Strategic Planning for Nonprofit Organizations, 2nd Ed

Strategic Pla Plan nning fo forr Nonpro roffit Organ Organizati izatio ons A Practic Practica al Guid ide e and Workbook second edition

Michael Allison Jude Kaye Comp ompas assPo sPoint int Non Nonpro profit fit Serv Servic ices es

John Wiley & Sons, Son s, Inc. Inc .

Strategic Pla Plan nning fo forr Nonpro roffit Organ Organizati izatio ons A Practic Practica al Guid ide e and Workbook second edition

Michael Allison Jude Kaye Comp ompas assPo sPoint int Non Nonpro profit fit Serv Servic ices es

John Wiley & Sons, Son s, Inc. Inc .

This book is printed on acid-free paper.   Copyright © 2005 by by CompassPoint CompassPoint Nonprofit Nonprofit Services, San Francisco Francisco.. All rights reserved. Published by Published by John John Wile Wiley y & Sons, Inc. Inc.,, Hobok Hoboken, en, New Jersey Jersey.. Published simultaneously in Canada. No part of this publication publication may be repro reproduced, duced, stored in a retrieva retrievall system, system, or transmitted transmitt ed in any form form or by any means, means, electr electronic, onic, mechanical mechanical,, photocop photocopying, ying, recording, recor ding, scanning scanning,, or otherwise otherwise,, except as permitted permitted under under Section 107 or 108 108 of the 1976 1976 United United States Copy Copyright right Act, without either either the prior written permission of the Publis Publisher her,, or authorization authorization throu through gh payme payment nt of the appro appropriate priate per-copy per-copy fee to the Copyright Clearance Center, Center, Inc. Inc.,, 222 Rosew Rosewood ood Drive, Drive, Dan Danv vers, MA 01923, 01923, (978) 750-8400, 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 11 111 1 River Street, St reet, Hoboken, N J 07030, 070 30, 201-7 201-74848-6011, 6011, fax 201-748-6008 201-748-6008.. Limit of Liabilit Liability/Disclaimer y/Disclaimer of Warranty: While the publis publisher her and and author author hav havee used their best efforts effor ts in preparing this book, they make make no representation representationss or warranties with respect respect to the accuracy or or completeness completeness of the contents contents of this book book and specif specif ically disclaim disclaim any any implied implied warranties warranties of merchan merchantability tability or f itness for for a particular particul ar purpose. No warr warranty anty may be created or extended by by sales representativ representatives es or written sales materials. The advice and strategies contained contained herein may may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publish publisher er nor author shall be liable liable for any loss of profit or any other commercial commer cial damages, damages, includin including g but not limited limited to special, special, inciden incidental, tal, conseque consequential, ntial, or other damages. Designations used by companies to distinguish their products are often claimed as tradema trad emarks. rks. In all instan instances ces where where John John Wil Wiley ey & Sons, Sons, Inc Inc.. is aware aware of of a claim, claim, the product product names appear in initial capital or all capital letters. Readers, ho howe weve ver, r, should contact the appropriate companies for more complete information regard regarding ing trademarks and registration. For general general information on our other products and services, services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United United States at 317-572-3993 or fax 317-572-4002. 317-572-4002. Wiley also publi Wiley publishes shes its books in in a variety variety of electr electronic onic formats. Some content content that that appears in print may not be available in electronic books. For more information infor mation about Wiley products, visit our Web site a t www.wiley.com. Library of Congress Co ngress Cataloging-in-Publication Data: Allison, Michael (Michael (Michael J.) J.) Strategic planning planning for nonprof nonprof it organizations organizations : a practical guide and workbook wo rkbook / Michael Allison, Allison, Jude Kaye.— Kaye.— 2nd ed. p. cm. Includes bibliographical references and index. ISBN-10: 0-471-44581-9 (paper/CD) ISBN-13: ISBN-1 3: 978-0- 471-44581-4 (paper/CD) 1. No Nonp nprrofit organ organiz izat atio ions ns — Ma Mana nage geme ment nt.. 2. St Stra rate tegic gic plan planni ning ng.. I. Ka Kay ye, Jud udee. II. Titl Title. e. HD 62.6. A45 2 005 658.4' 012— dc22 2004016486 Printed in the United United States of America 10 9 8 7 6 5 4 3 2 1

For my parents Lee and Margot Allison, my wife Jennifer Chapman, and my daughters Sarah and Madeline Allison — Mike Allison

In memory of Gregor Gregor E. McGinnis McGinnis,, a man of great vision who understood that the process is i s as importan impo rtantt as the th e end product. prod uct. — Jude Kaye

We dedicate the second edition of this book to the employee emplo yeess, vol voluntee unteers rs,, boar boardd membe members rs,, and financial f inancial suppor supporters ters of nonprof it organizat org anizations ions.. Your commitment to the nonprofit sector is helping make the world a better bett er place. place. Your gift of now promises a brighter tomorrow.

About the Authors Mike Allison served as Director of Consulting and Research Research at Comp CompassassPoint Nonprofit Services for 15 years and is now an independent consultant. sultant. He activ actively consults consults in the areas areas of strategic strategic planning, planning, gov governance, ernance, and organizational organizational dev development. He has written many articles and manmanuals and is a freq frequent uent speake speakerr at nonprof it sector conferences. c onferences. Mike is the former executiv executivee director of a community-based community-based organization organization and and received received his MBA from the Yale School School of Manageme Management. nt. Jude Kaye Kaye is a Senior Fellow with CompassPoint Nonprofit Services and a nationa nationally lly respe respected cted author author,, trainer trainer,, facilitato facilitatorr, and consu consultan ltant. t. She specializes specializes in strategic planning planning and organization dev development. elopment. Over Over the past three three decades, Jude has has worke worked d with hundreds hundreds of of large and small nonprof profit it organi organizat zation ionss and has has served served on many many nonpr nonprof ofit it boards. She teaches consultants how to have a greater impact through CompassPoint’s threeday Institute for Nonprofit Consulting and provides executive coaching services through her company, company, Intentions Intentions to Action. Founded in 1975, CompassPoint Nonprof it Services is on onee of of th thee nation’s nation’s premier consulting, training, and research research f irms focused exclusiv exclusively on the nonprofit nonprof it sector. With off of f ices in San Francisco and Silicon Valley Valley,, CompassPoint’ CompassPoint’ss mission is to increase the effectiv ef fectiveness eness and impact of people working working and volunteering volunteering in the nonprof nonprof it sector. We are guided in our belief belief that that nonprof nonprofits its serve serve as the agents agents of democrat democratic ic inv involvemen olvement, t, innova innovation, tion, and positive positive social change. A nonprof nonprof it ourselves, CompassPoint CompassPoint works works with organizations in areas areas including including non nonpr prof of it finance, finance, boards boards of directo directors, rs, fundraisi fundraising, ng, technolo technology gy,, strate str ategic gic plan planning, ning, organizational organizational change, change, and executiv executivee leadership. leadership. Every Every year, over 10, 10,000 000 nonprof nonp rof it staf sta f f and volunteer volunt eer s atten at tend d our ou r worksho work shops ps iv

about the authors

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and conferences, conferences, and nearly 300 nonprof nonprof its choose us as as their consultconsultants. ants. CompassP CompassPoint oint’’s programs programs support support the growth growth of an effect ef fectiv ivee nonprof profit it sector sector.. We are are a center center of learning learning for nonpr nonprof of it staf staf f, an affordable affordable consulting partner to the sector, and a research institution institution for innovation innovation in nonprofit nonprof it organizational effectiv ef fectiveness. eness. For more information, see our Web site at www.compasspoint.org.

