Mission Impact E-Book

Robert M. Sheehan

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: The AFP/Wiley Fund Development Series
• Sprache: Englisch

Seitenzahl: 418

Veröffentlichungsjahr: 2010

Beschreibung

Create powerful strategies for your nonprofit organization to achieve breakthrough performance in mission impact Does your nonprofit have a reliable way of knowing the impact its making? Beginning with an eye-opening discussion of what strategy is, Mission Impact: A Breakthrough Strategy for Nonprofits reveals how the process of strategy development should be designed with authoritative coverage of mission impact, vision, five year strategic stretch goals, strategy implementation, and management. * Step-by-step guidance and practical tools * Integrates the very best current thinking on performance and strategy available, drawing from both the corporate and nonprofit worlds * Cutting-edge ideas presented in a user-friendly fashion The deteriorating quality of life in our communities screams out for immediate action - for breakthrough improvement, not just incremental changes. Mission Impact: A Breakthrough Strategy for Nonprofits will lead you and your organization to achieve breakthrough performance for maximum mission impact. Note: CD-ROM/DVD and other supplementary materials are not included as part of eBook file.

Leseprobe

Table of Contents

Title Page

Copyright Page

The AFP Fund Development Series

THE ASSOCIATION OF FUNDRAISING PROFESSIONALS

2008-2009 AFP PUBLISHING ADVISORY COMMITTEE

Dedication

Introduction

LAYOUT OF THE BOOK

FOR MORE INFORMATION

Acknowledgements

About the Author

CHAPTER 1 - What Is Nonprofit Strategy?

WHAT IS STRATEGY?

STRATEGY GUIDES PERFORMANCE

NONPROFIT STRATEGY

HYPOTHETICAL EXAMPLE ORGANIZATIONS

CHAPTER 2 - Designing the Strategy Development Process

ARE YOU READY?

STAKEHOLDER IDENTIFICATION AND INVOLVEMENT

LENGTH AND SCOPE

THE STRATEGY DEVELOPMENT GROUP

APPLICATION TO HYPOTHETICAL ORGANIZATIONS

CHAPTER 3 - Your Mission Impact

THE MISSION ACCOMPLISHMENT APPROACH

THE MISSION STATEMENT

MISSION ACCOMPLISHMENT MEASURES

YOUR MISSION GAP

APPLICATION TO HYPOTHETICAL ORGANIZATIONS

CHAPTER 4 - Vision for Your Organization

WHAT IS VISION?

ASPIRATIONAL VISIONS

ROLE OF ASPIRATIONAL VISIONS

REAL-WORLD APPLICATIONS OF ASPIRATIONAL VISIONS

APPLICATION TO HYPOTHETICAL ORGANIZATIONS

CHAPTER 5 - Strategic Stretch Goals

WHAT WE KNOW ABOUT GOALS

OUTCOME-BASED SMART GOALS - Outcomes versus Activities

SMART Goals

ALMOST IMPOSSIBLE

REAL-WORLD APPLICATIONS OF STRETCH GOALS

APPLICATION TO HYPOTHETICAL ORGANIZATIONS

CHAPTER 6 - Organization Assessment

PLANNING YOUR ASSESSMENT

EXTERNAL ASSESSMENTS

INTERNAL ASSESSMENTS

THE VENTURE PHILANTHROPY PARTNERS CAPACITY FRAMEWORK

THE SDG SWOT ANALYSIS

APPLICATION TO HYPOTHETICAL ORGANIZATIONS

CHAPTER 7 - Strategy Development

NONPROFIT STRATEGY REVISITED

CREATING YOUR ORGANIZATION’S STRATEGY

THE STRATEGY NARRATIVE

APPLICATION TO HYPOTHETICAL ORGANIZATIONS

CHAPTER 8 - Strategy Implementation and Management

STRATEGY FIRST

ALIGNING THE ORGANIZATION

ANNUAL OPERATING PLANS

ADDITIONAL MANAGEMENT CONCEPTS AND TOOLS

LEVERAGING YOUR COMMITMENT AND HARD WORK

EPILOGUE

APPENDIX A - Venture Philanthropy Partners Capacity Assessment Grid

APPENDIX B - Summary of Hypothetical Organization Strategy Development Outcomes

References

AFP Code of Ethics for Professional Philanthropic Fundraisers

Donor Bill of Rights

Index

Copyright © 2010 by Robert M. Sheehan, Jr. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data:

Sheehan, Robert M.

Mission impact: breakthrough strategies for nonprofits/Robert M. Sheehan, Jr.

p. cm.

Includes bibliographical references and index.

eISBN : 978-0-470-59329-5

1. Nonprofit organizations-Management. 2. Strategic planning. I. Title.

HD62.6.S497 2010

658.4’012-dc22

2009037491

The AFP Fund Development Series

The AFP Fund Development Series is intended to provide fund development professionals and volunteers, including board members (and others interested in the nonprofit sector), with top-quality publications that help advance philanthropy as voluntary action for the public good. Our goal is to provide practical, timely guidance and information on fundraising, charitable giving, and related subjects. The Association of Fundraising Professionals (AFP) and Wiley each bring to this innovative collaboration unique and important resources that result in a whole greater than the sum of its parts. For information on other books in the series, please visit:

THE ASSOCIATION OF FUNDRAISING PROFESSIONALS

The Association of Fundraising Professionals (AFP) represents over 30,000 members in more than 197 chapters throughout the United States, Canada, Mexico, and China, working to advance philanthropy through advocacy, research, education, and certification programs.

