Non-profit organizations

Research report

Time to raise the bar on nonprofit strategic planning and implementation

Margaret F. Reid, Lynne Brown, Denise McNerney and Dominic J. Perri

Margaret F. Reid, Professor and Chair, Department of Political Science, University of Arkansas (mreid@ uark.edu), directs a nonprofit management certificate process See Change (http://see-change. org/). Lynne Brown ([email protected]), Vice President of Strategic Consulting for iBossWell, Inc., a strategic planning and organizational development company, has served as a nonprofit staff member, leader, board member and consultant. Denise McNerney, CEO of iBossWell, Inc., is Chair – Association for Strategic Planning-Center for Nonprofit Excellence (dmcnerney@ ibosswell.com). Dominic J. Perri is Principal Consultant of the Essential Conversations Group, which provides strategic planning and leadership development training to non-profit organizations (dperri@ essentialconversations. net).

T he nonprofit community faces a growing demand from stakeholders for outcome measures and proof of impact tied to a sustainable organization model. Achieving these new levels of accountability pose particular challenges for the large number

of nonprofit organizations (NPOs) already struggling to meet complex missions while facing severe resource and personnel constraints. Too often, their ability to demonstrate impact on their communities is hampered by a lack of clearly defined goals and outcomes, the absence of a process for tracking progress and the lack of a system for creating and updating meaningful reports about what they are doing and why it matters.[1]

The widely used approach to strategic planning in NPOs, a planning retreat followed by an annual board review of progress, is clearly no longer adequate. This realization has led to a debate among nonprofit leaders and their stakeholders who are intent on capacity building about how to make strategic planning significantly more effective.[2] In that context, the Association for Strategic Planning sponsored a national survey that would provide up-to-date data and fresh insights. This large-scale survey, initiated in 2012 and concluded in 2013, marked the first time a broad cross-section of the nonprofit community was asked to describe the strategic planning and strategic management practices they employ and to rate them for their impact on overall organizational success.

In sum, the research findings presented in this article suggest the conversation about strategic planning should be reframed. The question nonprofits and capacity builders should be asking is not whether to plan, but how to plan most effectively. The survey results provide useful insight into the actual planning practices of successful NPOs and demonstrate that well-formulated strategic plan development as well as ongoing implementation oversight practices significantly influence overall organizational success (See box, “Survey construction and response”).

Are the results of the survey surprising? For those who already are committed to strategic planning, it confirms what they have known for years. For many, including the tens of thousands of small and start-up nonprofits that make up the majority of the sector, this information is most likely a revelation. For those that have questioned the relevance of strategic planning, or the resource commitment it requires, the results should stimulate thoughtful discussion about the necessity of adopting a more effective strategic planning process. If the goal is to raise the bar on nonprofit performance, we must equip all NPOs with the information and tools they need to meet higher standards of accountability and financial sustainability. To do this, they need a road map, a solid strategic plan and a strategic management process that produces maximum benefits but can be implemented

DOI 10.1108/SL-03-2014-0019 VOL. 42 NO. 3 2014, pp. 31-39, © Emerald Group Publishing Limited, ISSN 1087-8572 STRATEGY & LEADERSHIP PAGE 31

Survey construction and response

Survey authors correlated responses to the following question to quantify and confirm this self-rating:

How would you rate the level of success of your organization in achieving the following?

� Our services are aligned with our mission.

� Our workforce is aligned with our mission.

� We are committed to a customer/recipient service.

� We develop a strategy and execute it.

� Our strategies are data driven.

� We receive a steady flow of funding.

� We are in a position of long-term sustainability.

� We make a distinctive impact on the communities we serve.

� Our CEO has outstanding leadership skills.

The responses received support the self-rating, but more powerfully, serve to clarify and define the traits and practices of a successful NPO. Highly successful nonprofits:

1. Make a Distinctive Impacts on their Communities

� 88 percent of high-success NPOs report making an impact, compared to 10% which reported average success

2. Assure Long-term Sustainability

� 62 percent of high-success NPOs say they are highly successful at sustainability, compared to 30% which reported average success

3. Receive Steady Flow of Funding

� 58 percent of high-success NPOs say they are highly successful at securing funding, compared to 32 percent which reported average success

4. Pursue Strategies that are Data-Driven

� 39 percent of high-success NPOs say they are highly successful at developing data-driven strategies, compared to 39 percent which say they have average success with such strategies

Total responses analyzed 973

Nonprofit respondents 72.2 percent

NPO consultant respondents 22.1 percent

Other: unusable responses 5.8 percent

Size of NPOs:

NPOs’ Annual Operating Expenses

Less than $1 million – 41.0 percent (278)

$1 million to $5 million – 32.6 percent (221)

Greater than $5 million – 26.4 percent (179)

(see Exhibit 1).

