The art of Wealth Decision Making

Strategic NonprofitManagementNonprofit Learning Point

June 10 & 17, 2015

Presented by: Sam Davis IIIPrincipal, The Davis Group

1Day Two ObjectivesReview the Strategic Management process, including how Strategic Thinking, Business Models, and Nonprofit Lifecycles contribute to effective Strategic Planning.Undertake a deep dive into the Strategic Planning process to permit participants to be able to design and pursue planning for their organizations.Emphasize the importance of being able to implement the Strategic Plan, track performance, and make changes as needed.What additional objectives do you want to pursue on the second day of this two-day class?Sam Davis III, The Davis Group for NPLP June 10&17 201522PROPOSED SCHEDULE9:009:30Review of Homework; Questions; Observations.9:3010:00Review of Day One Strategic Management, Strategic Thinking, Business Models, etc.10:0010:30Strategic Planning Overview w/Exercise10:3010:45Break10:45NoonStrategic Planning, Phase One, w/ExercisesNoon1:00Lunch on your own1:002:00Strategic Planning, Phase Two, w/Exercise2:002:30Strategic Planning, Phase Three, w/Exercise2:302:45Break2:454:00Strategic Planning, Phase Four, w/Exercises4:00 4:30Review; Questions; Taking it HomeSam Davis III, The Davis Group for NPLP June 10&17 20153Strategic Management as Process:Some Important Principles1. Strategic Management should be an ongoing process, not an event. 2. The strategic management process logic is generic, but its application is very situational. 3. Strategic Management is necessarily messy and iterative.

Keep it simple, but no simpler than it is. -Albert Einstein

There must be a system to balance the tensions between strategy and operational tactics.

Sam Davis III, The Davis Group for NPLP June 10&17 20154Discussion: For each principle, why is this important?4STRATEGIC MANAGEMENT SYSTEMSam Davis III, The Davis Group for NPLP June 10&17 20155Decision

ActionReady What to DoSteer Do ItAim How to Do ItSTRATGIC THINKING DEFINEDStrategic thinking is about clarity and simplicity, meaning and purpose, focus and direction, relationships and feedback and desired outcomes.- Haynes Center for Strategic ManagementAnticipationCritical thinkingInterpretationDecision-makingAligningLearningSam Davis III, The Davis Group for NPLP June 10&17 20156

Sam Davis III, The Davis Group for NPLP June 10&17 20157Dr. Jeffrey A. Krug7ORGANIZATIONAL LIFECYCLESSource: Nonprofit Lifecycles by Susan Kenny StevensSam Davis III, The Davis Group for NPLP June 10&17 20158

TurnaroundRenew7 STAGES OF NONPROFIT CAPACITYSource: Susan Kenny Stevens1. Idea Stage Magnificent Obsession

2. Start-Up Stage The Labor of Love

3. Growth Stage Becoming Who You Are

4. Maturity Stage Maintaining Your Edge

5. Decline Stage Someone You Used to Be

6. Turnaround Stage The Rubber Meets the Road

7. Terminal Stage Alive in Name Only

Sam Davis III, The Davis Group for NPLP June 10&17 20159

Nonprofit Lifecycleby Susan Kenney StevensAs amended by Charles Hardy in The Age of ReasonStartupGrowthMaturityDeclineRegenerationTurnaround The IdeaInflection PointsTerminalA sound Business conceptIn the boxFail VitalityHow do you know when you are approaching maturity?Decline?Sam Davis III, The Davis Group for NPLP June 10&17 20151010BUSINESS THINKINGA business model describes the rationale of how organizations create, deliver and capture economic, social, cultural and other forms of value for stakeholders.- the logic by which an organization earns its lively- hood and sustains itself financially.

