Since these members have expertise in specific areas, they can provide effective guidance and know-how that may be invaluable to an organization. See this advisory board toolkit for more information.
Both of these board structures meet periodically to oversee the performance and strategic progress of an organization and are committed to the organization’s long-term success. Board memberships are not set up to be permanent positions; most organizations have terms set up for board members, which typically fall between two and five years.
Networks, Consortia, and Partnerships
If your organization is part of a network, consortium, or partnership, you will need to decide how to manage its governance. This can be done through a separate entity, a lead agency, or an executive or steering committee.
By creating a separate entity, sometimes called a secretariat, in which all members contribute (e.g., through finances, staff time, expertise), you are assigning the governance of your network, consortium, or partnership to this new entity. That entity will subsequently be governed by a board of directors, usually made up of member organizations’ senior leaders, and sometimes nonexecutive or independent board members.
If you do not want to set up a separate entity to manage the partnership and are likely to be reliant on a single organization to take on a significant amount of the burden for supporting the partnership, you may choose to designate this organization as a backbone organization.
When funding is coming from a grant or contract to a partnership and you do not want to designate a formal backbone organization, you will still probably require a lead agency to receive the funding and to subgrant/subcontract to the other partnership members. To make this partnership more equitable, you will need to set up an executive or steering committee to ensure that there is participation by all partners in decision-making processes. Executive and steering committees are also used when there isn’t a lead agency and there is a flatter governance structure.
Case Study: Humanitarian OpenStreetMap
The Humanitarian OpenStreetMap Team (HOT) is an initiative dedicated to humanitarian action and community development through open mapping. Anyone can become a member of the HOT community by engaging in HOT activities. This community is structured around a code of conduct, and participates in the organization’s governance structure by voting directly on who will serve on the board of directors.
Dynamic Governance, Sociocracy, and Holacracy
No matter what type of partnership or network governance approach you take, it is possible to ensure that it is dynamic. The dynamic governance family of methods, including sociocracy and holacracy, seeks to reduce hierarchy and increase agency for staff.
There are four principles for dynamic governance:5
- Consent governs policy decision-making: While consensus generally seeks agreement, dynamic governance seeks acceptance. Objections are viewed as a welcome step in the process of reaching a decision, and complete agreement by all participants is not necessary, only acceptance is. A consent round is advised because reaching a decision provides an opportunity to hear objections.
- The organization of semi-autonomous circles: These circles form around a subject matter area. There might be a smaller “top circle” that acts like a board of directors or advisory board and includes people who are outside the organization serving as advisors or consultants.
- The circles are double-linked: Individuals participate in the decision-making of both their own circles and the next higher circle, which results in a feedback loop and increased collaboration.
- Elections are by consent: Individuals are elected to leadership positions through a nomination process.
Dynamic governance often leads to higher morale, increased productivity, and better decisions because it allows the organization to derive benefits not from specific individuals but from the system itself. However, this approach has plenty of opportunities to be creative in its application and shouldn’t be taken as a rigid system. Learn more about dynamic governance here.
As your organization grows, you will need to develop administrative functions, policies, and processes. It is critical that you enhance the agility of your organization and don’t create unnecessary bureaucracy as you mature and grow. The drive for systems, policies, and processes usually comes from two areas: a desire to develop robust governance, as described above, and the requirements of funders. A critical mistake many organizations that receive grants make is to allow the requirements of their most stringent donors to define their internal processes and then apply these same processes to all their work, creating onerous bureaucratic procedures for funding and workstreams that do not require them. If systems and processes that stem from these two stimuli are not developed wisely, your organization can become weighed down by the systems you develop.
The way to avoid this is to adopt and maintain agile practices in not just your software development and activities, but also your organizational development. So when developing any new policy, procedure, process, or system, ensure you ask the following questions before you sign off and implement it.
- Is this the simplest way to do this?
- Is this the quickest way to do this?
- Is this the most agile/flexible way to do this?
- Will this decision create any precedents or path dependencies that will negatively restrict our options in the future?
Management and Teams
People are the most valuable resource for strengthening your organization. As your organization adapts and grows, your human resources strategy may no longer fit and need to be reevaluated. Visualize where you want your organization to be and think about who it will take to get there.
Some key steps may include:6
- Creating a detailed staffing plan to help determine the number and right mix of talented, experienced staff members or external contractors who align with your operational budget
- Establishing the right job descriptions, titles, and recruitment strategies to ensure that you hire the most appropriate people to meet your needs
- Offering training, mentorship, and peer learning opportunities to enhance personal and professional growth and help your organization achieve its current and long-term goals
- Adopting performance management tools to model and reinforce desired behaviors
A quick audit may include asking the following questions:
- How suitable is the current level of staffing and skills profile?
- What tools are being used to forecast future staffing needs and skills? Is there a defined succession plan in place?
- What barriers exist in achieving desirable levels and skills of staffing?
It is important to remember that these steps are iterative and should be revisited on a regular basis to ensure that you have the right people with the talents, skills, and experience needed to help your organization reach its next phase. Moreover, maintaining flexibility will allow senior leaders to determine how best to achieve your organization’s goals.
