Category Archives: Organizational Development

Why Strategic Planning Goes Wrong

reprinted by request

As a consultant, executive staff member, board director, and teacher, I have had the opportunity to engage in a lot of strategic planning. I think about it, research it, and look for ideas to make it work better than how it tends to work.

It has always bothered me to know that more often than not strategic planning efforts go awry. In another article I wrote on this topic, I stated the biggest reason why strategic plans fail is that people don’t do them. While there is truth in that, the story doesn’t end there of course. It’s why people and organizations fail to do successful strategic planning that deserves some attention.

The difference between Strategy and Plan
Let’s start with what I suggest are some fundamental misconceptions about strategic planning. The biggest misconception is that strategy and planning are one in the same. How often, for example, do you hear people equate strategic planning with a “blueprint” or a “roadmap?” While those words are good metaphors for the word, “plan,” they fail substantially in capturing the meaning of “strategic” or “strategy.” Continue reading Why Strategic Planning Goes Wrong

Five Elements of Strategic Resource Development

Posting #1 in a series on Resource Development

It’s tough out there for non-profits and social causes when it comes to raising money, especially money for core operations and services. All of the seed grants, innovation grants, or target specific project grants are fine and dandy, but the growth in sustainable funding is not growing, is it? Impact Investing, Social Enterprise, and Crowd Funding are among the more recent methods of financing social good, though the extent of their reach and utility by the sector overall are emerging, not yet clearly understood.

I have read a fair amount over the years on fundraising and other resource development opportunities and one thing I found irritating in most of them was the thesis they presented, which generally was, “if you all do this or that, or follow this methodology, you all will raise more money.” The reality is, as you  know, every organization will not increase their revenues in a given year. Many struggle just to maintain current levels of funding.

intimate-relationships-connection-you-me-us-we
Relationships Matter

A colleague of mine recently suggested I write a piece like this, given my “success” in significantly growing two non-profits. For one, I doubled staff and financial resources in about three years; for another agency the growth in revenues was about 70% over 5 years. At both agencies there were significant additions in services, but also large gains in securing sustainable funding and improving operational infrastructure (which is all about capacity). This leads me to my first point about generating resources: Raising revenues significantly takes  a significant amount of time.  Patience is definitely a virtue in this instance. Continue reading Five Elements of Strategic Resource Development

Let’s Stop Assuming Non-Profits Should Just Be Run Like a Business.

It is not uncommon for business leaders or entrepreneurs to suggest that charities need to behave more like business. Of course non-profit operations should be based on sound financial and management principles and practices, but I suggest blanket statements like “be more like business” ignore some fundamental differences between private and non-profit sector organizations.

Often this advice is offered pejoratively, as if such business-minded people believe that non-profits lack business-savvy and consequently are inefficient or at least could be run much more effectively.  There’s another angle on this: business-savvy tends to be about sales and profits and doesn’t automatically provide for a comprehensive or fully relevant driver for doing philanthropy.

When business leaders cast their “non-profits should be more like us”  into the philanthropic sea, I am often surprised – and a little dismayed – by the number of non-profit leaders who nod their heads up and down in agreement.  I don’t know what troubles me more: the banker who thinks banking qualifies him as an expert in non-profit leadership and management or the non-profit executive who actually believes her sector should operate more like a bank. I have a feeling that few private sector folks would do much more than chuckle if advice was offered the other way around, even though such advice might be worth considering.

In reality there are sectorial differences that should be understood and considered before making such carte blanche judgements.  In an article written for Forbes in 2013, Tom Watson addresses those differences.

I summarize:

  • The philanthropic marketplace is dramatically different from private sector markets. The latter lends itself to measurements that are not applicable to what is known as “social capital.” How does one definitively measure the dollars and cents of social capital?
  • In the private sector we assess results or impact through such metrics as shareholder value, sales, the stock market, housing start-ups, and so on. All of these metrics can be assigned comparable numbers over time. It’s a lot murkier when it comes to assigning measures to social indicators of success. What numbers can be used to identify personal changes brought about by counselling or one’s process of healing from trauma? I am not saying there are no measures, but they aren’t as straight forward. As Watson writes, “The [social] return on investment will always have some haze beyond the spreadsheets.”
  • Motivations are different as well between the two sectors. One’s desire to give to charity or to get engaged financially or otherwise in social change are not the same motivations that drive entrepreneurs to create profitable businesses. In fact, the competitive nature of the private sector often includes a conquering mindset. One’s success in the private sector is tied to winning the battle for consumers and driving competitors away, if not out of business.  Charities don’t measure their progress in terms of displacing other charities or increasing market share.  They do compete for grants and for donor dollars, but not in a way that attempts to demonstrate the inadequacies of other charities.
  • Watson points out another fundamental difference: “Capital markets tolerate failure at a much higher rate than would be acceptable to non-profit donors. Most business ventures fail. Most non-profits do not – or rather, more accurately, they do not close their doors, merge with other organizations, or write down lost venture funding. In the worst cases, they tend to soldier on, withering slowly as their appeal to private donors and other funders diminishes – and their impact falters. That’s because there is no market for philanthropic stock, almost no liquidity for social capital.”

Another major difference has to do with what drives an organization’s resource engine. In business, customers drive revenues. Strategies are developed to address the needs of various customer segments and these strategies are designed to generate optimal revenues from those segments. At the same time the costs of engaging customers are managed as much as possible to ensure that profits are as high as possible.

Generally speaking, non-profits do not have these types of customers. We do have clients (we call them “participants” at Bissell Centre) and donors. While we should provide stellar service to our “customers,” our clients are, in a financial context, cost centres. We do not make money from them directly. It is true that some organizations charge user-fees but the majority of the time such fees do not cover the full cost of service, much less produce a profit.