If business is part mystery and part art, a big part is also basic science and math. Some fairly ordinary rules predict financial results.- Clara Miller, The Looking Glass World of Nonprofit Money, The Nonprofit Quarterly, Spring 2005.Sam Davis III, The Davis Group for NPLP June 10&17 201511CLOSELY-HELD BUSINESSES & NONPROFITS:SIMILARITIES & DIFFERENCESBoth typically have values-driven missions.Leadership succession can be a challenge for both.Industry and competitive environments are fragmented.Attracting and retaining talent can be a challenge.Neither closely-held businesses nor nonprofits tend to offer equity to executives.Access to capital can be a challenge for both.Profitability can be a clear bottom line for businesses, but success measures for nonprofits are often unclear.Sam Davis III, The Davis Group for NPLP June 10&17 201512THEORY OF CHANGEor LOGIC MODEL for NONPROFITSHow will we create the desired impact?What are our key inputs to induce change?What strategies will we make as priorities?What outcomes will we measure?a. Immediateb. Intermediatec. Long-termWhat is the ultimate impact we are trying to have?

Sam Davis III, The Davis Group for NPLP June 10&17 201513THE STRATEGIC MANAGEMENT PROCESS1-Year Strategic FrameworkStrategic Plan(Road Map)Quarterly Line of Sight PlanLevel 1Level 2Level 3Level 4Daily Execution3-Year Business Plan& ResourcePlansLevel 5Sam Davis III, The Davis Group for NPLP June 10&17 20151414

STRATEGIC PLANNING: A ROADMAP FOR MANAGING CHANGESam Davis III, The Davis Group for NPLP June 10&17 201515FormulateStrategiesto AchieveObjectivesEstablishGoals/ObjectivesAssess CurrentSituation; Develop Vision, Mission, andValuesImplementStrategiesMonitorand Evaluate PerformanceTask 1Task 2Task 3Task 4Task 5STRATEGIC PLANNING PROCESS: FIVE TASKSRevise as needed in light of actual performance, changingconditions, emergent strategies, and new ideasSam Davis III, The Davis Group for NPLP June 10&17 20151616THE STRATEGIC PLANNING PROCESSPLEASE SEE HAND-OUTFOR FLOW DIAGRAM OF THE PROCESSSam Davis III, The Davis Group for NPLP June 10&17 201517Phase 1: Preparation

STRATEGIC PLANNINGKEY QUESTIONSWhat are realistic goals for the process?What is the appropriate level of effort given the type, scale and timing of the required change?What is the logical starting point?What are the appropriate planning horizons/timeframes?What will be the Planning Calendar?How will the work be organized?Who will be the Champion?Who will be on the Strategic Planning Task Force?What information will be required?How will the Board and Senior Staff interact in planning?Identify the task forces, their work plans and responsibilities

Sam Davis III, The Davis Group for NPLP June 10&17 201518STRATEGIC PLANNING PROCESSAND KEY RESPONSIBILITIESBoard Ordains the planning process and approves the Plan; tracks implementation performanceCEO/Executive Director Staffs the process; shapes the Vision; and directs implementation of the PlanCFO Identities business model; projects revenues & expenses; tracks performance metricsStrategic Planning Task Force Oversees the process and ensures coordinationPlanning Professional Facilitates the design and conduct of the process; serves as objective advisorSam Davis III, The Davis Group for NPLP June 10&17 201519STRATEGIC PLANNING PROCESSFour Phases1. Pre-Planning Gaining commitment; gathering dataa. Review Mission and Valuesb. Define Business Model and Theory of Changeb. Assess Internal and External Environment2. Planning Retreat Visioning; brainstorming; team building3. Plan Development The essence of the processa. Goals, Strategies & Implementation Detailsb. Strategic Business Plans (financial projections)4. Implementation and Tracking Strategic Management; getting it done; making changes as necessarySam Davis III, The Davis Group for NPLP June 10&17 201520AN EXERCISE TO PREPARE FORTHE STRATEGIC PLANNING PROCESSConsider that you will engage with your organization in a Strategic Planning process, write answers to the following:1. What are your primary objectives in undertaking a strategic planning process?2. Who will champion your process? Who needs to be involved? What will be your role in the process?3.How will you assess the current status of your organization?4. What can you do before you begin to ensure that the Plan will be implemented, performance tracked and changes made as necessary?

