October 22, 2017
    Financial challenges in association strategic planning
    By Chris Frye, CPA | 02/23/2011

    Any nonprofit that has initiated a strategic planning discussion or, better yet, implemented a strategic plan already has overcome a huge hurdle. In the not-so-distant past, it was not uncommon for strategic planning to be viewed as an activity reserved only for large for-profit organizations. Now, strategic planning is essential for all nonprofits.

    The biggest financial challenge most organizations face when developing a strategic plan is honing in on the most important key performance indicators (KPIs). For a nonprofit it could be cash flow, cost per dollar raised, average gift amount, or revenue per member, to name a few. Often, an organization will focus on too many key performance indicators, or those that do not align directly with its overall mission and goals. This can make it difficult for the organization to focus its efforts, and the metrics requiring the most attention may be neglected inadvertently. Organizations should identify a small group of key financial metrics and set realistic goals, timeframes, and monitoring systems to measure the outcomes.

    Another key fallacy of strategic planning is focusing only on the financial aspect of the organization. While an important part of the overall strategic plan, the financial picture is just one piece of the puzzle. KPIs should also be established for the organization’s processes, customers and staffers. For a nonprofit, this could mean tracking the time to process a membership application (process KPI), number of constituents served per week (customer KPI), or training hours per employee (employee KPI). These metrics can be just as important as the financial indicators in determining if a nonprofit achieves its goals and effectively carries on its exempt purpose.

    The key to developing an effective strategic plan is gathering input from all of the stakeholders involved.  One group, be it management or the board of directors, should not dominate the discussions. Staffers outside of management who play a key role in the day-to-day operations of the organization should be included in the discussion. Constituents, such as donors, members or students should have a chance to voice their opinions as well. A strategic planning retreat is a popular method of bringing together all of these groups in a single location to facilitate meaningful discussion.

    Documenting a strategic plan on paper is a great start; placing that plan into action is even better. Key metrics should be monitored, measured and assigned to an individual who can be held accountable for the result. Strategic planning is not a “one and done” activity. It is an ongoing process that should be constantly changing and evolving to meet the new challenges that arise over time. It can be beneficial for the organization to align itself with a trusted advisor (accountant, banker, etc.) who can help the organization monitor critical strategic activities and serve as a sounding board for ideas and concerns the organization develops.

    Strategic planning checkpoints

    • Elicit feedback from all stakeholders involved.
    • Establish the most important key performance indicators; don’t limit it to financial indicators. Keep in mind your customers and employees.
    • Set realistic goals and timelines for meeting the goals.
    • Monitor progress and hold individuals accountable.
    • Update your strategic plan to accommodate changes over time.

    Details: Frye is with Yount, Hyde & Barbour, P.C., Winchester VA. Contact him at Chris.Frye@yhbcpa.com.

    Association TRENDS