The association fosters development and growth of fundraising professionals and promotes high ethical standards in the fundraising profession. For more information or to join the world’s largest association of fundraising professionals, visit www.afpnet.org.

2008-2009 AFP PUBLISHING ADVISORY COMMITTEE

Chair: Nina P. Berkheiser, CFRE

Principal Consultant, Your Nonprofit Advisor

Linda L. Chew, CFRE

Development Consultant

D. C. Dreger, ACFRE

Senior Campaign Director, Custom Development Solutions, Inc. (CDS)

Patricia L. Eldred, CFRE

Director of Development, Independent Living Inc.

Samuel N. Gough, CFRE

Principal, The AFRAM Group

Audrey P. Kintzi, ACFRE

Director of Development, Courage Center

Steven Miller, CFRE

Director of Individual Giving, American Kidney Fund

Robert J. Mueller, CFRE

Vice President, Hospice Foundation of Louisville

Maria Elena Noriega

Director, Noriega Malo & Associates

Michele Pearce

Director of Development, Consumer Credit Counseling Service of Greater Atlanta

Leslie E. Weir, MA, ACFRE

Director of Family Philanthropy, The Winnipeg Foundation

Sharon R. Will, CFRE

Director of Development, South Wind Hospice

John Wiley & Sons, Inc.:

Susan McDermott

Senior Editor (Professional/Trade Division)

AFP Staff:

Jan Alfieri

Manager, New Product Development

Rhonda Starr

Vice President, Education and Training

To my Dad, the dreamer, and my Mom, the pragmatist. Together you’ve encouraged me to bring dreams into reality.

With Love,

Rob

Introduction

We need a breakthrough in the quality of life for millions of people on our planet. A few examples:

Hunger

• An estimated 12.4 million children in the United States live in food-insecure households and are at risk of experiencing hunger on a daily basis.1

• Nearly 3 million seniors in the United States access food pantries annually to meet their emergency food needs.2

Housing

• More than 700,000 people in the United States are homeless.3

• More than 30 million U.S. households either pay excessively for housing, live in overcrowded conditions, or have physically inadequate housing—such as no hot water or no electricity.45

Education

• Up to one-third of school children in the United States begin kindergarten not fully prepared for a successful learning experience.6

• Only about half (53 percent) of high school students in the largest U.S. cities graduate on time.7

Health

• Cancer, heart disease, mental health, and other health issues continue to plague legions of Americans.

• HIV/AIDS continues to be a major problem in the United States; every 9 1/2 minutes someone in the United States is infected with HIV and for African-Americans and other blacks, HIV/AIDS is a leading cause of death.8

And these are just examples from the United States. The challenges for our fellow citizens across the globe are multiplied many times over by comparison.

While nonprofit organizations cannot and should not solve all of these problems, we do play a significant role in making a difference in the quality of life for millions of people. Children, families, and adults are living in conditions that are unacceptable, and we need to make more of an impact. And we need to do better than incrementally more. We need to somehow create breakthrough improvements in these intolerable conditions.

Staff and volunteers in the nonprofit sector already work very hard. The questions this book considers are: How can we work together even more creatively and strategically? How can we invent breakthrough improvements for those we serve through our missions? The intention of this book is to provide a process that nonprofit organizations can use to create breakthrough strategies that will make very significant improvements in our collective mission impact to improve the quality of life for others.

While we do work very hard, I believe that we in the nonprofit sector still have tapped only a tiny portion of our collective creativity and that great ideas are out there—waiting to be invented—that can help us make even more of a difference than we are currently.

And, of course, the preceding examples just begin to touch the myriad of other causes and issues that nonprofit organizations serve to make a difference for others, including those serving the environment, disaster relief, cultural interests, public interest groups, religious commitments, member associations, and more.

The strategy development process that is explained in this book is based on my more than 30 years of experience in the nonprofit world as a practitioner, academic, volunteer, and consultant. My unique blend of experiences gives me a practical perspective on strategy while also applying cutting-edge concepts—such as strategic intent and systems thinking—that are used primarily in the corporate world.

Much has been written about strategic planning for nonprofits. My approach is much different, and it is unique for three key reasons:

1. It shows nonprofits how to measure their mission impact and focuses the creation of strategy around increasing that impact to fulfill unmet needs, which is the organization’s mission gap.

2. It uses an aspirational mind-set to set vision and strategic stretch goals, which lead to the development of a breakthrough strategy—a strategy to close the mission gap as effectively as possible. Most strategy processes result in plans for incremental improvements.

3. It provides a clear definition of what strategy is and, more importantly, what nonprofit strategy is—a coherent, integrated explanation of how the organization is going to guide its performance toward a breakthrough in mission impact. Most strategy processes result in a collection of goals and activities that are not integrated or even connected in any way.

If your organization is committed to a breakthrough—a dramatic improvement—in the impact you are making for those you serve through your mission, then this strategy development process was designed for you. My distinct perspective on strategy derives from my unique blend of experiences with nonprofits during my career, including:

• Eighteen years as CEO of two different nonprofits in which each organization experienced breakthroughs in performance

• PhD from Ohio State focused on the study of organization development, leadership, and nonprofit organization performance

• A lifelong commitment to philanthropy as a donor, volunteer, and board member for a wide variety of nonprofits

• Numerous consulting engagements with a spectrum of nonprofits across the country

• Continuing academic research on nonprofit strategy and performance

• Executive education experiences with corporations, government entities, and nonprofits through the James MacGregor Burns Academy of Leadership and the Robert H. Smith School of Business, both at the University of Maryland, College Park

The result of these experiences is a perspective that has produced a Strategy Development Process that brings together the very best ideas on strategy and performance from all sectors into an approach that addresses the distinctive circumstances that nonprofits face.

