Organizational Business Planning for Nonprofits

Nuts and bolts guy

Back in April I wrote about the successful conclusion of a year-long D.I.Y. strategic planning process I facilitated for a small nonprofit.

Toward the end of the retreat that sealed the deal, the incoming chair asked, “How do we make sure that the strategy is implemented? What does the Board need to track?”

Great questions. While it’s important for the Board to track the progress of the strategic plan and key performance indicators through a dashboard (more on that next), it actually isn’t the Board’s job to micromanage the myriad of steps that will go into an implementation plan. That’s what a business plan is for as a tool of the executive director.

The job of the business plan, as I’m defining it here, is to bring the strategic plan to life. How will the executive director, in concert with its partners and allies, build out the strategy? Whereas this particular strategic plan has a five year horizon (five years because the small nonprofit needs running room to reinforce its financial base and fix core programs before it can develop new programs), the organizational business plan will be what the executive director uses to keep on top of the most critical tasks in the 1-3 years ahead.

What did it look like? Nuts and bolts. A project plan, broken into monthly milestones, created in Excel. (Digital project planning software is handy when large teams need to collaborate, but it doesn’t add much value when a small handful of people are performing all of the activities. Larger organizations also tend to include more narrative because they are used as a tool to communicate direction and priorities to the “ground troops,” but in this case the executive director would have been preaching to herself.)

The test of the business plan is this: if all of the steps are implemented on time, will they be sufficient to ensure the successful implementation of the strategic plan? If not – if it doesn’t have sufficiently robust activities to ensure the financial stability of the organization, customer and donor satisfaction, achievement of chosen outcomes and operational stability – then something is missing. It’s back to the drawing board or at least the computer.

As an organizing scheme for the project plan, we used a slightly modified version of the four perspectives typically associated with a strategy map and dashboard: financial, client and donor value proposition, operations and organizational capability. (The strategy map, developed by Robert Kaplan and David Norton, was originally developed for businesses in general and later adapted to nonprofits. Several years back, I led a workshop for nonprofit executive directors under the auspices of the Nonprofit Resource Center to help them devise a strategy map for their own organizations.)

Besides the organizational business plan, this small nonprofit also has work ahead of it to develop a new program. The term for that kind of plan is also “business plan,” but it will look a lot different. A business plan for a new program considers alternatives, creates the case and builds the operational plan for a new program. Then it demonstrates the sustainability of the new program with a financial pro forma that is pressure tested to create best case and worst case scenarios.

Stay tuned for more about how to create a business plan for a new program.

[For another point of view on the definition of a business plan, it’s worth looking at the approached used by Bridgespan, a large consulting firm that specializes in nonprofits. It defines business plans as an opportunity to “connect the dots between mission and programs, to specify the resources that will be required to deliver those programs, and to establish performance measures that allow everyone to understand whether the desired results are being achieved.” As a starting point, Bridgespan recommends looking at the entire portfolio of a nonprofit’s programs and taking stock, asking what audiences it really wants to serve, to achieve what outcomes, and which outcomes go farthest to achieve positive change. (More detail on their approach, which is methodical and thorough, is included in their white paper on the topic.) The DIY strategic planning process we just completed asked those very questions. So what they’re calling a business plan, I’m calling a strategic plan. Potato, po-tah-toh, either approach will take a nonprofit to a stronger, more outcomes-focused place.]

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