Beyond the Retreat: Strategic Planning and Non-Profits

By Franck Schuurmans, Director, Non-Profits, DSI

Inside non-profit enterprises, strategic planning often takes place as an event rather than as a process. Typical planning sessions tend to look like this: meeting at some sort of resort for a 1- or 2-day retreat where, board members and managers come together to review both the past year’s performance as well as initiatives planned (and often underway) for the coming year. Managers make presentations to board members, board members then comment upon management plans, and, in most cases, the board approves all proposed initiatives. Occasionally, an outside moderator appears to facilitate discussions about past performance and the immediate outlook, and to help participants in their quest to reach agreement on short-term goals or specific capital expenditures. When addressed at all, the external world appears through the sorts of environmental scans that tend to focus on the present and on predictable trends rather than on the uncertainties and ambiguities—the quintessential sources of risk and opportunity—that should drive strategic planning. Why do non-profit executives tend to avoid discussions about uncertainty and ambiguity? It would appear that most of them have not given either much thought, because they continue to believe that “execution” matters more than strategic planning. Moreover, they have sources they can cite to reinforce their perceptions about how best to proceed. The following pages not only review some of the reasons for these perceptions; they also offer an alternative vision, one centered on embracing uncertainty as part of an on-going, strategic planning process. This sort of structured strategic planning can help non-profits both to survive as well as to flourish in the ever-changing, and increasingly competitive, global environment.

Execution and Strategic Planning

As it turns out, Jack Welch, the revered, former chairman of GE, shares many of the assumptions that guide non-profit executives. Skeptical about the benefits that might flow from formal strategic planning, especially when informed by academic research, Welch has joined many others who trumpet a “Just Do It” mantra. And that mantra sells, evidenced by the splash Larry Bossidy and Ram Charan made with the 2002 publication of their Execution: The Discipline of Getting Things Done.¹ An airport bestseller, Execution emphasizes the fact that while firms may hire leaders for their vision, they tend to fire them for disappointing or failed execution. As a result, they argue that executives would serve their shareholders’ interests more by abandoning those convoluted strategic planning sessions and concentrating instead on taking care of the customer and paying attention to costs. The rest, as Andrew Carnegie often claimed, will take care of itself.

Uncertainty, Ambiguity and Dynamic Leadership

Although Andrew Carnegie inhabited a complicated world, he never envisioned many of the changes that would alter the 20^th century, never mind the global marketplace we have inherited from the generations of innovators who followed his lead. Perceiving this, many business strategists argue that success depends upon complex and inter-locking phenomena that call for something more concrete than inspirational leadership or an execution plan. Although often integral to success, leadership and execution also depend on a host of external forces beyond the control of any individual, firm, or industry. Flowing from cultural, economic, environmental, political, social, and technological change, external forces not only influence the context in which people negotiate the market. They also contribute to the vagaries of the marketplace itself, the whims of consumers, and the moves of current and future competitors. Importantly, most of those forces give off signals, some weaker than others, but all of them garnering the attention of savvy entrepreneurs and strategic planners who perceive in the uncertainty of forces and trends myriads of opportunities for both profit as well as increased customer satisfaction and lowered costs.

Taking the long view, it would appear that individual leadership and operational efficiency have mattered less to business success than the structural, anonymous forces that shape the world in ways we still barely understand or cannot predict. Few visionaries have predicted which companies would emerge as long-term future “winners”; little wonder that in our increasingly complex environment, the task of envisioning the future becomes even more difficult. For example, can you predict what might emerge as the next “Google” phenomenon or which industries and firms will dominate the landscape 10 years hence?

Although many people fail to perceive the externalities, marketplace, and industry competition that most affect them, most also seem to misunderstand—in equal measure—the internal sources that shape the environment. Crediting our own genius when we blow by target performance, beat the numbers, and crush the competition, we rarely think about the larger forces that help us to rise. Conversely, when things go sideways, we tend to blame the economy, regulators, “that other department,” or “those people” for a less-than-stellar performance. Summing up the psychology at play, an old proverb declares that, “Success has many parents, [while] failure is an orphan.”

Rationalizations are nothing new, but looking at them afresh can help to explain the resiliency of “great man” theories and hero worship despite evidence of general blundering, impending financial doom, ethical impropriety, and outright malingering among those we have elevated to secular sainthood. Although individuals (and firms) can accomplish much, everyone involved in both for-profit and non-profit enterprises would profit by increasing their sensitivity to the structural, long-term forces that have always shaped “great leaders” and the institutions that house them. Once done, they can then employ lessons from the past in strategic planning to create more robust, more realistic decision-making futures.

Non-Profits and Strategic Planning

Even if non-profit board members and managers want to undertake more rigorous strategic planning, they often find it difficult to sift through the many methodologies and business-model fads offered to them. In the February 2006 issue of Harvard Business Review, Gary Hamel reviewed this dilemma. Hamel’s article on innovation suggests that more than 175 distinct methodologies have emerged to help managers establish the advantageous position they seek. Although neither a holy grail nor a be-all-and-end-all solution has emerged among the plethora of methodologies available, it soon becomes apparent that both private and public institutions need to move beyond current assumptions.²

Among typical non-profit strategists, SWOT (strength-weakness-opportunity-threat) analysis remains one of the more popular methodological approaches to planning, particularly when combined with other options that force decision makers to state annual goals and objectives. In addition, Jim Collins, with his focus on core values and the centrality of honest, hard work, has long touched a nerve among select groups (although many concur that it remains difficult to translate his methodology into a practical, step-by-step plan). Few approaches, including SWOT, however, focus on the cognitive traps that can stifle creative thinking; and creative thinking is precisely what many non-profit enterprises require if they hope to prosper over the coming decades. Although unique differences (such as volunteer boards, tax-exempt status, and the absence of stock market analysts and their consequent influence) set non-profits apart, they still operate in a competitive, business environment. As a result, no matter the methodology (or methodologies) employed, non-profit board members and managers need to develop disciplined approaches to strategic planning if they hope not only to survive, but also to thrive in the future.

