June 20, 2011

Nonprofit Decision-making - Translating Your Strategic Plan into Action

When deciding whether or how to pursue contracts or grants, the most successful human service nonprofits develop some simple rules of thumb flowing out of their strategy and they also bring diverse perspectives to bear.

By: Daniel Stid

The Prussian strategist Moltke the Elder observed that no battle plan survives contact with the enemy. For human services nonprofits, the equivalent dictum might be that no strategic plan survives contact with the press of events. No matter how elegant the framework, when this request for proposal suddenly pops, or that contract comes up for renewal, and/or new jurisdictions suddenly approach you about taking over work their current providers are struggling to deliver, the direction you mapped out in the relative calm of a planning process can easily go by the way-side. In recent posts we have reviewed how nonprofits can develop a program portfolio matrix to help make better tradeoffs and how they can prioritize their different programs and services in terms of their relative mission impact and financial contribution. Today we take up how to make decisions on an ongoing basis that reflect this hard-won strategic clarity.

In our experience the most successful human service nonprofits link decisions on whether/how to pursue any particular contract or grant opportunity to their strategy in at least two ways. First, they develop some simple rules of thumb flowing out of their strategy for making decisions that they subsequently apply in the moment when assessing a particular opportunity. Consider the following examples of these kinds of rules that different executive directors have shared with us in recent months:

  • “We have a mantra: if we can’t do it at our level of quality, then we don’t want to do it.”

  • “The board set this basic fundamental philosophy about interacting with government…if a funding source fell away, we had to be willing to no longer supply the service.”

  • “Are we willing to invest in the emerging period and the growing period? If it will only lose money for 2 years [or less], then it can be approved. But by and large, we don’t do that - that is unusual.”

  • “We will take a contract that doesn’t fully cover our costs if it is aligned with our mission and if it positions us for other opportunities, for example in a different geographic area.”

  • “We might be willing to take a contract with no indirect cost coverage if it is mission-critical. If it’s not mission-critical, we would definitely want our indirect costs covered.”

Having established rules of thumb along these lines doesn’t automate decision-making, as there are many other factors to consider. Nor do the nonprofits who have articulated them always honor these decision rules in a hard and fast way. But the rules do provide clear ways to map out the path forward, and—as importantly—to make explicit exactly when and where the situation might warrant taking an alternative path, as well as the risks involved in doing so, etc.

Second, high performing human service nonprofits also bring diverse perspectives to bear when deciding about whether/how to proceed on contracts. They set up regular and recurring processes to engage leadership, program and finance teams in vetting contracting opportunities and pressuring-testing proposals before they are submitted. The resulting decision thereby reflects a more rigorous and consensus-backed assessment of how the work will advance the mission and what its financial contribution should be. You can tell that these processes are working well when functional distinctions start to break down: the program team can speak to the financial considerations and vice versa. It takes hard work to get your organization to this level of decision-making, but it is a lot easier to advance and adjust your strategy once you get there.

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