Tag Archives: strategic planning

A Nonprofit’s D.I.Y. Strategic Planning Process Blooms


[Sixth in a series: When a strategic plan is not a strategic plan, really; kicking the tires of the current strategy; an approach to strategy for nonprofits; now we’re getting somewhere; and the hard spade work of strategic planning.]

[Author’s note: While “Philanthrophile” — a.k.a. Betsy Stone — has been offline here for six months during the last stages of her father’s remarkable 96-year life, she has been busily blogging about aging, gratitude, father-daughter relationships, end-of-life, hospice, siblings, memory, faith, love and loss at The Henry Chronicles.]

Last night, a hard-working and engaged nonprofit Board concluded 18 months of work by formally approving a five-year strategic direction. Woo hoo!

I called it a “D.I.Y.” strategic planning process because this small nonprofit (~$1 million budget), like most nonprofits, didn’t have the luxury of hiring a fancy shmancy consulting firm to figure out how it might best focus its strengths and resources to have the greatest impact on the community, and differentiate itself in the process. Instead, it used a methodical approach that relied mostly on volunteer resources to analyze the situation and investigate options, as well as four mini-retreats where Board members came to a common understanding. The process took about a year, although due to two sudden family health emergencies, the formal approval of the draft plan was pushed out to last night.

This sixth post about the nonprofit strategic planning process outlines what’s happened since the staff investigated the potential strategic directions identified by the Board in May 2012, and shares the Board discussion process that culminated in unanimous approval.

Up to this point, three potential strategic directions were in play, identified by the Board in May 2012. To formulate a recommendation, exploratory work was needed – work that couldn’t be done during the course of a meeting or a retreat. The work that ensued over the summer months investigated:

  • Changing need within the nonprofit’s sector. This included reviewing a lot of secondary research into underlying causes and the size and growth of the need addressed by the nonprofit.
  • The “competitive” landscape. We collected information from the community’s 2-1-1 service and met with several key nonprofits who provide related services in the community. Our goal was to understand how need is being met by other nonprofits and government agencies recognizing that they may be potential allies in addressing needs. As a small nonprofit, our intent was to identify a niche where a community or group was not adequately served by other nonprofits.
  • Best practices. We conducted discussions with well-regarded local nonprofits about how they monitor and evaluate outcomes, and analyzed best practices of similar nonprofits in other communities by combing through public documents and websites.
  • Impact measurement. All nonprofits are being pushed to demonstrate that their approach has a positive impact and this nonprofit’s entire sector is struggling with how to measure results. We were able to meet with a nationally-regarded academician about outcomes measurements related to self-reliance.
  • What those in need want. We created and fielded a client survey, met with government agencies and community services knowledgeable about community need, and conducted focus groups with potential clients.

Any situation assessment also requires understanding how well a nonprofit is performing now. This nonprofit was fortunate to have a partner with substantial operating expertise step up to evaluate its operational capacity. Without that partnership, we would have had to do our own capability assessment. After looking at a variety of self-evaluation tools, I turned up this excellent Capacity Assessment created by McKinsey and available through Venture Philanthropy Partners, a “dot.org” that is driving much of the national conversation about impact and evaluation. (I previously shared a case study about how a nonprofit stopped doing what didn’t work and began to concentrate its efforts on a program with tremendous impact, which I discovered through VPP’s book, Leap of Reason.)

One last, important piece of the equation needed to be in place before choosing the strategic direction: establishment of financial targets. Too often, strategic planning processes consist of nonprofit Boards brainstorming new programmatic objectives without addressing the financial requirements to sustain the mission.

Targets establish performance-related goals to be achieved by the end of a period and are used to inform budgeting and guide the strategic plan. The inherent tension between current financial performance and desired performance helps to drive changes that encourage the stability and success of the organization. This nonprofit’s targets were developed in discussion with the executive director, external accounting firm (which specializes in nonprofits), and chair of the finance committee after considering what financial measures are important to a high-performing nonprofit and/or a high-performing organization of this type, as well as the organization’s current state of evolution and development.

