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The recent turmoil in national and foreign financial
markets is unparalleled in modern times. The dangers
to the stability of the interconnected global markets
are real and serious. The credit crisis has fundamentally
altered Wall Street in ways that are not yet
fully evident. Recent market turbulence has led to
major restructuring of financial institutions in this
country and abroad, resulted in serious and continuing
losses in many investment portfolios, damaged
many donors and left other supporters to wait out
the storm. In addition, public funding at state and
local levels—and, depending on the fiscal policies
of the new administration, possibly at the federal
level—will be adversely affected for some time.
It is still too early to gauge the full implications of the
evolving financial crisis. There are many unknowns
and uncertainties in the larger marketplace; recent
unprecedented volatility in the capital markets indicates
the absence of clear direction and reliable data;
the impact of consumer behavior and credit contraction
on the larger economy is unclear; and there is,
overall at the moment, a persuasive lack of confidence.
Consequently, it is easy to fall prey to a Chicken Little
anxiety: the sky does seem to be falling.
While the full dimensions of the current economic
problems are not yet visible and may not be for
some time, there still is—and will continue to be—
sizable private and public funding available to support
nonprofits. Philanthropy will undoubtedly
decline in the short run, but will rebound after an
economic downturn; there is a new breed of superrich
philanthropists who appear to be largely
unmoved by economic fluctuations; and it is likely
that substantial new wealth will be created during
these next several years of structural change.
| Turbulent times call for
clear minds and steady hands. |
The estimated intergenerational wealth transfer of
some $41 trillion may well fall substantially, but the
transfer will still remain sizable and will undoubtedly
grow back, over time, to at least the current estimated
level, if not higher. While there will be substantial
cutbacks in public funding, not all public funding
will immediately disappear.
Turbulent times call for clear minds and steady
hands. Hiding in the bunker and praying for deliverance
is both dangerous and foolish. Being anxious
about the sky falling will likely lead to clouded
vision, hasty decisions, poor judgment and lowered
morale—just the opposite of what is necessary to
survive, let alone thrive through this crisis.
So what to do?
At a minimum, every nonprofit should undertake vigorous
contingency planning to think through risks,
responses and opportunities. There are several reasons
why thoughtful contingency planning is vital right now:
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It enables an organization to consider the immediate
financial impact of down markets, tight credit,
frozen funds and other factors that may reduce
operating revenues; assess probabilities of varying
magnitudes of impact in the short- and longerterm;
and figure out possible alternative programmatic,
administrative and financial responses.
Immediate corrective action may be appropriate
—but then again, any significant negative
impact on the institution may not occur until six
or nine months down the road, at which time the
financial markets may be quite different.
-
Contingency planning can help organizations more
carefully assess both likely moves by competitors
and new competitive pressures; decide whether to
proceed with capital plans; determine how best to
conserve balance sheet strength and limit additional
debt; consider more collaborative activities with
other organizations; and, overall, tighten their
belts sensibly.
-
Determining possible alternative responses enables
the organization's leadership to create a handful
of potential cards to play and then to decide if
and when to put them on the table. Such preparedness
can ensure thoughtful consideration of
alternative courses of action and their implications.
It can also provide time to think through the
interrelationship of different possible actions, craft
appropriate messages and advise key parties
(including donors and prospects, public officials
and major internal and external constituents).
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Turmoil always creates opportunities, and nonprofits
often have more possibilities than they
realize. Down markets may increase the number
of professionals seeking part- or full-time higher
education; organizations may improve how they
utilize their space; the Internet may strengthen
branding and access in other countries; differential
pricing may attract new demographics; and the
like. Thoughtful internal planning is bound to
generate a host of ideas that, when filtered through
careful analysis and shrewd consideration, may
yield a set of highly attractive new approaches.
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Perhaps most importantly, contingency planning
will temper an inclination for immediate response.
By stepping back and carefully surveying present
understandings of the current situation, leaders can
see the larger whole more clearly, make balanced
decisions and take advantage of unanticipated
new possibilities.
In short, contingency planning acknowledges an
organization's immediate challenges, risks and
opportunities and lays out a set of alternative tactics
to address them.
But contingency planning is not enough, as it tends
to emphasize tactical responses in the short term.
Equally important is thinking strategically about the
longer-term and then pursuing the course of action
that such thinking yields.
| Every nonprofit organization should
take the time to think strategically
in an organized, thoughtful and
collegial way, especially in periods
of turbulence. |
The return on investment in strategic planning is
remarkable, particularly in times of financial stress,
economic uncertainty, major shifts in public policy
and moments of dislocation. Every nonprofit organization
—no matter what its size, financial health,
age, mission or geographical location—should take
the time to think strategically in an organized,
thoughtful and collegial way, especially in periods
of turbulence.
There are several reasons why longer-term strategic
planning serves institutions particularly well during
periods of turbulence like the present:
- Nonprofits with strategic plans are more likely
to stay on track, spot opportunities and make
thoughtful operational and tactical corrections.
Turbulent markets and the credit crunch are testing
all organizations, but those with strategic plans in
place have a better chance of understanding the
implications of financial pressures, focusing on what
is most important and sustaining higher morale and
commitment among their constituencies.
