One of the most common complaints about strategic planning is that, once it is approved, it sits on the shelf and molds, never to see the light of day again. This is a waste.
My prior post, The Big Picture, described the high level view of nonprofit strategic planning and management. It showed that all nonprofits start with the recognition of a problem and a vision of the world where the problem is resolved. The mission is the commitment to achieve the vision. The vision and mission are why the nonprofit exists and should
never rarely change.
The strategies are the broad actions the nonprofit will take to accomplish the mission; how they will achieve the vision. Strategies should be reviewed every 3 to 5 years or when there is a significant change in the environment.
The actions are the detailed plans for the next couple of years. These are what they will do to execute the strategies.
Managing the Nonprofit
The Logic Model, described in this post, is the basis for detailed management…and it’s often mandatory for grant applications.
A logic model is used to describe the whole process, starting with stating the problem, then the resources to be applied to the problem, the activities to be performed (including dosage, frequency, and duration) and the specific outputs of the activities.
There is usually an accompanying narrative that describes the problem in more detail and giving proof that the problem really exists and indicating the severity of the problem. The narrative may also discuss the root causes of the problem.
The Resources-Activities-Outputs columns represent the efficiency of the organization in addressing the problem. Typically, these activities and outputs are focused on addressing the root causes.
The last three columns detail the outcomes. This is the “So what?” describing the change in the external environment as a result of the activities and the outputs. This tells of the effectiveness of the activities and outputs.
Managing the Efficiency
So how do we manage the efficiency? The first step is to make sure that you have a Delegation of Authority in place. This authorizes budgeted expenses and allows for variance approvals.
Where does the budget come from? The board issues guidelines that represent their criteria for evaluating the budget. The budget funds the activities shown in the logic model using the resources they are willing to provide. The board should pay close attention to the measures of efficiency, usually expressed as ratios. Ratios such as dollars per student or clients per employee, or classes per month.
The staff prepares the budget and, if done according to the guidelines, the board approves it.
This budget is the baseline for the next year. Every month the board receives a report that shows 1.) the performance relative to the planned actions (budget) for the prior month, 2) the performance relative to the planned actions for the year-to-date, and 3 )the projected performance relative to budget for the full year. See the post on the Financial Ladder.
This report provides a roadmap for drilling down into the details to assess performance and to direct future actions. Note what the report does NOT include: 1.) references to last year. Last year is not the baseline. The budget is the baseline. Last year should have been considered when developing the budget. 2.) nor does it report how much budget remains. That is irrelevant when you have a baseline budget and projections on how it will be spent.
This report also provides the basis for projecting future cash needs.
Managing the Effectiveness
Managing effectiveness is a more difficult problem, but ultimately, it is the more important. The logic model has three columns under Outcomes. A near-term, a mid-term, and a long-term.
Near-term effectiveness is the easiest to measure. This is the immediate impact of our activities. This can be measured by observing clients; their awareness, knowledge, skills, behavior, practices, motivations, etc. You can just ask them, using surveys. We can tell right away if our activities have an impact. These measures often focus on root causes.
Mid-term effectiveness is a little more difficult. The real impact may take three to five years measure. We want to actually observe the changes in attitudes and behaviors. This can tell us if our near-term outcomes are really persisting, or are they just transitory. For example, does our middle-school reading intervention actually improve high school graduation rates. These measures have a middle-ground focus between root causes and the problem/vision.
Long-term effectiveness is quite difficult to measure. This is the achievement of the vision. (Remember the start of this post?) The real impact may be years away. It may be the impact of elementary school reading interventions on high school graduation rates. It may be a decrease in joblessness from GED training.
Quite often this happens long after the founder has passed from the scene. It may be Martin Luther Kings dream. It may be landing on the moon well after JFK’s death. It may be finding a cure for polio years after FDR died. But it is still the dream, the vision, and why we exist.
When it comes to managing finances, most nonprofits climb a consistent ladder of sophistication. Hopefully, they move quickly through the lower rungs. Continue reading The Nonprofit Financial Management Ladder
We often hear, “I don’t want to budget. I would rather have flexibility.”
But, your budget is not a straightjacket. It is simply a feasible, acceptable, baseline for income and spending. Continue reading Delegation of Authority: Your Budget is Not a Straightjacket
There are two ways to budget. Continue reading The Proper Way to Budget
Having answered the first of the two key questions, “How are we doing relative to what we planned to do?” We can now move to the second question, “Do we have enough cash to do what we planned to do?” Continue reading Financial Forecasting
Budgets are necessary to answer two questions:
- How are we doing relative to what we planned to do?
- Do we have enough cash to do what we planned to do?
You have a Mission to achieve a Vision that solves a Problem. You have well-thought Strategies that directly address the Problem. You know what Actions you need to perform to execute the Strategies.
Now you need a Budget.
Managing a nonprofit is very nearly a science. There are certain fundamental steps that you must take to ensure an effective, efficient program. Sure, there are lots of issues in Human Relations and Development, but the fundamental management steps, from the board’s perspective, remain the same. Continue reading The Big Picture