The Board’s Essential Role
in Nonprofit Strategic Planning
From perplexed to progress takes—yep—a little planning
Confused about what role the board should play in nonprofit strategic planning? Not sure who should take the lead in planning? If you are uncertain about the scope of nonprofit strategic planning, you aren’t alone. The role of the nonprofit board in strategic planning is confusing.
A few thoughts may help determine what is right for your board. These ideas apply the policy governance model to strategic planning. They also can be useful regardless of the governance model used by your board.
Let’s Define Terms
Common definitions are needed to think clearly about this challenge. It is necessary first of all to separate strategy from strategic planning and the strategic plan from the operational plan.
Strategy is about being different. It involves making choices. The strategy should answer the question: What should the organization focus on doing particularly well to fulfill its mission and deliver value over the long run? Michael Porter, one of the leading thinkers on strategy, emphasizes the importance of choice in strategy: “The essence of strategy is choosing what not to do.” Strategy is developed in the context of the environment the organization operates in and has a multi-year perspective. Strategy is not simply doing the day-to-day work well (operational effectiveness). That is a given. An organization’s strategy should be short and easily explained.
Strategic planning is the process used to develop a strategy. This process can range from short and simple to long and complex depending on the needs and capabilities of the organization. There are many strategic planning methodologies to choose from. Common planning process components include: environmental scans, SWOT analysis, market analysis, and competitive analysis. Strategic planning can include the processes to determine strategy implementation.
The strategic plan documents and communicates the strategy. These plans commonly include elements in addition to the strategy itself such as mission, vision, values, environmental scan results, and scorecards. The plans may also include implementation tasks, plans, and responsibilities.
Operational plans are sometime confused with or labeled as strategic plans. Operational plans are short term and address the key work and results the organization must achieve in the next year. Operational plan generally assign accountability so people know who is responsible for what. The operational plan covers more than the actions to implement the strategy. It encompasses much of the routine work of the organization. You can have operational plans without having a strategy. Calling an operational plan “strategic” doesn’t make it so.
Mission before Strategy
Now that the terms are understood, the next step is to be sure your organization has a clear mission and give it proper placement. The mission should be defined before the strategy is developed. The mission is why the organization exists. It captures who benefits from the activities of the organization and what those benefits are. A clear mission is necessary for managing an effective organization whether there is a strategy to fulfill the mission or not. The mission is the focus for strategy development. Strategies are the important choices regarding how to achieve the mission. Without a clear mission the organization’s purpose becomes fluid and open to interpretation.
Mission is a board responsibility
Nonprofit boards must assure their organization has a well-defined mission. That mission needs to be unequivocally supported by the board regardless of who does the work of creating the mission. Imagine the problems resulting from an organization adopting a mission that was not aligned with what the board expected or wanted. Everyone needs to be on the same page regarding the ultimate purpose of the organization.
The mission for leadership and management purposes is different from the often vaguer public mission statements. Those public mission statements are more about branding and community relations than providing clear direction for management purposes. Instead, the written mission should communicate who benefits from what the organization does, what benefit or value is provided, and how value is delivered.
Mission and ends policies
Boards using the policy governance model should be in good shape regarding mission. Ends policies, an essential part of the policy governance model, directly address the core elements of an organization’s mission. They may also address some parts of an organization’s long term vision. Ends policies answer the essentially the same questions – who benefits, what are the benefits, and at what cost. The process of adopting written policies assures that the board fully supports the ends for the organization. They can be used directly or with some interpretation as the focus for strategy development.
Leading the Strategic Planning Process
The CEO should lead the strategic planning process when feasible
The CEO should be responsible for strategic planning if that is possible. This does not mean they do all the work or directly manage the steps in the process. But they need to be accountable for making sure it gets done.
There are several reasons it’s best for the CEO to lead strategic planning: 1) CEOs are responsible for implementing the strategic plan. The strategy is more likely to be implemented if the CEO and their staff were responsible for developing it; 2) The organization is more likely to have the staff, leadership, and expertise to develop a good strategy. They are closest to the work of the organization and the business environment; and 3) Strategic planning leads immediately to annual operational planning. That integration will be more effective if the same people are responsible for it and it becomes part of the CEO’s management system.
CEO-led strategic planning must engage the board in the process. Board members bring key perspectives and knowledge to the strategic planning process. There are many ways to effectively engage the board in strategic planning.
There are exceptions – small nonprofits
The board’s role in small nonprofits is complicated by the lack of organization staff and other resources. Small nonprofit boards often provide essential resources to do the basic work of the organization. They have a dual role of governance as well as execution. In these situations, the board may need to lead the strategic planning process. Sometimes there is simply no one available except for board members. In these cases, the board must engage what staff the organization does have in the planning process.
Assuring the strategic plan aligns with the owner’s interests
It is the board’s governance responsibility to assure that the organization achieves the results expected by its owners using acceptable means. Consequently, boards need some mechanism to assure that the strategic plan furthers the interest of owners.
Ends and executive limitations policies applied to strategic planning
The policy governance model provides an effective means for assuring the strategic plan furthers the interest of the owners. It starts, as mentioned previously, with writing the ends policies. The ends policies represent the board’s interpretation of the results expected by the owners. The board can assure alignment between the strategic plan developed under the direction of the CEO with the ends policies through an executive limitations policy.
The sidebar shows an executive limitation policy (taken from a real organization’s policy manual with the name removed) which illustrates how this concept can work. Executive limitations policies exist to prevent the organization from imprudent actions. In this case the board determined that operating without a strategic plan is imprudent. The policy then goes on to identify the basic requirements for an acceptable strategic plan and planning process. The linkage between the plan and ends policies comes in policy 2.9.1 which requires the strategic plan to have a mission consistent with the board’s ends policies. In addition, the policy requires that the strategic plan state the linkage between the board’s ends and the organization’s mission, vision, and strategies. Together these assure that a plan complying with this policy helps the organization achieve what the owners want.
The board should approve or adopt the strategic plan
It is important that the board approve or somehow formally adopt the strategic plan regardless of the governance model used. A strategic plan is important enough to warrant that level of board engagement. Strategic plan implementation may require additional resources and changes in the risk tolerance for the organization – all board responsibilities. For boards using the policy governance model, approval may involve accepting a CEO report on compliance with the strategic plan executive limitations policy. Alternatively, there could be a formal resolution or motion to approve the strategic plan.
The Take Aways
- Set the mission first. It is the board’s job to assure a clear mission exists to guide strategy development. Ends policies in the policy governance model meet that need.
- The strategic planning process can be led by the CEO (the preferred approach) or the board depending on the organization’s needs and resources. Regardless of leadership, both sides must be engaged.
- Boards must assure the strategic plan furthers the expectations of the owners. A strategic planning executive limitations policy can be effective in providing this assurance. It also can be done through board approval of the strategic plan.