By September, highlights of the investigation were rolled into a briefing that was reviewed with the executive director. The executive director felt that the findings – and her own experience on the front lines of the nonprofit – unambiguously pointed to one direction.

The waters were tested when the executive director presented her recommendation to the Executive Committee of the Board. She concluded by asking, “Are there things we haven’t considered? How do we make sure we have the right kind of discussion with the Board?”

With the full support of the Executive Committee, the Board was brought together for a retreat to hear and discuss the recommendation, using the following agenda:

Welcome and introductions – Board chair

What’s in a strategic plan? What’s the Board’s role?

Where we are in the strategic planning process

What we’ve learned – highlights of the situation assessment

Environmental update, and findings from the capability assessment

Recommended strategic priorities

Board discussion of pro’s, concerns and risks to consider

Determination of next steps

  • Implications for budget
  • What are the next deliverables for review by the Board?
  • Check-in points: how should the Board monitor progress? Through a committee? At Board meetings?

As indicated in the author’s note at the top of this post, “life intervened” when I had to suddenly leave the retreat, although the outcome was as hoped: the strategic direction was approved.

Last night’s retreat was an opportunity to confirm and polish the strategic plan. A draft Strategic Plan document was circulated in advance to the board, with the following table of contents:

  • Recognition of Board participating in development
  • Introduction
  • Mission statement
  • External situation factors (social, economic, giving/grants, government/political, technology, competition/other providers)
  • Internal situation factors (capacity, operations, financial stability, facilities and operating hours, programs, management, Board, strategic partnerships, quality, donor base, volunteers, corporate sponsorships and relationships)
  • What are we trying to do and how will we get there? (summary of strategic direction)
  • Goals and objectives (including financial targets)
  • What will have to change to accomplish our goals (“from”/”to” table)
  • What will stay the same?
  • What are the expected outcomes when we get there?
  • What are the risks and how can we mitigate them? (risks/possible mitigations table)
  • Acknowledgements

During last night’s mini-retreat, the group expanded the discussion of changes that would be required to achieve the plan as well as potential risks and mitigation strategies. Goals, objectives and outcomes were approved, and the Strategic Plan in its totality was enthusiastically and unanimously approved.

Are we finished? Hardly! Now the hard work of implementation begins as well as the development of new tools to monitor progress toward the strategic plan and the factors most critical to its success.

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The Hard Spade Work of Strategic Planning

[Fifth in a series.]

In May, I reported that the strategic planning process I was facilitating for a small local nonprofit was right on track. After engaging the Board in identifying three possible directions, following a discussion of the environment and potential outcomes, the time came to dig in.

As Patrick Bell, who teaches the Non Profit Resource Center’s “Board Leadership: The Essentials” workshop tells Board members, a Board should provide input for long-range goals and the strategic plan and forge a strong partnership with staff in leading the organization.

That “strong partnership” has to respect the fact that the nonprofit’s leader is the one in day-to-day contact with clients and constituents. Staff should be in the best position to understand the operational challenges of potential directions. And, of course, they are going to be the ones held accountable for achieving the desired results.

This summer, I’ve been helping the staff of a small nonprofit explore three potential directions. By the end of August, we hope to be in a position to cue up the options so that the executive director can choose the best course, and prepare to recommend a five-year strategy.

Here’s a peek at the streams of work that have been underway:

