The Nonprofit FAQ

Why do we develop an annual operating plan?
Upon completion of the strategic plan, an operating plan for the
upcoming year must be prepared. An operating plan is a schedule of
events and responsibilities that details the actions to be taken in
order to accomplish the goals and objectives laid out in the strategic
plan. An organization should have annual operating plans that
corresponds to its fiscal year for each major organizational unit. The
plan ensures everyone knows what needs to get done, coordinates their
efforts when getting it done, and can keep close track of whether and
how it got done.

Imagine you are driving a car on a camping vacation. It is important to
have a destination in mind -- your "long-range goal." The destination
alone, however, is not enough to get you there successfully. You need to
have detailed instructions about which roads to take, when to make
turns, estimated distance and time, where you can stop for food and gas,
gauges that tell you how much gas you have in your tank, and warning
systems to tell you if the engine gets overheated.

Now imagine that you are not driving the car alone, but instead you have
twenty people doing different jobs simultaneously: your organization's
executive director is at the steering wheel with a couple of board
members looking over his or her shoulder, but four others are at each of
the wheels making them spin; other people are looking out each window,
reporting what they see to the driver, and someone else is in the back
making sandwiches. It is going to take an impressive plan to move this
crew in the same direction.

This is the stuff of operating plans: which programs and management
functions are going to do what, by when, and how much "gas" (money and
person power) it will require. This level of detail is unnecessary in a
strategic plan itself -- in fact, it would clutter up the presentation
of the long-range vision: the strategic plan focuses on the swimming
hole at the camp you are going to, not which gas station to stop at
along the way.

Characteristics of an Effective Annual Operating Plan

There are three important attributes to good operating plan:


  • an appropriate level of detail -- enough to guide the work, but not so
    much that it becomes overwhelming, confusing, or unnecessarily
    constrains creativity
  • a format that allows for periodic reports on progress toward the
    specific goals and objectives
  • a structure that coincides with the strategic plan -- the goal
    statements for the strategic plan and the operating plan are one and the
    same; the objective statements for the strategic plan and the operating
    plan will be different.


Just as monthly financial statements often present a budget for revenues
and expenses and then report actual figures for a given time period, so
should operating plans allow for the same type of comparison: the plan
declares the "budgeted" work in terms of goals and objectives for each
program area and management function, and reports the actual progress on
a monthly or, perhaps, quarterly basis. This "budget-to-actual" report
gives a clear reading on how the "trip" is going.

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