The art of Wealth Decision Making

Strategic NonprofitManagementNonprofit Learning Point

June 10, 2015

Presented by: Sam Davis IIIPrincipal, The Davis Group

1STRATEGIC NONPROFIT MANAGEMENTFOLLOWING IS THE SCHEDULE AND CONTENT FOR DAY ONE OF THIS TWO-DAY COURSE.

THE SCHEDULE AND CONTENT FOR DAY TWO WILL BE PRESENTED SEPARATELY.Sam Davis III, The Davis Group for NPLP June 10&17 20152Day One ObjectivesUnderstand what we mean by Strategic Management.Understand and practice Strategic Thinking.Understand how Business Thinking applies to nonprofit management.Understand the context in which Strategic Planning can be undertaken; prepare for Day Two.What additional objectives do you want to pursue on the first of this two-day class?Sam Davis III, The Davis Group for NPLP June 10&17 201533PROPOSED SCHEDULE9:009:30Introductions; Overview of the day9:3010:00Strategic Management w/exercise10:0010:45Strategic Thinking w/exercises11:0011:15Break11:1512:30Business Thinking Applied to Nonprofits12:301:30Lunch on your own1:301:45Nonprofit Theory of Change1:452:15Nonprofit Lifecycles w/exercise2:152:30Break2:304:00Strategic Management Process & Planning4:00 4:30Review; Questions; HomeworkSam Davis III, The Davis Group for NPLP June 10&17 20154TO BEGIN: SOME ADULT LEARNINGPRINCIPLES TO CONSIDER - THE 4 IsInductive Work connects the learner to the task by relating the core concepts to the core of the learners real life, making the material relevant.Input Verbs are used for input tasks: describe; examine; listenNew content is presented to supplement what the learner has experienced in life and work.Implementation is key. To retain what you have learned, you need to touch it a practice it right away.Integration tasks ask learners to move the content into the world and apply it in some meaningful way.

Sam Davis III, The Davis Group for NPLP June 10&17 20155STRATEGIC MANAGEMENTStrategy is about the future state and the need to manage change.Strategy is not planning. Strategy is about making smart choices as the world changes around us and taking action in real-time. - David LaPiana, 2011Strategic Management: A disciplined process to guide decision-making and prompt actions that shape and guide what an organization is, what it does and why it does it. - John Bryson, 2004Strategic Planning Development of a road map to clarify desired future state, how it might be achieved and how to measure progress.

Sam Davis III, The Davis Group for NPLP June 10&17 20156Lays out your strategy

Enables you to manage more strategically6STRATEGIC MANAGEMENT PROCESS4 MAJOR PHASES1. Preparation Enduring Purpose. Our Guiding Principles. Our Stakeholders. The need for change.2. Strategic Thinking Current situation. Internal and External Analysis. S.W.O.T. Analysis3. Planning Vision. Strategic Plan. Business Plans.Yearly Priorities. Quarterly Operating Plans.4. Execution, Feedback, Learning & Adapting Accountability. Continuous learning. Managing change.Sam Davis III, The Davis Group for NPLP June 10&17 20157STRATEGIC MANAGEMENT SYSTEMSam Davis III, The Davis Group for NPLP June 10&17 20158Decision

ActionReady What to DoSteer Do ItAim How to Do ItDISCUSS IN PAIRS1. With another person from your organization, the person next to you, or with anyone you choose, take 5 minutes to discuss your understanding of Strategy and the Strategic Management process.

2. What questions arose from your discussion?

3. Share with one another at least one example of strategic management, or the lack thereof, in one of your organizations.

4. Be prepared to share your questions and examples with the class.Sam Davis III, The Davis Group for NPLP June 10&17 20159STRATEGIC THINKINGI skate to where the puck will be.

- Wayne Gretsky

Sam Davis III, The Davis Group for NPLP June 10&17 201510STRATGIC 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 201511

Sam Davis III, The Davis Group for NPLP June 10&17 201512Dr. Jeffrey A. Krug12HOW OUR BRAINS WORKEmotional IntelligenceDaniel Goleman

The Role of ParadigmsWhat are paradigms?Biases; assumptionsCreatures of habitShifting habits; new paradigmsSam Davis III, The Davis Group for NPLP June 10&17 201513HOW OUR BRAINS WORK (cont.)Strategic Intuition William Duggan

Intelligent Memory

Expert Intuition

Presence of Mind

Flashes of Insight; Coup dOeil

Learn and Evolve; Resolve

Sam Davis III, The Davis Group for NPLP June 10&17 201514HOW DOES THIS APPLY TO YOUR ORGANIZATION?Think Pair - Share

Think - On note cards provided for you, write down at least two examples each from your organization of : (1) Intelligent Memory; (2) Expert Intuition; and (3) Learn, Evolve and Resolve.Pair Join with another student (or two) and share your notes. Select the best example of each of the three components of Strategic Intuition above.Share Select one person to speak for your group and prepare to share your examples with everyone.