Contents What You Will Find in This Book Introduction to the Second Edition

x

Acknowledgments Chapter 1

Introduction to Strategic Planning

1

The Language Language of of Strategic Planning Planning in the the Nonprof Nonprof it Sector Sector How Much Time and Money Does It I t Take To Do Strategic Planning?

24

Phase 1: Get Ready

31

How Do We Get Started? Star ted? Step 1.2: 1.2: Set Up Your Planning Planning Pro Process cess for for Success Success

31 32 35

Step 1.3: 1.3: Develop Develop a Plan for for Gathering Gathering Information from Internal and External Stakeholders

39

Why Plan? What Strategic Planning Is Not Keys to Effective Strategic Planning Summary Sum mary of Key Key Concep Concepts ts Dif ferent ferent Types of Planning Planning The Strategic Planning Process

Step 1.1: 1.1: Identify the Reason Reasonss for Planning Planning

Step 1.4: Design Your Strategic Planning Planning Process to Meet Your Organizatio Organi zational nal Needs N eeds Step 1.5: 1.5: Write a Planning Workplan orkplan Case Study: Worksheet 1 Case Study: Worksheet 2 Case Study: Worksheet 3 Case Study: Worksheet 4 vi

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1 2 4 5 6 7 14 20

What Is Strategic Planning?

Chapter 2

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46 62 68 71 75 81

contents

Chapter 3

Phase 2: Articulate Mission, Vision, and Values Why Do We Need a Mission Missi on Statement ? Step 2.1: Write (or (or Reaff Reaff irm or Rewrite) Your Mission Statement Step 2.2: Write Your Vision Vision Statement Statement Step 2.3: Articulate the the Fundamental Fundamental Values that Guide Gui de Your Your Work

87 99

Case Study: Worksheet 7

Phase 3: Assess Assess Your Situation Situation

125

Review History and Cur rent Scope and Scale of Oper Operati ation onss

127


Step 3.1: Prepare Prepare a History History and Descriptive Descriptive Prof Prof ile of Opera Operatio tions ns

Step 3.4: 3.4: Gather Information from External Stake Stakeholders holders

127 129 134 135 140

Step 3.5: 3.5: Gather Information from Documents Documents and and Other Sources

142

Step 3.2: Articulate Previous Previous and and Current Current Strategies Strategies Overvie Overview w of Informati Information on Gathering Gathering Step 3.3: 3.3: Gather Information from Internal Stake Stakeholders holders

Step 3.6: Summarize Summarize Information into a Situation Situation Assessment Case Study: Worksheet 8 Case Study: Worksheet 9 Case Study: Worksheet 10 Case Study: Worksheet 11 11 Case Study: Worksheet 12 12 Chapter 5

85 86

107 118 120 122


Chapter 4

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Phase 4: Agree on Priorities

149 153 158 160 162 168

Overvie Overview w of of Phase Phase 4

177 178

Step Step 4.1: Analyze Analyze Data, Data, Review eview Progr Progress ess to Date, Date, and Update Workpla Workplan n

181

Step 4.2: 4.2: Use Business Business Planning: Planning: Tools for Assessing Assessing Your Program Portfolio

186

Step 4.3: Agree on Each Program’ Program’ss Future Grow Growth th Strategy and Develop D evelop Your Program Portfolio Portfol io Step 4.4: Confirm Conf irm Your Future Future Core Strategies Strategies Step Step 4.5: Agree Agree on Admi Administ nistrati rativ ve, Financ Financial ial,, and Governance Priorities Case Study: Worksheet 13 13 Case Study: Worksheet 14 14

201 204 214 221 224

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contents

Case Study: Worksheet 15 Case Study: Worksheet 16 Chapter 6

Phase 5: Write the Strategic Plan Step 5.1: Create Goals and Objectives Step 5.2: Understand the Financial Implications of Your Decisions Step 5.3: Write the Strategic Planning Document Step 5.4: Adopt the Strategic Plan and Next Steps Common Obstacles Encountered in Phase 5 Case Study: Worksheet 17 Case Study: Strategic Plan

Chapter 7

Phase 6: Implement the Strategic Plan

235 235 240 249 269 270 274 277

Step 6.2: Develop a Detailed Annual Operation Plan

287 287 290

Sample (Annual) Operating Plan: Program Goal for an Economic Development Agency

295

Step 6.1: Plan to Manage Change

Fund Development Goal for Museum (from Annual Operating Plan)

Chapter 8

227 230


295 298

Phase 7: Evaluate and Monitor the Strategic Plan

299

Step 7.1: Evaluate the Strategic Plan and the Strategic Planning Process


299 301 303 305 307 309

Appendix A

Blank Worksheets

315

Appendix B

Sample Workplans for Abbreviated, Moderate, and Extensive Planning Processes

373

Elements of an Effectively Managed Organization (EEMO2™ ): An Assessment of Your Organizational Capacity

390

Appendix D

Self-Assessment of Board of Directors

408

Appendix E

Sample Techniques Used in Client Needs Assessment and Program Evaluation

413

Step 7.2: Monitor the Strategic Plan and Update as Needed Life After the Strategic Plan Is Done Conclusion: A Word to Leaders Case Study: Worksheet 19

Appendix C

contents

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Appendix F

Conducting Focus Groups

418

Appendix G

Techniques and Tools for Managing Group Process: A Toolbox of Meeting Process Tools and Techniques

426

Appendix H

Tips on Using Task Forces

434

Appendix I

Templates for Strategic and Operational Plans

438

Appendix J

External Stakeholders: Process Recommendations and Suggested Questions

442

Selected References

448

Appendix K Index

451

What You Will Find in This Book Strategic Planning for Nonprofit Organizations: A Practical Guide and Workbook, Second Edition, offers a conceptual framework and detailed process suggestions for strategic planning in nonprof it organizations. This book is the product of the authors’ experiences as planning and organization development consultants. The concepts, process design, and language presented here have been shaped by our work over the years with hundreds of nonprof it organizations on strategic planning. Many of the worksheets and approaches to formulating strategy were developed while working with individual clients in response to particular situations. In addition, the book builds on the work of many authors before us and incorporates the wisdom and experience of CompassPoint’s strategic planning practice group members. We hope that this book provides you with a practical approach that is comprehensive without being either overly complex or unduly simplistic. The user-friendly tools and techniques should help you put the framework into action.Those who have experience with strategic planning will f ind the book a useful refresher and “one-stop source book” of fundamental concepts and techniques; those without such experience will f ind it a valuable introduction to what strategic planning is— and is not— and how to make the best use of the process. When done well, strategic planning is both a creative and a participatory process that engenders new insights and helps an organization focus its ef forts in pursuit of its mission. It is an important tool that can help nonprofit organizations achieve their goals. A tool’s effectiveness, though, ultimately depends on how well it is wielded: a hammer is a good tool for nailing together bookshelves, but just swinging a hammer doesn’t mean the bookshelves will get built, nor does failure to build bookshelves ref lect poorly on the hammer. With this workbook, the authors hope to help others understand enough about the potential and the requirements of x

what you will find in this book

xi

this particular management tool to create sound strategic plans that contribute to the viability and success of their organizations’ work. Intended Audiences

