You might respond that COVID-19 was a once-in-a-generation event, and hopefully you are right. But so are the economic crises driven by the war in Ukraine and its fallout at a time of global fragility, or the long overdue racial justice reckoning following the murders of George Floyd, Ahmaud Arbery, Breonna Taylor, and too many others—all of which can and should have big implications for nonprofit strategies. What can be planned for, or at least explored, are things like big swings in income or demand, or sudden changes in government policy or the political climate.
Good planning requires you to consider various scenarios and give thought to how you will respond. You can seek to put all of this in a written plan, though the more detailed it is, the sooner it is likely to become irrelevant. Rather, you should state what you want to achieve by when, broadly describe how you think you can best achieve that, with underlying assumptions, and be willing to constantly review and adjust your strategy as circumstances change.
One nonprofit governance expert likens this to the contrast between the era of using paper maps to navigate while driving and the current era, where GPS systems and smartphones (satellite navigation, or “satnav”) are most commonly used:
The “Maps” world consisted of incredibly detailed and lengthy strategic plans and annual budgets. The “Satnav” world . . . consists of strategic frameworks and parameters and dynamic budgeting. I.e., making decisions, at the best time, with the very latest information.9
In this example, we need to move from creating static “maps” and toward dynamic plans that allow us to adjust our actions based on changing contexts. But this presupposes that you do your planning well. Sadly, bad planning is all too common. This is not surprising, given that nonprofits have the difficult-to-define objective of delivering the greatest possible impact. They also have multiple stakeholders (e.g., staff, communities served, donors, board, partners) with a vested interest in the strategy and power to influence its formulation, which can result in a protracted and sometimes problematic process when formulating strategy. As a consequence, too many nonprofits engage in drawn-out, unfocused, and expensive planning processes, which result in less-than-ideal strategies. But it doesn’t have to be this way. A successful planning process requires a number of things:
The roles of those participating in the process need to be clearly delineated. Staff absolutely should be involved, and consulted, but the strategy shouldn’t be drafted by a committee of the whole organization. The same goes for other key partners and constituencies, such as your funders and, particularly, those your organization serves. You also need to engage closely with your board members, as they will ultimately sign off on the strategy, so the more they engage with the key issues being considered, the more likely they will be to support the strategy that results.
Clarity around key questions is vital. For example: Is your mission (still) fit for purpose? What kind of impact are you seeking to achieve, over what time frame, and with what resources? What funding is out there for your cause? How will your programs deliver the impact you are aiming for? What scenarios may impact your ability to deliver? What are peer organizations doing? Clarity on these matters will also support more effective consultation, and hence better decision-making.
When circumstances change (e.g., pandemic or economic crisis), or things don’t develop as planned (e.g., hoped-for funding doesn’t come through, or activities don’t translate into impact as expected), there must be a willingness to make difficult choices, such as what to stop doing, or not do in the first place, rather than ignoring or overlooking them.
Whatever your planning process, as part of that process you will need to review your mission, consider the impact that you wish to achieve in a defined time frame, and determine your theory of change. We’ll look at each of these in turn.
REVIEW THE MISSION WHEN SETTING STRATEGY
It’s often helpful to define or revise your mission at the same time you prepare your strategy, as the mission and impact go hand in hand. To decide what you are going to do and for whom, you need to spend time thinking about the impact you want to achieve, the various scenarios you may face, and how you can best deliver the change you seek to achieve. This all feeds into the process of defining your mission and setting your strategy. Returning to our example of the very well-funded shelter for the homeless in a gentrifying part of San Francisco,* if you were engaging in a new strategic planning process for that organization, now would be the time to revisit its mission and impact goals, and revise both of them in light of the fact that your nonprofit clearly has the opportunity and resources to be much more ambitious and hence have a greater impact in pursuit of its purpose.