- Thoughtful organizations engaged in strategic
planning are more likely to remain faithful to core
principles and achieve key objectives during periods
of financial uncertainty. They are better able
to make tough decisions thoughtfully; distinguish
between the essential and the less central; take
advantage of unanticipated opportunities; and,
overall, emerge stronger when the economy picks
up again.
- In an environment of diminished resources, big,
clear and compelling ideas—which ultimately are
what strategic planning is all about—have the
best chance of yielding a larger slice of a smaller
pie. Institutions that can clearly and persuasively
articulate how they can contribute to improving
the economy, better meet pressing social needs
and help solve significant endemic social, community
or sector challenges, as well as measure
their results, have the best chance of attracting
major public and private support.
- By engaging in the process of strategic planning,
and by establishing means of monitoring action
based on the plan, an institution builds up both the
intellectual "muscles" and the "tool kit" it will need
for clear thinking in turbulent times. Through regular
cycles of strategic planning, an organization
instills in its personnel skills of inquiry and analysis
that they can bring to bear on sudden and unforeseen
problems. In addition, the metrics an organization
develops to measure progress against the
plan are then available quickly. These tools are
useful for both determining the potential impact
of new problems and tracking the effectiveness of
the solutions the organization devises to meet
such challenges.
- Successful strategic planning energizes its participants
and builds morale among the organization's
staff, as they see the ideas and thinking they contributed
turned into effective initiatives and a more
focused institution. Proud of their organization's
success, employees and volunteers are eager to
continue this trend and anxious that the organization
not lose ground. In such an environment,
they are more likely to understand and make sacrifices
during crises and economic downturns,
believing such sacrifices will enable the organization
to return to the path they helped define.
Nonprofits that already have strategic plans should
revisit them in light of the current uncertain situation.
- Reaffirming the mission, vision and core values is
essential during a time of uncertainty and major
shifts in the external environment—as is confirming
key strategic goals. While it is likely that none will
require modification, reviewing them in a thoughtful
way provides an opportunity to ensure the
organization is clear about and remains committed
to its central purposes, identity and aspirations.
| Reaffirming the mission, vision
and core values is essential during
a time of uncertainty and major
shifts in the external environment. |
- Revisiting a strategic plan permits an organization
to make sensible mid-course corrections: it may
be wise to delay or scale back a certain initiative
while moving another forward; it may be time to
rethink certain aspects of governance or the relationship
between governance and executive leadership;
it may be appropriate to design and pilot a
new program. An organization can then thoughtfully
incorporate such adjustments into its ongoing
implementation and longer-range financial planning.
- Revisiting a strategic plan gives confidence to
internal and external stakeholders simply by
showing that the organization is reexamining its
strategy in difficult times and not plunging ahead
without considering how the changed environment
will affect it. When an organization reconvenes
its planning team to consider the effect of a
turbulent economy or other crisis, that team can
identify explicitly the stakeholders they need to
address and the messages they need to convey to
ensure their continued support.
Nonprofits without strategic plans should promptly
undertake a thoughtful planning process, for they
otherwise run a substantial risk of letting external
pressures and internal anxieties define their futures.
But nonprofits without strategic plans are sometimes
loathe to commit the resources they believe
planning will require in terms of time, patience,
communications, funding and, especially, opportunity
costs.
- "Given the number and magnitude of our problems,"
leaders of these organizations may say to
themselves, "how can I justify (to faculty, clients,
our board, etc.) the time and money we'd need to
spend on a planning process?"
- Although the root of an organization's most immediate
and pressing problems are often found in its
lack of planning in the past (and therefore the
absence of a set of goals and principles to guide
it in the future), the immediacy of the financial or
other threats to the organization often "crowd out"
its ability to focus on strategic planning. "There's
always some fire to put out," such organizations
think, "Spending time on planning instead will
send the whole house up in flames."
But such concerns are ill-founded. Organizations
without strategic plans can get started by doing contingency
planning, as suggested above, and should
do so as a matter of institutional prudence and
responsible leadership. Thinking through present
risks, responses and opportunities is, in effect, to
begin a strategic planning process, for contingency
planning will inevitably raise a host of issues about
program focus, changes in the competitive landscape,
service delivery, organization design, use of
technology, among other issues.
By then formulating a thoughtful planning process, an
organization can quickly begin (at a minimum) to
revisit its present mission statement, craft a possible
vision for when times are better and delineate several
key strategic objectives around which its energies and
financial resources can focus over the next several
years. And having undertaken this step, the organization
will begin to think and act more strategically and
will have the benefit of starting to shape consciously
its future.
Never has it been more important to think and act
strategically. Although the current turmoil may seem daunting if not overwhelming, the longer-term future
for nonprofits remains remarkably robust. The contributions
of the nonprofit sector to society locally,
nationally and globally are more important than
ever—and will continue to grow during these
moments of major economic, technological and
political dislocation.
Those nonprofits that plan and act strategically now
have the best chance of thriving as stability returns.
— John Braunstein and Anthony Knerr
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