Once confined to Fortune 100 companies, strategic planning has become a regular ritual in the nonprofit sector. Most nonprofits have engaged in some form of strategic planning in the past, and no doubt, many nonprofits were in the process of “refreshing” their strategic plans or adopting a new plan when the world turned upside down in March. Should nonprofits continue to engage in “strategic planning” during times of extreme uncertainty? This article answers that question.
The Shibboleth of Strategic Planning
Strategic planning involves “a structured process to define success for an organization, determine the operational and programmatic steps to get there, and align resources and staff to achieve the goal within a given time frame.” (Bridgespan.) According to Boardsource, strategic planning is one of the “primary responsibilities” of a nonprofit board. As a result, recent surveys suggest that 70% of nonprofits engage in strategic planning, making strategic planning one of the top management tools used in the sector.
Despite being widely touted and broadly used, strategic planning has always had its critics. Back in 2013, Dana O’Donovan and Noah Rimland Flower argued that “the trusted, traditional approach to strategic planning is based on assumptions that no longer hold.” More recently, Joan Garry maintained in the Chronicle of Philanthropy that too many nonprofits avoid the “tough questions” when planning and “do not involve the right people at the right altitude.”
O’Donovan and Flower noted that strategic planning had its origins in the military where, historically, one could “count on a few constants,” including the past as a reliable predictor of the future. In modern times, they contended, that core conceit is flawed: “[t]he future is no longer reasonably predictable based on the past – in fact, it is liable to be startlingly different.”
Stop Strategic Planning – Start Managing Risks
How right they were. Nonprofits now face unprecedented uncertainty, and one may reasonably wonder whether and when the sector will settle in some new “normal.”
Should you engage in strategic planning right now? No – definitely not. Conserve resources so you can respond with agility in the face of uncertainty. You have no sound basis for deciding what you will achieve five years from now. If you think you do, you’re kidding yourself. Stop wasting money.
Instead, use your resources to become shore up your business plan, become radically aware of the threats and opportunities you face, and take the next reasonable steps in response to those uncertainties. In other words, apply essential tools of risk management. Even in “normal” times, nonprofits face tough business models, making risk management more important in this sector than elsewhere. These are not normal times, so here are three prescriptions for our current reality.
Ensure Business Continuity
As a first step, make sure your organization ensures business continuity. If you haven’t already, adopt a business continuity plan that sets out key resources and responsibilities in times of emergency (you can find a free template here). Your team needs a simple guide, so aim for clarity and specificity over length. As part of business continuity planning, ensure that you and your staff are not serving as vectors for disease, even if this means modifying or curtailing essential services in the short run. Business continuity planning may force you to confront some tough choices, including whether to hibernate or fundamentally shift your underlying business model. In making these choices, err in favor of over-communicating to relevant stakeholders, including clients, staff, donors, and peer organizations.
Identify and Prioritize Your Risks
If a nonprofit has a strategic plan without having a risk management process in place, all it has is a strategic hope. In other words, if a nonprofit does not have a robust process in place for identifying its core capabilities and weaknesses, it has no basis for solidly projecting its operations into the future. It’s merely whistling in the dark.
If you have not adopted risk management in the past, you don’t need to invest a vast amount of time or money now. A risk management process is simply a defined commitment within an organization to identify threats (negative risks) and opportunities (positive risks), prioritize them, respond to them, and assess and improve over time. It’s a cycle of continuous learning, adaptation, and growth. Far from being a scary process of looking for everything that can go wrong, risk management is simply a way of coping with uncertainty constructively.
You don’t need to commit to a full risk management process now. Save that for later, when we understand more about the new “normal.” Instead, focus on the first two steps: identification and prioritization of your risks. Engage your senior staff in a structured inquiry into the threats and opportunities you face in every aspect of your nonprofit – operations, finance, IT, talent management, and other areas. (You can find a detailed guide to help you perform this task on our website.)
You might object that you have your hands full right now. That’s why I place this step after necessary business continuity. Ensure your basic operations have reached some temporary stasis; then perform a risk inventory. But by all means, do it. You might think that the current crisis is the most crucial issue on your agenda, but unless you perform a risk inventory, you may miss the most critical issues by focusing on the most urgent.
After your team performs a risk inventory, you will have a long list. Some issues will be illusory (someone identified something that isn’t factually accurate), while others may be trivial. But you will still face a substantial number of risks – on the order of 50 or more. You cannot possibly focus on 50 issues at once, so have your staff provide input on the most critical issues, based on their individual assessments of the magnitude of the risk, the likelihood of it happening, and the speed of onset if it occurs. (You can find a podcast describing how to do this here.)