Exhibit 1 Classification of NPO respondents

Sector % n

Human services 30.60 207 Health (health care, mental health, health/med research, related associations, etc.) 16.70 113 Education 10.90 74 Arts, culture and humanities 8.90 60 Public and societal benefit (except foundation) 6.20 42 Religion-related 4.30 29 Environment/animals 3.80 26 Foundation (principally grant-making institution) 3.20 22 International and foreign affairs 1.80 12 Mutual/membership benefit 1.30 9

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with limited resources.[3] The management practices identified by this survey are a good guide for how to proceed.

Choices and commitment

Much of our knowledge about nonprofit strategic planning and management practices is case-driven or anecdotal except for two large-scale studies, one a review of literature on the subject published between 1977 and the late 1990s,[4] and the other a survey of social-service NPOs that explored the impact of performance measurement on strategic decision-making.[5]

While strategic planning and management have long been entrenched in corporate management practice, the social sector – both public sector agencies and NPOs – has been slower to embrace those practices, for a variety of reasons. Unlike the corporate private sector, managers organizing community-based strategic planning must consider different constraints: the process requires collective responses in a highly charged policy and political environment,[6] and nonprofits are chronically short of resources to support managerial functions.

The manner in which nonprofit and for-profit organizations measure success is also vastly different. Nonprofit effectiveness is often thought of in terms of accomplishing a mission,[7] while corporate effectiveness focuses on profit, growth and stakeholder value. Performance and outcome expectations and measures are thus fundamentally different.

In the words of Bryson and his colleagues[8] “effective (nonprofit) strategic planning is actually a complex cognitive, behavioral, social and political practice in which thinking, acting, learning, and knowing matter, and in which some associations are reinforced, others are created, and still others are dropped in the process of formulating and implementing strategies and plans.” Beginning a strategic planning process in an environment of high uncertainty, and then sustaining strategic management efforts, is not for the faint of heart. Yet the results of this survey make clear it is worth the effort. Fully 93 percent of the most successful organizations, regardless of size or budget, credited their strategic planning and strategic management efforts as having “some” to “critical” impact on their organization’s overall success.

The survey results provide useful insights about which strategic planning and implementation practices work well, and which ones do not. This synopsis of the key findings is organized around the two essential elements of strategic planning:

1. Plan development.

2. Ongoing plan implementation.

1. Plan development

The survey asked four key questions focused on plan development. They addressed the factors that drive engagement in the strategic-planning process, activities nonprofits engage in to get themselves ready for the process, challenges they face when planning and how they work through these challenges, The questions were designed to ascertain the differences in each of these areas between those organizations that characterize

‘‘The evidence in this survey is so compelling that we believe the successful practices it identifies should be adopted by nonprofits of all sizes, demanded by boards, and supported by funders.’’

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themselves as highly successful as opposed to those that consider themselves less successful (See box, “A note about defining success”).

As Exhibit 2 shows, a key difference between organizations that describe themselves as successful and those that rate themselves as unsuccessful or minimally successful relates to whether they engage in the planning process as a proactive management exercise with concerted follow-up or as a reaction to an imminent threat.

The message is unmistakable and definitive: successful organizations make planning a “consistent periodic process.” Conversely, the strategic planning process in less successful organizations tends to be reactive, spurred by crisis or unanticipated risks and challenges.

Preparation and analysis The survey revealed noteworthy differences in the practices organizations use to prepare for the planning process. Planning practices differ based on size of organization:

� Larger organizations are more likely to focus on activities that examine issues or challenges originating from their external environment, most likely because they have the resources to conduct larger-scale formal assessments, such as performing a SWOT analysis, conducting environmental scans or reviewing industry trends.

� Smaller organizations, on the other hand, are more likely to employ internal assessment methods such as using brainstorming techniques or conducting visioning sessions.

