Due Diligence: Special Considerations in Support of Scale

CASE at Duke
Dec 11, 2020 · 5 min read
Image by Shahid Abdullah from Pixabay

Funders must recognize that you won’t know everything during up-front diligence. Scaling impact will include significant iteration and pilot results are unlikely to hold during scale. Conduct appropriate diligence but also commit to the journey as a partner, with an openness to iterate along the way.

The following includes special due diligence considerations related to talent and government partnerships. Obviously, there are many more aspects of diligence on scaling ventures, we recommend the CASE Smart Impact Scaling Diagnostic to assess an organization on the seven dimensions of scaling readiness.

Diligence on Talent

1. Prioritize talent considerations in your due diligence.

Prioritizing talent from the start of funder/investor engagement with scaling enterprises is critical. Enterprises need to understand that funders view talent as a priority, and funders need to hold enterprises accountable to navigating the talent evolution.

“Funders often want to deploy capital once we have reached targets. However, for our scaling needs, we need capital up front to grow our team to be able to reach targets. Patience and trust will help us secure our key hires to poise ourselves for immense growth.” — Scaling Pathways survey respondent

2. Assess talent strength and gaps.

Consider the following questions:

  • What key business model or strategy pivots has the organization experienced in the past one to three years and how has that affected the existing team and its needs?
  • What are the strengths — and gaps — within existing teams (including internal staff as well as the board, partners, outsourced contractors, volunteers, etc.)?
  • As the organization considers its future strategy to scale impact, how will its talent needs change? How well can the organization articulate the kinds of roles which will become more or less important?
  • Does the enterprise have a well-formed talent strategy that includes: Management team and other staff roles? Board or other governance structures (such as with key suppliers or partners)? Both programmatic and operational infrastructure roles (e.g., technology, impact management, HR, etc.)? Succession planning for key roles, looking ahead three to five years? Plans for diversity and equity?
  • If the organization does not have a well-formed talent strategy, is it willing to create one?

3. Assess talent development.

Consider the following questions:

  • What programs (or plans) for training and development does the organization have in place to allow for existing staff to reach full potential and drive impact?
  • What additional programs (including those highlighted in this paper) could the organization benefit from adding, and when?

4. Assess talent management.

Consider the following questions:

  • What HR infrastructure is in place and how siloed or embedded is talent management throughout the organization?
  • What evaluations and assessments are conducted to measure and understand organizational culture? Are the evaluations open and anonymous or heavily driven by management? What learnings have surfaced, and how has the data led to changes in programming, values, vision, and culture?
  • What percentage of executive team and board meeting time is spent on talent strategies, and is it sufficient? Keep in mind that if these are areas you want the organization to prioritize, you need to consider how you will support those efforts through funding, in-kind support, or other means.

Moving Away from Overhead
A common refrain from social enterprises was a plea to reframe the conversation about talent away from indirects or overhead percentages and focusing instead on mission-critical investments that are directly related to impact.

“There is no way to deliver a quality project on the ground without overhead. We need the people making sure the finances are accurate, the curriculum written, the government partnerships managed. In order to create systems change, we need to invest in the professional development of our team, yet it’s the piece that funders never want to pay for.” — Survey respondent

“One story was particularly eye-opening for me as a funder: I was talking to the CEO of an incredibly successful organization. They have 200 employees and growing, work across multiple countries, and want to hire a chief people officer so that they could really focus on their personnel strategy and building a positive and cohesive organizational culture as they scale. But the CEO felt that she didn’t have the money and that her funders weren’t willing to invest in this. And I think it speaks to this idea that we [funders] really need to flip our mindset from one that sees talent as simply overhead to something that is mission critical. If we as funders are asking for impact at scale, we should be willing to invest in the people and processes that are needed to realize it.” — Elyssa Lewis, Analyst, Skoll Foundation

Diligence on Government Partnerships

1. Assess the appropriate government engagement based on your experience.

Depending on the sector, target population, and region, advise on the appropriate level of government engagement from what you have seen work (or not work) with former grantees/investees. Skoll Foundation Principal, Lucien Chan, notes, “Some sectors are government-regulated or are a government-provided service, so the hypothesis is that the enterprise would need government partnerships as a critical pathway to scale. With market-based solutions, where government is an enabler or potentially a blocker, the engagement will be different.”

“Systems change, which includes working with and through governments, takes time. Results are both slow to come and less tangible for reporting. Relationship building is critical and has to be widespread to not have all eggs in one basket because of constant changes. It’s critical for funders to understand this and support it.” — Elizabeth Hausler, Founder & CEO of Build Change

2. Ensure ventures have the appropriate core competencies and human capital.

Ask additional questions to determine the strength of government buy-in. If there is an MOU or letter of intent, is the document with a department or a person who has authority over this area? If the venture is looking for the government to contribute funding eventually, can it show evidence that this will be possible — and at a price point that the government can afford? If the venture will be providing evidence to the government to inform policy change, will its data be compelling to the right parties? Look out for any government partnerships or promises established ahead of an election, which may be red flags.

Scaling Pathways

Hard-won insights on the path to impact at scale

Scaling Pathways

Scaling Pathways is a partnership between the Skoll Foundation, USAID, Mercy Corps Ventures, and CASE at Duke to curate and share scaling insights from the world’s leading social entrepreneurs.

CASE at Duke

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The Center for the Advancement of Social Entrepreneurship (CASE) at Duke University leads the authorship for the Scaling Pathways series.

Scaling Pathways

Scaling Pathways is a partnership between the Skoll Foundation, USAID, Mercy Corps Ventures, and CASE at Duke to curate and share scaling insights from the world’s leading social entrepreneurs.