Sam Davis III, The Davis Group for NPLP June 10&17 201521LETS TAKE A 15 MINUTE BREAK.Sam Davis III, The Davis Group for NPLP June 10&17 201522PHASE ONE:WHAT IS YOUR ENDURING PURPOSE? WHAT IS YOUR CURRENT STATUS?MISSION & VALUES

BUSINESS MODEL; THEORY OF CHANGE

ENVIRONMENTAL SCANInternal Assessment; External Analysis

S.W.O.T. ANALYSISSam Davis III, The Davis Group for NPLP June 10&17 201523MISSIONMission Statement: An organizations statement of its enduring purpose; the fundamental reason for an organizations existence

Some Examples:Enriching lives by fostering environmental awareness through education and connecting communities with nature.To increase access to dental care for all Virginians.To provide safe, affordable housing for elderly persons lacking adequate resources.To increase market access for local and regional food producers.

Sam Davis III, The Davis Group for NPLP June 10&17 20152424Page 11 in manualRefer to other examples in book.

Dont ask participants to share mission statements yet.

CORE VALUESPrinciples that govern behavior in your organization and the way you pursue your Mission

Some Examples:Client focused Committed to understanding the needs of our clients and meeting them in a timely manner by providing high quality services and programs.RespectAccountabilityTeamworkInnovation

Sam Davis III, The Davis Group for NPLP June 10&17 20152525Citywide values for all OR department specific or hybridENVIRONMENTAL SCANS.W.O.T. ANALYSISInternal AnalysisWhat is our Current Situation?Strengths and WeaknessesExternal AnalysisWhat are the forces for change that may affect us?See hand-out of sample External AnalysisOpportunities and ThreatsSam Davis III, The Davis Group for NPLP June 10&17 201526THE CURRENT SITUATIONINTERNAL ASSESSMENTProducts / Services / ProgramsFinancial ManagementAccess to Capital / FundraisingMarketing / Strategic CommunicationsTalent ManagementInfrastructure and SystemsGovernanceSam Davis III, The Davis Group for NPLP June 10&17 201527INTERNAL ASSESSMENT: Triage -Quickly Assessing Current SituationWhat is the General Condition and Momentum of the Organization?

MomentumPositiveStableNegativeStrongMany optionsFor how long?Have time to fix itAveragePlans are workingLittle margin of errorNeed corrective actionWeakShould strengthen over time

Hanging onHow much time do you have?Applies to Organization as a whole and to each Component of the BusinessConditionSam Davis III, The Davis Group for NPLP June 10&17 20152828INTERNAL ASSESSMENT:STRENGTHS AND WEAKNESSESHave we objectively assessed our capabilities and performance to identify key strengths?What are our core competences, those capabilities that allow us to differentiate ourselves from others?What critical weaknesses have we identified that must be addressed before we can position ourselves for future success?Have we prioritized these weaknesses?Are we prepared to act to overcome these weaknesses?Sam Davis III, The Davis Group for NPLP June 10&17 201529STRENGTHS: CRITICAL SUCCESS FACTORSCritical Success Factors (CSFs) are those strengths of an organization that are so profound they can leverage future success.CSFs are distinctive competences the organization has built that can provide for long-term sustainability.CSFs are capabilities that differentiate an organization from its competitors.Identify your CSFs (one, nor more than three), and pursue strategies that will leverage the capabilities to ensure future success.

