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.

Step 1: Identify the Problem

All nonprofits start here. Someone identifies something wrong in the world.
“This is wrong. Someone should do something.”
“They shouda, oughta, wanna change things.”

For you engineers, this is State 1, the Initial Condition of the environment.

For example, John Kennedy saw that the Russians (Soviets, actually) were ahead of us in space.

Franklin Roosevelt saw that polio was crippling and killing people.

Martin Luther King saw a racist nation.

Even Howard Hill, in The Music Man, saw that boys were about to be corrupted by a pool table.

Step 2: See the Vision

But that someone has a vision, and the vision is that, “The problem is solved!”
This is State 2, the End State.

You should state the Vision in the present tense, as though it has already happened. It is the description of the environment that you would like to make at the end.

John Kennedy envisioned the U.S. demonstrating leadership by being the first to set foot on the moon.

Franklin Roosevelt could imagine a world without polio.

Martin Luther King had a dream of a racially blind world.

Howard Hill called for a city where boys were engaged in a worthwhile activity.

3. Set the Mission

Next, the visionary says, “I am going to make the Vision happen.”

He has just stated the Mission by committing to achieve the vision, or at least make progress toward it. That’s all the mission is: a commitment.

John Kennedy committed to placing an American on the moon by the end of the 1960’s.

Franklin Roosevelt committed to eradicating polio.

Martin Luther King committed to achieving racial equality.

Howard Hill committed to keeping boys occupied.

Notice that there is no hint of strategy here. The Mission and Vision are WHY the organization exists. They rarely change. Strategies can, and probably will, change as circumstances require.

Note well: the fundamental job of the board is to protect and advance the Mission and Vision. The board must, as Steven Covey said, “Keep the main thing the main thing.”

Donors, volunteers, and many staff get involved because of the Mission and VIsion. Changing the Mission and Vision requires a revalidation from all of them. Simon Synek pointed out that Martin Luther King said, “I have a dream.” He did not say, “I have a plan.” People followed MLK because of his commitment to achieving his vision, not because of how he planned to get it done.

Note: Here is where the nonprofit is usually formed. The visionary (now called the founder) finds 2 to 10 people who also recognize the Problem, can see the Vision, and are committed to the Mission. They form a board of directors, hopefully with a lawyer and a CPA among them. They set up some by-laws, incorporate with the state, and apply to the Internal Revenue Service for an Employer Id Number (EIN) and, if appropriate, for a 501(c)3 status.

All of the steps up to here are one-time actions. Yes, you should review them every 3-5 years, but they should not change much.

Step 4. Determine the Strategies

Now we get to the fun part. The board must decide HOW they will accomplish the Mission and achieve the Vision. Strategies are descriptions of broad approaches to the Problem. They are not detailed action statements.

Most nonprofits have more than one strategy and strategies can have sub-strategies.

For example, John Kennedy consolidated all man-on-the-moon space efforts under a single agency, NASA, with high priority and ample funding. (By the way, governments are also nonprofits.) (BTW #2, Kennedy’s strategy became NASA’s mission. NASA then developed their own strategy.)

Martin Luther King decided to 1.) form coalitions to get broad support, 2.) demonstrate for awareness of racial injustices, and 3.) press for national legislation.

Franklin Roosevelt formed the March of Dimes to 1.) care for those already stricken with polio and 2.) fund research into vaccines.

Howard Hill proposed starting a boy’s band.

There are lots of ways to determine the appropriate strategies. I will discuss this in more detail in a future post, but, basically, it involves

• Setting the decision criteria
• Weighting the decision criteria
• Brainstorming potential strategies
• Applying the weighted criteria to the potential strategies
• Assessing the risk of various strategies
• Selecting the strategies to be implemented. (Sorry for the engineer-speak. I am not one, but have spent many years among them. Some of my best friends are engineers.)

Key questions to ask (these are really broad criteria) include:

• Are the strategies effective? Will they move us toward the vision?
• Are the strategies efficient? Can we afford them? Do we have the resources or a plan to get them?
• Can we handle the risks?

