Your Engine of Impact: Strategy

Every nonprofit needs a strategy—a planned set of actions that will enable it to achieve the all-important mission that provides its reason for being.

The development and implementation of a viable strategy can be a daunting task for nonprofit leaders, but valuable tools and frameworks are available to help guide them. Many of these tools and frameworks originated in the discipline known as business strategy. Nonprofits, of course, differ from for-profit corporations in that they exist to serve a social purpose rather than to increase shareholder returns. But like businesses, nonprofits operate in markets, and the basic principles of economics apply to them, too.

Strategy is one component of the engine of impact that every nonprofit organization must build and tune to become truly effective. Nonprofit leaders who want their organization to achieve maximum impact must embrace the essentials of strategic leadership. We compare this kind of intentional leadership to a high-performance engine. Strategy—the second essential part of this engine, after mission—provides an actionable set of goals that help govern the design and implementation of programs and interventions.

We have identified a handful of strategic concepts that are especially relevant to nonprofit organizations. To be sure, some of these concepts require adaptation to reflect the realities of the nonprofit sector. But leading academics and consultants have already done important work on this front. Here are four concepts in particular:

Theory of change: A theory of change is a logical description of how your organization’s strategies will help achieve its mission. Unlike the other three concepts, this one originated in the nonprofit and government sectors.

Six-forces model: The six-forces model was adapted by Yale University scholar Sharon Oster from the five-forces model that Harvard University scholar Michael E. Porter developed to analyze for-profit businesses. Porter’s model is used to assess an organization’s competitive position in a market; Oster added a sixth “force”—the power of funders—and applied the model to nonprofit markets.

Core competencies: The idea of assessing core competencies emphasizes the need to ensure that an organization bases its strategy on its distinctive capabilities. It requires nonprofit leaders to regularly ask, “Does our organization have the competencies or skills required to achieve our mission?”

Strategic planning: The strategic planning process offers a means for leaders to reduce uncertainty by exploring potential scenarios for their organization, whether strategic or financial, and then analyzing a range of possible outcomes.

Let’s consider the first concept—theory of change, which has attracted a great deal of attention within the nonprofit sector in recent years. (In our book, Engine of Impact, we discuss all four concepts in detail.) This idea obliges nonprofit leaders to address several critical questions: How do you plan to achieve your mission? Which program or intervention will you implement? And can you cite empirical evidence to demonstrate that this program or intervention will work? By answering these questions in a rigorous way, relying on facts rather than intuition, you can ensure that your theory of change will be logically and empirically sound.

A theory of change can take a variety of forms. An organization might, for instance, distill it into one or two sentences. Consider the Center for Equal Opportunity (CEO), an organization based in New York City that provides employment services to people recently released from prison. Its theory of change focuses on the timing of an intervention. CEO posits, in particular, that “if the employment needs of persons with criminal convictions are addressed at their most vulnerable point—soon after conviction or when they are first released from incarceration—by providing life skills education, short-term paid transitional employment, full-time job placement and post-placement services, they will be less likely to become re-incarcerated and more likely to build a foundation for a stable, productive life for themselves and their families.”

Alternatively, a theory of change can take the form of a graphic image that shows how various assumptions, activities, strategies, and expected outcomes relate to each other and how they will enable an intervention to succeed. GuideStar’s theory of change, as it happens, provides an excellent example of this approach. Using words, boxes, and arrows, the graphical depiction of this theory of change illustrates how GuideStar aims to achieve its mission by (for instance) “collecting broad and deep information on nonprofits,” which will lead to greater “trust in the nonprofit sector” and a more “supportive policy environment,” which in turn will result in “more giving.”

However, you decide to formulate and present your theory of change, what matters most is that you have one. That is no small thing since about half of nonprofits don’t have a theory of change. If you are one of these organizations, take the time to develop a theory of change and then establish the discipline to abide by it. The process of formulating a theory of change, and the benefits of using it as a strategic tool, will be well worth the effort.

Orginally published by Guidestar

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