This workbook is written to help the board and staf f of nonprof it organizations, and other planning practioners, perform effective strategic planning. The book is written with small to medium-size organizations (those with no budgets to those with budgets of several million dollars) particularly in mind. However, the general nature of much of the discussion will also serve larger organizations, consultants working with nonprof it organizations, teachers and students of nonprofit management, and others interested in this area. Structure of the Workbook

The workbook is organized so that it can be easily followed and referenced during the course of strategic planning. After the introduction, each of the seven phases of strategic planning is discussed. “Cautions to Facilitators” are included at the end of each chapter. An extensive resource section is included to provide various types of suggestions and instruments to assist with strategic planning. The introductory chapter provides a brief introduction to the strategic planning process by defining the process and its components and by differentiating strategic planning in nonprofit organizations from other related topics. This chapter will give readers a good overview of the subject and provide more detail about the following phases: • Phase 1 raises several questions. What do we want to accomplish through strategic planning? Is this the right time for strategic planning and, if so, what do we need to do to get ready? If the time is right for strategic planning, the chapter covers several steps that can greatly increase the chances for a successful planning process. • Phase 2 involves articulating mission and vision. This is an opportunity for planners to reflect on the fundamental reasons for their work, the nature of the contribution they are trying to make through the work of the organization, and the challenge of f inding language that communicates such important and lofty ideas.

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• Phase 3 provides guidance for gathering the information necessary to make informed plans. How is the environment changing? What do our board, staff, and perhaps others think about what we do well and where we can improve? Who else do we need to consult? In what ways do we need to build our organization’s capacity to deliver our programs and services? Identifying key questions and the methods for answering them is the topic of this chapter. • Phase 4 is where the process turns from exploration to decision making. After reconsidering mission and vision and gathering new information, it is time to set priorities. This chapter provides a structured approach to choosing strategic directions and agreeing on goals. • Phase 5 covers the steps involved in writing a plan. Most of the big-picture thinking has been completed by this stage, and the task of developing a clear format and understandable language is at hand. • Phase 6 reviews the first key to successful implementation: incorporating the strategic plan — which likely covers several years — into an organization’s annual operating plans and thereby making clear what is to be completed in the coming year. • Phase 7, the final phase, covers the other key to successful implementation: approaches to monitoring and adapting the plan in a structured way. Clarifying an organization’s overall planning cycle is a focus of this chapter. • Finally, the appendices provide key process aides, survey instruments, and suggestions for various ways to accomplish the tasks involved in each of the seven phases of the planning process. The workbook contains several features — worksheets, sidebars, and case studies —to help explain concepts and to help readers work through the various planning phases. These features are described in the following sections.

Worksheets An integral feature of this workbook is the series of worksheets that complement the text. The worksheets will help planners structure and focus the thought process involved with each planning step. Each worksheet is discussed in the text and includes process notes, which provide brief instructions for using the worksheet. Blank worksheets are included in Appendix A and on the CD included with this book.


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Please note: We have heard from people who used the first edition of this book that using the worksheets provided the necessary structure for their planning committees to write a strategic plan. We also know that not all of the worksheets are necessary in every situation: They are meant to provide guidance for a comprehensive planning process.

Sidebars Throughout the workbook, short case studies and commentaries drawn from real-life experience with nonprofit organizations are included as boxed sidebars to illustrate particular situations that may arise during a planning process. In some cases, the name of the organization is used, but in others, the name has been disguised for reasons of confidentiality.

ASO/USA Case Study The AIDS Service Organization/United States of America (ASO/USA) is a fictional organization. To illustrate the kinds of questions and issues raised in the planning process, a strategic plan for this organization has been completed, in a step-by-step process, throughout the book. Worksheets that have been completed for the ASO/USA case study are included as examples at the end of the chapters. A complete strategic plan for ASO/ USA is included at the end of Chapter 6. Following is an introductory profile. AIDS Service Organization/United States of America (ASO/USA) is an organization in a midsize Eastern city founded in 1988 to meet the needs of the growing number of people infected with and affected by HIV/AIDS. Ken Brown, the founding executive director, led the organization for 12 years and was succeeded by Joseph Chin in 2000. The organization started out operating a hotline and doing prevention work and won a federal grant to continue its work in the second year of operation. Since its inception, ASO/USA has gained a reputation as a reliable community agency serving low-income men and women of all racial/ethnic backgrounds. In 1993, the agency received its first federal grant to provide health care services in addition to prevention services. Under the direction of program manager Delores Molina, the Support Services Division was established. This division provides case management services,

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support groups for people living with HIV/AIDS (PLWHA) and their caregivers, transportation vouchers, benefits counseling, and employment referral. The agency also continues its prevention work through community outreach, a program under the Public Education Division. ASO/USA also continues to operate the hotline (currently housed in the Support Services Division), which provides information on prevention and transmission, as well as information on treatment and care. ASO/USA also has a Public Policy and Communications Division, which does a limited amount of policy work and media advocacy, supported by local foundations. The organization’s expense budget in 2003 was $1.6 million, with 25 FTE staff (20 FTE program staff and 5 FTE administrative staff) and a core team of 80 volunteers. In 2003 their revenue was generated from four principal sources: $900,000 came from federal sources, $400,000 came from the city health department and general fund, $200,000 came from foundations, and another $85,000 was raised from special events, individual donors, and other fundraising. Revenue fell short of expenses by $15,000. Four years ago, ASO/USA collaborated with the largest independent health clinic in the city, City Clinic, to conduct more aggressive outreach to people who are at high risk for acquiring HIV (e.g., injection drug users, homeless persons, and sex workers), but who were not receiving ongoing medical care or social services, due to various barriers to access. ASO/USA conducts the outreach component of the program, and City Clinic provides the HIV testing and referral component. This project is funded by the city’s department of public health for $400,000 per year for three years, which is split between the two organizations. The collaboration has presented significant challenges in terms of clarifying roles, responsibilities, and accountability. Five years ago the organization completed a strategic plan. The process was somewhat unsatisfactory, characterized by key board members as too staff-driven. The board recognizes the need for planning, but tends not to be active in this process. Sam Green, the board president, is supportive of the organization and of the staff, but he has put little time into energizing the rest of the board. The executive director and the board president have decided that, given the changes happening in the external environment, increasing demands for services, and other challenges facing the organization, it is time to revisit strategic planning.


