Long before the threat of sequestration, the nonprofit sector endured episodes of merciless uncertainty. Staying the course with less than perfect vision is nothing new. Yet, this time it seems different. Perhaps it’s the exponential effects of layers of ambiguity. Perhaps we’re just tired.
No matter the reason, it is imperative that we effectively plan for a range of contingencies. One way to prepare our organizations for the unpredictable is to engage in scenario planning.
Scenario planning is the identification and analysis of the most relevant and probable future states. It includes creating a tentative course of action. It must also include an unwavering focus on the mission, as this is the North Star for nonprofits.
There are many resources to help you engage in this type of planning. I will talk about components that seem to be common to all of the approaches that I’ve seen or experienced.
The first step, as I mentioned in Navigating a Sea of Uncertainty Part I, is an environmental scan. What’s out there, in the external business environment, with the potential to pose immense problems for your organization? What opportunities exist to counteract the challenges or present new, hopeful possibilities? The next step is to figure out which variables will have the most significant impact. Changes in consumer demographics? Decreases in funding source A and F? Increased regulations or modified compliance criteria?
After identifying the most critical variables, it is time to ask the question, “What if…” Examine the possible impact of change. What if the customer group for your most effective program disappears? What if this revenue source, or that one, is discontinued? What if they both take a significant (greater than 50%) cut? Brainstorm, without judgment, what the worst possible variations would look like for your firm. I suggest inviting input from all layers of your organization to answer these crucial questions. Everyone’s perspective counts.
Once you have looked at all of the worst possible outcomes, pick the most probable scenarios. For example: there may be a chance that your customer group would disappear, but it is more likely that two of your funding streams will receive catastrophic cuts. Brainstorm your possible response to each change. How can you turn lemons into lemonade? Be as creative as possible. When you have come up with a list of viable responses, you can begin to evaluate your ideas and pick the one best response to each variable.
At this point, I strongly suggest that you present your scenarios to your governing body—e.g., the Board of Directors, City Council, Advisory Committee. An oversight group should have the opportunity to weigh in and approve any strategic adjustment. It would be wise to seek this approval before the next step—developing a detailed action plan.
As with all good plans, an action plan (sometimes called a work plan) is required for each contingency. These identify what, when, where/how, and who. In the event the scenario unfolds, the action plan will ensure a timely and accurate response. This document also facilitates communication, ensuring that each stakeholder has the same information.
Engaging in scenario planning will help your organization to be prepared for the likely outcomes of the changes you predict. It will also enable you to maintain a sense of calm, order and control throughout your firm.