Strategy for Nonprofits – 10 Things to Remember

strategy development

I’ve worked on a lot of strategy consulting engagements for government and nonprofit clients over the years. When I started, these were the sectors which were the least developed in terms of management thought and the application of technology. Michael Porter was quite emphatic about the situation:

“Billions are wasted on ineffective philanthropy. Philanthropy is decades behind business in applying rigorous thinking to the use of money.”

Michael Porter

Happily, when I recently worked with nonprofits, I found this had changed for the better. There’s an appreciation that nonprofits needs to be as professional as their corporate cousins. In fact, it’s even more critical, since nonprofits don’t usually have the luxury of funds that allow a recovery from strategic mistakes.

An area where there’s still room for improvement for nonprofits is in strategy development. My feeling is that most nonprofits still struggle, finding the development process difficult, and historically not geared to the needs of this sector.

Nonprofits can fix this difficulty by following an approach to strategy development that focuses on ten areas where clarity will help:

1. Be clear what is “Strategy”

Strategy is what the organization will do to achieve its vision and goals in a way that is different and better from other firms. It is a guide for what operations should achieve, not the operations themselves. A strategy delineates a territory in which a company seeks to be unique.

(Its) about making choices, tradeoffs; it’s about deliberately choosing to be different.

Michael Porter

2. Define Clear Goals. First!

A good strategy is one which aligns to well defined goals, which should be derived from the mission. The best way to define goals is to define the impact you plan on having i.e. what are you trying to accomplish? Your strategy can then lay out the specifics of how you plan to achieve that.

Sound strategy starts with having the right goal.

Michael Porter

3. Make Sure There’s Forward Movement

Otherwise known as ‘going around in circles’. Symptoms: getting stuck in endless discussions of details, not getting desired output in time, nothing new emerging from repeated planning exercises.

Nonprofits most often get bogged down by relying solely on themselves to develop the strategy (“we are unique.. we know our work best”) and starting discussions and analysis in an unstructured manner. This often leads to time wasting (no output) and is not inclusive (so it’s the “same old discussion”) which erodes the value of a strategy planning exercise.

Some shortcuts to use for an efficient process are:

  • Use an external facilitator who guides the discussion and ensures all the elements gets discussed. Discussions led by internal staff deteriorate into just that – internal discussions which focus on the micro aspects rather than strategy.
  • Have the CEO involved in the process from the start, no handover, no option given to leadership teams but to participate and contribute.
  • Be specific: Objectives, view on maximizing strength and reducing weaknesses, priorities, timelines, ownership: all of these need to be laid out and finalized

4. Avoid the “Let’s do that too!” syndrome

Oh boy, this is a biggie.

It’s good to be enthusiastic. It’s better to be effective.

Goals, goals, goals – set them right, focus on an area, and deliver results in that space.

The essence of strategy is choosing what NOT to do.

Michael Porter

What is your program/service focus: i.e., what services do you want to provide and to whom. Don’t go too far downstream: Don’t get lost in the action plan. That’s a separate discussion. What kind of skills, systems, staffing, structure are needed, and what can you provide? If you don’t have a team with skills in a specific area, or you aren’t willing to invest to build up those skills, don’t include it. And don’t waste time discussing it.

5. Don’t Leave Your Strategy On The Shelf

The strategy planning exercise shouldn’t result in a plan document that gets left on the shelf, or is viewed only by the Board or CEO, and not connected to functional areas.

The strategy development effort should include an implementation plan with specific initiatives. And be ready to change the implementation plan as needed after launching initiatives.

6. Dont be Shy About Money

A planning session at a nonprofit has to include a discussion of the economic model to deliver the strategy. In my experience, a majority of staff at a nonprofit avoid discussing the finances of the organization since its meant to be a socially focused enterprise. However, top leadership has to address this in detail since without staying abreast of funding trends the organization cannot achieve its goals.

7. Manage Both the Amount and the Type of Funding

Funding has, and always will be, an issue for nonprofits. In the scramble for funding sometimes nonprofits can lose sight of the fact that restricted funding, most often focused on specific programs, limits the directions of growth to relatively narrow areas of impact.

While restricted funding is cheaper, with a low cost to funds ratio, there is a hidden cost that might not always be considered – donor-specified restrictions on operations might be suboptimal, and there may be a significant additional effort and cost of meeting scrutiny of financial and administrative practices and proving effectiveness.

If the organization’s ambitions are larger, then its strategy should address the mix of funding to consider the necessity for unrestricted funding to meet expenses such as management, training, marketing, interest costs, etc. which may be a necessity to meet its mission more effectively. Where these sources are limited, the organization must consider its options and decide where its future lies.

8. Ignore Governance At Your Peril

Governance needs to be an essential part of a nonprofits strategy since it involves legal, ethical and financial processes to protect trust in the organization by using process KPIs to ensure alignment to standards and principles. This is an aspect most organizations ignore when they prepare their plan.

9. Build Measurements into the Strategy

How do you know you are achieving the desired results? When defining the strategy, specific metrics have to be defined as well, so that there are targets for the implementation activities to aim at.

10 And Finally…

Whatever strategy you develop, be true to yourself and what you have set out to achieve. Maintain continuity and don’t get distracted by the ways and means of achieving your vision.

Plans and strategies can always be changed and improved. But vision doesn’t change. Visions are simply refined with time.

Andy Stanley

Useful resources: Two great articles on strategy building for nonprofits