Lost in Implementation

Late this summer (2010), the Alliance for Children and Families embarked on a detailed study, funded by The Kresge Foundation, to explore whether the role of chief strategy officer (CSO) might serve to strengthen the capacity and enhance the social impact of our country’s most complex human service agencies.

The purpose of this article is to share our preliminary findings and the questions generated thus far by those findings.

The initial phases of the project involved extensive research on the concept and on the experience of both for-profit and nonprofit organizations that have experimented with the concept, with special attention to the differences between for-profit and nonprofit organizations.

The power of strategic planning is not new. In that sense, our research has revealed that “what’s old is new again” with regard to strategic thinking and planning. Our most significant findings can be boiled down to one understanding, as presented in an August 2001 report prepared by McKinsey & Company: “The nonprofits … that experienced the greatest gains in capacity were those that undertook a reassessment of their aspirations—their vision of what the organization was attempting to accomplish … their strategy.”¹

What is new is the perception and concern that the successful implementation of long-term strategies, which has largely remained in the domain of the CEO, may be severely limited without a full-time executive at the highest levels of the organization who is dedicated to the alignment and integration of all of the organization’s key functions with a coherent view and plan for the future.

Our research, and the information provided by nonprofit CEOs during more than 50 interviews conducted this fall has made it clear that strategic issues frequently take a backseat to program development, day-to-day “firefighting,” ongoing changes in the regulatory environment, and the pursuit of new sources of revenue.

Another McKinsey & Company study, conducted in 2006, supports that concern. When the researches inquired about the strategic planning concerns of more than 800 executives, only 36 percent said their strategic plans were meaningfully integrated with their human resources and processes; and only 56 percent said their companies tracked the execution of strategic initiatives. In other words, as in some 75 percent of complex organizations, the planning was done, the plans existed, but they were not aligned with day-to-day operations to the extent that the plans drove and defined organizational priorities.

Based on our research, current interest in the potential of the CSO position may simply be a new recognition of these realities. Given increasing complexity, economic instability, shifts in market forces, increased mergers and acquisitions activity, historical limitations on executive suite capacity, and the demands made of CEOs by nonprofit boards and other stakeholders, the successful implementation of long-term strategies in nonprofits may not be achieved without a new and substantial dedication to that purpose.

In response to questions posed in our interviews, Curtis Mooney, CEO of Alliance member DePelchin Children’s Center, Houston, said, “We’ve struggled to implement a plan because we don’t have someone holding us accountable, and we also need to know how to get there. It takes forever because everybody is doing their day-to-day jobs. The detail and accountability is missing—someone looking at it on a regular basis. How do we stop doing some things we’re doing, looking at the whole picture?”

It appears, then, that those organizations that for want of executive action and attention have been unable to test their basic assumptions about capacity, and check performance against their plans, may be missing out on opportunities to enhance their impact on the social problems they seek to address.

“Good” Overhead or “Bad?”

Taking a good, hard look at the importance of strategy and making a commitment to dedicate significant resources, such as those required to support a CSO, will not be easy for many nonprofits. History and the interests and demands of those who fund nonprofit programs can, and do, work against organizational efforts to build the capacity for effective strategic planning. Most importantly, they work against dedicating significant resources to implement and align organizational programs with mission and vision across all departments and functions.

The dominant ethic in the nonprofit world is that money is for programs and service delivery. Substantial spending on managerial capacity has been described by some CEOs as taboo or a luxury not likely to be smiled upon by board members and funders, including governmental sources of revenue. As stated by Kim Scott, president and CEO of Alliance member Trillium Family Services, Portland, Ore.: “Some of the cultural issues go back hundreds of years. Keeping overhead low, like the old charities, we shouldn’t make money. We can’t invest in ourselves. We’re the only industry that’s not for progress. We can’t really invest in our capacity to increase our ability to advance our mission.”

Other CEOs have indicated that obtaining resources to support the development of managerial capacity is a “stretch” that would require significant changes in their organizational cultures and clear evidence that the investment will produce tangible and measureable results for the clients they serve.

Some of that evidence may be found in the 2001 McKinsey & Company study mentioned previously, which focused on 13 nonprofit organizations that took a “deliberate and proactive approach” to reassessing their aspirations and strategies, and by doing so, dramatically enhanced their organizations’ capacities.