IDENTIFY THE IMPACT YOU EXPECT TO HAVE OVER THE NEXT FEW YEARS
Given that your nonprofit exists to make a positive change in the world, to be effective you need to be able to set out what you are trying to achieve, and for whom, within a reasonable time frame. These are your impact goals, sometimes called intended impact. They can be general, particularly in the early days of the organization, or more specific when you have a better idea of what you can realistically achieve. Shaped by your mission, they are usually set for three to five years, as that’s about as far out as most organizations can comfortably plan. But sometimes they are longer, and sometimes you might have a combination of both shorter- and longer-term goals.
These goals can reflect the impact that your organization can achieve directly or indirectly, on your own or in collaboration with others, as we explored in the previous chapter.
DETERMINE THE THEORY OF CHANGE
“Theory of change” is the most important component of strategy for nonprofits. It’s the insight that powers your organization. It explains why the things your nonprofit is doing will produce the change you want to see. If your organization doesn’t have that insight, and act on it, it will struggle to succeed. And if the insight is wrong, then your organization may well fail to bring about the change it seeks to achieve.
A more technical description of theory of change is that it “explains how the organization’s intended impact will actually happen, the cause-and-effect logic by which organizational and financial resources will be converted into the desired social results.”*10
To return to our example of Teach For America, its theory of change in its formative years was that the organization would bring exceptional talent into education and then cultivate and develop that talent to create lifelong leaders working to drive change for low-income kids.11
Theory of change is important for nonprofits because their goals are usually ambitious, and difficult to measure accurately. Nonprofits are often operating in an environment where many others are seeking to achieve the same or similar impact, so attribution can be a challenge: If ten organizations are working to tackle child poverty in a particular city, how do you explain how your organization’s work is making a difference? A good theory of change will explain why the specific activities of your organization are contributing to the change you seek to bring about. Because your assumptions are made explicit, those scrutinizing your work can better make their own assessment as to your contribution.
Take, for example, two nonprofits working to reduce levels of teen pregnancy in Arizona. One advocates sex education as the most effective method to do so. Its theory of change—its insight—is that better-informed youth make better choices about when and how to have sex, and it shapes its mission and programming accordingly. The other promotes teen abstinence as the best approach. Its theory of change is that only by encouraging teens to stop having sex can we reduce pregnancies. Now, assume during the last five years in which they have both been operating that there has been a significant reduction in teen pregnancy in Arizona. Which organization can claim credit for this—that is, which model is more effective? Absent expensive research studies on both organizations’ work in the state, it will be difficult to answer this. But now assume there are robust studies in other US states showing that comprehensive sex education was far more effective than abstinence in reducing teen pregnancy levels there. (In fact, we can do more than assume—a large body of research shows that abstinence-only education is correlated with higher teenage pregnancy and birth rates.*) Even if this research is not explicitly focused on Arizona, it gives greater credibility to the theory of change of the sex education nonprofit than that of its abstinence-focused counterpart because there is evidence in support of its assumptions.
Nonprofit leaders need to spend time understanding theory of change, because it links the measurable work of nonprofits with their larger objectives, and hence provides a degree of rigor to the work. The reasoning behind theory of change is that when we look at the outcome we want to achieve, we can usually generate empirical data on our intermediate steps (our activities), even if we can’t measure the outcome itself in a robust way. So, think tanks can measure reports published, and number of meetings with policymakers, if not policy change directly resulting from their reports and advocacy. Or, while nonprofits may be able to measure outcomes, they can’t always measure their contributions, not least when others have also contributed to those outcomes (such as in the teen pregnancy example earlier). Thus, we need a way to logically explain how our activities contributed or mobilized others to contribute.
A good theory of change is helpful as you develop your strategy because, as you make decisions or consider scenarios, you can use the framework of the theory to consider how these decisions and scenarios will likely contribute to (or detract from) impact goals. But, of course, your theory of change will only be as good as the quality of the data you have, and the quality of the insight underlying it (e.g., comprehensive sex education versus abstinence). Over time, ideally, you will accumulate more and more data to validate that your theory of change is fit for purpose. You will move from apparent effectiveness to demonstrated effectiveness, and from anecdotal findings to empirical evidence.