Sam Davis III, The Davis Group for NPLP June 10&17 201515

CREATIVE vs CRITICAL THINKINGAnalytical Thinking and Problem Solving

Design ThinkingInspirationIdeationBrainstormingGroupingPrioritizingImplementation

Creativity and Innovation

Sam Davis III, The Davis Group for NPLP June 10&17 201516CREATIVE THINKING EXERCISEBRAIN CIRCLING

An Exercise

Sam Davis III, The Davis Group for NPLP June 10&17 201517LETS TAKEA 15 MINUTEBREAK

Sam Davis III, The Davis Group for NPLP June 10&17 201518BUSINESS THINKINGIN NONPROFIT ORGANIZATIONSNonprofit refers to a tax status; Ex: 501 (c)3Nonprofits have traditionally not focused on the business aspects of building and sustaining an organization.Few business courses are offered in traditional academic programs taken by nonprofit managers.The language of business and the language of nonprofits can be somewhat different.Some nonprofit leaders have a bias against thinking of themselves as operating a business.Lets re-examine that thinking.Sam Davis III, The Davis Group for NPLP June 10&17 201519BUSINESS THINKINGIf 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.

A 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 livelihood and sustains itself financially.

Sam Davis III, The Davis Group for NPLP June 10&17 201520CLOSELY-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 201521BUSINESS RULES APPLY TO NONPROFITSB - focus is on consumers. NPO - focus on clients and donors.B - Product price covers costs plus profit margin. NPO Donors subsidize portions of cost plus surplus.B - Operating capital comes from revenues, debt and investment capital. NPO Some revenues restricted; management of cash flows critically importantB Price determined by supply and demand; NPO demand almost always exceeds supply; cost of services and goods based on ability to paySam Davis III, The Davis Group for NPLP June 10&17 201522BUSINESS & NONPROFIT RULES (CONT.)B Profits reinvested in the business; NPO limited working capital; surpluses become operating reservesB Investments made to stimulate growth for efficiencies and increased profitability; NPO growth limited by ability to attract donorsB Overhead is seen as a cost of doing business; NPO overhead % must be kept low to satisfy donorsB Innovation sought as a competitive advantage; NPO Risk averse; innovation not part of cultureSam Davis III, The Davis Group for NPLP June 10&17 201523AN INDIVIDUAL EXERCISE:On a note card or piece of paper answer the following:1. WHAT IS YOUR BUSINESS MODEL? How do you payfor and sustain impact? List your revenue sources by %of total annual operating revenues.2. HOW TO YOU DETERMINE THE USE OF OPERATING SURPLUSES? How do you cover operating deficits?3. HOW DO YOU DETERMINE THE PROPER BALANCE of revenues and expenses needed to sustain the organization over a multi-year period?4. HOW DO YOU MEASURE IMPACT? (Not program objectives alone.)5. DONOR INVESTMENT? Have you defined what benefits donors receive from investing in your organization?Sam Davis III, The Davis Group for NPLP June 10&17 20152424LUNCH WILL BE ON YOUR OWNSam Davis III, The Davis Group for NPLP June 10&17 201525THEORY OF CHANGEor LOGIC MODEL for NONPROFITSHow will we create the desired impact?What are our key inputs needed to induce change?What strategies need to be our priorities?How will we measure change? Outcome measures?a. Immediateb. Intermediatec. Long-termWhat is the ultimate impact we are trying to have?How will we measure our success in achieving impact?

Sam Davis III, The Davis Group for NPLP June 10&17 201526AN EXERCISE FOR YOU1. On a note card or piece of paper, try to answer the questions posed on the Theory of Change slide using your organization as the example.2. For those questions you are unable to answer, list the steps you will take prior to next weeks class to find answers to those questions within your organization.3. If your organization has not defined its Theory of Change, list steps you might take to help define this for your organization, and include the names of individuals or positions who need to be involved in articulating that Theory of Change.Sam Davis III, The Davis Group for NPLP June 10&17 201527YOUR ORGANIZATIONS LIFECYCLE STAGE AFFECTS YOUR STRATEGIC THINKING AND YOUR STRATEGIC MANAGEMENT PROCESS

Sam Davis III, The Davis Group for NPLP June 10&17 201528ORGANIZATIONAL LIFECYCLESSource: Nonprofit Lifecycles by Susan Kenny StevensSam Davis III, The Davis Group for NPLP June 10&17 201529