This book is written primarily for nonprofit practitioners—staff and volunteers—to empower them to design, develop, and implement breakthrough strategy to make an increased mission impact. Graduate students who are or intend to be practitioners will find it very useful. In addition, there are enough academic citations and recommendations for additional reading to satisfy the curious practitioner, serious graduate student, and practice-minded academic. As a special bonus, board members who work for corporate and/or government organizations will find that many of the ideas in the book can be applied to their sectors as well.

LAYOUT OF THE BOOK

The book is a guide for designing and carrying out a strategy development process for a nonprofit organization. As an aid to help understand how to apply the concepts within each chapter, examples are provided through the creation of three hypothetical organizations. These organizations include a food bank, a housing services organization, and a literacy council—each with their own unique circumstances.

Chapter 1 is the conceptual setup for the book and answers the question, “What is nonprofit strategy?” Chapter 2 explains the factors an organization should consider as it designs its strategy development process. Chapters 3 through 7 explain the key steps that a strategy development group would go through in creating a strategy. These include establishing mission accomplishment measures, a mission gap, an organization vision, strategic stretch goals, completing an organization assessment, and developing an organization strategy narrative. Chapter 8 provides an overview of issues for senior management to consider as it implements strategy.

Appendix A includes a reprint of the Capacity Assessment Grid that was developed for Venture Philanthropy Partners by McKinsey & Company. I am very pleased that we were given permission to include this helpful assessment tool in the book. Appendix B includes summaries of the actions taken by the three hypothetical organizations discussed in Chapters 1 through 7.

One theme that continues throughout the book is the importance of taking the time to go through this entire process thoughtfully, rather than trying to do strategy in an afternoon or in the midst of an emergency. Crafting breakthrough strategy takes time and the involvement of key stakeholders.

Following are more details on what is included in each chapter.

Chapter 1: What Is Nonprofit Strategy?

This chapter provides the definition of nonprofit strategy that will guide the strategy development process. Nonprofits differ from their counterparts in the for-profit world, and these differences must be made clear as they set out to create strategy. While for-profit organizations are primarily concerned with producing profits and beating their competition, nonprofits are primarily concerned with accomplishing their missions—making a difference for society. Therefore, the objective of nonprofit strategy is to guide the organization on its way to mission accomplishment.

Chapter 2: Designing the Strategy Development Process

The design of the strategy development process can take many forms and must fit the organization’s situation. This chapter explains the factors that an organization should consider as it is designing its process. It is important that stakeholders are meaningfully involved and that those most intimately involved have credibility and organizational wisdom—an understanding of the dynamics that can lead an organization to high performance. The organization’s board of directors and its CEO, along with other senior staff management, need to collaborate and agree upon the design of the strategy development process.

Chapter 3: Your Mission Impact

The first action item for the strategy development group (SDG) to address is the review of the mission and its intended impact. By the conclusion of this step in the process, the SDG will make sure that the mission statement contains impact language, that mission accomplishment measures are set, and that its mission gap—an identification of unmet needs—has been articulated. In subsequent steps, a vision, strategic stretch goals, and the new strategy will all be designed to close the mission gap as effectively as possible to maximize mission impact.

Chapter 4: Vision for Your Organization

The next step in the process is for the SDG to set a vision for the organization. With their mission gap in mind, the SDG is asked to create a future picture of what their organization would be like if it was ideally designed to fill the mission gap as effectively as possible. An inspiring, aspirational vision of the organization provides focus and momentum for strategy development.

Chapter 5: Strategic Stretch Goals

In this step of the process the SDG sets five strategic stretch goals, which are designed to catapult the organization toward its vision. The goals sharpen the organization’s focus for the strategy development process and spur creativity. Working toward the accomplishment of the goals begins to bring the vision into reality. In this way, the goals are strategic and their completion point is at the end of the strategy time frame being used (three to five years out). They are outcome based and SMART: specific, measurable, almost impossible, relevant, and time bound.

Chapter 6: Organization Assessment

A clear strategic understanding of the organization’s current reality is essential in order to craft breakthrough strategy from that current reality toward the strategic stretch goals and vision. This chapter explains how the SDG can effectively identify the organization’s strengths, weaknesses, opportunities, and threats in the context of the organization’s commitment to achieve the strategic stretch goals, pursue the vision, and close the mission gap.

Chapter 7: Strategy Development and Management

Chapter 7 integrates all of the prior steps into the process to create the strategy. Strategy development is a creative process that results in a statement of the general themes, a strategy narrative, which will guide the organization’s performance for the coming three to five years. The strategy narrative generally explains how the organization will leverage its strengths, fortify its weaknesses, seize its opportunities, and block its threats as it pursues its strategic stretch goals, vision, and mission accomplishment.

Chapter 8: Strategy Implementation and Management

Now that the organization has developed a breakthrough strategy, it is time for implementation. This begins by making sure that all aspects of the organization, especially the culture, are aligned with the strategy. The strategic stretch goals are then integrated into the annual planning process, while the strategy guides the development of the action plans. The organization and external environment are continually monitored for changes—and the organization prepares itself to engage those changes. Implementing and managing the strategy requires comprehensive effort from everyone within the organization. Concepts and tools to help support the implementation are provided at the end of this chapter including ideas on quality management, the balanced scorecard, and strengths-based management.

