Our last article highlighted William Bridges’ work with Transitions. He advised starting at the end rather than at the beginning so that we can let go of the old before we pick up the new. This period is followed by what he calls the neutral zone where “old and maladaptive habits are replaced with new ones that are better adapted to the world in which the organization now finds itself.”
After we analyze and learn from our ending and imagine possibilities in the neutral zone, it’s time for our new beginning. In this phase, we will be developing a fresh identity, experiencing renewed energy, and discovering our revitalized sense of purpose. Scenario planning will be an effective process for exploring the new beginning.
>>Scenario planning helps us imagine and prepare for various possible outcomes.
Think of scenario planning as imagining numerous stories and how they might unfold rather than what might be the best or worst-case scenario. With so much unknown, we need a higher degree of imagination than ever. We are not trying to predict the future, we are developing an orderly way of thinking and making decisions. Instead of asking “what if” questions, we will be asking “what will we do if” questions.
So start with what you don’t know. What unknowns are weighing on you most heavily? Think of what actions will have the greatest impact and require quick decisions. You can’t tackle everything at once, so begin with what most supports your mission and achieves your core objectives.
>>Start with a diverse team.
Scenario planning offers an excellent opportunity to gain feedback from a wide variety of stakeholders. Invite board members, staff, donors, collaborators, and other supporters to a brainstorming session. Not only will they contribute new ideas, but they will also feel like a valued part of the organization.
The French philosopher, Emile Chartier, said it well: “Nothing is more dangerous than an idea when it’s the only one you have.” So, a team approach with diverse membership will yield the best and most creative results.
Of course, because of social distancing, the meeting won’t look like sessions you have had in the past where everyone sits around at a table and someone writes on a whiteboard or flip chart. Hearing ideas from a cross-section of stakeholders is still important and possible in the new environment. For example, you can have a period of asynchronous brainstorming on a digital channel, followed by a couple of hours of debate and refinement on an open videoconference.
>>Use your imagination to create the best scenarios for your group.
Start by examining your mission. Ask yourself if your mission statement is still serving the original need. Get in touch with the real purpose of your organization and adjust the mission statement accordingly. The result, of course, will be your “North Star,” guiding all current and future decision making.
Now is the time to be creative but realistic. At first, narrow your focus on timely, essential needs. Ask yourself what impact your organization wants to have, how you are going to fund it, and ultimately what organizational capacity is needed.
Begin with just two or three scenarios based on your most urgent needs. It can be stressful and overwhelming to imagine more than that. Be sure to get input from those who will perform the work. Think through all aspects including program, financial, development, human resources, and operations. After creating a couple of scenarios, evaluate each one to assess the likelihood of success. As more information becomes known, re-evaluate your scenarios and create new ones. This is an iterative process, not a once and done project.
Your goal should be to pick the scenario whose outcome seems most likely and to base a plan upon that scenario. You should also plan clear contingencies if another scenario begins to emerge instead.
>>Budgeting for each scenario is essential.
Even though your newly-imagined scenarios may turn out to be wrong, creating a basic budget for each one is still critical. Keep in mind, scenario budget planning is not a complete budget or a new strategic plan. It is an effort to paint a complete picture of your scenario using the information available to you at the moment.
Carrie Wanek, CFO for the Foodbank of Santa Barbara County, offers insight into the process she uses. “Given the uncertainty of several key drivers, we have elected to develop a budget based on a base level, or target budget methodology. Our assumption was that FY21 would perform in a similar manner as FY20, with modest increases in donations and fairly flat to slight increases in operating expenses.
“The scenario planning approach was utilized by adding a column for each period (we broke ours down by quarter) specific to our COVID-19 activities, and then added the two data fields together, for each quarter. This allows us maximum flexibility to adjust our forecast as new information is gleaned every day.
“We can easily pivot the projections up or down with all remaining forecasts adjusted automatically using built-in formulas. For example, we assumed six months of current activity, but can shorten that timeline or increase it easily, along with adjusting the amounts.”
The old nonprofit adage, “no money, no mission,’ still holds true and reminds us that even when creating multiple scenarios, budgeting for revenue and expense is still an important part of the process.
>>Remember you have a dual bottom line: mission impact and financial return.
The nonprofit business model is simply what we do (programs), why we do it (mission), and with what resources (finances). Wikipedia defines sustainability as “the capacity to endure.” One of my favorite books, Nonprofit Sustainability, reminds us that “sustainability encompasses both financial sustainability and programmatic sustainability. Sustainability is an orientation, not a destination.”
I highly recommend purchasing and using this book as an important tool to evaluate your organization’s work and plan for future development. The authors recommend evaluating all of your programs according to two criteria: impact and profitability. Impact relates to whether the program is essential in achieving your mission; whereas profitability tells whether it is financially sustainable. Here are four possible program evaluation scenarios:
- High Mission Impact but Low Profitability. These are often activities that are popular with the community or staff. Often they are thought of as sacred cows—we’ve always had these programs so we must continue. This can be a valuable evaluation because it gives you the opportunity to identify ways you can increase profitability if the beloved program is indeed essential to your mission.
- High Mission Impact and High Profitability. These are your star programs because they support and promote your mission and are also financially sustainable. You can keep these programs and maybe even think of ways to increase profitability.
- Low Mission Impact and Low Profitability. You should probably stop these programs. They are typically things you’ve done for a long time but they don’t contribute to your mission or to your financial bottom line.
- Low Mission Impact but High Profitability. These are often fundraising events. Sometimes attendees have a great time but can’t even remember which organization is in charge or what the mission is. But the organization continues to host the events because they are so profitable. If a program or event falls into this category, you can go ahead and keep it but find ways to enhance it so it is more in line with your mission.
>>Jump in and start your scenario planning today.
Once you have identified the lessons learned from the pandemic’s abrupt ending of your normal operations and spent time in the neutral zone imagining possibilities, it’s time to start your new beginning. And even though all the unknowns make the way unclear, you can create and assess a few scenarios. For each one, you will pull together a diverse group of people to build a strawman budget and evaluate which programs will be included based on their impact and profitability. I predict you will enjoy the process and be surprised and happy with your results.