  • Deep diving into outcomes: According to some studies, organizations that commit to outcomes* and evaluate them actually perform better than organizations with a looser sense of impact. Most nonprofits (especially those that operate in the sector that this one does) do not have true outcome goals. They measure output (for example, clients served), but not outcome. The “deep dive” has included interviewing several well-run local nonprofits, investigating the literature about outcomes related to this sector, meeting with a top national academician on the topic, surveying 20 nonprofits in the same sector in similar-sized communities, and collecting feedback from existing clients. The survey of 20 nonprofits (based on public sources) turned up a fourth direction that is now being considered.
  • Investigating targets: Successful for profit companies recognize that they have to be as good as competitors, or their lunch will be eaten. Nonprofits compete, too. They compete to be deserving of funders’ and donors’ confidence. They would benefit from knowing how their “competitive set” is performing with respect to indicators like administrative efficiency and contribution to overhead (total revenues minus total expenses, divided by total revenues). My hope is that this nonprofit will not only land on a couple of indicators that will help them to assess how they are doing, but set specific targets for where they need to be as part of the metrics related to strategic plan progress. A nonprofit, for example, can’t break even. It must be “profitable” enough to fund basics like IT infrastructure (increasingly expensive and critical) and program development. An emerging (but still debated) measure for nonprofits is the amount of funds contributed by social enterprise; McKinsey’s capability model (see link in next paragraph) assumes that nonprofits should develop sources of revenue beyond grants and donations. The survey of 20 organizations revealed a net “profit” ranging from -10% to over 10%, so it’s going to be interesting to figure out the right target for this organization! (One approach would be to decide which organization they most want to be like “when they grow up.”)
  • Assessing capability: We identified several helpful tools to help the organization assess its strength across every aspect of its management, from the Board through operations through communications and fundraising. Here are a couple of resources worth checking out: McKinsey’s tool adapted from its extensive work in the commercial sector, and United Way of Minneapolis’ tool posted on managementhelp.org.
  • Qualitative research into the possible directions: We’ve been out talking to nonprofits serving related clients as well as holding focus groups with people facing the kinds of problems that we hope to alleviate. There is no substitute for going straight to the horses’ mouths, and there have been some surprising insights that have come from this work.

Along the way, our understanding of the external environment has greatly expanded, insights that we’re weaving into the partially completed strategic plan document. When we’re done, the executive director should be in a position to put in front of the Board a well-researched recommendation and plan that answers the questions:

  • Where are we now?
  • What are we trying to do?
  • What will have to change?
  • How will we get there?
  • What do we expect to happen when we get there?
  • What are the risks and how can we mitigate them?

McKinsey, in a recent article entitled “How Strategists Lead,” did a great job of describing what we’re trying to build: “A great strategy, in short, is not a dream or a lofty idea, but rather the bridge between the economics of a market, the ideas at the core of a business, and action. To be sound, that bridge must rest on a foundation of clarity and realism, and it also needs a real operating sensibility.”

* Outcomes are defined as, “Socially meaningful changes for those served by a program, generally defined in terms of expected changes in knowledge, skills, attitudes, behavior, condition, or status. These changes should be measured, be monitored as part of an organization’s work, link directly to the efforts of the program, and serve as the basis for accountability.” — adapted from the Glossary of Terms of the Shaping Outcomes Initiative of the Institute of Museum and Library Services, Indiana University and Purdue University Indianapolis; The Nonprofit outcomes Toolbox: A Complete Guide to Program Effectiveness, Performance Measurement, and Results by Robert Penna; and the Framework for Managing Programme Performance Information of the South African government. As published in “Leap of Reason: Managing to Outcomes in an Era of Scarcity, Venture Philanthropy Partners

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Now we’re getting somewhere – a nonprofit strategic planning process


photo credit: alexabbound under CC license via flickr

[Fourth in a series. Read more about what’s wrong with most nonprofit’s strategic plans, how to evaluate the current strategy, and see an agenda to kick off a strategic planning process.]

This post might as easily be titled, “How to avoid the syndrome ‘we’re lost but making good time*.'”

The strategic planning process that I’m facilitating for a local Sacramento nonprofit is getting really exciting as its reaches the half-way point.

Having decided in October that it wanted to establish a direction and measurable outcomes goal to guide its efforts for the next five years, the Board set aside an evening in February to brainstorm. Before jumping into idea creation, the group received a refresher course on changes in the internal and external environment from the executive director. A substantive discussion followed about potential audiences or groups that the agency might choose to focus upon. But perhaps the most interesting discussion was about potential outcomes.

