Stress Test for Nonprofit Strategy

Stress Test Your Nonprofit Strategy

We are one month into the new presidential administration, and the federal cabinet appointments are falling into place. As the pieces fit together, the picture that is emerging is an image of storm clouds swirling and a strong east wind gathering. The reality is that the philosophical orientation of the Republican-controlled government will result in different funding and program priorities which will bring the winds of change. Some of the winds will come at gale force. On top of the changes at the federal level, many states are facing similar political change, and many state legislatures are also facing economic uncertainty. Note: There is no judgment as to the rightness or wrongness of change. What matters in this post is that change is coming. In this context, nonprofit leaders and board members need to be prepared to both lead and adapt. 

Remember the last big change? The lack of preparation during the 2008 economic recession left many nonprofits digging out of the rubble of collapsed revenue models. Equally, other nonprofit agencies struggled to expand fast enough to absorb and integrate short-term economic stimulus grants and contracts.

Make no mistake about it, a radically different political philosophy taking charge of federal agencies. In this context, we can expect discretionary spending priorities to shift rapidly, and in the longer term, there may be a second wave of changes in mandatory spending programs as Congress begins to act on new, yet largely opaque, funding priorities. Couple federal and state changes (like these funding cuts in Florida -see here), and we magnify the effects of changing priorities even further.

I have underscored it before but it bears repeating. Today, nonprofit agencies need to think and act strategically. I suggest starting with a stress test of your current strategic plan (whether it is written or unwritten) including the following steps:

1. Assess Your Revenue Model Weaknesses: Start with asking yourself “what if” questions. •What if your anchor Federal grant was eliminated? •What if the stock market dives deeply and people decrease their giving? •What if your local institutional philanthropists increasingly divert resources from operational grantmaking to shore up the “crisis of the day?” Based on such questions you can test the strength of your revenue model and create action plans for a worst-case scenario (for more see herehere, and here).

2. Assess Your Institutional Values: A second stress that might occur as public policy changes, involve your organizational values. We already have reports that at least four Muslim nonprofit groups have turned down federal grants totally over two million dollars because of values conflicts with current federal policies (see here and here). As new philosophical values become embedded in government programs across different federal agencies nonprofits, your nonprofit needs to be intentional about your values. •Should your nonprofit receive federal funds if the funds exclude, racial, cultural or gender groups? •Can your nonprofit live with accepting federal funds that require you to report on the immigration status of clients? •Is your nonprofit willing to implement federal programs that have little (or no) evidence or science-base? If your board has not had a conversation about how institutional values impact program decisions, such a conversation should be part of your strategy stress test.

3. Assess Potential Program Strategy Shifts: In the last few weeks, I have already witnessed nonprofit organizations that have historically been service providers, jump into the areas of protest and advocacy. Other nonprofits have had to internally shift their program focus in response to the crisis caused by increased immigration challenges. My question is whether these are intentional program strategy decisions or a knee-jerk reaction? If your program strategies change in reaction to what’s coming at you rather than with strategic forethought, your nonprofit can potentially undermine your effectiveness. Thinking through implications of changing strategy focus might start with trends and projecting scenarios (see here). • What scenarios would cause us to shift our program and service delivery? •What are the staff, and budget implications of shifting programs.? •What would be the collateral damage of making program strategy changes? •What strategy changes will create the greatest impact for those we serve? Remember, program and service decisions are about allocating scarce resources and must be pursued intentionally.

4. Assess your Capacity to Change: A final stress test is to balance the ledger of the three previous assessments. Putting in place contingency plans, trigger benchmarks to define actions, and proactively acting in advance of the change, are important strategies to develop. It may mean building a different revenue model, redefining your allies and expanding your agency’s board or advisors. Your capacity to change is about action and proactively planning for action.

In writing this article, I recognize that all nonprofits will be equally impacted by the political changes currently underway. The urgency for conducting a stress test will be higher for some nonprofit organizations than others. At the same time, the ability of a nonprofit to develop a forward-thinking strategy and stress test the strategy periodically is a competency that should be shared by all nonprofit leaders.

As always, your thoughts are welcome and remember, we are here to help.

~ Mark

Photo Credit: Unsplash

Mark Fulop
Mark founded Facilitation & Process in 2009 to help organizations and communities bridge the gap between where they are today and where they want to be tomorrow. He’s led dozens of Portland nonprofits, government agencies and philanthropic organizations through complex change initiatives including strategic planning, revenue planning, board development, collaboration, and facilitation.