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Additional Resources

Additional resources to support strategic planning are included in the appendices. Some of these resources can also be found on the CD that accompanies this book. • Blank worksheets (Appendix A) • Sample workplans for a strategic planning processes (Appendix B) • Self-assessment survey for boards and staff (Appendices C and D) • Tools and techniques for program evaluation (Appendix E) • Group process tools (Appendices F, G, and H) • Templates for strategic and operational plans (Appendix I) • Process recommendations and suggested questions for gathering information from external stakeholders (Appendix J) • Selected references (Appendix K) How to Use This Workbook

For anyone who is looking for an overview of the strategic planning process, the introductory chapter should suff ice. Many resources, including worksheets and the description of various phases (e.g., data collection), can be referenced to support a process guided by an experienced planner. However, for anyone considering leading a strategic planning process for the f irst time, we suggest that you read the book all the way through before beginning. We believe you will find that the benef its of familiarizing yourself with the full process upfront far outweigh the cost of time in additional preparation. There are many points in the process where, depending on one’s specif ic goals and the circumstances the organization faces, different choices are possible. In order to make the best choices in navigating through the full process, being familiar with the flow of the overall process is invaluable. a word about words

Every person in the world benefits from the work of nonprofit organizations every day. Both in the United States and abroad, our water and air are cleaner, civil rights have been advanced on many

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a w o r d a b o u t w o r d s (Continued)

fronts, culture continues to be renewed and celebrated, people are cared for, and the policies and practices of both government and business are shaped and monitored—all through the work of nonprofit organizations. The beneficiaries or consumers of the goods and services nonprofit organizations produce are called by many names: Legal service and human service organizations serve clients, health care organizations serve patients, arts organizations serve patrons, advocacy organizations serve constituents, and other organizations serve customers, members, and so on. We have chosen the term “client” to serve as a representative name for the primary beneficiaries or consumers of the goods and services produced by nonprofit organizations. We recognize that it is not a wholly satisfactory solution, but it seems less distracting than using different names and more appropriate than using a more generic name such as customers. Nonprofit organizations are not owned as are private corporations, nor are they subject to the electoral process as are government organizations. Nonetheless, nonprofit organizations are accountable to many parties for their work, in addition to their clients. And, as with clients, the individuals and groups of people to whom nonprofit organizations are accountable are called by many names. We have chosen to call funders, clients, the general public, other organizations, regulators, and so on “external stakeholders,” and to call board members, staff, and volunteers “internal stakeholders.” Simply stated, a “stakeholder” is anyone who cares, or should care, about the organizations— anyone who has a stake in the success of its mission. Finally, many titles are in use for the top staff person who is selected by the board of directors and to whom all staff ultimately report. These titles include executive director, CEO, president, director, and others. In this book we use the term “executive director” for this person, because it is the most commonly used term.

Introduction to the Second Edition Over the past seven years since the first edition of this book was published, the two of us have been astounded and delighted by the reception the book has received. We have received letters and e-mail from people all over the country and from abroad who have let us know that the book was helpful to them in various ways—leading their own organizations through planning, as consultants to nonprofit organizations, and as university instructors at both the undergraduate and graduate levels. In the past seven years we have also learned more about strategic planning ourselves. Changes have taken place in the nonprofit sector at large and in the f ield of strategic planning. The nonprof it sector has matured in many ways, with more inf luence, a higher public prof ile, and more attention to issues of accountability and organization performance. Capacity building is now a major topic for nonprofits. Venture philanthropy came into vogue, and the stock market soared and crashed, greatly affecting foundation and individual giving patterns for nonprofits. Strategic planning is more widely practiced—valued by nonprofits and funders alike—and increasingly attends to business issues, including revenue generation, risk management, and cost control. In this new edition, we undertake two tasks: (1) we add new material particularly about business planning and the inherent challenges in implementing your plan, and (2) we draw on our experience over the past several years and that of our colleagues at CompassPoint to ref ine and enrich the text, examples, and worksheets. However, readers familiar with the first edition will find the fundamental approach to strategic planning unchanged. We have found that our basic principles and insights about group process have withstood the review of thousands of readers and the test of xvii

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introduction to the second edition

time. We remain dedicated to the principle that the best results come from sustained, intentional ef forts, and we believe that the practices associated with strategic planning that we describe in this book can contribute to just such efforts. One last change worth noting is that, for this edition, we have added some cartoons created by CompassPoint’s resident cartoonist, Miriam Engelberg. These cartoons are to remind us that amidst the hard work and seriousness of the issues that face the nonprofit sector, there is also humor and joy. We welcome comments from readers and colleagues and are always looking for opportunities to improve our tools, add new ones,and share our passion for supporting the world-changing work of nonprof it organizations. We are proud to be colleagues with you in working for a better world!

San Francisco, California 2004

MIKE ALLISON JUDE KAYE

Acknowledgments The origins of this book lie in the strategic planning worksheets that were created by Jude Kaye for training she conducted on strategic planning. This training inspired Paul Kawata and the National Minority AIDS Council (NMAC), located in Washington, D.C., to produce a handbook that we published jointly with NMAC in 1994. This book is much expanded from that f irst work, but we owe its existence to the impetus created from these important beginnings. Although the ideas and presentation of the strategic planning process have been put to paper by the two of us, we gratefully acknowledge our debt to the many other consultants, writers, and friends who have kept us sane and contributed to our learning and to the f ield of planning over the past many years: • Many of the individuals who made signif icant contributions to both the first and second editions of the book include: consultants Lee Allison, Jane Arsenault, Tom Battin, Christina Chan, Dara Coan, Jan Cohen, Ann Danner, Miriam Engelberg, Lane Erwin, Anushka Fernandopulle, Doug Ford, Richard Fowler, Diana Gray, Peter Ginsberg, Denis Greene, Jennifer Hamilton, Grace Hammond, Marla Handy, Steve Hartranft, Gary Levinson, Steve Lew, Jan Masaoka, Barbara Miller, Antoine Moore, Pat Murphy, Jeanne Peters, Nancy Ragey, Rick Smith, Sabrina Smith,Alfredo Vergara-Lobo,Tim Wolfred, and Robin Wu. Thank you all. • We owe a great of gratitude to all of our clients who have helped us to develop and ref ine much of our thinking over the past several years and continually inspire us to make our written materials as user-friendly as possible.

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acknowledgments

• We have benefited greatly from all of the authors whose work we reference. • Finally, in the list of people to whom we are intellectual heirs, we would like to acknowledge a special debt to the late Jon Cook, founder of the Support Centers of America and a pioneer in bringing the practice of strategic planning to the nonprof it sector. Jon was an important teacher to both of us, and many of our best ideas originally came from him. In writing this book, we had the good fortune of working with two delightful editors at John Wiley & Sons. We want to thank and acknowledge Maria Bobowick and Martha Cooley who worked on the f irst edition, and Susan McDermott and Jennifer Hanley on the second edition. All were a joy to work with. We wish that all author s could receive as much patience, support, and understanding in bringing a book to fruition.

chapter

1

Introduction to Strategic Planning What Is Strategic Planning?

Strategic planning is making choices. It is a process designed to support leaders in being intentional about their goals and methods. Simply stated, strategic planning is a management tool, and like any management tool, it is used for one purpose only— to help an organization do a better job. Strategic planning can help an organization focus its vision and priorities in response to a changing environment and ensure that members of the organization are working toward the same goals. In short we define strategic planning as follows: Strategic planning is a systematic process through which an organization agrees on— and builds commitment among key stakeholders to—priorities that are essential to its mission and are responsive to the environment. Strategic planning guides the acquisition and allocation of resources to achieve these priorities.