FOR MORE INFORMATION

I have developed a Strategy Development Workbook as a complement to this book, which organizations can use to follow the strategy development process. The Workbook is available at no cost and can be found on my web site www.SheehanNonprofitConsulting.com in the Resources section. You may make as many copies as you would like for your planning and strategy development purposes.

Also on the web site, you will find additional strategy examples from more hypothetical organizations to complement what is already in the book. These include organizations representing cultural missions, member associations, public interest groups, and more.

Some people will read this book and say that I have made strategy too simplistic. I have, indeed, intended to make a complex concept as practical as possible. Having said that, if, as you read along there is anything in the book that is unclear to you, please email me at [email protected]. I will create an FAQ section on my web site for the book as questions come in, so please check there first. But if you have other questions, please let me know so I can build out more FAQs.

Thank you for your commitment to the nonprofit world and for taking the time to learn how your organization can make even more of an impact for those you serve. I am committed to philanthropy—as a volunteer, donor, consultant, and researcher—and I believe that our collective philanthropic efforts play an important role in creating a more just, equitable, and thriving society for all.

Rob Sheehan College Park, Maryland July 2009

Acknowledgments

Writing this book has been like distilling the learning from my 30-year nonprofit career into a readable package. That has included academic learning and on-the-job training.

I learned a great deal about organization performance, strategy, leadership, and nonprofit organization effectiveness during my graduate work at Ohio State. While many people influenced me there, I give special thanks to Jeff Ford, Bob Backoff, and Astrid Merget.

As powerful as these formal educational experiences were, I have learned even more through my practical experiences. Board members and staff at Alpha Sigma Phi Fraternity and Alpha Sigma Phi Educational Foundation, where I served as CEO of both entities from 1981 to 1990, taught me many things during those years. I want to particularly thank Ralph Burns, Evin Varner, Stan Miller, Bob Sandercox, Jeff Schwind, Jeff Hoffman, Al Wise, Kevin Garvey, Bev Moody, Merilyn Sipes, Hazel Dargatz, Randy Lewis, Bob Simonds, Gale Wilkerson, and Steve Zizzo for training me there in my first nonprofit assignment.

My practical learning continued and expanded during my years as CEO of LeaderShape, Inc. from 1992 to 2001. Board and staff members who especially influenced me during those experiences include Gene Hoffman, Alice Faron, Anne Humphries Arseneau, Paul Pyrz, Mike McRee, Barb Frahm, Bob Baney, Bob Brucken, and Maureen Hartford.

In more recent years, I have been fortunate to work on a variety of executive education projects through the James MacGregor Burns Academy of Leadership and the Robert H. Smith School of Business at the University of Maryland, College Park. This has continued my exposure to more cutting-edge ideas in strategy, leadership, and organization performance. I extend special thanks for this continued learning to Judy Frels, Gerald Suàrez, Hugh Courtney, Scott Koerwer, Steve Feld, Carol Pearson, Nance Lucas, Jeff Kudisch, Cindy Stevens, Joyce Russell, Paul Tesluk, Susan Taylor, Russ Ackoff, Doug Smith, and Anand Anandalingam.

I started consulting on a part-time basis more than 20 years ago and have had the pleasure to work with a wide variety of nonprofits from whom I have learned much through the years. I have also had the opportunity to teach nonprofit executives in various settings, including training programs sponsored by NeighborWorks America. The NeighborWorks America people are doing important work in the arena of affordable housing and I have learned much from them. Special thanks for all of this goes to staff and consultants there with whom I have had the pleasure to work, including Randy Gordon, Chris Deady, Paul Kealey, John McCloskey, Carilee Warner, Mark Levine, Tom Adams, Karen Gaskins-Jones, and Mark Robinson.

I have also learned a lot about nonprofit performance and strategy from years of experience as a volunteer and Board member for a variety of organizations. I especially acknowledge learning with and from Carla Poanessa, John Thies, Pat Chapel, Tim Deuitch, and Bill Kitson through these experiences.

As cosponsors of this book and as colleagues, I also want to thank the Association of Fundraising Professionals. I have been a member of AFP since 1986 and have served as president of two different AFP Chapters—Central Ohio and East Central Illinois. I believe that AFP does very important work in bringing much-needed, quality educational programs to nonprofit executives through chapters all across the country. Special colleagues there have included Nina Berkheiser, Jim Weidman, Gene Hunckler, Kelly Godshall, Bob Fogal, Mark Neville, and many more.

There are many people who have also been specifically helpful to me in writing this book as resources for information and supporters. This first includes Susan McDermott and Judy Howarth at Wiley who have very helpfully guided me through the process of writing the book. Others include Julie Scofield, Jeff Eaton, Maggie Grieve, Barbara Edmonston, Ron Johnston, Lyn Hang, Steven Miller, Gary Cook, Ed Leonard, Paul Niven, Irv Katz, Susan Phillips Bari, Claire Walden, Lynn Brantley, Ross Fraser, Marla Bobowick, Jan Pruitt, Heath Courtney, and many colleagues within ARNOVA who have given me helpful ideas.

Finally, and most importantly, I want to thank my family—my all-time greatest fans—for their love and support, as well as the many friends who are so wonderfully caring and supportive.

This book is an extension of my commitment to philanthropy, which is grounded in my faith in God as well as my love for humankind.

