By Denise McNerney

 

Considerable evidence indicates that strategic planning enhances performance (Bryson, 2011; Moore, 2000). Many studies have also identified important practices that enable organizations to fully leverage the advantages of strategic planning.

 

However, most of this research focuses on the private sector, with few empirical studies examining the effectiveness and the practice of strategic planning in nonprofit organizations (NPOs). The objective of this article is to 1) show that strategic planning significantly impacts the overall success of NPOs; 2) identify the drivers of, and practices used in strategic planning; 3) determine how organizational capacity (Cap) affects these variables; and 4) discuss the implications of the findings for the practice and support of strategic planning in NPOs.

 

The data presented in this paper originates from both empirical research and consulting work. First, the core of the findings comes from a survey on planning practices in NPOs I conducted in collaboration with Crystal Evans and Margaret Reid (Evans et al.,  2024). By “strategic planning,” we mean conducting environmental  assessment efforts, developing the plan content, and establishing plan implementation tracking/reporting processes. In turn, by NPO we mean charitable organizations, sometimes referred to as NGOs, and classified by the US government as 501c3 or c6. This survey, sponsored by the International Association for Strategy Professionals (IASP), allowed us to gather data from 1,216 NPOs throughout the US (one survey respondent per NPO).

 

I revisited several questions from that survey to reach my objectives in this article (Table 1).

Statistical analyses were conducted to examine the data, including calculating the mean for specific variables and comparing these means between High-Cap and Low-Cap groups. Additionally, a regression analysis explored the influence of the ensemble of practices (Independent variables) on Cap (Dependent variable) for those firms in the High-Cap sub-sample.

Along with the empirical survey data, the insights presented originate from 30+ years of experience in the field, which not only informed the survey content but also provided essential context for interpreting the findings and their implications. These actionable insights will assist practitioners in enhancing the quality of their strategic planning practices, and help educators emphasize the most effective strategies.

 

1. Capacity of Nonprofits and Who Has a Strategic Plan

Approximately 1/3 of organizations were High-Cap, whereas another 1/3 were Low-Cap. Roughly 60% of the 1,216 respondents had a current strategic plan. Furthermore, almost 90% of High-Cap had a strategic plan, whereas only 70% of Low-Cap had one. This begins to build the case that strategic planning is important and related to an NPO’s overall organizational capacity. I thus encourage all NPOs to conduct strategic planning as it will likely have a positive impact on their capacity.

 

2. Impact of Strategic Planning on Overall Organizational Success

58% of respondents indicated their strategic planning process had a high impact on their overall organizational success, while 30% and 9% respectively said it had some or low/no impact. In addition, High-Cap were more likely than Low-Cap to say their strategic planning process has a high impact to their overall organizational success (72.9% versus 44%) (Table 2). Furthermore, Low-Cap are five times more likely than High-Cap to say strategic planning has a low impact on their success (17.6% versus 3.4%)

A significant majority of High-Cap report that strategic planning has greatly impacted their overall success. While practitioners have intuitively understood this for decades, we now have concrete evidence to support it. These findings are particularly compelling for those who argue that “strategic planning is dead.” They also provide a strong rationale for justifying budget or resource allocation to support planning and suggest that more Low-Cap could enhance their capacity and effectiveness as an NPO if they were supported in strategic planning efforts.

 

3. Drivers of Strategic Planning

Our research identified four key drivers for the strategic planning process. In order of importance, they are: 1) routine periodic process in our organization; 2) driven by opportunity; 3) driven by significant risks/challenges; and 4) mandated by a stakeholder/funder. Findings support that strategic planning as a routine periodic practice is very important for both High- and Low-Cap NPOs (Table 3). Furthermore, being driven by opportunity is more important to High-Cap than Low-Cap, whereas the other two lower rated drivers are more important for Low-Cap than High-Cap NPOs. An interesting note is that Low-Cap NPOs were almost twice as likely to say they were “driven by significant risks/challenges” or “mandated by a stakeholder/funder.”

Based on these results, conducting a routine strategic planning process enables an organization to be more proactive rather than reactive. It’s also interesting that Low-Cap NPOs seem significantly more “reactive” given their level of “driven by a significant risk/challenge” or “mandated by a stakeholder/funder.” I encourage all NPOs to ensure strategic planning into a routine process.

 

4. Practices Used in Strategic Planning

Two areas of practice were analysed, with survey questions focusing on each area: 

1) plan preparation and content development and 2) plan implementation tracking and reporting.

 

 

Our research identified 16 plan preparation and content development practices. In order of effectiveness, they are:

1. Conduct programs/services assessment/evaluation

2. Mission/strategy mapping

3. Gather stakeholder input: interviews/surveys and/or focus groups

4. General group discussions on identified strategic topics

5. Research best practices/benchmarks

6. Brainstorming techniques

7. Conducting visioning session(s)

8. Review industry trends

9. Explicitly defining customer value proposition

10. Needs assessment

11. Review competitive environment

12. Scenario Planning

13. SWOT

14. Logic Modeling

15. Review of regulatory environment, social, economic, technological environments (PEST)

16. Balanced scorecard approach

 

 

 

The order of effectiveness of the practices is very similar for both the High-Cap and Low-Cap. It is important to note, however, that, when comparing the average rating of each practice in both High and Low, the High-Cap NPOs’ numerical ratings of top practices were significantly higher than Low-Cap.