Many of you will find Logic Models to be very useful in Step 4 and the up-coming Step 5. I intend to discuss these further in a future post.

Strategies should be reviewed annually to make sure they are effective and efficient. Do they move the outside world toward the objective and are they the best use of the available resources.

Step 5. Create the Action Plan

Note: By now, you should have realized that you need someone to actually do the day-to-day work. Most nonprofits will designate someone as the Executive Director (ED) to oversee the Action plan and to provide the interface to the board. Nonprofits usually start out with a volunteer, often it’s the founder, as the ED, but quickly move to a hired position as the organization expands.

The ED and his staff will usually be the ones to perform develop the actions. They are the ones that must perform them.

Now you, or the ED, will translate the strategies into actionable steps.

For each strategy, you, or the ED, will set down the steps you will take to accomplish that strategy, List when you will take them and what resources you will use. This will constitute your Annual Operating Plan (AOP). The calendarized Financial Budget is the a key subset of this plan. More about budgeting in a later post.

The level of detail will vary. For example, an action may be to hold the annual fundraising banquet by March 15th. But there will be many actions in earlier months, some of which will cost money. These actions do not always need to be detailed in the Annual Operating Plan, although planned expenditures must be scheduled.

Step 5 is performed annually, prior to the start of the fiscal year. The plan takes into account trends from prior years. More on that below, in Steps 7 and 8.

John Kennedy’s NASA developed and launched Mercury, Gemini, and Apollo missions.

Martin Luther King scheduled a demonstration in Washington, D.C

The March of Dimes funded iron lungs and Doctors Salk and Sabin.

Harold Hill scheduled a parade.

Step 6: Execute the Action Plan.

Finally! We have dreamed it. We have planned it. We have approved it. Now, we get to actual start performing.

Having planned the work, now work the plan. Just do it!

Step 7. Review the Action Plan results monthly.

OK, you know that you get what you measure. And the measurement must be often enough and recent enough to provide meaningful feedback.

Every month, the ED should provide the board with a discussion of the activity for the prior month and how it compares to the plan. Check out the post on The Monthly Financial Summary.

• Did we do what we said we would do?
• Did we do it when we said we would do it?
• Did we use the resources we said we would use?
• Did we do better or worse than we planned?

Notice that I did not say “higher or lower” nor did I say “than last year.”
It’s “better or worse” because many board members get bogged down in making the distinction between over- / under -budget income and under-/ over-budget expenses.

Likewise, all comparisons are to be made against what we said we would do in the Annual Operating Plan. Many boards get tied-up in explaining  that last year we held our fundraising banquet a month later and this month had 3 pay periods this year instead of two. That, as the LEAN people would say, “is MUDA.” The only comparison that counts in this review is against the AOP and the calendarized Budget.

It’s also meaningless to evaluate how much budget is remaining for the year. Comments such as, “We are half-way through the year and have spent 60% of the budget” are worthless without knowing how much you intended to spend by this time. The typical nonprofit gets 30 percent of their donations in December, so they are showing a deficit position all year long. You don’t want to start cutting back on programs and laying-off people just because you are in a deficit position even though you are thousands of dollars better off than you planned. More on this in a later post.

• Finally, What is the projection for the remainder of the year?

Not only is it important to know how you have done year-to-date, but you also must know how that will effect the plans going forward. You must differentiate between timing issues (e.g. “We paid the rent a month late”) that will be reversed later and real variances (e.g. “The banquet made $5,000 more than planned”) that are permanent. This enables cash management. Check out the post on Financial Forecasting.

By the way, in this step, you are evaluating the efficiency of outputs.

Step 8: Review the Strategy Annually

Once a year, you should evaluate how well each strategy is accomplishing the Mission and moving toward the Vision. You are measuring the effectiveness of the strategy in achieving the desired outcomes.

Eight steps. Some simple, some not-so-simple. But following them will give your nonprofit a firm foundation for fulfilling your Vision.