Small nonprofits usually think — and report — output, not outcomes. How many clients have they served? How many sites were they in? Organizations rarely have the resources to collect or analyze data about long-term impact such as whether a problem was prevented or fixed. And as a result, they usually don’t think in those terms, even if their mission statements are visionary and ambitious.

The discussion of outcomes set the table for a very productive brainstorming session about potential directions the agency could adopt. As members offered ideas, they were asked to suggest a specific target and provide an example measure of success. Their ideas filled the better part of two flip chart pads.

By the end of the three-hour meeting, 10 draft goal statements had been formulated. Participants used the time-honored sticky dot method of voting to identify ideas worth exploring. Three goals emerged with a preponderance of dots.

Board members were then invited to volunteer to join one of three subgroups that would develop a draft goal into a proposal for the full Board to consider at its next mini-retreat. Using a common template, the groups met to discuss:

  • The target audience: Is the description specific enough?
  • Outcomes: What meaningful changes would we aim to achieve (1-3 measures)?
  • Need:  What objective information is available about the need and the trend in that need?
  • Service gap: Is there a gap in addressing this need?
  • Before-and-after: How would the organization change if it adopted this goal? What likely programs would be developed, changed (or even eliminated)?
  • Assets: What capabilities or allies do we have that could help the organization achieve the goal?
  • Models: Are we aware of successful models in other communities we might emulate?
The three proposals were presented at a mini-retreat earlier this month. It was not expected that one would emerge as the clear choice. And that was the case! However, it did result in two goal ideas going to the next step of development. More information will be collected to help inform the Board as it chooses its five-year directions.
Observations to date
  • Nonprofits typically don’t have real long-term strategic plans in part because they don’t have staff or consultants to develop them. A good strategic plan takes a ton of work.
  • The step-wise process we’ve used so far has made it possible to engage the brain power of the Board and to let them do the initial tilling of the field. New Board members have become connected and engaged faster than they would have by attending monthly meetings, while the wisdom of longer-term Board members has been tapped.
  • The challenge now will be for the group to identify what information will help them to take a step back and be good governors and risk-managers for the organization. They will have to distance themselves from the ideas they have helped to bring to the table.
  • It’s time for staff – with a little third-party help from me – to put effort into developing both ideas. As we move closer to a draft direction, the executive director should have a stronger leadership role. The executive director knows the most about the capacity of the organization, the resources of the community, and the appetite of funders.
Stay tuned!

*’We’re lost but making good time’ is taken from Venture Philanthropy’s Leap of Reason Managing to Outcomes in an Era of Scarcity, featuring essays by top nonprofit management consultants, nonprofit leaders and philanthropists.

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An approach to strategy for nonprofits

Photo credit: kevulike/flickr under CC license

As many who follow this blog know, I retired from my professional life as a marketing and strategy executive to care for my now 95-year-old father and have used the hiatus to support nonprofits. That’s a long way of saying that most of the work I do by choice is pro bono, for causes I care about. I use this blog to share what I’m doing in the hopes it may support other nonprofits as they strive to fulfill their missions. In this post, I’ll share an agenda that I used last fall and describe the results.

In my first post in this series, I suggested that nonprofits have a greater need for real strategy than larger organizations. But, up against the press of reality, it may make more sense for a nonprofit to focus on action planning rather than strategic planning, and call it that.

Most nonprofit organizations also don’t have the resources to do what large corporations do: either task a staff department to draft a new strategy, or hire a smart consulting firm to develop a strategy under the supervision of management. One takes six months to a year, and the other, many thousands of dollars.

Last fall, I worked with a nonprofit to figure out: did it really need to focus on operational planning, or strategic planning? This particular organization is recovering from a crisis, making it very difficult to think beyond day-to-day challenges. But with operations normalizing, the Board felt ready to start talking about the organization’s future direction.

