Strategic Planning and Financial Sustainability
This chapter focuses on the principles, approaches, and processes of long-term strategic planning, the relationship of strategic management and program effectiveness, and the interrelationships between strategic planning and financial sustainability. The chapter introduces various approaches to effective strategic planning geared to the financial sustainability of a nonprofit organization.
WHAT IS STRATEGIC PLANNING?
Strategic planning is probably as old as human civilization. Almost all known human civilizations have developed practices that aim to shape the future in a relatively predictable manner. However, contemporary strategic planning in organizations may be traced from the scientific management principles developed during the Industrial Revolution. Simply put, strategic planning is the process of assessing the current situation of an organization or institution, developing incremental objectives, and designing plans and strategies, in order to achieve strategic goals that are mission focused and vision driven. Strategic planning is a systematic process that leads to basic decisions, goals, and actions to position an organization for future success. A strategic plan states what an organization will become, what goals it will attain, and what it will do to accomplish them.
IMPORTANCE OF STRATEGIC PLANNING
Why is strategic planning important for a nonprofit organization? The strategic-planning process or the development of a strategic plan responds to a need to shape the future of an organization or institution. A sustainable organization must be able to shape its future as much as possible. It is very difficult to ask people to support an organization if the organization does not have a clear vision for the future. People who support an organization need the basic assurance that the members of a particular nonprofit organization know where they want to be and have outlined a plan to get there. A strategic plan provides opportunities to clarify organizational vision. An organization with a clear vision is likely to perform better than an organization that does not. In that sense, a strategic plan can contribute to organizational performance. The strategic planning helps ensure that there is potential for efficient use of resources. There is no guarantee, of course, that an organization with a strategic plan will use its resources well. However, organizations that use their resources efficiently always have a strategic plan, which includes a long-term vision that the organization is implementing gradually. Further, the fact that members of an organization were able to sit down together and develop a strategic plan means that there was a relative consensus regarding the future of the organization. Therefore, the strategic goals set in a strategic plan can be easily interpreted as the strategic priorities of a nonprofit organization. It is an ongoing and inclusive process. It is a framework that can be broken down into parts or annual plans. The plan should be looked at—at least annually—because change happens and modifications may be needed. Each part may deal with a major issue facing the organization. For example, the program plan is about what an organization is doing and plans to do. The human resources plan outlines ways of dealing with important issues related to personnel. The financial plan deals with generation of income and expenditures to make.
STRATEGIC-PLANNING APPROACHES AND PROCESSES
There are various strategic-planning approaches, depending on the size, the age, or the culture of an organization or institution. Kriemadis and Theakou (2007) identified five models of strategic planning used by nonprofit organizations. Some benefits of strategic planning for nonprofit organizations are listed in Box 6.1.
Box 6.1 Benefits of Strategic Planning
Determines the changes needed for an organization to better fulfill its mission
- Establishes and sustains effective programs
- Ensures organization is aligned with its environment
- Helps meet community needs
- Enables the uses of resources in the most effective manner possible
- Helps improve public communications
- Helps gather social, political, and financial support
- Clarifies direction for effective decision making
- Shows how the organization will build on its strengths
- Helps identify and target opportunities
- Uncovers and overcomes internal weakness and external threats
- Predicts the future and positions of the organization
1. Basic strategic planning: The first model uses a basic top-down process that includes:
- Identification of purpose through definition or revision of the mission statement Selection of strategic goals that an organization needs to accomplish in the process of furthering its mission
- Identification of specific strategies and approaches that will enable it to reach each goal
- Identification of specific action plans to implement each approach or strategic program
- Monitoring and updating the strategic plan to ensure that activities that are being implemented reflect the strategic vision of the organization
2. Issue-based strategic planning: The second model is referred to by Kriemadis and Theakou (2007) as issue-based (or goal-based) planning, and consists of the following steps:
- Conduct a SWOT analysis to identify the strengths, weaknesses, opportunities, and threats related to the future of an organization.
- Identify and prioritize major issues or goals through strategic analysis.
- Design strategic or key programmatic areas.
- Define or update the vision, mission, and values statements.
- Design action plans that include objectives, resources needed, roles, and responsibilities.
- Record and attach documents developed during the strategic-planning process into the strategic plan document.
Develop annual operating plan documents throughout the life span of the strategic plan, which can be 3,5, 7, or even 10 years.
- Develop and authorize the yearly budget.
- Conduct first year of operation.
- Monitor, review, evaluate, and update the strategic plan.
3. Alignment model: The third model is called the alignment model, and is mainly a fine-tuned strategic-planning approach. It encompasses:
- Creating a planning group to define or revise the organizational mission, programs, resources, and support
- Identifying what works and what needs improvement
- Developing strategies to make possible adjustments
- Including the strategies in the strategic plan
4. Scenario planning: The fourth model is labeled scenario planning. Kriemadis and Theakou (2007) argue that this approach is more of a supplemental framework to use in conjunction with other strategic-planning models. The scenario-planning approach involves:
- Identifying forces and trends that may affect the future of an organization
- For each force or trend, identifying at least three scenarios (best, acceptable, and worst) that may have implications for the organization
- Anticipating actions that can be taken in relation to each scenario
- Anticipating strategies to respond to possible changes
- Deliberating on external factors with the most potential to affect the organization
5. Organic planning: The fifth and last model identified by Kriemadis and Theakou (2007) is called organic or self-organizing planning. This method departs from the previous linear approaches. The organic approach is a continuing and self-reflecting process of clarifying and articulating the value system that guides the actions of an organization. The process includes strategies such as story-boarding techniques and dialogues.