Several key concepts in this definition are worth expanding on to better articulate the authors’ approach to planning and our values and beliefs regarding a successful planning process: • The process is strategic because it involves choosing how best to respond to the circumstances of a dynamic and sometimes hostile environment. All living plants respond to their environment, but as far as we know, they do not choose how to respond. Nonprof it organizations have many choices in the face of changing client or customer needs, funding availability, competition, and other factors. Being strategic requires recognizing these choices and committing to one set of responses instead of another. • Strategic planning is systematic in that it calls for following a process that is both structured and data based. The process raises a sequence of questions 1

2

chapter 1

introduction to strategic planning

that helps planners examine past experiences, test old assumptions, gather and incorporate new information about the present, and anticipate the environment in which the organization will be working in the future. The process also guides planners in continually looking at how the component programs and strategies fit with the vision and vice versa. • Strategic planning involves choosing specific priorities. The collection of data should (1) surface a variety of choices about what the organization will and will not do, (2) analyze the implications of those choices, and (3) result in making choices, some of which have signif icant tradeoffs. Hard choices are often not overly complex, but are those that require making agonizing or unpopular decisions. Planners must strive for consensus on priorities at many levels, from the philosophical to the operational. • The process is about building commitment. Systematically engaging key stakeholders, including clients and the community, in the process of identifying priorities allows disagreements to be engaged constructively and supports better communication and coordination. An inclusive process allows a broad consensus to be built, resulting in enhanced accountability throughout the organization.This commitment ensures that a strategic plan will actively be used for guidance and inspiration. • Finally, strategic planning guides the acquisition and allocation of resources. Too often, decisions are made quickly about new funding opportunities or spending for program and administrative needs in response to situations as they arise without a thorough assessment of the implications. An approved strategic plan helps leaders make proactive and realistic choices between competing funding strategies and between spending for various program and administration needs. Balancing the resource acquisition and spending plans is the essence of the business side of strategic planning.

Why Plan?

Why should an organization embark on a strategic planning effort? After all, planning consumes resources of time and money — precious commodities for any nonprof it — and def ining the direction and activities of an

why plan?

3

organization, in an ever-changing environment, is daunting and can almost seem futile. The answer is that strategic planning helps organizations do a better job by helping leaders to be intentional about priorities and proactive in motivating others to achieve them. Leadership guru Warren Bennis writes in his book, On Becoming a Leader: “Managers are people who do things right, and leaders are people who do the right thing.”1 Strategic planning is both a leadership tool and a management tool. As a leadership tool, a successful planning process encourages the organization to look at the question: “Are we doing the right thing?” As a management tool, an effective planning process focuses on whether the organization is “doing things right.” Planning alone does not produce results; it is a means, not an end. The plans have to be implemented to produce results. However, well developed plans increase the chances that the day-to-day activities of the organization will lead to desired results. Planning does this in two ways: It helps the members of an organization bring into focus its priorities, and it improves the process of people working together as they pursue these priorities. Successful strategic planning improves the focus of an organization in that it generates: • An explicit understanding of the organization’s mission and organizational values among staff, board, and external constituencies • A blueprint for action based on current information • Broad milestones with which to monitor achievements and assess results • Information that can be used to market the organization to the public and to potential funders Successful strategic planning improves the process of people working together in that it • Creates a forum for discussing why the organization exists and the shared values that should inf luence decisions • Fosters successful communication and teamwork among the board of directors and staff • Lays the groundwork for meaningful change by stimulating strategic thinking and focusing on what’s really important to the organization’s long-term success

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• Brings everyone’s attention back to what is most important: seeking opportunities to better accomplish your mission

What Strategic Planning Is Not

Everything said previously to describe what strategic planning is informs an understanding of what it is not. • Strategic planning does not predict the future. Although strategic planning involves making assumptions about the future environment, the decisions are made in the present. “Planning deals with the futurity of current decisions. Forward planning requires that choices be made among possible events in the future, but decisions made in their light can be made only in the present.” 2 Over time, an organization must monitor changes in its environment and assess whether its assumptions remain essentially valid. If an unexpected shift occurs, major strategic decisions may have to be revisited sooner than they would in a typical three- to f ive-year planning cycle. • Strategic planning is not a substitute for the judgment of leadership. Strategic planning is a tool; it is not a substitute for the exercise of judgment by leadership. Ultimately, the leaders of any enterprise need to ask themselves:“What are the most important issues to respond to?” and “How shall we respond?” Just as a tool such as a hammer doesn’t create a bookshelf, so the data analysis and decision-making tools of strategic planning do not make the decisions. There is no right answer. Strategic planning merely supports the intuition, reasoning skills, and judgment that people bring to the work of their organization. • Strategic planning is rarely a smooth, predictable, linear process. Strategic planning, although structured in many respects, typically does not flow smoothly from one phase to the next. It is a creative process, requiring f lexibility. The fresh insight arrived at today might very well alter the decisions made yesterday. Inevitably, the process moves forward and backward several times before the group arrives at the final set of decisions. No one should be surprised if the process feels less like a comfortable trip on a commuter train and more like a ride on a roller coaster, but remember that even roller coaster cars arrive at their destination, as long as they stay on track!

keys to effective strategic planning

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Keys to Effective Strategic Planning

The elements highlighted previously in our def inition and approach speak to the characteristics of strategic planning that we believe are most necessary for success. In addition, a few other thoughts about our approach are suggested here as advice to prospective planners: • Focus on the most important issues during your strategic planning process. It may take a while to become clear, but inevitably there are only a few critical choices that the planning process must answer. (If you don’t have any really important choices to make about your organization’s future, you don’t need strategic planning.) Resist the temptation to pursue all of the interesting questions. You simply won’t have the time, energy, or resources to do it all. • Be willing to question both the status quo and sacred cows. In order to understand what is most important in the current atmosphere and in the expected future, old assumptions about what is important must be challenged. It is possible to honor the past and still make new decisions. Don’t allow new ideas to be characterized as inherent criticisms of the past. • Produce a document. Whether an organization engages in an abbreviated process or an extensive strategic planning process, a planning document should be created. A useful strategic plan can be only a few pages long. The document is a symbol of accomplishment, a guide for internal operations, and a marketing tool for current and future supporters. • Make sure the strategic plan is translated into an annual operating plan for at least the first year. A critical test of a good strategic plan is that the operational implications are clear. Without a practical operating plan that articulates short-term priorities—and clearly identifies who is responsible for implementation—a strategic plan will rarely be implemented. Writing the f irst year’s annual operating plan and supporting budget with the strategic plan in mind makes sure your strategic plan passes this test. We like the following cartoon about strategic planning because it pokes gentle fun at the too-common tendency for strategic plans to be f iled but not used.

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Summary of Key Concepts

Strategic planning: • Is strategic. Intentionally responds to the current environment, including competition • Is systematic and data based. Gathers new information to make decisions • Sets priorities. Makes decisions about direction and goals • Builds commitment. Engages appropriate stakeholders • Guides resource acquisition and allocation. Takes into account the business of nonprofits Strategic planning is not: • A prediction of the future. Instead, it is a plan based on current information. • A substitute for judgment. Instead, it is a vehicle for informed decision making. • A smooth, linear process. Instead, it is iterative; insights at one stage may change earlier conclusions. Keys for effective planning: • Focus on the most important issues.

different types of planning

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• Be willing to question the status quo and sacred cows. • Produce a document. • Make sure the strategic plan is translated into annual operating plans. Different Types of Planning

