Navigating a Sea of Uncertainty

Uncertainty is a construct that the business sector struggles to define. A recent literature review (McIver, Shimizu and Kim, 2008[1]) noted that the varying explanations of the term render its use practically meaningless. However, it seems that no matter how uncertainty is defined it remains an important concept that impacts decision making in organizations.

Bage - March 29The most useful way I’ve found to understand and teach this topic is illustrated in a management textbook[2]. It explains that environmental uncertainty can be assessed by examining three factors: resource scarcity, rate of environmental change, and complexity (i.e., the number of external factors affecting the organization). In a highly uncertain environment, accurate and timely information may be difficult to gather; forecasts maybe unreliable. The more uncertain the environment, the more difficult it is to make decisions.

Based on this characterization, nonprofits operate in a highly uncertain environment. As the 2013 sequestration points, out financial resources are scarce. Funding streams have been reduced or eliminated; the competition for revenue is fierce. Like our for-profit counterparts, nonprofits must manage a rapidly changing environment. New technology, the volatile economy, the evolving demographics of our constituents and the changing political clime require ongoing flexibility. Moreover, the nonprofit sector is incredibly complex.

Fortunately, it is possible to survive and even thrive in an environment of uncertainty. I offer the following considerations:

  • Although good data will be hard to find, a comprehensive environmental scan (otherwise known as S.W.O.T. analysis) is critical. The information derived from the scan will lay the foundation for sound scenario planning.
  • Scenario planning involves using the information from the environmental analysis to identify a range of possible futures that your organization may face, and then making plans to address those circumstances that you project will exist in each future state.

Scenario planning is akin to creating several alternate strategic plans. The process creates intentional flexibility. Moreover it can foster collaboration, hope, and innovation.

April’s blog will take a closer look at scenario planning.

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