My apologies to the many people who have helped me along the way but whom I have inadvertently left out.

About the Author

ROBERT M. SHEEHAN, JR.

Rob Sheehan is currently the academic director of the Executive MBA program at the Robert H. Smith School of Business at the University of Maryland, College Park, where he is also a lecturer in the Department of Management and Organization. In this capacity, he directs the academic aspects of the Executive MBA and teaches in the program. He also assists with custom-designed executive education programs for various client organizations.

Rob also is principal of Sheehan Consulting, where he provides consulting services in strategy development and implementation, leadership and teamwork development, board development, and succession planning for nonprofits, businesses, and government entities.

His background and experiences have included serving as CEO of LeaderShape, Inc., a nonprofit that provides ethics-based leadership programs to young adults, from 1992 to 2001. He served as CEO of Alpha Sigma Phi Fraternity and Alpha Sigma Phi Educational Foundation from 1981 to 1990. From 2001 to 2004 he served as Director of Executive Education at the James MacGregor Burns Academy of Leadership at the University of Maryland, College Park.

He received his master’s degree (1989) and PhD (1994) from The Ohio State University. While at Ohio State he directed the Excellence in Philanthropy research project, which became the basis for his dissertation, Mission Accomplishment as Philanthropic Organization Effectiveness. His BA is from Westminster College, PA (1979).

Rob is an active member of ARNOVA (Association for Research on Nonprofit Organizations and Voluntary Action) and the Academy of Management. He has published research in both leading nonprofit academic journals, Nonprofit and Voluntary Sector Quarterly and Nonprofit Management & Leadership. He is an active member of the Association of Fundraising Professionals, having served as president of both the Central Ohio and East Central Ohio chapters. He attained the association’s CFRE (Certified Fund Raising Executive) designation in 1986.

Rob has been an active volunteer and donor for a wide variety of nonprofit organizations, and currently serves as chair of the board of trustees of LeaderShape, Inc.

CHAPTER 1

What Is Nonprofit Strategy?

Nonprofits differ from their counterparts in the for-profit world, and these differences must be made clear as they set out to create strategy. While for-profit organizations are primarily concerned with producing profits and beating their competition, nonprofits are primarily concerned with accomplishing their missions—making a difference for society. Therefore the objective of nonprofit strategy is to guide the organization on the way to mission accomplishment.

WHAT IS STRATEGY?

The concept of strategy is often misunderstood in all sectors—corporate, government, and nonprofit. Hence the plethora of strategy consultants and books (here’s another) abound. So let’s begin by simplifying.

Strategy is an integrated and coherent explanation of how an organization is going to guide its performance in the future. It explains how its essential operations will interact with one another, and within the organization’s environment, to produce effective performance.

We’ll now look at the different parts of this definition.

An Integrated Explanation of Performance

Many authors point out that the historic roots of strategy come from the military. For example, “The term strategic is derived from the Greek strategos, meaning ‘a general set of maneuvers carried out to overcome an enemy during combat”’ (Nutt & Backoff, 1992, p. 56). Using the same military mind-set, Hambrick & Fredrickson (2005) call strategy “the art of the general” and explain that “Great generals think about the whole. They have a strategy; it has pieces, or elements, but they form a coherent whole. Business generals . . . must also have a strategy—a central, integrated, externally oriented concept of how the business will achieve its objectives” (p. 52). Others build on this militaristic concept to describe strategy more generally for organizations as “determining what an organization intends to be in the future and how it will get there” (Barry, 1986, p. 10).

When many organizations discuss their strategy, they end up listing pieces or elements without an explanation of how these are integrated into a whole. For example, organizations will list goals, initiatives, and/or plans without an explanation of how these are connected to one another. In fact, any connection between these various elements is often unclear. It’s not that goals and initiatives and plans are bad, it is just that without an explanation of how they fit and interact together to move the organization forward, they do not constitute a strategy.

Explaining a strategy is like telling a story that has a beginning, middle, and end. As we think back to the example of generals, we can imagine them talking with their troops to explain what they are about to do: “First, we are going to . . . then some of you will . . . which will then allow others of us to . . . and that will give us the opening to . . . which will lead us on to victory.” Note how the actions in this simple example are connected with one another. Many people refer to strategy as a cause-and-effect story that describes the journey from the present to the desired future. Certain actions create certain effects, which then allow new actions to be taken, and so on. The strategy story becomes the guiding narrative for the organization’s future activities.

In order for a strategy to work well, the various strategic actions taken need to have positive interactions. They need to produce a positive reinforcing cyclical effect upon one another so that the collective result of the actions propels the organization into the future. We know that organizations can find themselves in vicious downward spirals. Good strategy creates a virtuous positive spiral toward high performance (Senge, 1990).

The importance of these positive interactions is central to the concept of systems thinking. Systems thinking seeks to understand an organization as a whole. It looks at how the different parts of the organization interact and affect one another. Rather than analyzing each part of the organization separately, the parts are looked at synthetically. Russell L. Ackoff, one of the leaders of the systems thinking approach, describes one of the tenets of this approach: “A system’s performance is the product of the interactions of its parts” (1999, p. 33) rather than the sum of the performance of the parts or “how they act taken separately” (1999, p. 9).