One might see a donor as a customer, but I think it is inappropriate to equate being a donor with being a customer. The exchange a donor is looking for is not the same exchange a customer seeks. Their donation is purposed to benefit others, typically those less fortunate than they are. What they wish to experience is the satisfaction of seeing positive results for others, not themselves.

Watson’s perspective suggests that business people might better serve their non-profit colleagues by providing their bright minds and experiences to non-profit organizations within the context and environment non-profits experience, rather than assume what is good for the private sector must make sense for the non-profit sector.

I have worked with many community and business leaders who understand this. Our success together has not happened because of an “I know more than you” mindset. Rather, we have clicked because we have come to the table with what we know and a desire to learn what others know, no matter what sector they come from.

The truth is that all of us need to think and act more like one another do. It just depends on the context really. I do believe there are many private sector practices that can help non-profits, whether they are financial management processes or tools or methods of developing strategy. I have helped a couple of non-profit organizations adapt the Balanced Scorecard to their operations and I have referenced many HR practices, risk management approaches, customer service functions, and other private sector elements in the development of our own at Bissell Centre.

In this day and age of dissipating customer loyalty, businesses might be better served if they treated customers like well-run non-profits treat donors. At Bissell Centre, for example, every donor receives a thank you phone call from a volunteer or staff member, regardless of the size of donation. We don’t ask for more money, don’t pitch any further involvement; we just say thank you for believing in our work. Saying thank you is our way of recognizing the relationship we have with the donor and hopefully that simple act of saying thanks sends our intended message: you matter to us. Most businesses I buy goods and services from don’t make me feel that way.Often it is quite the contrary to be frank.

Non-profits put mission first before money. While it is true non-profits require revenue to do mission work, we believe an individual’s alignment with our brand should be clearly mission-connected, not an alignment based on transactions.

People wish to feel engaged in life and that includes their work life. Dan Ehrenkrantz wrote a piece earlier this year in Forbes Magazine, “Why You Should Run Your Business Like a Non-Profit.” One of his suggestions to business leaders is to treat employees like volunteers.

“Your best employees are a lot like volunteers: They have other options and can leave. This is especially true in fast-growing fields such as health care, environmental science, and technology, where demand outstrips supply and new knowledge is scarce and valuable.

“Most businesses mistakenly assume that their most valued employees will stay put and stay happy if they pay them enough. But research indicates that salary is not the most effective motivator, and the cost of disengagement is high.  A 2013 Gallup study showed a direct link between employee engagement and shareholder return; companies where 90% of employees felt engaged had earnings per share 147% higher than their competitors in 2010 and 2011.”[1]

There are lessons to be learned everywhere, no matter what sector we are in or looking at. Operating with a bias that has one sector being better than another is not only a misguided bias, it narrows our capacity to learn from one another.

 

[1] Retrieved from http://www.forbes.com/sites/forbesleadershipforum/2014/02/26/why-you-should-run-your-business-like-a-nonprofit/ September 28, 2014.

Let’s Play Pretend

Let’s play pretend.

Pretend you run a business that sells widgets that are critical to a buyer. The price of each widget is $1000.00 and the buyer needs 100 of them. That’s $100,000. Now let’s pretend the cost of each widget (materials, labour, reasonable marketing costs, equipment maintenance, transportation costs, etc.) makes up 80% of the market price, leaving you with a gross profit of $20.00 per widget or in the case of this order of 100, a gross profit of $20,000 or 20% of the total price.

Now imagine the buyer informs you that it does not pay proportionately for your accounting services, facility costs, delivery costs, or marketing costs. The buyer’s rationale is really interesting; they believe someone else should pay for those costs.  Now imagine the buyer suggests your staff should be paid less than their staff and not have benefits as good. And then imagine being criticized for putting some money in the bank to cover a crisis and being told they don’t approve of that (even though they have money saved for their rainy days).

How would you feel if you were the Widget Company?

funderspullThis is often how contract or funding agreements are set up with non-profit agencies. Some contracts are structured in a way that do not allow non-profit organizations to offer competitive compensation, much less a reasonable  RRSP benefit, if any. Of course the contracts don’t stipulate this outright, but funding limits and structures present non-profits with the hard choice of either accepting such under-resourcing or turning down an opportunity to undertake mission-related work.

Long-term funding agreements (often called multi-year agreements) were introduced to our community in 1989. The intent was to offer quality-run organizations an ongoing financial commitment by participating funders. The thought was such agreements would help non-profits be more confident of planning ahead, positively impact stability, and create more of a partnership approach to addressing community problems than can be had from one year, zero-based funding. The intent as well was to provide increases over the life of the multi-year agreement to address incremental costs, like wage increases, and hikes in utilities, rents, and other fundamental expenses. Continue reading Let’s Play Pretend

Becoming a Learning Organization – Part Two

ACTION LEARNING

According to Michael J. Marquardt[1], “action learning is a dynamic process that involves a small group of people solving real problems, while at the same time focusing on what they are learning and how their learning can benefit [one another]….Perhaps action learning’s most valuable capacity is its amazing, multiplying impact to equip individuals, especially leaders, to more effectively respond to change. Learning is what makes action learning strategic rather than tactical. Fresh thinking and new learning are needed if we are to avoid responding to today’s problems with yesterday’s solutions while tomorrow’s action-learning_redchallenges engulf us.”

Engaging in action learning involves coming together to create a learning space that not only allows but facilitates out of the box ideas. Sometimes people may wish to throw the box away completely; so the learning space must also be a safe space for exploration. Action Learning  is an exercise in creativity and the audacity of people believing they can do better, be more, and make a bigger difference. Continue reading Becoming a Learning Organization – Part Two