It is also critical in the humanitarian and development sectors to recognize that individuals see their work as a vocation and have a strong values base that underpins their work. This has positives, such as a strong commitment to their values whether paid or voluntary and a desire to see social impact. However, there are downsides to this. For some, doing good is sufficient, and they do not accept performance management well. At the other end of the spectrum, there are those who are passionate about the cause and have a potential for burnout. There is also the potential for some to see organizational decisions as clashing with their values. This is because there are a myriad of social and environmental issues that staff care deeply about, but as an organization, you will not be able to deal with all of them. You will have to prioritize, and staff can perceive this as a value judgment for or against what they are most concerned about. It is important to proactively manage these downsides to ensure that staff remain engaged in their work.
Case Study: Esoko: Don’t Be Afraid of Change
In 2015, as Esoko reexamined its vision for the company, it realized that a new set of skills was needed for growth. The board of directors, in consultation with the CEO, decided a new CEO with new skills was needed. To ease the transition, staff were informed of the decision well in advance, and the search for new leadership was conducted in an open and transparent manner. In late 2015, a new CEO with a digital development and business background was hired.
Once on board, the new CEO quickly realized that developing and rolling out the new e-commerce product would require commercial investment and someone with a background in finance. A quick assessment revealed that this skill set was missing from Esoko’s team, so the CEO hired a vice president of finance and operations with experience in investment banking to fill that capacity gap.
While the changes to senior leadership have been critical, the business model shift has had far-reaching impacts on human resources. For example, the new e-commerce service, now called Tulaa, has required development of a cadre of call center agents. Esoko emphasized finding individuals with agricultural expertise that could engage with customers in a respectful way. Agents needed to have a minimum of one year of field experience, an agricultural-related degree, and the ability to speak at least three of the native languages spoken by users.
Agents also needed to have the right attitude, show respect for the agricultural trade, and not speak in a condescending tone to farmers. It took Esoko three months to hire five agents, but the time and effort have proven worthwhile.
Taken from DIAL’s Beyond Scale
An Intrapreneurial Team Within an Established Organization
While some organizations today recognize the importance of being agile, innovative, and forward thinking, others find it difficult to make changes to how they are accustomed to doing things. If you are an intrapreneur within an established organization, there are a number of issues that you are likely to come across as you develop your team.
- As you mature and potentially scale as a team, you may increasingly find that the parent/host organization’s systems and processes stifle your progress.
- As you deploy your solution to more contexts and have more development instances, the resources required to maintain deployments in multiple contexts may be too much of a strain for the parent/host organization.
- Your ability to develop a new business model may be constrained by the registration of your parent organization; its strategies and priorities; and, often most importantly, its risk appetite.
- Your organization may have to deprioritize the area that your digital solution seeks to address (e.g., change its sectoral focus away from health even though you have an m-health solution) as it moves into a new strategic period.
- You start to develop your own culture, which is seen as being too different from the parent/host organization’s culture.
Oftentimes, the friction between your intrapreneurial team and the host/parent organization becomes so great that the intrapreneurial team wants to spin-off from the host/parent organization. It is important to anticipate these challenges and prepare your team and the parent/host organization for them. Identifying options for the housing of the digital solution as it matures is a conversation that should be started early on in the development of solutions and teams. That way, areas of friction can be identified and negotiated before they become too painful. Additionally, you can reach a joint understanding of what the feasible routes are for the digital solution as it matures and potentially scales, such as absorption into a programatic team, spin-off from the organization, or becoming part of a consortium/network (also see End Game).
Your organizational structure, governance, and management will have a significant impact on the success of your business model and its sustainability. The right approach will enable you to manage risk as you mature and ensure that you are accountable to your stakeholders. It will also enable you to remain agile and ensure that you have the right staff and team. If you are an intrapreneur in a parent/host organization, anticipating the challenges and developing solutions before the friction becomes too much will increase the chances of sustainability for your business model. Key points are:
When faced with the decision of whether to establish your sustainable business model as a nonprofit, for-profit, or social enterprise, you should first determine the merits of each type of structure and then decide which aligns best with the mission and vision of your organization.
Determining which governance structure is right for your organization will depend on what stage of your business journey you are in and what type of support and accountability you need to have in place.
When your organization has a network, consortium, or partnership, you will need to set up a form of secretariat, such as a separate entity, a lead agency, or an executive or steering committee, to manage your governance.
As you mature as a team and organization, you should ensure that you put in place policies, systems, and processes that retain agility and keep bureaucracy to a minimum.
The most valuable thing you can do is seek guidance from those who have been there before when it comes to organizational structure, governance, and management issues. There is now a lot of experience in the sector from intrapreneurs and entrepreneurs. Find those who have trodden the path before you and seek their advice.
Complete the following in your Business Model Sustainability Canvas:
- Identify what type of registration is best for your sustainability.
- Determine what form of governance is right for your organization.
- https://hbr.org/2016/06/why-companies-are-becoming-b-corporations - Also note, companies can seek B-corp accreditation in other countries.↩
- A diagram that shows a sustainability scale for organizations. On the left side of the scale is social sustainability, whilst on the right is economic sustainability. These are indicating the main purpose of the organization. There are then six options moving from left to right along that scale. Traditional not-for-profit, not-for-profit with income generating activities, and the social enterprise. These three options make up organizations whose primary purpose is social sustainability, but with an increasing commercial approach. The next three options are primarily commercial, with a lessening secondary social sustainability focus. They are from left to right, socially responsible business, then a corporation practicing social responsibility, and finally traditional for profit business.↩
- SME Governance Guidebook published by the IFC, p. 6.↩
- Becky Bowen. “What is Dynamic Governance?”↩
- DIAL, Beyond Scale, p. 185-214↩