What Is the Difference Between Strategic Planning, Long-Range Planning, Business Planning, and Operational Planning? Although many people use these terms interchangeably, strategic planning and long-range planning differ in their emphasis on the assumed environment. Long-range planning is generally considered to assume that current knowledge about future conditions is sufficiently reliable to ensure the plan’s reliability over the duration of its implementation. In the 1950s and 1960s, for example, the U.S. economy was relatively stable and somewhat predictable; therefore, long-range planning was both fashionable and useful. It was not uncommon for U.S. corporations to have large planning staffs developing long-range plans with highly detailed goals, strategies, and operational objectives identif ied over a 20-year time period or even longer. Strategic planning, however, assumes that an organization must respond to an environment that is dynamic and hard to predict. Strategic planning stresses the importance of making decisions that position an organization to successfully respond to changes in the environment, including changes by competitors and collaborators. The emphasis is on overall direction rather than predicting specific, year-by-year, concrete objectives. The focus of strategic planning is on strategic management (i.e., the application of strategic thinking to the job of leading an organization to achieving its purpose). As a result, although some organizations may develop visions that stretch many years into the future, most strategic plans discuss priority goals no further than five years out, with operational objectives identified for only the first year. Strategic planning and operational planning involve two dif ferent types of thinking. Strategic decisions are fundamental, directional, and overarching. Operational decisions primarily affect the day-to-day implementation of strategic decisions. Whereas strategic decisions usually have longer-term implications, operational decisions usually have immediate (less than one year) implications.

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Business planning typically attends to not only strategies and goals, but also detailed (at least three years’ worth) projections for revenues and expenses. The audience for a traditional business plan includes potential investors and lenders; a business owner uses the plan to convince investors and lenders that the business activity will generate enough money to pay a return or to pay back a loan.Thus, a business plan relies on decisions made in a strategic plan but is likely to be much more focused on the implementation and financial elements of a plan. Increasingly, nonprofits are developing business plans not only for investors and lenders but to help make explicit the relationship between money and mission in their enterprise. These various levels of planning often overlap. Strategic plans should outline core strategies (the primary focus of the organization’s resources to best achieve its mission) and usually contain a description of longerterm program and administrative priorities (long-term goals and objectives). Both long-term and operational (short-term) goals and objectives are needed to support core strategies. All of these goals are important and need to be done well. However, it is important not to confuse the four concepts: strategic planning, long-term planning, operational planning, and business planning. These concepts can be summarized as follows. Long-Range Planning • Views future as predictable — assumes current trends will continue • Focuses on setting long-range objectives • Assumes a most likely future and emphasizes working backward to map out a year-by-year sequence of events • Asks the question:“What should we be doing each year for the next three to five years? Strategic Planning • Views future as unpredictable • Views planning as a continuous process • Considers a range of possible futures and emphasizes strategy development based on assessment of the organization’s internal (strength and weaknesses) and external (opportunities and threats) environment • Asks the questions:“Based on our current understanding of the environment, are we doing the right thing? How can we best use our resources to achieve our mission?”


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Operational Planning • Focuses on setting short-term (less than one year) objectives • Assumes much more detailed planning regarding by whom and how activities will be accomplished • Asks the question:“What do we need to be doing for the upcoming year and/or immediately to best accomplish our mission?” Business Planning • Is typically expected to include not only strategies and goals but also detailed (at least three years’ worth) projections for revenues and expenses • Is used by a business owner to convince existing and potential investors and lenders (the audience for a traditional business plan) that the business activity will generate enough money to pay a return or to pay back a loan.

Incorporating a Business Planning Approach into Your Strategic Plan Traditionally, few nonprof its have been able to borrow money to fund operations—largely because their operations did not generate new revenue. Nonprof its did not spend money they did not have; rather, they raised money from grants and contributions and spent it. However, as more nonprofits have begun to manage revenue-generating activities, often called social enterprises, the use of business plans has increased. When a museum runs a store, or a community development corporation collects rent from apartments they developed, these activities generate revenue as opposed to being funded with grants or other contributed revenue. More recently, nonprofits are coming to value the discipline of business planning even for activities that are not generating revenue in the aforementioned sense. The business strategy of an organization with 100 percent government funding is to be fully grant funded. If the outlook for continued government funding dims, then the desirability of this business strategy decreases. Most nonprof its are unable to provide the kind of detail anticipated in business plans because of unpredictability of revenue flows (e.g., it is diff icult to forecast what grant funding will be received three years hence).

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Still, business planning is becoming an increasingly useful concept (i.e., to think of operations in business terms), and such thinking should be incorporated into a strategic plan. Do we have a sustainable business strategy? What are the assumptions on which our strategy is based? Do the current and future political,economic, social, technological, and demographic trends support the sustainability of our current business strategy? A business planning approach informs the model of this book in that we attend to where money and other resources come from and how resources are used.

Should Strategic Plans Always Have a Longer-Term Focus? Typically, yes: a strategic plan articulates both core future strategies and specif ic longer-term goals and objectives. A strategic plan may also— or sometimes only— be current focused and articulate shorter-term goals and objectives. Strategic Decisions

Operational Decisions

Fundamental, directional

Focused on current operations

Longer-term impact

Shorter-term impact

Is Strategic Planning Capacity Building? Yes. In fact, strategic planning is one of the most frequent activities nonprofits undertake among various types of capacity building. In the last decade, we have seen an enormous growth in attention to capacity building for nonprof it organizations. Paul Light, noted researcher and author, identifies strategic planning as one of a handful of capacity-building activities that are most frequently undertaken. 3 Others include strengthening internal management (e.g., through new information technology), reorganization, team building, leadership development, and hiring consultants in a variety of roles. Moreover, recent studies show that nonprof its use these various capacity-building activities nearly as often as private-sector companies. According to Light, a 2002 study by the Bain management consulting firm found that 89 percent of their private clients had conducted strategic planning within the previous year or two. Light’s own research suggests that 69 percent of nonprof its conducted strategic planning in a similar time frame.4


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How Is Strategic Planning with Nonprofit Organizations Different from Planning in For-Profit Businesses or Government Entities? Strategic planning is interdisciplinary and incorporates concepts from competitive strategy, history, business practices, and organizational theory. It came to prominence as a distinct discipline in the 1950s and 1960s because of its popularity among many corporations headquartered in the United States. Still, the essential concepts are applicable to any organizational setting. What is similar about strategic planning in nonprof its, for-prof it businesses, and government entities is the essence of strategic planning— in an organizational setting, deciding what to accomplish and how to go about it in response to a dynamic operating environment. What is dif ferent is the nature of the internal and external forces that bear on the essential task. The governance of organizations in the three sectors is quite different and has significant implications for strategic planning. A board of directors governs both nonprof its and for-prof it businesses, whereas government organizations are governed by a wide variety of publicly elected bodies. The boards of for-profit businesses represent — or are — the literal owners of the business. Nonprofit boards represent the public interest. For-prof it businesses, especially in the past 20 years, have emphasized customer satisfaction to a greater degree than either nonprof its or government. For-profit businesses have invested heavily in market research and in attempts to improve quality as they compete for customer business. Because the direct consumers of the products and services of nonprof its and government organizations typically pay only a small portion of the cost, the funders — whether foundations or taxpayers — have had a much greater influence than customer satisfaction on the strategies of organizations in these two not-for-prof it sectors. This situation is beginning to change, however; witness the popularity of Reinventing Government,5 a book that emphasizes increased responsiveness of the government to the public and increased focus on accountability in the nonprofit sector. Finally, values and orientation to a mission have typically been the hallmark of nonprof its and less inf luential in for-prof it business and government. This attitude is also changing. In the past decade, much of the for-profit business sector literature, starting with In Search of Excellence,6 has emphasized the importance of values and mission statements in well-run