TurnaroundRenewLIFECYCLE PRINCIPLESSource: Susan Kenny StevensDiagnostic, not deterministic

May not be evolutionary or sequential

Not age or size dependent

Some capabilities may be at different stages

Used to set realistic expectations

Characterizes capabilities in an objective fashion

Sets the context for strategic thinking and action

Sam Davis III, The Davis Group for NPLP June 10&17 2015307 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 201531DIFFERENT STRATEGIC THINKINGAT DIFFERENT STAGES EX: START-UPGovernance Members with personal connections

Strategy Focused initiatives; outcomes lacking

Program Simple, experimental; breadth not depth

Management Founder led; part-time staff; volunteers

Marketing Founder is the brand; trial and error

Resources Low budget; grant dependent

Infrastructure Financial and admin weak or outsourced

Sam Davis III, The Davis Group for NPLP June 10&17 201532ANOTHER EXAMPLE: GROWTH STAGEGovernance Board formalizes; board committees

Strategy Simple strategic plan; priorities change rapidly

Program Defined programs; differentiation from others

Management Leaders see potential and manage change

Marketing Begin build brand, target audiences

Resources Diversified income sources; expand donor base

Infrastructure Financial systems maintain accountabilitySam Davis III, The Davis Group for NPLP June 10&17 201533A FINAL EXAMPLE:DECLINE STAGEGovernance Board unaware; hands-off; status quo

Strategy Outcomes not achieved; strategies stale

Program Program costs high, losing clients to competitors

Management Lacking strategic vision; blaming others

Marketing Brand value in decline; not reaching audiences

Resources Fixed costs heavy; cash management challenges

Infrastructure Systems antiquated, upgrades not funded

Sam Davis III, The Davis Group for NPLP June 10&17 201534LIFECYCLESAND YOUR ORGANIZATIONWhere are you today on the Lifecycle graph?Where is the momentum in your organization?What are the core strengths and weaknesses of your organization?Thinking strategically, what challenges lie ahead?What options might you consider for addressing these challenges?How might a strategic planning process benefit your organization?Sam Davis III, The Davis Group for NPLP June 10&17 201535NOW, ITS YOUR TURN AGAINThink Pair - ShareThink Writing on your note cards again, use the Lifecycle hand-out to plot the location of key components of your organization on the Lifecycle curve. Then, consider what type of Leadership Styles might fit the needs of the organization in the stages given in the 3 examples. Consider: entrepreneurial; analytical; collaborative; controlling/directive; steady/cautious; bureaucratic; inspirational; etc.Pair With the partner with whom you have been working or another individual, compare your Lifestyle charts and the Leadership Styles you each recommended for your organizations. Be prepared to present your ideas to the larger group.Share Choose a member of your group to present some highlights of your shared information to the larger group.Sam Davis III, The Davis Group for NPLP June 10&17 201536LETS TAKE A 15 MINUTE BREAK.Sam Davis III, The Davis Group for NPLP June 10&17 201537Strategic 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 201538Discussion: For each principle, why is this important?38

STRATEGIC PLANNING: A ROADMAP FOR MANAGING CHANGESam Davis III, The Davis Group for NPLP June 10&17 201539FormulateStrategiesto 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 20154040THE 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 20154141Phase 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 responsibilitiesSam Davis III, The Davis Group for NPLP June 10&17 201542STRATEGIC 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 201543THE STRATEGIC PLANNING PROCESSPLEASE SEE HAND-OUTFOR FLOW DIAGRAM OF THE PROCESSSam Davis III, The Davis Group for NPLP June 10&17 201544STRATEGIC 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 201545SUMMARIZING DAY ONE1. Take 5 minutes to review what has been presented, using hardcopy of the slides and your notes to guide you.2. Write down any concepts or information you wish to have reviewed before departing today. 3. Identify any information you expected to be presented that was not covered today.4. Write any additional questions you may want to ask.5. Once everyone is ready, the Instructor will open the floor to questions and discussion.Sam Davis III, The Davis Group for NPLP June 10&17 201546HOMEWORK TO PREPARE FOR DAY TWO1. If your organization has a Strategic Plan, obtain a copy and bring it to the next class.2. Identify key components of your organizations Business Model. Feel free to bring information to class for review.3. Review the Lifecycle chart for your organization and give further consideration to the lifecycle status or each major component of your organization.4. Using the Lifecycle chart and thinking strategically, write down the key challenges you believe your organization will face in the next 3-5 years.Sam Davis III, The Davis Group for NPLP June 10&17 201547THANK YOU.Sam Davis III, The Davis Group for NPLP June 10&17 201548