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Unit v strategic issues in nonprofit management
Nonprofit organizations are tax-exempt organizations that are organized to serve the public interest rather than generate profit. They may generate revenue but must use any surplus to further their mission rather than distribute profits. Strategic planning is important for nonprofits to connect their mission and programs, establish performance measures, encourage strategic thinking about resource allocation, and define their intended impact, theory of change, strategic priorities, and resource and performance indicators. Key challenges for nonprofits include defining and measuring success, fundraising, and attracting and motivating talent given limited resources.
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Unit v strategic issues in nonprofit management
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- 2. Nonprofit Organizations Organizations whichenjoy tax exempt status as a result of being organized to serve a broad public interest. A non-profit organization, also known as a non-business entity, not-for-profit organization or non-profit institution, is dedicated to furthering a particular social cause or advocating for a shared point of view. In economic terms, it is an organization that uses its surplus of the revenues to further achieve its ultimate objective, rather than distributing its income to the organization's shareholders, leaders, or members. Non-profits are tax exempt or charitable, meaning they do not pay income tax on the money that they receive for their organization. They can operate in religious, scientific, research, or educational settings.
- 3. Nonprofits and profits Nonprofit organizations are permitted to generate a profit However, nonprofits may not distribute their profits to their staff or directors – non-distribution constraint Surplus must be used to further the mission of the organization
- 4. The nonprofit worldhas been experiencing significant changes Increasing privatization of government services (education, health care, social services, the arts) Increasing financial pressure on nonprofits Increasing concerns about the efficacy of nonprofits Increasing corporate social responsibility initiatives and funds Other trends? Source: Social Enterprise: Private Initiatives for the Common Good (Harvard Business School)
- 5. Some of themanagement challenges of the nonprofit enterprise Defining and measuring success (economic stability and growth is a subsidiary goal). Raising funds – cannot sell the company ‘shares’ Attracting and motivating people given the often limited resources and the nondistribution constraint (no profit-based incentives)
- 6. Strategic Planning inNonprofits
- 7. What is strategy? Gettingcritical resource decisions right – allocating time, talent, and money to the activities that have the greatest impact – is what “strategy” is about. Source: The Bridgespan Group is a nonprofit,501(c)(3) organization applying leading-edge management strategies, tools and talent to help other nonprofits and foundations achieve greater social impact.
- 8. Strategic Planning The processof developing a comprehensive document that sets forth what and organization is working to accomplish and how it intends to succeed Source: The Bridgespan Group
- 9. The Strategic Plan Connects the mission and the programs Establishing performance measures that are understandable to all Encourages strategic thinking – the best allocation of scarce resources The strategic planning process is as valuable as the end result
- 10. Four main componentsof strategic planning 1. Strategic clarity – Mission statement – Intended Impact – Theory of Change 2. Strategic priorities: What specific actions and activities must take place to achieve the intended impact 3. Resource implications: To pursue the priorities, and the plan to secure them 4. Performance measures: Establishing the quantitative and qualitative milestones to measure progress Source: The Bridgespan Group
- 11. The mission isthe centerpiece of the nonprofit organization It serves a boundary function Serves to attract and motivate stakeholders (donors, staff, and clients) Should help in the process of evaluation The challenge could be see to create a mission statement that is specific enough to inspire, but sufficiently broad to allow strategic redirection
- 12. A nonprofit’s theoryof change: Theory of Change: Explains how the organization’s intended impact will actually happen. In other words, why will the organization’s approach bring about the desired change.
- 13. To clarify anonprofit’s theory of change, ask: 1. What are the most important elements of our programs? 2. What assumptions led us to choose these particular program element? 3. Are there other ways to achieve the desired outcomes? Why are we not taking that approach?
- 14. A nonprofit’s IntendedImpact provides a bridge between mission and programs Intended Impact: Is a statement about what the organization is trying to achieve and will hold itself accountable for within a period of time. It identifies both the benefits the organization seeks and the beneficiaries.
- 15. To clarify anorganization’s intended impact, ask: 1. Who are the beneficiaries? 2. What benefits do our programs create? 3. What won’t we do?
- 16. 2. Determining strategicpriorities is the next step Looking at current programs – How do they align with mission, intended impact and theory of change? – How much do they cost? (per outcome?) – Do they play into the organization’s strengths? – How do they compare with peers? – Changes that should be made? • Modify • Add new ones • Discontinue
- 17. 3. Resource Implications– human and infrastructure What will it cost to implement? What’s the gap? Financial projections for new strategy – Scenario planning
- 18. 4. Performance measures Need to collect data – INDICATORS Program milestones – Quantity – Quality Operational milestones – Human resources – Infrastructure Financial milestones – budget In establishing performance measures, it is important to be clear about the timing and ownership
- 19. Measuring success innonprofit organization 1. What makes measuring success particularly difficult in the nonprofit environment? 2. What was the problem with the ‘bucks and acres’ measurement system of the TNC? 3. What approach did the American Cancer Society (ACS) adopt given its challenge? 4. Any questions/points you want to discuss on the reading?
- 20. Managing in ToughTimes 1. Act quickly, but not reflexively, and plan contingencies. 2. Protect the core 3. Identify the people who matter most and keep the group strong 4. Stay very close to your key funders 5. Shape up your organization 6. Involve your board 7. Communicate openly and often How is your organization reacting the ‘financial crisis’?