Ok, let's get this out there: Most nonprofits' strategic plans are ineffectual. Few are actually used. Even fewer lay the groundwork for success. This theme cuts across fields of work, geographic boundaries and budget size.
The new Northwest Nonprofit Capacity Report, a study of over 1,600 nonprofits, shows that only 44% of organizations actively use a strategic plan, and just 37% find it effective.
Strategic planning clearly can have value -- it's an established best practice among Fortune 500 companies, and Public Interest Management Group's applied research shows a large correlation between high-quality plans and nonprofit organizational success. But that's not the standard in our sector. Countless staff and volunteer hours, not to mention hard-earned dollars, are dispensed on processes that fizzle in the end.
We review dozens of plan documents, and see several common problems. Most plans suffer exhibit two or more toxis symptoms:
- Vagueness, with only general or ill-defined goals and objectives
- Incrementalism - a series of "small picture" tactics without a unified destination
- Lack real-world context, informed primarily by the intuitions of people inside the organization
- Failure to address operational, staffing or financing requirements, further extending the detachment from reality
- Inability to adapt to changing conditions—plans are static at a point in time.
Our research further shows that an inadequate plan is scarcely better than no plan at all.
So many missed opportunities…
PIMG's study of over 70 nonprofits points to several characteristics of effective strategy, including close attention to the core of the organization's business model, specification of programmatic and financial goals, and identification of needed capacity investments. Effective strategies generally leverage organizational partnerships, and directly address the underlying revenue structure. Decision-making is informed by a wide range of objective data. These may not be warn, fuzzy topics for a planning retreat, but nonprofits that check these boxes are typically more successful than those that do not!
Further, the most successful nonprofits cultivate an ability to adapt to change, and value financial and management functions on par with mission-related programs. These cultural traits support the effective implementation of plans.
PIMG's approach to strategy formation draws substance from research findings and avoids the gaps typically found in strategies. We call it Data-Driven Strategic Planning.
Unlike conventional strategic planning, this approach is not primarily about promoting alignment of people within the organization. Instead, it’s principally about identifying a strategy that will focus the organization on successful performance.
Here are several key features, in six straightforward steps:
1. We start with a 360 Organizational Assessment. This process, developed and piloted by PIMG over the past several years, collects valuable data from internal and external stakeholders, and identifies key organizational strengths and priority needs, in part by utilizing a data bank of success factors for over 60 nonprofits.
2. We complement this data with market research. This will help clarify the organization’s competitive position and opportunities, and allow deeper engagement of key stakeholders.
3. Working with a team of staff and board leaders, we identify a range of strategy options and specific metrics for success – programmatic, financial and operational.
4. Next, we develop these alternatives using financial modeling, and then vet the options side by side, using a set of criteria established by the group.
Each of these steps is punctuated with facilitated discussions of the staff-board project team, to explore the meaning and implications of data we’re collecting. We engage the entire board and staff in the process.
As we narrow down the options, deeper analysis sheds light on benefits, costs and risks. The process leads to a preferred organizational strategy, which becomes the centerpiece of the strategic plan and, in turn, informs the next step:
5. We lay out an operational framework for implementation of the new strategy, covering needed capacity investments, staffing and infrastructure requirements, organizational structure and change management.
The main deliverable of Data-Driven Strategic Planning is now ready: a well-defined strategy that will point your organization toward performance on the mission, as well as a sound and sustainable business model. The plan includes key milestones, multi-year financial targets, and a carefully honed scorecard for tracking performance.
With a tangible strategy in hand, the process then focuses on ensure everyone is moving forward together.
6. We facilitate discussions among staff and volunteers to build alignment around the plan.
Finally, we leave the organization with a simple “kit” for updating plan elements from year to year, to keep it fresh and relevant as the world changes.
Data-Driven Strategic Planning has depth, but you don’t have to have deep pockets to participate. The process is flexible, allowing consulting work to wrap around your specific needs. Some elements may be done in-house. We’ll coordinate the process and ensure its integrity, but you, as the client, can define the specific scope you need.
So, that’s our cure for the commonly cold strategic plan.
If this framework may fit your vision for a dynamic, high-performance organization, we should talk.