Sam Davis III, The Davis Group for NPLP June 10&17 201530INTERNAL ASSESSMENT:AN EXERCISE IN PAIRSA. Considering your own organization, answer the following:Is there clarity about your Mission? Your Guiding Principles?Do leaders of your organization agree on where you stand on the Lifecycle curve, and do they understand what this means for strategies you might pursue in the future?What are your organizations Critical Success Factors?What critical weaknesses do you need to overcome?B. Share your responses with the person next to you.C. Prepare to share key findings with the large group.Sam Davis III, The Davis Group for NPLP June 10&17 201531EXTERNAL ANALYSIS:ASSESSING EXTERNAL FORCES FOR CHANGE See hand-out for example of External AnalysisWhat trends in nonprofit management and philanthropy may offer opportunities to pursue?What nonprofit sector, social, demographic, technology, or market trends may affect us in the near future?Who are our competitors? What are they doing? What is our niche?How are we working with other nonprofits, community leaders, centers of influence, funders, businesses and individuals to form strategic alliances?Sam Davis III, The Davis Group for NPLP June 10&17 2015325 FORCES MODEL UPDATEDSam Davis III, The Davis Group for NPLP June 10&17 201533SubstituteProducts(of firms inother industries)RivalryAmongCompetingSellersPotentialNewEntrantsSuppliers ofKey InputsBuyersMacroeconomicsTechnologyRegulatoryCustomer PreferencesEXTERNAL ANALYSIS:OPPORTUNITIES & THREATSRemember: This is not about predicting the future but identifying factors and trends that may affects, either positively or negatively.From our analysis of external forces for change have we identified numerous potential opportunities we might pursue?Have we identified potential threats to our future operations or challenges for which we need to prepare?Have we prioritized these Opportunities & Threats?Sam Davis III, The Davis Group for NPLP June 10&17 201534S.W.O.T. ANALYSISPROVIDING A CLEAR SENSE OF REALITYSam Davis III, The Davis Group for NPLP June 10&17 201535S.W.O.T. ANALYSIS:OPPORTUNITY TO CHART YOUR ORG.1. On a sheet of paper, list the sources you might use to gather data to help identify externally driven Opportunities that your organization might pursue over the next 3 to 5 years and external Threats against which you will need to defend? 2. List 3 5 Opportunities your organization might pursue.3. List 3 5 Threats that have the potential to disrupt your organization or to force you to change strategies.4. You have previously identified your Core Strengths and Critical Weaknesses. Now, plot your S.W.O.T. analysis on a grid like those shown on the slide.Sam Davis III, The Davis Group for NPLP June 10&17 201536LUNCH ON YOUR OWN.Sam Davis III, The Davis Group for NPLP June 10&17 201537PHASE TWO:PLANNING RETREAT, VISION OF FUTUREFor a Strategic Plan to be based in reality and gain the commitment of both those responsible for the future direction of the organization and those responsible for its implementation, some form of planning retreat can serve as a means for sharing information, gaining consensus on the strategic direction and priorities of the organization, and build a culture of teamwork.Remember that the planning retreat is not for final decision-making but for brainstorming and team building.Sam Davis III, The Davis Group for NPLP June 10&17 201538STRATEGIC PLANNING PROCESSA VISION OF THE FUTURESam Davis III, The Davis Group for NPLP June 10&17 201539

STRATEGIC VISION Using data from the Internal Assessment and the External Analysis will provide leaders with the basis for forming a creative yet realistic Vision. This is not about writing a Vision Statement. It is about envisioning the future state of the organization:

Where we are going?

What is our shared image of what future success will look like?

What are the critical paths to be pursued to ensure the future success of our organization.

What is our BHAG? (Big, Hairy, Audacious Goal)

Sam Davis III, The Davis Group for NPLP June 10&17 20154040Clear and compelling and serve as unifying focal point of effortStimulating and promote forward movement and progressTangible, energizing, people get it right away, takes little or no explanationHave clear finish line so can know when achieved be measureable

QUESTIONS TO ASK ABOUT YOUR VISIONIs it consistent with your Mission?Is it future focused or bound by your current situation?Does it represent a stretch but not a fantasy?Does everyone in the organization understand where you intend to be in 20 years?Does this Vision inspire your leadership, employees, donors and strategic partners?Will pursuit of this Vision differentiate you from others?Sam Davis III, The Davis Group for NPLP June 10&17 20154141WHAT IS A BHAG?BIG HAIRY AUDACIOUS GOALJim Collins, Good to Great