Crafting strategy, this cause-and-effect story, is a creative act, not an analytical function. It is a process of considering the organization’s current situation, such as its SWOTs (strengths, weaknesses, opportunities, and threats), looking at the organization’s desired future, and designing a set of actions which will catapult it forward. Typically, an organization will want to leverage strengths, seize opportunities, fortify weaknesses, and block threats. These orchestrated actions all make up the cause-and-effect story. In this sense, there is no such thing as a right or wrong strategy and a strategy cannot be figured out. It needs to be generated from the strategist’s understanding of the current situation and commitment to pursuing the organization’s future intentions. This is what Henry Mintzberg refers to as “strategic thinking” as he compares it to the analytical function of “strategic planning”: “Strategic thinking, in contrast, is about synthesis. It involves intuition and creativity. The outcome of strategic thinking is an integrated perspective of the enterprise, a not-too-precisely articulated vision of direction . . . ” (1994, p. 108).

While a strategy may not necessarily be right or wrong, it can be sufficient or deficient. If the strategy does not coherently explain how the various strategic actions it is going to take are integrated with one another and/ or does not explain how these actions will work together to create a virtuous cycle of performance, then it will serve as little future guidance to the organization.

In order to further understand the essential elements of the strategy story, it is helpful first to understand the essential elements of the means of organization performance.

Essential Elements of Performance

Many different aspects of an organization need to work together well in order for it to achieve high performance. This is true regardless of the type of organization it is—for-profit, government, or nonprofit. The strategy definition we are working from states that strategy explains how its essential operations will interact with one another, and within the organization’s environment, to produce effective performance. The “essential operations” of an organization are its primary means of performance.

In his book Make Success Measurable! (1999), organization expert Doug Smith outlines the essential elements of an organization’s operations, which it needs to integrate in order to be successful. These activities are essential for organizations from all three sectors. The categories of activities can be thought of as financing, staffing, and provision of products/services/ programs of value.

These categories of activities will make intuitive sense to most people who are familiar with running an organization. The categories cover essential questions:

1. What products/services/programs of value are we going to provide and to whom?

2. Who do we need to hire to provide the products/services/ programs?

3. How do we finance all of this activity?

The specific ways the activities are carried out will vary within different sectors, but answering these questions is essential to each. Smith explains that organizations must create a “reinforcing cycle” of actions that connects the three categories of activity so that they build upon one another to create a “cycle of sustainable performance.”

For the for-profit entity, the cycle includes shareholders who provide opportunities and rewards to people of the enterprise and their partners who provide value to customers who generate returns to shareholders . . . and the cycle continues (see Figure 1.1). Each of the three parts of the cycle benefits from the other two and contributes to them as well. Smith then changes the terminology slightly to demonstrate how the same logic works for government and nonprofit organizations. In government, shareholders are taxpayers, while in nonprofits they are funders. In each case, though, the function is about financing the operation. Customers become citizens in the government model and beneficiaries in the nonprofit model. In this case, it is all about providing products/services/programs of value regardless of the sector (see Figures 1.2 and 1.3).

FIGURE 1.1Cycle of Sustainable Performance (a)

Source: Douglas Smith, Make Success Measurable! (1999). Reprinted with permission of John Wiley & Sons, Inc.

FIGURE 1.2Cycle of Sustainable Performance (b)

Source: Douglas Smith, Make Success Measurable! (1999). Reprinted with permission of John Wiley & Sons, Inc.

FIGURE 1.3Cycle of Sustainable Performance (c)

Source: Douglas Smith, Make Success Measurable! (1999). Reprinted with permission of John Wiley & Sons, Inc.

For each sector, the same cause-and-effect logic applies to the explanation of how strategic actions in one area of the organization’s operations will impact the others. Smith calls this logic a “performance story,” and he points out the “cyclical interdependence” that each area has on the others.

Consider some examples of this cyclical interdependence in the nonprofit world:

• If not properly financed, then a nonprofit will not be able to retain the quality or quantity of staff it needs. Therefore, it needs to figure out how to be well financed.

• If the appropriate quantity and quality of staff (and/or volunteers) are not attracted and retained, then it will not be able to provide programs and services well. Therefore, it needs to figure out how to attract and retain staff and/or volunteers.

• If programs and services are not provided well, then funders (which can include those paying fees for service) will not renew their support. Therefore, it needs to figure out how to provide programs and services well.

Without all three of these areas of activities working well and positively feeding off of one another, the cyclical interdependence breaks down and performance is not optimized.

So as organizations answer the three questions posed at the outset of this section, they need to be sure that their plans in each category positively interact with their plans in the other categories. Since the answers to these questions are essential to the organization’s performance, they are also essential to the organization’s strategy and need to be included in the organization’s strategy story.

The three essential elements of staffing, financing, and products/ services/programs are the “means” of performance, and they need to be addressed by organizations in all three sectors. However, an important way that the for-profit, government, and nonprofit sectors differ is by their core purpose—why they exist. Therefore, while they have similar categories of means of production and performance, their ends are quite different—and this will impact how they craft strategy.

STRATEGY GUIDES PERFORMANCE

The purpose of having a strategy is to guide the organization toward its desired future. In other words, the strategy guides the organization’s performance. With this in mind, we can examine the different ways in which for-profit and nonprofit organizations think about performance and then look at implications for strategy.

For a number of decades, consultants and authors have taken the general idea of strategy—built upon its militaristic past—to design methods for corporate organizations to craft and implement strategy. In more recent years, nonprofit organizations have begun seeing the value of strategic planning. They have attempted to take methodologies used in the for-profit world and apply them to nonprofits.