A note about defining success

Respondents were asked to self-rate their organization for overall success and the likelihood for continued success in the foreseeable future. Results from this data were then used as a filter to analyze practices across all responses by level of success (N � 507). The tally for overall organizational success across all respondents was:

� Low (unsuccessful/minimally successful) Success 6%.

� Medium success 31%.

� High success 63%.

The first question a reader might logically ask is how accurate can a self-perceived rating of success be? Herman and Renz address this issue directly: “Given that we lack evidence for best practices, those who fund or provide capacity building support should avoid advocating for one best way or set of ways for doing things. Ideally, they will recognize and support an array of promising practices and provide process skills and knowledge to help NPOs assess the match of the practices to their environment, circumstances and stakeholders” (Herman & Renz, 2008:411). In other words, success in the nonprofit world is most appropriately viewed as a social construction based on the practices an organization has found to be most effective to accomplish its mission and serve the clients or communities in which it operates.

Exhibit 2 Primary drivers for engaging in strategic planning

Overall success Low success

(%) Moderate success

(%) High success

(%) Total responses

(%)

Routine (systematic) periodic process in our organization 36 60 74 68 Driven by opportunity 14 8 10 10 Driven by significant risks/challenges 46 24 9 16 Mandated by a stakeholder/funder 0 3 3 3

Note: n � 504

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However, it is also important to note that size does not matter in some key areas. NPOs of all sizes reported they were able to successfully conduct and manage a strategic plan. And, as to the bottom line of organizational success, there was no significant difference by size in reporting the extent to which strategic planning has impacted perceived organizational success (Exhibit 3).

More successful organizations tend to prepare for strategic planning more rigorously and conduct the process with more focus and discipline. While all organizations recognize the importance of defining desired outcomes for their activities, highly successful organizations begin strategic planning with a deliberate effort to formulate mission/vision and goals. Successful organizations commit to deliberation, communication and analysis from the start of their strategic-planning process.

� Highly successful NPOs are far more likely to engage in the type of preparation activities recommended by strategy professionals, whereas organizations that characterize themselves as low success, rarely engage in these practices, and those that classified their overall success as average perform them less than 20 percent of the time.

� More successful NPOs support their strategic-planning processes with environmental analyses, such as reviewing industry trends or benchmarks, conduct stakeholder interviews, surveys or focus groups, as well as internal analyses such as program assessments to assure that programs align with the goals and in turn with organizational outcomes.

Accountability and resource planning Organizations that classified themselves as more successful are more likely to assign specific accountabilities, including responsibility and timeframes, to items in their strategic plan:

� Assignment of clear responsibilities for elements of the strategic plan varies between more and less successful organizations. While only 14.5 percent of organizations that reported they are successful say no responsibilities are assigned in their plans, one in four (25.9 percent) of less successful organizations say they do not assign responsibilities.

� Likewise, only 12 percent of successful organizations reported that they do not assign timeframes within their plans compared to almost 30 percent of the less successful organizations.

� Finally, organizations that include resource planning in their strategic-planning processes are more likely to rate themselves as successful overall. Only 15 percent of very or outstandingly successful organizations fail to assess resources needed for execution of the plan. But more than 35 percent of organizations reporting average or

Exhibit 3 Activities nonprofits use to prepare for SP

Overall success Low (%)

Medium (%)

High (%)

Sum of responses (%)

Conducting environmental analysis 2.8 19.3 39.3 61.3 Mission/vision discussion 3.2 19.3 39.1 61.5 Review industry trends/benchmarks 2.8 14.4 33.5 50.7 Brainstorming techniques 2.6 13.2 24.9 40.6 Define organizational performance outcomes 3.2 14.0 33.5 50.7 Conduct program analysis/assessment 2.0 12.8 30.2 45.0 Conduct stakeholder interviews/surveys/ focus groups 1.4 1.8 26.0 39.3

Note: n � 507

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lower success do not diligently consider resources needed to support their strategic plan.

Facing challenges One reason that embarking on a strategic plan is not for the faint of heart is that every organization, regardless of size or overall level of success, will face significant challenges during the development process (Exhibit 4).

Not surprisingly, nearly half of all organizations cited the lack of time to plan as a significant challenge. In addition, the survey found that “poor board involvement/engagement” was identified by 31 percent of all respondents – this lack of board involvement was an especially significant challenge for organizations with budgets under $5 million. Conversely, “fear of change by staff and/or board” was identified by 30 percent of all respondents, but was the number one challenge for organizations with budgets over $5 million.