Practitioners in the Non-Profit Arena

Often, non-profit planners do not even know where to begin in their selection of methodological approaches to strategy, a situation made all the more difficult given the fragmentation among the providers parceling out advice. As the introduction to this article suggested, few non-profit players explore strategic planning at any depth; and only a handful of outside firms even focus on non-profits or designate a separate practice to deal with them. Large consulting firms, such as McKinsey, overlook non-profits because the former assume the latter cannot absorb the fees associated with the undertaking’s scope. Moreover, the few smaller consulting firms—including those focused on legal and accounting practices—that do specialize in non-profits tend to focus on an operational issue germane to a particular enterprise, and provide strategic planning and governance issue options as add-on services. Other outsides—regional players, college professors, leadership speakers, and team-building experts, to name a few—provide services, but they usually perceive in non-profit organizations little more than a one-time source of additional income. Thus, when non-profit strategic planning takes place, it typically unfolds organically, via internal strategists appearing among those non-profit actors who have built an excellent reputation, either within the industry or as a member of a trade organization. At least these people know the value of strategic planning; but the best among them also recognize that they could use some assistance.

The Strategy Planning Process

Given the dearth of expertise focused on non-profits, it should come as no surprise that the exercise has become an event rather than an on-going process. Moreover, until very recently, few non-profit strategists embraced the concept of segmentation, and when it surfaced at all, decision makers usually employed it to think about ways in which to define membership groups. Few non-profit grasped its importance in terms of understanding their own past successes. Indeed, “serving our constituents” seemed an obvious strategic position. But “serving our constituents” remains so vague and generalized that it has no real meaning in terms of guiding an organization’s future. For example, when asked to think about their constituents (and potential constituents), few non-profit decision makers ask questions about to whom they refer (which ones?), whether they differ from each other, and which channels and products they choose. Referring to constituents as a catch-all group tends to result in muddled thinking, and an uninformed “strategic” position. How do non-profits know which position to take if they do not know much, if anything, about the many constituencies they serve, or those currently beyond their reach but imminently approachable given the right sort of strategy? Questions must, therefore, include the crucial ones: “What are we particularly good at?” and “Where, why, and among whom are we currently successful?” Ancient Greeks put great stock in Knowing Thyself because they not only perceived it as an excellent remedy for complacency, but also as an antidote for false confidence.

Like many firms falling behind in the competitive race for global profits, most non-profits follow an inside-out approach to strategic planning. Board members define goals and objectives, and then look to their managerial experts for an execution strategy. But, again, few consider how many success factors actually fall beyond the control of individuals, institutions, and the industry. Those factors—which we call forces, trends, drivers, and uncertainties—take place in the external environment, in the marketplace, and on moves made by competitors. Thus, for-profit and non-profit firms alike need to take those externalities seriously.

Getting Strategic Planning Right

Agility and speed matter to strategic planning and to the ultimate success of organizations. In non-profits, the structure of both board and decision-making meetings often impedes decisive action because both focus upon events rather than on strategic planning as a process. Most non-profit board meetings expend no more than 10-20% of the time involved to strategic planning. Instead, management updates on current business take up most of the time allocated for monthly meetings. If non-profits want to thrive in the future, they need to change that balance, spending far less time on management data examination and approval, and much more of it on the strategic challenges ahead, which must include increasing board members’ and managers’ abilities to read and to understand changes in competition, in the marketplace, and especially throughout the economic, geographic, political, social, and technological environments in which they operate. Once done, they can explore the trends and uncertainties likely to guide their own, as well as the industry’s future.

In addition, strategic planning sessions should not only focus on locating a vision for the institution. They must also center on reaching a fuller understanding about the trends and uncertainties that will shape their future within the context of creating better alignment between board member wishes, managerial tasks, and organizational execution. All parties involved need to question whether a day and half retreat provides a winning formula for structured planning—including sufficient time (and opportunities) to gather the appropriate amount of data, to develop options, and to discuss alterative outcomes. Corporate planning, for example, often takes six months—with periods of intense research, examination, and discussion—before strategists present data and executives make final decisions. Yet, as one industry survey recently revealed, only 88% non-profit respondents reported that their institution holds an annual, strategic planning session. Significantly, only 4% claimed to engage in strategic planning activities every quarter. Many more confessed that they only focus on long-range plans once every three, or in some cases, every five years.

In the right hands and minds, strategic planning becomes a dynamic, real-time process yielding significant results. Serious planners do not merely search for evidence that confirms what they already know. They do not emphasize the trends and predictions they have heard "through the grapevine.” They focus on uncertainty and ambiguity, the fissures along industry lines that present opportunities. Does strategic planning really matter? In our experience, it does. Our non-profit clients have learned that in an ever-changing environment, they need strategic planning to create robust futures. The process helps to identify new opportunities and the capabilities required to succeed in the future, to increase membership, to improve governance, and to realize the pathways toward creating “sustainable, competitive advantages” in the increasingly complex worlds in which they operate.