Below, I’ve pasted in a copy of the agenda for the 6 hour discussion I facilitated last fall. You’re looking at two paths the Board could have gone down. The left hand (blue) approach implies, “Hey, we’re doing important work. We just need to stay focused on doing what we’re doing well. Let’s stay the course.” The right hand column, which was the one the Board chose, meant, “Now that we have our heads above water, let’s take a fresh look. Let’s think about need and imagine if we were designing this nonprofit from the outset. What’s needed today?”

The group didn’t have that conversation with some grounding in reality. The agenda included a review of the environment, which included an inventory of local organizations addressing the same need. I developed a high level environmental assessment with categories that made sense: charitable giving trends, underlying issues having to do with need of the population served, trends in poverty/unemployment/economy, related trends in the retail/service environment, trends affecting the government’s role in addressing the problem, nonprofit trends including administrative cost pressures, and social/political/cultural trends. (For some organizations, it may also be important to consider technological trends – and, of course, changing demographics are a biggie.)

Given the constraints of volunteer Board members’ time (a Harris Poll found that Americans lost an average of 20 percent of their available leisure time from 2007-2008, as reported in Grassroots Fundraising Journal), I thought the group might want to divide and conquer by chartering some mini-teams to explore several new/different overall approaches to fulfilling the mission and reporting back to the full group. Instead, they established a series of full-group mini-retreats — extended 3 hour meetings — at which they will identify and explore options as a group. The first of those meetings is next month.

At that meeting, the group will attempt to achieve these outcomes:

1) Discuss/establish one or more long term goals as a stretch target or direction.  Long term goals will have a longer horizon such as something we would hope to achieve in 5-10 years.

2) Brainstorm ideas for alternatives or initiatives.  A limited number (1-3) will be selected for further exploration.

3)  Assign teams to develop concept proposals based on guidelines established by the Board.  Teams might be asked to gather data or input from community experts or leaders, draft a refined concept, estimate costs to develop, identify risks, and identify potential benefits and funding sources.

Stay tuned!

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Kicking the tires of the current strategy

Photo credit: Emotion Finder/flickr under CC license

Before holding that next “strategic planning” retreat, I’d suggest that the nonprofit’s Board chair, executive director and strategy/finance committee chair meet to kick the tires on the existing strategy.

In thinking about how to do that, I was struck by an article published by Chris Bradley, Martin Hirt and Sven Smit in the January 2011 issue of McKinsey Quarterly. Of course, the process of strategic planning is a lot different for a small nonprofit than it is for organizations that have the resources to work with McKinsey, but helpful things can be learned from these strategy experts.

Here are the eight strategy tests I adapted from the McKinsey experts:

  1. Will our strategy beat the market? The assumption here is that we have to be better than average to compete for donors and funders, and develop a positive reputation among clients and referral sources.  Good strategies are those that differentiate when compared to others who serve the same market or audience.
  2. Does our strategy tap a true source of advantage?  Distinct competencies like managing stakeholders or delivering programs in a unique way can be sources of advantage.  By definition, these capabilities have to be something we’re really good at that others are not.
  3. Is our strategy “granular” about where to compete and serve?  The idea here is to think about all of the distinct segments we serve rather than considering clients as a bloc.  A granular strategy might call out specific groups we want to serve well, such as seniors, medically fragile people, groups at risk of chronic conditions, or people who live in specific areas.
  4. Does our strategy put us ahead of trends?  Besides the obvious, we need to “look to the edges.”  How are competitors innovating?  Are there new entrants that are approaching what we do differently?  If an organization wanted to really shake things up and tackle a need, what might they do?
  5. Do we have proprietary insights about the need we address – or need in general?  Can we help our clients solve their problems in a new way?  Or do we just know what others know?
  6. Does our strategy embrace uncertainty?  Have we identified the variables that would influence how we prioritize or make an important decision about resources?  Have we thought about how we would respond to a range of scenarios?
  7. Do we avoid being contaminated by bias?  Are we overly optimistic or do we put too much emphasis on avoiding risk and the downside?  Do we identify objective criteria that help us to make decisions?
  8. Have we translated our strategy into an action plan?  Does everyone know what to do?  Do we know what we need to shift from and to? Do we know what the major change initiatives are to implement the strategy successfully, and are they resourced appropriately?