Challenges arising from change are inherent in the strategic-planning process. The more pertinent question is, how do organizations address and overcome them? The survey identified distinctive practices that managers in more successful organizations use to assist in working through them:

� Focus on making the goals, objectives, and other content concise and making them understandable for planning participants – 61 percent.

� Communicate clearly and concisely how the plan will lead to action – 45 percent.

� Carefully define expectations/process for participants on the front end – 42 percent.

� Gather input from key stakeholders – 35 percent (a statistically significant difference from less successful organizations, who gather stakeholder input in only 14 percent of cases).

2. Ongoing plan implementation

The second segment of the survey focused on the extent to which more successful and less successful NPOs differ in their approach to plan implementation. The survey included four key questions to gain insight into implementation practices: degree of success with plan tracking and oversight; key implementation practices for reporting plan progress; challenges encountered to successful plan implementation; and frequency of reporting plan milestones (Exhibit 5).

A key finding is that while all organizations report some success with plan implementation, there is a statistically significant connection between “very successful plan implementation” and perceived high overall organizational success. Thirty-six percent of high success

Exhibit 4 Challenges faced during plan development

Overall success Medium

(%) High (%)

Overall % of respondents

Lack of time to plan 40 46 43 Poor board involvement 34 28 31 Fear of change by staff and board 29 32 31 Lack of clarity for who is accountable 29 23 26 Lack of high-level strategic thinking by leadership 37 18* 26 Resistance to make hard choices 35 18* 25

Notes: *Statistically significant p � 0.05; n � 502

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organizations characterized their plan implementation as very successful compared to only 8 percent of medium success organizations.

Implementation is the touchstone for every strategic plan and nonprofits must be prepared to encounter and overcome inevitable challenges. The survey found that the largest impediments for plan implementation are financial – close to 50 percent for small and medium size NPOs – and human resources, mentioned as an issue by 50 percent of all NPOs. While it seems counterintuitive, highly successful organizations report encountering similar or greater challenges to plan implementation than the less successful. It is useful to consider that highly successful organizations may be more aware of their own shortcomings. They demonstrate a greater commitment to planning and greater awareness of the challenges they face. Since every organization will be challenged in some way by implementation issues, increased awareness about the realities of strategic planning difficulties enable NPOs to address them more effectively (Exhibit 6).

Monitoring and reporting on plan implementation on a regular basis – with staff and to the board – is an important differentiator between more and less successful organizations. Highly successful organizations are more likely to discuss progress at staff meetings, to review mission alignment at least annually and to assess and report on progress regularly (Exhibit 7).

True accountability lies in an organization’s commitment to not only tracking plan progress, but to reporting on that progress to staff, board and community. Far too many NPOs are

Exhibit 5 Success with plan tracking and oversight

Overall organizational success Medium

(%) High (%)

Somewhat successful implementation 55 52 Very successful implementation 8* 36*

Notes: *Statistically significant p � 0.05; n � 503

Exhibit 6 Most significant challenges encountered during plan implementation to tracking/reporting

Overall success Low (%)

Medium (%)

High (%)

Sum of responses (%)

Staff spread too thin to pay explicit attention to plan implementation 3 17 33.8 53.8 Insufficient financial resources 3.4 13.6 26 43 Lack of formal reporting process on plan progress 1 8.3 14 23.3 Lack of measurable progress indicators 1 9.1 10.8 20.9

Note: n � 507

Exhibit 7 Most successful implementation practices for plan tracking and reporting

Overall success Low (%)

Medium (%)

High (%)

Sum of responses (%)

Discussing updates on progress during some executive staff meetings 3 16.2 38.3 57.5 Annual review of mission/vision in alignment with strategic plan 2 14.2 28.8 45 Periodic assessment/reporting 6 15.4 41* 62.4

Notes: *Statistically significant p � 0.05; n � 507

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intimidated by plan tracking and reporting, claiming it opens them to negative feedback or even punitive action from their boards and their funders. The results of this survey make clear that successful organizations embrace these activities and use them to drive their programs and performance to increasing levels of effectiveness and excellence. Rather than shy away from reporting, high-success organizations assess and report on plan progress more frequently than less successful ones – over half of them indicated they report three to four times a year, or even monthly.