Of these were:

• Children’s Defense Fund, New York, which created new partnerships and alliances that resulted in a 63 percent increase in the number of children vaccinated against infectious diseases in New York City; and
   
• Citizens Schools, Boston, which educates children and strengthens community ties through after-school programs, and which increased the number of children it served by almost 70 percent and the number of after-school program slots by more than 50 percent during the late 1990s.

At present, organizations that are more likely to support the development of a CSO role are those that recognize the need to invest in infrastructure, see the connection between enhanced planning and results, and are willing to adopt a deliberate focus on high-level goals, including the capacity to align an organization’s strategies with its aspirations, mission. and goals.

At first glance, these would be organizations that have considerable resources, but our research has indicated that even smaller organizations can increase their impact when they can rise above the fray of day-to-day operations and programs and allow “big-picture” issues to direct growth, innovation, and strategic alliances.

Twelve Key Elements

We also have been able to collect at least 12 key elements or functions involved in successfully elevating strategy to a level where it may have a decisive and considerable impact on the most important outcomes of any organization, for-profit or nonprofit. These are:

1. support, facilitation, and contribution to the development and articulation of the strategic plan from the planning team, including the CEO, board, and other stakeholders;
    
2. communication and translation of the organization’s mission, purpose, and strategies up, down, and across all functions and departments;
    
3. continuous testing of assumptions, actions, and performance against the overall mission, vision, and goals;
    
4. commitment to ensuring that all mid- to long-term strategy is actionable and drives day-to-day behavior at all levels of the organization;
    
5.  focus on the organization’s long-term relevance, sustainability, and social impact, rather than solely on the day-to-day operations;
    
6. ongoing monitoring and identification of significant changes in the environment, as well as the potential impact of those changes on the ability and capacity of the organization to achieve positive social impact;
    
7. creation and maintenance of an integrated system of practical performance goals, measures, and milestones—all of which are aligned with and clearly linked to mission and strategy—for each critical organizational function;
    
8. continual exploration and pursuit of initiatives, processes, efficiencies, and opportunities to enhance the organization’s mid- to long-term social impact;
    
9. active facilitation of the integration and alignment of all initiatives, innovative practices, and alliances or partnerships;
    
10. review and screening of all potential growth initiatives, innovative practices and strategic alliances or partnerships against the organization’s mission and mid- to long-term strategy;
     
11. interpretation and communication of how each innovative practice or initiative fits into the organization’s strategy and fosters the achievement of the organization’s overarching goals; and
     
12. regular reporting about the progress of the organization and each of its functions and programs against the strategic plan and the goals, measures, and milestones that support the plan.

Potential Benefits

In a world where strategy is refined, monitored, aligned, and driven by a key executive reporting directly to a CEO, the benefits that might be realized by nonprofits may include:

• enhancement of revenues available for service delivery;
   
• elimination of non-aligned, “off-mission” programs and initiatives;
   
• expansion of successful core services;
   
• reconfiguration of existing services and “capturing” of greater program efficiencies;
   
• building new value-added services through innovation;
   
• greater resilience in the face of economic downturns, and therefore enhance sustainability of highly effective programs;
   
• greater social impact within communities served.

Whether the key to the successful pursuit of a strategic perspective is the advent of the CSO in every complex nonprofit organization, or the development of other new and comprehensive strategic initiatives by CEOs and their executive teams, it is clear that a renewed and substantial effort to capture, align, and execute strategic thinking and planning may be one way to enhance an organization’s ability to thrive and survive in today’s increasingly complex world—if not the best way.

The Alliance will continue review and explore the potential benefits and obstacles to the effective integration and alignment of strategy in nonprofit human service organizations, and these findings will continue to be shared with the membership through the Alliance website.

ENDNOTES:

1. See “Effective Capacity Building in Nonprofit Organizations,” page 15.

Thomas Aranow is senior advisor for business strategies at Kohls Consulting Group, which is a member of the Alliance’s Executive Consultant Select Group. He has extensive experience in the development of entrepreneurial ventures in both for-profit an nonprofit settings. Aranow’s consulting career began in the early 1980s with governmental clients. He has served a wide variety of industries and organizations since then, and joined Kohls Consulting Group in 1999. Previously, he was executive vice president of Sun System, New York. Later he served as the director of corporate operations for the Kapson Group, New York, a venture capital company with both service and manufacturing operations in several states.