Nonprofit Responding to Strategic Trends: Shape, Adapt, or Reserve
One of the criticisms of nonprofit strategic planning is that the world is moving to fast and the future is too uncertain to plan. Those who read this blog on a regular basis know that I disagree with that premise (see here & here) and that uncertainty increases the need to plan –not lessen it. Rather than ignoring the future and reacting to it unprepared when it arrives, leading-edge nonprofit organizations anticipate the future and think and act strategically. The idea of planning and in the context of an uncertain future is not a new idea. Back in 1997, Hugh Courtney, published a classic article (and subsequent book) outlining an approach to strategy development in times of uncertainty. Courtney’s premise that that planning for the future is a function of thinking about the trends and developing a strategic posture where organizations can chose to a) help shape the future, b) actively adapt to the future, or c) prepare for but reserve the right to join the future as it become clearer. Note: Courtney and colleagues also published a great article in 2013 that expands your planning toolbox further (see here).
In my work with nonprofit clients, planning for the future involves looking at trends. Some trends are more micro and impact a small range of nonprofit organizations and other trends are macro and shape the public sector. The explorations of trends can form the basis of the assessment phase of strategic planning. Among the trends most pressing on the sector are these three:
The Changing nature of Revenue and Capital Markets: While the changes to the capital markets for nonprofits is not yet a sweeping trend, a clear shift in how money is being aggregated, controlled, and distributed is underway. The traditional model of diversifying your nonprofit revenues to include a mix of grants, donations, and earned income, if it ever were accurate, is even less so today. There are at least three dimensions to this trend. First, those institutions controlling significant capital are shifting towards narrower, investment-oriented philanthropy. Locally, United Way, Social Venture Partners Portland, Northwest Health Foundation, and, likely, the Meyer Memorial Trust, are all narrowing their focus under various models of collective impact or related investing approaches. Second, the democratization of philanthropy through technology-based tools is allowing for individuals to self-organize and focus giving though crowd-funding, giving circles, and event-based fundraising (e.g., #Give Tuesday). Finally, the markets of accessible capital for nonprofits are also changing with brokerage firms, and banks now offering donor-advised funds that are often less transparent and accessible. In short, the changing force nonprofits to think differently about future revenue strategy.
The Blurring of the Social Sector A trend that has the potential to disrupt the nonprofit sector is the blurring of the public and private sector. In the old days, the framework was that the government and nonprofit sector worked together towards social good. Historically, the public sector was capitalized by the collaborative investments of tax revenues and charitable contributions. Earned income also played a role in providing operating capital for nonprofits. Today, the emergence of benefit corporations is a hybrid construct where for profit companies, seek to provide both social value and create a profit for corporate shareholders. While still in their infancy, models such as Flexible Purpose Corporations, Benefit Corporations, and L3Cs, are beginning to reshape how we view the social sector. To the degree that such hybrid business models are perceived as being more “entrepreneurial” than nonprofits, there is the potential that significant resources currently being invested in nonprofit agencies will be redirected towards hybrid social enterprises. In fact, a number of grant making organizations are being encouraged to invest in social purpose and benefit corporations (for example see here). In the conversations around this trend, there is a potential that nonprofits could be marginalized as less entrepreneurial, adaptable, and strategic than the for profit entity.
The Changing Dynamics of Nonprofit Ecology Apart from the new models of benefit corporations there is a also increasing complexity within the nonprofit ecology. Naming a few indicators: a) government funding continues to trend as a mostly flat or declining line with the exception of occasional “topic of the day” that can spike funding either up or down (depending on the politics), b) collaboration is being forced on some facets of sector driven by varying implementations of a collective impact or other collaborative model, c) social outcomes are being sought at a premium by funding agencies, and d) talk of shrinking the sector persist while many continue launch new nonprofits that results in Darwinian competition for scarcer resources.
None of the trends are new but, in working with nonprofit organizations, I have encountered organizations that have spent little spend time thinking and planning in relationship to these trends. Other nonprofit leaders and boards may have spent more time thinking about the issues but, give that nearly 60% of nonprofit agencies don’t have a strategic plan (see here), many have not actually committed their strategies to writing. This brings us to the point of the blog. If these trends are emerging and gaining speed then they should drive nonprofit agencies to action. Does consideration of these trends show up in your strategic plan? Are you planning for a day where partnerships increasingly matter and your outcomes must be proven? Is your revenue model competitive, clear and driven by data? Are your shaping the future, adapting to it, or conservatively making small innovations?
Nonprofits today are most successful when they are identifying trends and building a strategy that is based on the trends identified above. As suggested by Courtney, sometimes strategies are designed to shape the future by bending the public policy, resource development, or innovative programming. In other cases, strategy parallels the unfolding of the future by building new competencies, adapting programming, or funding models. Strategy might also include building a responsive “opt-in” model that focuses on making “small bets” and as the future unfolds jump in fully. Regardless of the strategy mix that you follow, taking action is the operative concept. Sitting on the sidelines no longer works.
The bottom line is that the most effective nonprofits I know, do not hesitate to invest in planning and thinking strategically. Conversely, those nonprofits with an uncertain future choose to focus on the immediate rather than the long view. The future is coming and inaction is not an option. It is up to the leadership of nonprofits to Shape, Adapt, or Reserve. The choice is yours.
As always, your thoughts are welcome.
photo credit: Jerry Nettick