The Nonprofit FAQ

What is a strategic plan?
The Support Center of San Francisco offers this explanation:

In strategic planning it is critical to formally consider how your
organization will accomplish its goals. The answer to this question is a
strategy. There are a variety of formal definitions for strategies, but
everyone fundamentally agrees that a strategy is the answer to the
question, "How?"

"Strategies are simply a set of actions that enable an organization to
achieve results." MAP for Nonprofits, St. Paul, MN

"Strategy is a way of comparing your organization's strengths with the
changing environment in order to get an idea of how best to complete or
serve client needs." Jim Fisk & Robert Barron, The Official MBA Handbook

Essentially, there are three different categories of strategies:
organizational, programmatic, and functional. The difference among the
categories is the focus of the strategy:


  • Organizational strategy outlines the planned avenue for organizational
    development (e.g., collaborations, earned income, selection of
    businesses, mergers, etc.).
  • Programmatic strategy addresses how to develop, manage and deliver
    programs (e.g., market a prenatal care service to disadvantaged
    expectant mothers by providing information and intake services in
    welfare offices).
  • Functional strategies articulate how to manage administration and
    support needs that impact the organization's efficiency and
    effectiveness (e.g., develop a financial system that provides accurate
    information using a cash accrual method).


When to Develop Strategies



Strategy development follows the creation and affirmation of the
organization's purpose statement, environmental and program data
collection and analysis, and identification of critical issues. It is
critical that strategy development follow these steps because the
information gathered and decisions made in these phases are the
foundation for strategy creation and selection. Each
of these steps provides the following:


  • The purpose statement, the statement of the organization's ultimate
    goal, provides the direction to which the strategies should ultimately
    lead.
  • External market data and program evaluation results provide critical
    data to support strategy development. Without this information and
    insight, the organization's strategies will not be in alignment with or
    effective in the marketplace.
  • The critical issues list serves as the specific focus and framework for
    the activities of the organization and the pattern of these activities
    (developing and selecting the strategies).


How to Develop Strategies



Strategy formulation is a combination of rational, scientific
examinations and educated, intuitive best guesses. Many individuals are
overwhelmed by the idea of developing strategies, but it can be a fun
and invigorating process. The process entails:


  • examining the organization's critical issues
  • determining how the organization's strengths and skills can be employed
    to address the critical issues
  • analyzing opportunities and strengths and looking for ways to synthesize
    the two
  • exploring and choosing the best approaches for the organization.


During this evaluation ask these key questions: Does the strategy
meet/address critical issues? Is this aligned with our mission? Is this
approach financially viable?

One effective method of strategy generation is to list critical issues
and organizational strengths onto flipcharts and then have staff or
board members brainstorm possible uses of those strengths or other
skills to address the critical issues. Once the brainstorm session is
completed, use a roundtable discussion to investigate and evaluate the
possible strategies. Remember to develop a list of alternative
strategies to investigate and keep in the contingency planning file.

It is important not to discount the ideas that come to people during
non-working hours. The Polaroid camera is the result of a three year
old's question to her father: "Dad, why can't I see the picture now?"

Tools for Analysis and Planning



A number of analytical tools have been developed to assist organizations
with the planning process. Many nonprofit organizations have
adapted these tools, modifying the questions and criteria to align with
their own specific services and markets. Listed below are analytical
tools frequently used by nonprofit and for-profit organizations.

SWOT Analysis

SWOT analysis is a methodology of examining potential strategies derived
from the synthesis of organizational strengths, weaknesses,
opportunities and threats (SWOT). The partnering of the different
elements and the extensive data collected as a result of the analysis
can serve as a spark for roundtable discussions and refinement of
current strategies or generation of new strategies.

The MacMillan Matrix

This strategy grid, developed by Dr. Ian MacMillan, is specifically
designed to assist nonprofit organizations to formulate organizational
strategies. There are three assumptions underlying this approach:


  • the need for resources is essentially competitive and all agencies
    wanting to survive must acknowledge this dynamic
  • given that resources are scarce, there is no room for direct duplication
    of services to a single constituency -- this is wasteful and inefficient
  • mediocre or low quality service to a large client population is less
    preferable to delivering higher quality services to a more focused
    population.


These assumptions have implications that are difficult and painful for
many organizations and individuals. It might mean terminating some
programs to improve core services and competencies, giving programs and
clients to more efficient, effective agencies, or competing aggressively
with those programs that are less effective or efficient.