The results of these efforts have been mixed. The difficulty in translating for-profit methods of strategy development into the nonprofit world was one of the motivating forces behind a research forum sponsored at Harvard in 1998. From their work with nonprofit practitioners, the conveners stated, “The feedback from these practitioners was that strategy models developed for for-profit organizations were relevant for their purposes, but these models required significant modification or adjustment to work in nonprofit settings” (Backman, Grossman, & Rangan, 2000, p. 2).

While numerous books and articles on nonprofit strategy have been produced since this conference was held more than 10 years ago, nonprofit executives still find difficulty in applying for-profit methods to their unique situations. The development of modifications and adjustments that need to be made in for-profit methodologies of strategy development, in order for them to work for nonprofits, begins by examining the key differences between the two types of organizations—their reasons for being and their notions of performance.

For-Profit Performance

For-profit organizations typically judge their performance by various perspectives on how much profit they make. They have investors who expect a return on that investment. Many companies will also monitor metrics such as customer and/or employee satisfaction, but most do this as a means to the important end of making profit. Some companies may take a shorter-term view of profits (e.g., most companies listed on the New York Stock Exchange) while some may focus on the longer term (e.g., Berkshire Hathaway). Some may look at different permutations of profit, such as price of traded shares or return on invested capital. But, essentially, the idea is to make a profit.

Certainly, many for-profit entities are also concerned about the “social value” they produce for society and they are increasingly concerned about their impact on other various stakeholders. However, for most, these are secondary to their interest in making a profit and returning value to shareholders. A statement from the Business Roundtable, an association of CEOs of leading U.S. companies, reinforces this in its 2005 version of its Principles of Corporate Governance:

Corporations are often said to have obligations to shareholders and other constituencies, including employees, the communities in which they do business and government, but these obligations are best viewed as part of the paramount duty to optimize long-term shareholder value. (2005, p. 31)

This statement is not as blunt as renowned economist Milton Friedman’s famous article “The Social Responsibility of the Corporation is to Increase its Profits” (1970), but it makes the same point.

The definition we are working from states that strategy explains how its essential operations will interact with one another, and within the organization’s environment, to produce effective performance. We see that effective performance means making profit for the for-profit organization (aptly named). But it is also important here to comment on the environment in which for-profit organizations operate.

A key challenge that for-profit organizations face is that they exist within a highly competitive environment where other organizations also exist to make a profit. Once they start making a good profit on a particular product or service, then other organizations will enter their market to make a profit by selling a similar service or product to the same types of customers. Therefore, the for-profit world is understandably preoccupied with the problems of competition. A leading expert on corporate strategy is Michael Porter, whose Competitive Strategy (1980) is perhaps the most widely read book on the subject. In Porter’s view, “Strategy is making trade-offs in competing” (1996, p. 70). This is why the military roots of strategy apply so nicely to the for-profit world. A military general may want to take territory, while a business general may want to take market share. They are both very much concerned with the others in their competitive space and take their actions accordingly.

It is understandable, then, that people refer to the “competitive paradigm that is one of the drivers of the business world” (Kearns, 2000, pp. xiv-xv). Since making profit is its purpose and competition is an important aspect of the environment in which it operates, a for-profit organization needs to address these issues in its strategy story. Next, we look at how the purpose and environment for nonprofits differ.

Nonprofit Performance

While for-profit organizations are accurately labeled according to purpose, using the term nonprofit does not describe the purpose of these organizations. People have tried to promote other labels, such as charitable or philanthropic organizations, but none of these have caught on, and we seem to be stuck with the nonprofit term for at least a while longer.

Nonprofit organizations are formed for different purposes than for-profit organizations. By definition and by charter, they are given permission by the federal government to exist as organizations that do not pay taxes on their net revenues because their purpose is to make a difference in society. Some nonprofits may also accept contributions, for which donors may receive a federal tax deduction. Nonprofit organizations need to be financially viable, but they do not judge their success by how much their revenue exceeds their expenses. In the absence, though, of profit as a performance criterion, we find that notions of nonprofit performance can become much more complex.

Much has been written and researched regarding nonprofit performance (or in other words, effectiveness) to try to clear up this complexity (Forbes, 1998). Yet, after many years of research and writings by many people, the concept remains elusive. Recently, two of the most notable contributors to the nonprofit effectiveness research literature stated, “Nonprofit organization effectiveness remains a complicated and challenging construct for researchers and practitioners alike” (Herman & Renz, 2008, p. 412).

The view on this issue that I have long advocated—and used as a nonprofit CEO and consultant—is the “Mission Accomplishment as Nonprofit Organization Effectiveness” approach (Sheehan, 1994, 1999, 2005, 2009). Essentially, this approach says that the core purpose of a nonprofit is to carry out its mission—to make a difference for society. The extent to which it is accomplishing its mission is its level of performance. Therefore, the focus of its strategy should be to maximize mission accomplishment.

A number of scholars and authors support this idea:

• James Phills, in Integrating Mission and Strategy for Nonprofit Organizations, suggests “For a for-profit organization, performance is typically defined in terms of profitability or economic returns to its owners. For the nonprofit (as well as for some for-profits), performance is defined more broadly, typically in terms of achieving the mission” (2005, p. 17).

• In their review of a collection of articles on nonprofit strategy, Backman et al. conclude that “The most important and perhaps most obvious theme that emerges from these articles is that mission and values, rather than industry structure or internal capacities, are the starting points for strategy development in the nonprofit sector” (2000, p. 6).

• Paul Light, in his survey of 250 executive directors of nonprofits identified as “high performing,” found that “three in five equated effectiveness with being focused on or accomplishing a mission or goals” (2002, p. 39).