STRATEGY INVOLVES TRADE-OFFS
By definition, making a decision to follow a particular course of action also means making a decision not to pursue alternatives. Teach For America had to do this in its early years, closing down a couple of its initiatives—and its willingness to make tough choices set it up for longer-term success. Likewise, when the Freedom Fund got started, we had to choose between a set of alternatives, such as investing deeply in one country or more broadly in a range of countries. As you allocate your key resources of funding and staff, you must decide where they will have the greatest impact. This means choosing between a range of options. Doing this well is key to effective strategy.
That said, too often in the nonprofit world leaders seek to avoid tough decisions. Frequently, they are reluctant to decide between attractive options or stop doing something they have started, even if it’s not having the intended impact. But if everything is a priority, nothing is. Businesses have their financial bottom line and relentless competitive pressure to help concentrate their minds on the need to make choices and trade-offs. That’s often not the case for nonprofits and, lacking such discipline, they often pursue too many options. Or they put off necessary decisions, like closing a failing program or making cuts to staff or other expenditures in a fraught financial situation. But, of course, not deciding is a decision in itself—just not a very good one in most circumstances when action is required.
Robust planning, a clear understanding of your mission and the impact you want to achieve, and a thoughtful theory of change will all help you make the right decisions. And by making the right decisions and trade-offs, you’ll be pursuing the most effective strategy for your organization and positioning it to make the greatest impact.
My experience in so many different contexts has always underscored for me that purpose shapes everything that nonprofits do in their efforts to drive change. The concept of purpose is both amorphous and empowering. It’s amorphous because it can be difficult to translate into concrete results—namely, impact. This amorphousness is a key difference between nonprofits and businesses, as the latter have much clearer metrics by which to measure progress and success. That is why strategy is so important to nonprofits, as it sets the path by which they translate purpose into concrete results. But the concept is also empowering, because pursuing positive change is inherently motivating for staff, and gives leaders a superb tool to build a highly effective team, which is what we will explore in the next section on people.
STRATEGY ACTION POINTS
Make Choices to Maximize Impact
Understand the importance of planning and the difference between planning and the resulting strategic plan.
Review your organization’s mission and make sure it is (still) fit for purpose.
Seek to identify the impact you hope to have over the next three to five years (or another defined period). This is your organization’s intended impact.
Explain how your activities, and your programs in particular, will translate into the desired impact, and set this out in your theory of change.
Internalize that you need to make choices about what your organization will and won’t do, to ensure it has the maximum impact with the available resources.
Set all of this out in your written strategic plan or framework, understanding that it will need to evolve as circumstances change.
* The lack of support for these communities has significant longer-term consequences. An influential report in 1999 highlighted the resulting “achievement gap”: “By the time they are nine years old, students in low-income areas will already be three to four grade levels behind nine-year olds in high-income areas . . . And with such extreme disparities that start at such an early age, it should be of no surprise, that children from low-income families are seven times less likely than children from high-income families to graduate from college.” Patte Barth, Jeanne Brennan, Kati Haycock, Karen Mora, and others, “Education Watch 1998,” The Education Trust State and National Data Book, Vol. 2, 1999, 1–24, cited in Sarah Thorp (2000), Teach For America, HBS 9-300-084, hbsp.harvard.edu/cases/.
* The global umbrella organization is Teach For All. For more on Teach For All, listen to the Wendy Kopp interview on the System Catalysts podcast, “Creating an Education Leadership Movement with Teach For All.”
† Some other definitions of nonprofit strategy: “A planned set of actions that are designed to achieve its mission,” Meehan and Jonker, Engine of Impact, 46. “Getting critical resource decisions right—allocating time, talent, and dollars to the activities that have the greatest impact—is what ‘strategy’ is all about,” Susan Colby, Nan Stone, and Paul Carttar, “Zeroing In on Impact,” Stanford Social Innovation Review, Fall 2004. One of the leading academics on corporate strategy, Michael Porter, describes it as “deliberately choosing a different set of activities to deliver a unique mix of value,” Michael E. Porter, “What Is Strategy,” Harvard Business Review, November/December 1996.
* This is sometimes also written in the format of a “log frame,” or logical framework. I’ll stick with “theory of change” here.