After completing this exercise, you will have a dramatically better awareness of your organization’s current capabilities, as well as a punch list of items to address in the short term to increase resilience and sustainability.
Scenario Plan Instead
Once you have engaged in business continuity and identified and prioritized your risks, you can face the future. But don’t attempt to forecast. Scenario plan instead.
Forecasting attempts to predict what the next few months will bring. Prediction is challenging even in relatively quiet times. It is notoriously difficult to predict what is going to happen next. But forecasting is particularly challenging in turbulent times, and we face incredibly turbulent times. The facts we face are unprecedented in the adult lifetimes of anyone on earth. Beyond broad brush strokes, we don’t know what’s going to happen next. We know there will be massive economic dislocation. We know that there will be government and community attempts to respond to that. Beyond that, we don’t know that much.
But scenario planning does not require that we can forecast with accuracy. Scenario planning is different. You don’t perform scenario planning to predict what will happen. Instead, you use scenario planning to hypothesize possible futures so that you can reflect on what you might do differently in the present.
Organizations engage in scenario planning to avoid shortsightedness and to increase agility in the face of uncertainty. Even in normal times, people get stuck in ruts. Scenario planning allows people to disrupt those ruts and think about different possibilities. In crises, scenario planning plays a slightly different role. In an emergency, people tend to focus on their immediate environment. That has value, of course, but it can also create shortsightedness. Focusing only on the present and responding to immediate concerns might lead an organization to expend resources or take steps now that would be harmful in the future. Scenario planning can force an organization to broaden its point of view.
Let me give you two examples of scenario planning that your team could engage in right now.
It’s seven months from now, and you are looking at your budget and operations. On the one hand, your organization faces an increase in demand for services of 15%. On the other hand, it faces a year-over-year decrease in revenues of 20%. That is our imagined future, our scenario. Let’s now unpack that scenario and find lessons for the present day.
How likely are we to face this scenario? This question sounds like a forecast, but it’s not. The inquiry is, how likely are we to face this scenario as a reality? In answering that question, your team should make its assumptions explicit. Why do we believe that it is likely or unlikely that we would face such an increase in demand? Such a decrease in revenues? Have we faced situations in the past where demand and revenues have diverged, and if so, why?
If we face this scenario as reality seven months from now, what choices would we expect to be making at that time about services and revenues? What services would we reduce, and what budgetary choices would we make? Do we have a firm commitment to tap reserves, if we have them? In other words, reflecting on this possibility, what advice can we give our future selves so that we aren’t facing such questions in the heat of the moment?
If we think there is a reasonable possibility of this scenario becoming a reality, what can we do now to reduce its likelihood or reduce its impact? This third question seeks to take steps in the present to increase resilience in the face of an uncertain future.
When scenario planning, don’t merely focus only on bad things. Risk management focuses on uncertainty, and uncertainty can be good as well as bad. We just examined a troubling scenario – a threat scenario. Let’s go through a good script – an opportunity. You and your team should consider the following hypothetical situation.
Nine months from now, your organization finds itself with 33% more financial resources to spend on your service population. In other words, you have found one or more benefactors who are dramatically raising their support for you. The same three basic questions apply.
How likely do we feel this scenario might be? The point here is again to make your team’s assumptions explicit. If the team is pessimistic about such a rosy scenario, why? If any team members are more optimistic than others, what is the basis for that optimism? Capture these thoughts not to be critical, but instead in a spirit of constructive inquiry. Do any of the assumptions drawn out at this point in the exercise suggest differences in factual understanding that the team needs to explore? Do any of the assumptions require research?
If we face this bounteous scenario nine months from now, what would we spend those resources on? Would we expand current programs or pilot something new? Would we use some of these resources to bolster our human resources or our infrastructure? This part of the scenario emphasizes priorities within the organization.
In light of our answers to the previous two questions, should we be doing now to increase the likelihood that this potential opportunity becomes a reality? Are there new sources of funds that we can explore not for a small short-term burst of money, but with the prospect of a substantial payoff nine months from now? Cultivating funder relationships often takes time. Are there any proofs you can supply to potential funders now that would dramatize the fact that you would be particularly effective stewards of increased financial support?
Strategic planning during battle is absurd. But the preservation of business continuity, radical awareness of your current reality (including what you don’t know), and probing possible futures using scenario planning can dramatically improve your organization’s resilience and sustainability. The best generals understand that, in von Molke’s words, “no plan of operations extends with any certainty beyond the first contact with the main hostile force.” We’ve met the main hostile force; now we learn about the obstacles before us and take the next reasonable steps in response.
Stay current with COVID-19
To keep up-to-date with current information on COVID-19 and how nonprofits are affected, go to our Coronavirus Nonprofit Risk Management Resources page.