Can you conceive of a major initiative, consistent with your Mission, that will speed the organization in the pursuit of its Vision, generate financial and public support, set your organization apart from its competitors, and serve as the basis for future success?Be bold! Be innovative! Be inspired!Sam Davis III, The Davis Group for NPLP June 10&17 201542

VISION OF THE FUTURE & BHAG -WHAT ARE YOURS?Pair Brainstorm Inform1. Find a partner, preferably one with whom you have not worked previously.2. At the Instructors direction you and your partner will be given 2 minutes to brainstorm key elements of the Vision of both your organizations. Prizes will be given for the most ideas listed.3. Now, at the Instructors direction, you will be given 3 minutes to brainstorm BHAGs that might be pursued.4. Prizes will be awarded for the best BHAG in class.Sam Davis III, The Davis Group for NPLP June 10&17 201543PHASE THREE:DEVELOPMENT OF THE STRATEGIC PLANHow do we organize our work to pursue our Vision?

Where are the gaps between our current capabilities and what we need to be successful in pursuing our Vision?How can our governance and management structures be enhanced to serve our strategic planning efforts?How does our Nonprofit Lifecycle status suggest how we might organize our work? Governance? Programs? Financial Resources? Strategic Communications? Infrastructure? ManagementWhat did our Internal and External Assessments reveal about our organization?

Sam Davis III, The Davis Group for NPLP June 10&17 201544THE STRATEGIC PLANGOALS, STRATEGIES & TACTICSSTRATEGIC PLANNING TERMS DEFINEDGOAL: aka Objective; The desired outcome from strategic management efforts taken over the 3-5 yr. planning period.

STRATEGY: One of a select number of means for achieving a Goal over a period of time (usually 1 or more years) to produce measurable change.

TACTICS: aka Initiatives; steps to be undertaken in a finite period of time (usually less than 1 year) to carry-out a designated Strategy.Sam Davis III, The Davis Group for NPLP June 10&17 201545GOALS:SOME PRINCIPLESState only one Goal for each Strategic Path issue.Virtually all nonprofits will need to have in their Strategic Plans include, among others, Goals for:Governance or LeadershipFund DevelopmentProgramsGoals should require 3 or more years to achieve.Goals must be measurable in quantitative or qualitative terms.Ask yourself: How do I know how the organization is doing in pursuing this Goal?Sam Davis III, The Davis Group for NPLP June 10&17 201546STRATEGIES: SOME PRINCIPLESFor every Goal there are likely to be 4 to 6 Strategies.Use action verbs. What is it we intend to do to pursue the stated Goal?Are there better ways of pursuing the Goal?What changes are we making? Are these realistic?Is the Strategy consistent with our Mission and Values?Do we have the resources necessary to pursue this Strategy?How will we measure success in pursuing the Strategy?Quantitative or qualitative data is needed; no pass/failSam Davis III, The Davis Group for NPLP June 10&17 201547STRATEGIES:DISTINGUISHED FROM TACTICS/INITIATIVES1. Strategies generally cannot be accomplished in less than a year; most take several years.2. Strategies are not a check list; no pass/fail.3. Strategies require multiple steps to complete.4. Tactic/Initiatives Think of these as being steps to be taken to pursue an given Strategy5. Tactics/Initiatives may be accomplished in very short periods of time.6. Tactics/Initiatives should be prioritized according to completion timeframes.

Sam Davis III, The Davis Group for NPLP June 10&17 201548ASSESSMENT OF POTENTIAL STRATEGIESHigh Mission ImpactLow Revenue Potential High Mission ImpactHigh Revenue PotentialLow Mission ImpactLow Revenue PotentialLow Mission ImpactHigh Revenue Potential Revenue Sustainability Mission Impact KEEP OPERATING CONTAIN COSTSINVEST RESOURCESAND GROWCLOSE, TRANSFER TO PARTNERS/OTHERS PURSUE IF IMPACTCAN BE INCREASEDSam Davis III, The Davis Group for NPLP June 10&17 201549

PHASE FOUR:IMPLEMENTATIONWithout details of how to implement each Strategy you will have only a Strategic Vision with no action plans.