MacMillan's matrix examines four program dimensions that guide placement
on the strategy grid and indicate implied strategies.

Alignment with Mission Statement


Services or programs that are not in alignment with the organizational
mission, unable to draw on existing organizational skills or knowledge,
unable to share resources, and/or unable to coordinate activities across
programs should be divested.

Competitive Position


Competitive position addresses the degree to which the organization has
a stronger capability and potential to fund the program and serve the
client base than the competitive agencies.

Program Attractiveness


Program attractiveness is the complexity associated with managing a
program. Programs that have low client resistance, a growing client
base, easy exit barriers, and stable financial resources are considered
simple or "easy to administer." The level of program attractiveness also
includes an economic perspective or a review of current and future
resource investments.


Alternative Coverage


Alternative coverage is the number of other organizations attempting to
deliver or succeeding in delivering a similar program in the same region
to similar constituents.

The MacMillan Matrix provides ten cells in which to place programs that
have been reviewed in terms of these four dimensions. Each cell is
assigned a strategy that directs the future of the program(s) listed in
the cell (e.g., aggressive competition, joint venture, orderly
divestment, etc.). One cell of the matrix, "Soul of the Agency,"
requires additional explanation. These are the difficult programs for
which the organization is often the clients' "last, best hope."

Management must find ways to use the programs in other cells to develop,
piggyback, subsidize, leverage, promote, or otherwise support the
programs in this category.

For more information on the MacMillan Matrix, contact the Support
Centers of America.


Additional Strategies for Your Organization



Listed below are several strategies applicable to both the
organizational and program levels, adapted from Philip Kotler's
Strategic Marketing for Nonprofit Organizations (Prentice Hall, 1995). From a social need and
services perspective, some are more desirable than others.

Surplus Maximization


An agency runs its organization in a manner that increases the amount of
resources on hand. Usually this strategy is adopted to accumulate
resources for expansion or growth.

Revenue Maximization


An agency manages its organization to generate the highest possible
revenues, perhaps in an effort to establish a reputation or critical
mass.

Usage Maximization


An agency works to serve the highest number of users of their services.
This strategy can be used to position the organization or program for
funding or budgetary purposes.

Usage Targeting


An agency provides services in a manner that encourages serving a
specific number or type of constituents. This strategy is used to
address unmet needs of specific populations or to cover the costs
associated with providing services.

Full Cost Recovery


An agency manages its programs and services so that it financially
breaks even, providing as much service as the finances will allow. Many
nonprofits adopt this strategy in an effort to provide services without
entering fiscal crisis.

Partial Cost Recovery


An organization operates with a chronic deficit every year, providing
services that are critical and cannot be provided at a break even level
of costs (e.g., mass transit or the Post Office). These organizations
rely on public and private foundations, individuals, and governments to
cover the annual deficit.

Budget Maximization


An agency maximizes the size of its staff, services, and operating
expenditures regardless of revenue/cost levels. Organizations that are
concerned with reputation and the impact of trimming services or
infrastructure on that reputation employ this strategy.

Producer Satisfaction Maximization


An organization operates towards a goal of satisfying the
personal/professional needs of a founder, staff, or board of directors
rather than the established needs of external clients and customers.

Fees for Service


An organization provides services to clients for a fee. The fee is
typically below market rates and does not cover the full cost of
providing the services.

New Revenue Strategies


An organization uses direct marketing activities designed to generate
new sources of revenue from specific funders. Examples include starting
a new service or program, approaching a new funder, changing the way
services are provided, or setting up a profit making venture.

Legitimization Strategies


An organization works to communicate to the community that it is
conforming to existing standards and norms - that it is a legitimate and
worthy participant in the sector. Examples include adapting services to
funder priorities, contributing non cash or cash resources to other
nonprofit organizations, or seeking endorsements or board participation
from prominent individuals.

Retrenchment Strategies


An organization emphasizes efforts to reduce internal costs to offset
the potential or real loss of revenues or grant monies. Examples include
increasing staff workloads, increasing use of part time or volunteer
staff, eliminating services or programs, or reducing non-fixed expenses
such as training or supplies.

[NOTE: You can order Strategic Marketing for Nonprofit Organizations through Amazon.com and generate a small royalty which will be used to maintain this site. Order http://www.amazon.com/exec/obidos/ASIN/0132325470/internetnonprofi">Kotler's book now.]



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Reserved. NOTE (6/18/02): The Support Center of San Francisco is now known as CompassPoint and has a website at http://www.compasspoint.org/.