• Mark Moore, in “Managing for Value: Organizational Strategy in For Profit, Nonprofit, and Governmental Organizations,” states that “Just as financial performance becomes the touchstone for gauging past and planning future performance in the for-profit sector, so mission performance becomes the touchstone for gauging past and planning future performance in the nonprofit sector” (2000, p. 194). He suggests that the key calculation for public-sector strategy should be to “find better ways to achieve mission” (p. 189).

• Numerous other researchers have suggested effectiveness approaches consistent with the mission accomplishment approach (e.g., Stauber, 2001; Sawhill & Williamson, 2001a, 2001b; Singh, 2005).

While the mission accomplishment approach seems very straightforward to numerous practitioners, consultants, and researchers, there are those who promote other approaches. Three other popular perspectives are the goal approach, the internal process approach, and the social construction approach. Each of these provides interesting viewpoints.

The goal approach was preferred as a method of assessing effectiveness of all types of organizations for many years (e.g., Price, 1968). This approach considered an organization effective to the extent that it met its goals. But problems persisted with this approach. First, organization goals are often not clear, and this makes it difficult to tell if they have been met. Next, even when they are clear, conflicting goals often exist within the same organization, and it is difficult to tell which ones are more important. And finally, goals may or may not be relevant to the organization’s core purpose. Goals can play a vital role in the development and implementation of an organization’s strategy—as we will see in forthcoming chapters. However, on their own, they may or may not provide a reliable indication that an organization is fulfilling its purpose.

The internal process approach has been used by researchers who want to study the internal operations of an organization to determine if some optimal set of internal processes may end up predicting effectiveness (e.g., Etzioni, 1964). A great deal of research, for example, has focused on organizational decision-making processes (e.g., March & Simon, 1958). Again, knowledge gained from these approaches can be helpful in the implementation of strategy, but these approaches are more concerned with the means of performance than the ends. If an organization has efficient internal operations, for example, we still cannot determine the extent to which it is fulfilling its purpose.

A more recent development is the social construction approach developed by Herman & Renz (1997, 1998, 1999, 2004, 2008). Their research demonstrates that various stakeholders of organizations have different perspectives on whether an organization is effective and/or the extent to which it is effective. They have recently concluded that “Nonprofit leaders need to recognize that NPO effectiveness is socially constructed, that it is not a stable construct, and that different stakeholders will judge it differently” (2008, p. 410). This is very good advice, and it makes sense that various stakeholders with their own set of values and perspectives would judge performance differently.

Contrasting the mission accomplishment approach with the social construction approach, we see that even when an organization chooses to judge its own performance by the extent to which it accomplishes its mission, it cannot control how various stakeholders will judge that performance. Stakeholders may (and some surely will) have their own criteria that differs from what the organization’s board and senior management team chooses. Therefore, when an organization sets out to craft strategy toward accomplishing its mission, it must keep in mind that its performance will be judged differently by various stakeholders. This will be particularly important to remember in Chapter 3 as we look at operationalizing the mission accomplishment approach. In this way, the social construction approach provides a valuable perspective to judging performance and crafting strategy.

While the goal, internal process, and social construction approaches provide helpful perspectives on performance, the mission accomplishment approach is the most appropriate perspective to use as the organization sets out to develop strategy. The mission accomplishment approach captures the core purpose of the nonprofit organization—to make a difference for society. To think of this in the same terms as the Conference Board’s earlier commentary on the paramount importance of shareholder value, we could say that “While goals, internal processes, and stakeholders are all important, they are best viewed as part of the paramount duty of the nonprofit to optimize mission accomplishment.”

And what about the environment in which nonprofit organizations operate? The strategic opportunities and threats in a nonprofit’s environment are even more complex than that of a for-profit. This has been pointed out by many researchers, including Jim Collins in his “social sector” supplement to Good to Great (2001). Nonprofits must carefully consider all of their complex environmental factors when they develop strategy—including the possibility of competitive issues.

Depending on the nonprofit, issues of competition may or may not be vital environmental factors to consider. For example, nonprofits that rely heavily on fees for service in environments where other service providers are active will certainly need to consider competition when crafting strategy. Importantly, though, they will consider the competition within their broader commitment to accomplish their mission—not to make a profit. With this in mind, we can imagine the strategic move of two nonprofit competitors to collaborate in order to maximize mission accomplishment for the good of a community. This type of cooperation would be less likely in the for-profit world and may even be deemed as collusion—subject to the violation of law. Therefore, while competition may be something for a nonprofit to consider in its environment, beating its competition is not its overriding concern. It is concerned with making a difference for society.

NONPROFIT STRATEGY

With the preceding discussion in mind, following is the definition of nonprofit strategy, which will be used in the rest of this book:

Nonprofit strategy is an integrated and coherent explanation of how a nonprofit organization is going to accomplish its mission of making a difference for society in the future. It explains how its essential operations (funding, paid & unpaid staffing, programs/services for beneficiaries) will interact with one another, and within the organization’s environment, to accomplish its mission. (Sheehan, 2009)

This compares to the more general definition provided at the outset of this chapter.

Strategy is an integrated and coherent explanation of how an organization is going to guide its performance in the future. It explains how its essential operations will interact with one another, and within the organization’s environment, to produce effective performance.

The nonprofit definition adds specific language that tailors it for these organizations. The first change is that it replaces the term performance in both sentences with language that acknowledges that performance for a nonprofit means accomplishing the mission.