For every Strategy, Strategic Plans need to include: A. Tactics/Initiatives Multiple steps to be taken B. Timetable - For initiating and completing the Strategy C. Resources Required - The human, financial, and other resources required to execute the Strategy D. Accountability Measures - Specific measures for assessing progress in completing the Strategy E. Responsibility The position (nor person) with lead responsibility for successfully implementing the StrategySam Davis III, The Davis Group for NPLP June 10&17 201550Goal: Leadership Development:Provide visionary board and man- agement leader-ship to shape the future of the organization and ensure its financial stability.Strategies:1.1 Develop a governing board of diverse leaders w/expertise1.2 Recruit and train a dynamic and highly capable senior management team1.3 Use annual performance plans to develop and assess leaders1.4 Provide governance training for board members and professional development opportunities for staff.1.1 Tactics / Initiatives:Use criteria to identify and recruit visionary leaders committed to our MissionImplement a leadership succession program for officers and board membersReview the implementation of the Strategic Plan through board committeesIncrease board financial contributions and participation in fundraising.

A NONPROFIT EXAMPLESam Davis III, The Davis Group for NPLP June 10&17 20155151RESOURCE PLANS(ESPECIALLY H.R. AND INFRASTRUCTURE)All too often Strategic Plans fail to anticipate the human resources, technology and other resources needed to implement key Strategies. Such plans assume that staff and volunteers can simply do more without the organization incurring any additional expenses.Investments in the future should include provisions for attracting, training, compensating and retaining the most qualified staff possible. There is a cost for doing so.Similarly, IT upgrades and other systems improvements can be costly and need to be included in financial projections. Strategic plans cannot be implemented without adequate resources, and these need to be identified in every Plan.Sam Davis III, The Davis Group for NPLP June 10&17 2015523-YEAR BUSINESS PLANSJust as every organization needs to have an annual budget, so too every organization should operate using a rolling 3-Year Business Plan (current budget year, plus two years of financial projections based on the Strategic Plan.3-Year Business Plans do not require the same line item detail included in Annual Budgets. However, projections should realistically project revenues (based on the Development Plan) and expenses.Business Plans will be covered in more detail in the 5th and final course in the Strategic Management series: Strategy Implementation.Sam Davis III, The Davis Group for NPLP June 10&17 201553Two types of Accountability Measures:Leading Indicators measures of short-term performance that will lead to long-term outcomesLagging Indicators measures of final outcomes; may not be determined in the short-term

Example: Increase Annual Fund to sustain program growthLeading - # of new donors generated per yearLagging - % increase in Annual Fund > than budget growth

Can we gather and analyze the necessary data?Sam Davis III, The Davis Group for NPLP June 10&17 201554A WORD ABOUT ACCOUNTABILITY MEASURESDASHBOARD REPORTThe most important part of the Strategic Planning process is implementation of the Plan; after all, the ultimate objective is not to plan but to take action to manage change.

Dashboard Reports provide a handy, effective means for the ED and Board to track implementation on a monthly basis.

Dashboard Reports track priorities to be implemented in the current year.

Top 10 Strategies and/or Initiatives are identified, and progress in meeting the Outcome Measures for each is reported. (Color codes may be used to indicate process.)

See hand-out for example of Dashboard Report.Sam Davis III, The Davis Group for NPLP June 10&17 201555RESOURCES TO CONSULTBIBLIOGRAPHYSEE HAND-OUTSam Davis III, The Davis Group for NPLP June 10&17 201556QUESTIONS & COMMENTS

As a final action to ensure that you will put what you have learned into practice, please list at least 3 action steps you will take to apply Strategic Management principles to benefit your organization.

Lets share these with the class.Sam Davis III, The Davis Group for NPLP June 10&17 201557STRATEGICNONPROFITMANAGEMENT

THANK YOU!

Sam Davis III, Principal, The Davis Group sdavis@sdavisgroupconsulting.com (804) 314-1836

Sam Davis III, The Davis Group for NPLP June 10&17 201558