Thriving in Turbulent Times

By John Braunstein and & Anthony Knerr

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?

The Importance of Contingency Planning

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:

  • 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).
  • 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.
  • 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.

The Benefits of Thinking and Acting Strategically

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.

  • 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.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.

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.

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