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When a “strategic plan” is not a strategy, actually

Photo credit: dbaron/flickr under CC license

First in a series

A friend recently showed me a document that was purported to be the strategic plan for a nonprofit association. What it was, actually, was output from a brainstorming session at which the organization’s board picked a bunch of initiatives and actions, titled, “Strategic Plan.”

Discussions, brainstorms and lists of initiatives are useful exercises for nonprofit boards, but they are no substitute for a strategy.

Let me make two flat statements:

  • Very few nonprofits — at least small, local ones — have a plan that rises to the level of being “strategic”
  • Not every nonprofit needs to invest in strategic planning – at least, not right now

What’s wrong with most nonprofit strategic plans?

1) They usually aren’t grounded in an understanding of the changing environment and competition; by competition, I mean anything that addresses the need the nonprofit is concerned about. The “anything” would certainly include other nonprofits but it would also include government and grassroots responses to the need.

2) They rarely drive toward a clear goal and target. Many nonprofits are focused on activity, for example, clients served. Though important and useful, activity measures aren’t adequate to provide direction. If you helped 10,000 people last year, is attempting to serve 15,000 people the following year an adequate goal? This isn’t McDonald’s, and numbers served isn’t an outcome. Most things that pass for goals represent too broad of a focus to help an organization decide how to deploy its resources. If it can’t guide decisions about where to invest staff and resources, then it isn’t adequate as a goal. In other cases, the goal seems to be based on bean-counting: the goal may be to achieve a certain level of revenue, or to produce a certain number of programs, but what’s to say those are the right numbers? That’s the role of a target. Targets should be based on an understanding of what would be good performance for that nonprofit as it chooses what problem it will attack; it can be very helpful to consider what other high-performing nonprofits have been able to achieve in their communities. The right targets can be transformative to an organization.

Some reading this may be thinking, “That’s all well and good for corporations, but nonprofits don’t need real strategic plans.”

I would argue that nonprofits need strategic plans more than for-profit enterprises because their resources are so constrained.

Strategic plans are about choice, thoughtful choice. When you can’t do everything, you have to decide what’s the best thing you can do. That takes understanding your organizational capabilities — both assets and limitations — as well as something about what needs are unfilled. It’s not about the quest for the next new thing.

Why strategic planning isn’t for every nonprofit – at least not right now

As a group of McKinsey authors said in a paper last year, “Strategy is a way of thinking…” (Bradley, Hirt and Smit, “Have you tested your strategy lately?” McKinsey Quarterly, Jan. 2011)

If an organization is in the midst of a crisis, or stretched to the limit, it may be better served by action planning than by strategic planning. Action plans identify the basic steps that have to take place to meet the immediate need. What has to happen to support client services? What block-and-tackling marketing and fundraising activities have to be completed within critical timeframes? What infrastructure has to get fixed or put in place?

It’s a little like farming. Action planning lets a nonprofit subsist off the land, but it may not maximize its productivity. Creating a thriving farming enterprise requires understanding the market for crops, analyzing the soil/climate and what the farm could produce best, perhaps learning and implementing new approaches, and figuring out how to switch from doing things the old way to the new way. It might also involve creating new alliances or partnerships.

But with the annual strategic planning retreat coming up, what’s a nonprofit to do?

To use the time of the Board wisely, think long and hard about what the outcome of the retreat needs to be. Does the nonprofit need to prioritize the most important actions that need to be taken to stay afloat (which includes de-prioritizing some programs or activities that may be sacred cows to some Board members)? If so, then an action planning retreat would serve it best — and call it that, not a strategic planning retreat. Or are operations under control enough to look toward the horizon? Then focus the conversation on how the Board wants to approach the process of strategic planning.

I think there’s a moral imperative for nonprofits to periodically re-examine their direction, even their missions. What can the nonprofit focus upon that really meets a need and is within its potential capabilities? That’s what the strategy should answer.

Next: kicking the tires of the existing strategy/direction

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