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companies. Similarly, it is not uncommon now to f ind government off ices with mission statements that articulate the unique contribution the off ice aspires to make to the public welfare. Despite these differences, with minor translation to different contexts, much of the conceptual framework in this book is equally applicable to organizational settings in either the for-prof it business or government sectors.7

What Does a Strategy Look Like? Contained within a strategic plan should be the articulation of an organization’s three to five core future strategies. These strategies help the reader understand where the organization will be primarily focusing its resources for the time frame of the strategic plan. Strategies communicate what priorities are most important for the organization to be focusing on—priorities that will help an organization make substantive progress toward the achievement of its mission and assist the organization get from where it is now to where it needs to go in the longer term. Strategy is not a response to short-term f luctuations in operations or the environment. . . . Strategy deals with the predetermined direction toward which these quick responses are pointed. It is concerned with the longer-term course that the ship is steering, not with the waves. 8

Following are some sample strategies. Sample Program Strategy After many years spent caring for neglected animals, one local Society for the Prevention of Cruelty to Animals (SPCA) shifted its overall program strategy toward prevention. This shift required keeping the care programs at current levels, but increasing the education and advocacy programs. To implement the strategy, all programs were instructed to develop and implement an education component to their service, and the staff increased their efforts to pass legislation designed to prevent unwanted pets and animal abuse. A possible long-term objective to support this strategy would be: • Within the next f ive years, reduce by at least 50 percent the number of animals that have to be put to sleep. Sample short-term objectives to support this strategy include: • Within the next year, have each department develop and implement a plan for adding an education component to its scope of work.


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• Hire an education director to coordinate education efforts. • Develop and implement a “Spay and Neuter” campaign. Sample Resource Development Strategy In pursuit of their mission to “increase opportunities to experience world-class art in our community,” a relatively new museum chose an innovative acquisition strategy: They chose to rent much of their collection, rather than primarily raise money to increase their art collection. Although this strategy did not directly affect all departments, it did have a major impact on the use of resources. Sample long-term objectives to support this strategy include: • Acquire at least 50 percent of exhibitions from other museums’ collections. • Focus art collecting on twentieth-century California artists. Sample short-term objective to support this strategy includes: • Within the next year, collaborate with other museums to put on one exhibition that highlights nineteenth-century Japanese drawings and one exhibition that highlights French impressionists. Sample Administrative Capacity Strategy During its planning process, an organization received feedback that while clients valued their services, most people — referral agencies, potential donors, etc.—knew little about the organization’s work. One of their core future strategies was “greater emphasis on visibility.” Each department was asked to add a visibility component to its long-term objectives and annual workplan. A sample long-term objective to support this strategy includes: • Increase by 50 percent the number of referrals received from government and community organizations. Sample short-term objectives to support this strategy include: • Contract with a public relations firm to assist in the development of a marketing campaign. • Develop a brochure and other supporting data to be used by the board and staff to publicize services. Sample Governance Strategy The board of directors of a volunteerrun organization played both an administrative and a governance role —

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they ran the organization (made all the day-to-day decisions) and governed the organization (protected the public interest by making sure that charitable dollars were used effectively and eff iciently to support the organization’s mission). The board made the decision to start to hire staff to run the programs and change from an administrative and governance board to a primarily governance board. Sample long-term objectives to support this strategy include: • Focus board committees primarily on governance (i.e., fundraising, f inance, planning) as opposed to program operation. • Increase the board to 18 members, with particular attention to individuals with fundraising experience and interest. Sample short-term objectives to support this strategy include: • Train board members on the roles and responsibilities of a governance board. • Develop a decision-making grid to clarify decision-making roles of the staff and board. In each case, the organization made a clear choice among competing options about how best to pursue its mission. Strategies either affect every department or use a considerable amount of the organization’s resources. It is easy to see how each of these core strategies might be translated into specif ic goals and objectives over a period of several years and for the immediate future, with suff icient resources allocated in the yearly budget to support the accomplishment of those strategies. What is not easy to see is how much effort, experimentation, and discussion were required to f ind these successful strategies. The strategic planning process helps organizations identify various strategic options and make intelligent choices in developing strategic directions and plans. The Strategic Planning Process

The fundamental phases of the strategic planning process, as outlined in this book and illustrated in Exhibit 1.1, are presented as a logical series of phases and related steps that allow for flexibility and creativity. These recommended phases are not the only recipe for cooking up a strategic plan — other sources might recommend dif ferent steps or variations on these phases— but this book’s strategic planning process describes the essential

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s e a e : r r i t t g d e u i e e s n r o t n e s r i h i i l t e u o u n a n m r i f t f o f g e i , i r l n a v g a o d u e t p i e m r f r a e a r t t i l e t g d i o d c e o e t a p o n s s c c a z p s r a e r n c e t i p n l n i e n a n l s p o p s r e e s m a o o t s o i m n a s l g h i f n S e c e t m a s r e e e o n o t e , r : k a i e f g e w t c s m t r a r e e r v 4 a s o o r u u g g i v o a r n o s r t e M a p o g S p A s A t g s . d B . . . . a 2 4 3 5 h 1 . . . . . P 4 4 4 4 4 s s y d r r t e n s n s i e e o t t t e u g i d t c o d l c s m o e i t t e e n o i l l n h h v a l a l a h r e a s o t s i l e r ’ l e c r s m r o c t r k a a n p t u p f a o n n d e ; s e o t c n z r z i o e p i s e s e i t m i n e e r t r t o i r l t e a v t r m a a a c t i a z c l u r i n a a a i t S m e n c m m c h r l a u u r r : m n c g e a d i m e j m o d t 3 t a o t g f a o u r r u b r n n v x r e E p o S i e S o a A a G f n s . . . . . a 1 2 6 3 5 h . . . 4 . . . P 3 3 3 3 3 3 t n d e s n s ’ ) e t m n a i m , l e r s o s p i t i i i f f t v a c f n e t a e i i n a z l o / r s i i s r e r s t e n p o n i n b p o v e t e , g a a t ( i l g s a m u r s i n S e t s e t : a i f e c o u d t i i 2 e m a a t e l r t r h a u r e C s A t v g s . a D . . a 1 2 3 h . . . P 2 2 2

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ingredients of the planning process and the usual results. We encourage planners to add their own touches to the recipe (e.g., by spicing up opportunities for interaction among participants or giving elegance to the presentation, to create a plan that will not only sustain an organization but will help it prevail).

Phase 1: Get Ready To get ready for strategic planning, an organization must f irst assess whether it is the right time to engage in a planning process and what that planning process might look like. Although several issues must be addressed in assessing readiness, that determination essentially comes down to whether an organization’s leaders are truly committed to the ef fort and whether they are able to devote the necessary attention to the big picture at the time. If a funding crisis looms, or if the founder is about to depart, or if the environment is so turbulent that everyone is putting out f ires, then it doesn’t make sense to engage in strategic planning at this time. An organization that determines it is ready to begin strategic planning must then complete the following tasks to pave the way for an organized process: • Identify specif ic issues or choices that the planning process should address. • Decide on the basic process to use, including roles and participation (who does what in the process, whether to use a planning committee, whether to hire a consultant, etc.). • Identify the information that must be collected to help make sound decisions. The product developed at the end of Phase 1 is a strategic planning workplan (plan for planning).

