strategic issues in nonprofit management

1. Overview of Nonprofit
Organizations

2. Nonprofit Organizations
Organizations which enjoy 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 world has 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 the management 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 in Nonprofits

7. What is strategy?
Getting critical 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 process of 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 components of 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 is the 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 theory of 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 a nonprofit’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 Intended Impact 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 an organization’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 strategic priorities
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 in nonprofit 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 Tough Times
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’?