Perhaps the most telling statistic in the survey is the correlation NPOs make between engaging in systematic strategic planning and their overall success, which is reflected in (Exhibit 8). Two-thirds of highly successful organizations consider strategic planning to have either a large or critical impact on overall organizational success. Meanwhile, less than a quarter of medium-success organizations and only 11 percent of low-success organizations point to strategic planning as integral to their overall success.

A call for action

This research leads us to believe that nonprofits that characterize themselves as highly successful have a “culture of planning and strategic management” that reflects a commitment and discipline that less successful organizations do not have. The results of this survey lay out a path to success, from initial steps through implementation, and confirm that strategic planning and management are in fact inextricably linked to organizational success.

With this evidence supporting the value of strategic planning and strategic management, nonprofit managers and planning advocates should use it:

� To guide processes for plan development.

� To create a culture of discipline for implementation.

� To stress the value of planning, which clearly promotes organizational success and improved community impact.

The question of whether successful organizations can credit their overall success to strategic planning and management has been answered. The evidence in this survey is so compelling that we believe the successful practices it identifies should be adopted by nonprofits of all sizes, demanded by boards, and supported by funders. These calls are echoed in a recent open letter to “Donors of America,” by the CEOs of the BBB alliance, GuideStar and Charity Navigator – three watchdog groups – that asked for a more nuanced approach to assessing overhead costs.[9] The letter endorsed the position that many nonprofits actually should spend more on overhead, explaining that investing in training, planning, evaluation, internal systems and fundraising allows charities to sustain themselves and make improvements. “When we focus solely or predominantly on [reducing] overhead, we can create what the Stanford Social Innovation Review has called ‘The Nonprofit Starvation Cycle’.[10] We starve charities of the freedom they need to best serve the people and communities they are trying to serve,” the letter says. Hence, funders should consider not only supporting strategic plan development, but also supporting development of ongoing plan management/

Exhibit 8 The extent to which strategic planning has impacted organizational success

Overall organizational success Low (%)

Medium (%)

High (%)

Large or critical impact on success 11 23 65 Some impact on success 37 57 28 No or minimal impact 44 14 5

Note: n � 504

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implementation practices and requiring plan assessment reports/updates as part of the grantee’s reporting.

Notes

1. Bryson, J.M., Crosby, B.C. and Bryson, J.K. (2009), “Understanding strategic planning and the formulation and implementation of strategic plans as a way of knowing: the contributions of actor-network theory,” International Public Management Journal, Vol. 12 No. 2, pp. 172-207.

2. Gregory, A.G. and Howard, D. (2009), “The nonprofit starvation cycle,” Stanford Social Innovation Review, Vol. 7 No. 4, pp. 48-53.

3. Herman, R. and Renz, D. (2008), “Advancing nonprofit organizational effectiveness research and theory: nine theses,” Nonprofit Management and Leadership, Vol. 18 No. 4, pp. 399-415.

4. Stone, M.M., Bigelow, B. and Crittenden, W. (1999), “Research on strategic management in nonprofit organizations: synthesis, analysis, and future directions,” Administration and Society, Vol. 31 No. 3, pp. 378-423.

5. Leroux, K. and Wright, N.S. (2010), “Does performance measurement improve strategic decision making? Findings from a national survey of nonprofit social service agencies,” Nonprofit and Voluntary Sector Quarterly, Vol. 39 No. 4, pp. 571-587.

6. Kwon, M., Berry, F.S. and Jang, H.S. (2013) “A theoretical framework on the determinants of strategic cities: empirical results from Florida city governments,” American Review of Public Administration, Vol. 43 No. 4, pp. 438-459.

7. Sheehan, R.M. (1996), “Mission accomplishment as philanthropic organization effectiveness,” Nonprofit and Voluntary Sector Quarterly, Vol. 25 No. 1, pp. 110-123.

8. Bryson, J.M., Crosby, B.C. and Bryson, J.K. (2009), “Understanding strategic planning and the formulation and implementation of strategic plans as a way of knowing: the contributions of actor-network theory,” International Public Management Journal, Vol. 12 No. 2, pp. 172-207.

9. www.bbb.org/us/storage/113/Documents/GS_OverheadMyth_Ltr_ONLINE.pdf

10. Gregory, A.G. and Howard, D. (2009), “The nonprofit starvation cycle,” Stanford Social Innovation Review, Vol. 26, Fall, pp. 48-53.

Corresponding author

Margaret F. Reid can be contacted at: [email protected]

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