Phase 2: Articulate Mission, Vision, and Values A mission statement communicates to the world what you do and why you do it. As such, organizations need to have a succinct and well-crafted mission statement that has both a statement of purpose— why the organization exists — and a description of what the organization does— and for whom — to fulfill that purpose.

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Whereas the mission statement summarizes the who, what, and why of an organization’s work, a vision statement presents an image in words of what success will look like if the organization achieved its purpose: A vision is a mental model of a future state . . . built upon reasonable assumptions about the future . . . influenced by our own judgments about what is possible and worthwhile. . . . A vision is a mental model that people and organizations can bring into being through their commitment and actions. 9

Finally, most nonprofit organizations are driven by — and grounded in—values and beliefs about why they exist and how they want to operate in support of those values. The more those values are made explicit, the more likely it is that those values will be put into action. With mission,vision, and values statements in hand, an organization knows what it is doing, why it is doing it, and what it hopes to achieve. The next phases of the process discuss how to get the job done. The products developed at the end of Phase 2 are draft statements of mission,vision, and values.

Phase 3: Assess Your Situation Once an organization has established some clarity on why it exists, what it does, and what it hopes to achieve, it must take a clear-eyed look at its current situation.This step requires gathering up-to-date information about the organization’s internal strengths and weaknesses and its external opportunities and threats (SWOT)—assessments that will refine and possibly reshape the list of strategic questions the organization faces and seeks to answer through the strategic planning process. In this phase, information is gathered from both internal and external stakeholders about their perceptions and expectations of the organization and empirical data are collected to inform the decisions made in the next phase. The product of Phase 3 is a database of concrete information that will support planners in making decisions about an organization’s future priorities. At times, an organization may choose to reverse Phases 2 and 3, gathering data about the organization’s situation before having a discussion regarding mission, vision, and values.

Phase 4: Agree on Priorities Once an organization’s mission has been affirmed and its critical issues identified, it is time to make decisions about the future direction of the

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organization: the broad approaches to be taken (strategies) and the general and specific results to be sought (the long-term and short-term goals and objectives). Strategies, goals, and objectives may emerge from individual inspiration, group discussion, or formal decision-making techniques, but the bottom line is that, in the end, leadership agrees on its top priorities. This phase can take considerable time. Discussions at this stage may require additional information or a reevaluation of conclusions reached during the situation assessment. It is even possible that new insights will emerge that change the thrust of the mission statement. In order to create the best possible plan, it is important that planners are willing to go back in the process to an earlier phase to use new information. The product of Phase 4 is an agreement on the organization’s priorities: the general strategies, long-range goals, and specific objectives.

Phase 5: Write the Strategic Plan The mission has been articulated, the critical issues identif ied, and the strategies and goals agreed on. This step involves putting the pieces together into one coherent document. Usually one member of the planning committee, the executive director, or a designated writer,will draft a f inal plan document and then submit it for review by all key decision makers (usually the board and management staff ). The reviewers should make sure that the plan answers the key questions about priorities and directions in suff icient detail to serve as a guide for the organization’s members. Revisions should not be dragged out for months, but action should be taken to answer any important questions raised at this juncture. The end result will be a concise description of where the organization is going, how it should get there, and why it needs to go that way— ideas that are widely supported by the organization’s staf f and board. The product of Phase 5 is the strategic plan.

Phase 6: Implement the Strategic Plan All of the work described so far is for naught if it doesn’t align the day-today work with the strategic priorities that have been so carefully chosen. The interface between the strategic directional thinking embodied in the strategic plan and day-to-day work is a concise and easy-to-use operating plan. It should coincide with the organization’s fiscal year and accommodate the

the strategic planning process

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need for other, more detailed program-level planning related to funding cycles or other reporting cycles. An organization’s strategic priorities, its organizational structure, and its previous planning process will influence the nature of a particular organization’s operating plan. The essence of the operating plan, though, remains the same: a document that def ines the short-term, concrete objectives leading to achievement of strategic goals and objectives and that is easy to use and monitor. Ironically, the level of detail is not the deciding factor in how useful the operating plan is; the most important factors are the clarity of guidelines for implementation and the precision of results to be monitored. In addition, we need to be aware that confusion and resistance may surface during implementation of the plan, especially regarding the changes that need to occur. As part of ensuring successful implementation of the plan, management needs to pay attention to managing the changes required and supporting organization members in successfully executing those changes. The products of Phase 6 are a detailed annual operating plan.

Phase 7: Evaluate and Monitor the Strategic Plan The strategic planning process is never really finished. There are cycles and periods of more and less intense activity, but the process of responding to a changing environment is ongoing. Each organization needs to choose the appropriate length of time for planning and reevaluating. Many nonprofits use a three-year planning cycle. The first strategic plan is completed with a three-year time horizon and a one-year annual operating plan. At the end of years one and two, progress toward the priorities of the strategic plan are assessed and adjusted as necessary, and a new annual operating plan is developed. During year three, a renewed strategic planning process is undertaken. Depending on the extent of change in the organization’s internal and external environment, the strategic planning workplan is more or less intensive. By the end of year three, a new three-year plan, as well as a new annual operating plan, is approved and the cycle begins again. What is important is that the planning process is ongoing and responds to the changing environment. If the core strategies and priorities agreed to for the future remain valid, which is not uncommon, then the time frame previously outlined works well. However, if the environment changes in ways that are fundamentally different from the assumptions underlying the strategic plan, then it is necessary to regroup and

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chapter 1


restrategize earlier. The product of Phase 7 is a current (quarterly or annual) assessment of the ongoing validity of the decisions made during the strategic planning process and revision to the plan as needed. Exhibit 1.2 describes the phases in detail, with all the related steps necessary to complete the plan. The Language of Strategic Planning in the Nonprofit Sector

In professions such as accounting and law, the language is fairly welldefined. Every accountant knows what a debit is. Every lawyer knows what a tort is. There is no such agreement on the definitions of planning words used by planners, however, and there are differing definitions of planning words as used by the nonprofit sector as opposed to the for-profit sector. Is there a difference between mission and purpose? Why distinguish between external and internal vision? What is a strategy? What distinguishes goals from objectives and programs from activities? We believe two things are important about strategic planning terms. The f irst is that it doesn’t really matter what you call certain concepts, as long as everyone in your group uses the same definitions. The definitions we use are spelled out in the next couple of pages. The second point is a fundamental distinction between means and ends. In our view, it is critical not to confuse means and ends— and one of the key purposes of language clarity is to support this conceptual clarity. A successful strategic planning process supports an organization involving its stakeholders in reaching consensus about what end results they are trying to achieve (external vision, purpose, goals, and objectives),and the means to accomplish those results (internal vision, core services, specif ic programs and administrative functions, and activities). An organization’s strategic plan is not an end, but rather a means of achieving its purpose. Tom Peters (In Search of Excellence 10 ), John Carver (Boards That Make a Difference 11), and many others have emphasized the need for the people implementing a strategic plan to have enough flexibility and authority to be creative and responsive to new developments—without having to reconstruct an entire strategic plan. This f lexibility is required most in adjusting means. In other words, the purpose of an organization and the priority goals are much less likely to change than are the programs and activities necessary to achieve them.

Strategic Planning for Nonprofit Organizations, 2nd Ed

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