 

Due to the apparent similarity in basic statistical comparisons of effectiveness of practices between High and Low-Cap, we conducted a regression analysis of the 16 practices on to the capacity variable for the High-Cap NPOs. Only 11 of the 16 practices are statistically significant for High-Cap (Table 4). The three highest-ranked practices by High-Cap focus on externally-facing practices. Surprisingly, the SWOT practice is one of the most common pre-planning techniques, and though widely used, ranked last in terms of its effectiveness. It is also noteworthy that several other commonly used practices were found not to be significantly beneficial. For instance, Logic Modeling and the Balanced Scorecard are widely recommended and utilized. However, there was no statistically significant relationship between them and NPO capacity.

 

Consequently, NPOs are encouraged to make greater investment in the pre-planning stage where an important component is external assessment. These are often practices that are skipped as they can be time-consuming, expensive, and can require special skill sets. However, this research shows the importance of not skipping these efforts. A well-executed community needs assessment typically includes stakeholder interviews, surveys, focus groups, and a review of the competitive environment (other practices that ranked highest overall). I encourage NPOs and funders to consider the costs of these external assessments and information gathering in their grants, recognizing the importance of these efforts to both the strategic planning process and organizational capacity. The findings also show SWOT analysis, the Balanced Scorecard, and Logic Modeling have low effectiveness, which has important implications for NPO practices and curricula. I encourage trainers and practitioners to consider using higher-rated techniques like Mission/Strategy Mapping, PEST Analysis, reviewing industry trends, and conducting visioning sessions, in addition to the top four approaches noted above.

 

Plan Implementation Tracking and Reporting: Our research identified six plan implementation tracking and reporting practices. In order of usefulness, they are:

1. Discussing updates on progress of plan implementation during periodic executive and board meetings.

2. Annually meet with board and staff leaders to review plan progress and content.

3. Running formal periodic (e.g., quarterly) reporting and documentation.

4. Align staff accountabilities/incentives/performance expectations to achievements of strategic plan goals/outcomes/metrics.

5. Conduct audits and financial annual reports relative to strategic plan initiatives.

6. Use software applications to help with tracking/reporting.

 

Similar to our findings in development practices, we found little difference when comparing High-Cap and Low-Cap NPOs. Due to this, we conducted an additional analysis and evaluated the frequency of reported progress on plans. Most NPOs indicated that they conducted some level of plan progress reporting annually (Table 5). The highest frequencies were 3 to 4 times annually (34.9%) and 1 to 2 times annually (22.8%). In addition, 20.2% indicated monthly reporting, and 22.1% indicated “no or inconsistent in reporting.” When comparing High-Cap to Low-Cap (Table 6), we found that High-Cap NPOs report plan progress/achievement results more frequently than Low-Cap, with 40.9% reporting 3 to 4 times per year. Only 28.3% of Low-Cap NPOs report 3 to 4 times/year, and 30% of Low-Cap report inconsistently or not at all.

 

I believe tracking and reporting on progress regularly is critical to ongoing plan success and I encourage all organizations to review their plan three to four times annually, which is a successful practice of High-Cap NPOs.

 

5. Key People Involved

The following nine key groups were found to often participate in the planning process: 1) board, 2) CEO/ED, 3) senior management, 4) mid-level management, 5) frontline staff, volunteers, 6) funders/donors, 7) clients or members, 8) expert advisors, and 9) regulators. When comparing High-Cap and Low-Cap, High-Cap NPOs generally involved a larger variety of stakeholders in their plan development process. Furthermore, beyond “consistently involving” their CEO/EDs, Low-Cap were much less likely to consistently involve board members, senior management, mid-level management, or frontline staff in their plan development process. Alternately, High-Cap involved most of these various groups at different points of the process, with CEO/ED, board members, senior management, mid-level management, being the most engaged – but not leaving out frontline staff at appropriate waypoints. 

 

This level of broad and high engagement of diverse stakeholders certainly helps increase plan buy-in throughout the organization. Furthermore, given that this is a practice of High-Cap NPOs, I highly recommend that organizations be intentional in their preparation for planning by identifying all the key stakeholder groups to engage in the process, as well as when and how to engage them.

 

This article provides empirical evidence that having a strategic plan enhances an organization’s capacity, enabling NPOs to better optimize their resources. As practices, technologies, and ecosystems evolve, I encourage researchers to continue studying which planning practices are most effective to advancing the missions of NPOs and ensuring their ongoing financial sustainability.

 

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Denise McNerney is Founder and Chief Strategy Officer of iBossWell. She is also past-president of the IASP Board of Directors. 

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