Strategic Planning for Nonprofits

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Strategic Planning for Nonprofits

Aug 24, 2015

by Gregory S. Dowell

Nonprofits are not immune to the need to plan strategically. Arguably, with more constrained budgets and a dependence on volunteers than businesses in the for-profit sector, strategic planning is even more important for nonprofits than for most other entities.

There is a real cost to strategic planning – in terms of volunteer time, management time, and resources. Even if the planning is done on the cheap, there is some kind of cost to be absorbed. Face it – nonprofits are fighting over what seems to be an ever-shrinking pie of available resources. When those critical resources are received, whether those resources are financial or human, the visceral reaction is to allocate everything to the organization’s mission. Living day to day without any real plan is always the default option, but that leaves the organization in peril and exposed to the next financial downturn.

So why is strategic planning necessary? Simply put, it is important to help the organization stay focused on its mission today, and it forces the nonprofit to look into the future – giving it a better chance of surviving. A strategic plan will typically look out 5 years or so – looking much beyond 5 years in most cases is too speculative, as there are just too many variables to consider. As one strategic plan winds down, it is important to re-boot the process and develop another plan.

There are a number of approaches, but the basics of strategic planning involve the following:

Announce that the nonprofit values the strategic planning process and will embark on its own plan.
Pick a leadership team that is representative of the nonprofit.
Have the leadership team recommend a set of strategic objectives.
Present these objectives to the larger body. Look to gain support for the objectives and be willing to modify as necessary.
Develop a business plan to attain these strategic objectives.
Assign responsibilities for each of the objectives to teams; each team to be headed by a leader.
Determine how success will be measured and how often it will be measured, and by whom.
Commit the necessary resources to achieve the plan.
Communicate with everyone in the organization to gain buy-in and to explain how the organization will benefit from the plan.
Report on the process to the entire organization on a regular basis.

Strategic planning needs to be led by someone or, preferably, by an internal team that is represented by the various sectors of the nonprofit – if the organization does not have that kind of talent, an outside consultant can be hired. If a team is developed, someone must lead the team. Importantly, all levels of the nonprofit must be involved in the process, including finance, volunteers, management, staff, donors, and benefactors (and maybe community representatives as well).

A recent article, “Tips for a Successful Not-for-profit Strategic Plan” (by Ken Tysiac) appeared in the Journal of Accounting, highlighted the need for adopting the strategic planning process. To quote from this article:

“. . . without a well-constructed strategic plan, resources can be wasted, and the organization may never develop the focus and mechanisms needed to accomplish its goals. Worse, an organization without a strategic plan might never even figure out exactly what its goals are.”

This article calls for developing three objectives in the strategic planning – more than that will run the risk of spreading resources too thinly. These objectives should be simple and clearly stated. Furthermore, it is very important to come to consensus on these objectives – which is where the leadership becomes critical.

Developing a business plan to achieve the objectives is next. The plan should be as specific as possible, and each part of the plan should lend itself to measurement; we often refer to these measurement tools as “metrics”. A number of sayings abound, but I like thinking that we have a better chance of achieving what we commit to measuring. The article in the Journal of Accounting mentions the SMART method for developing measurement criteria, which stands for Specific, Measurable, Attainable, Results-oriented, and Time-bounded.

An example of a nonprofit setting a measurable goal is given in the article:

“Ducks Unlimited set its metrics at protecting or restoring at least 480,000 acres of wetlands over five years, reaching 700,000 members, and achieving a $2 million annual operational surplus.”

A critical piece of the planning process is the buy-in aspect. The plan will fall on its face if it does not become part of the day-to-day fabric of the organization. It will be a challenge but, if a plan involves the entire organization throughout the planning process, and if the nonprofit makes the process of its operations, it will reach that critical stage of becoming institutionalized. Planning is hard, but implementing the plan will be harder still. Many find it far easier to do business as it has always been done, which is the death knell for change. Leadership must do its job, not just with planning, but with gaining and maintaining consensus along the way, especially as the plan is implemented, in order maximize the chances of achieving the objectives.

This process is not for the faint of heart – it represents a huge commitment. The stakes for nonprofit organizations are high, though, and the risk of failure due to a lack of strategic planning is all too real.

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by Gregory S. Dowell Updated May 16, 2023 Spring is the traditional kick-off to wedding season, and thoughts quickly turn to the wedding venue, gifts, the happy couple, and, of course, the guest list. Lurking somewhere in the shadows, behind even that strange uncle you barely know, is another guest that needs to be considered: The tax impact on the newlyweds. To start, newlyweds will have two options for filing their income taxes in the year of marriage: Filing status can either be married filing jointly, or married filing separately. In the vast majority of cases, a couple will benefit with a lower overall tax burden to the couple by choosing to file married filing jointly. One of the classic cases where a couple may consider filing separately is when one spouse has significant amounts of medical expenses for the year. 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As this article explains, from the federal income tax standpoint, some individuals marrying next year may come out ahead by either deferring or accelerating income, depending on their circumstances. Others may find it to their advantage to defer a year-end marriage until next year. For some quick background, a “marriage penalty” exists whenever the tax on a couple’s joint return is more than the combined taxes each spouse would pay if they weren’t married and each filed a single or head of household income tax return. Before President Trump’s TCJA, only the 10% and 15% married filing jointly brackets were set at twice that of the singles bracket, and so the marriage penalty effect on joint filers applied in the brackets above the 15% bracket. Beginning with the 2018 tax year, however, the TCJA set the statutory tax brackets for marrieds filing jointly-through the 32% bracket-at twice the amount of the corresponding tax brackets for singles. As a result, the TCJA eliminated any tax-bracket-generated marriage penalty effect for joint filers where each spouse has roughly the same amount of taxable income-through the 32% bracket. For example, if two individuals who each have $215,950 of taxable income file as single taxpayers for 2022, each would have a tax bill of $49,335.50, for a combined total of $98,671. If they were married, their tax bill as marrieds filing jointly would be $98,671, exactly the same amount as the combined total tax they’d pay as single taxpayers. Because the 35% bracket for marrieds filing jointly isn’t twice the amount of the singles 35% bracket, the marriage penalty effect will still apply to joint filers whose income falls in the 35% bracket. Using 2022 tax tables, two single taxpayers may each have $500,000 in taxable income, for a combined total of $1,000,000, without having any of it taxed higher than 35%. 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The bonus is the result of two factors: 1) the tax brackets for marrieds filing jointly cover wider spans of income than the tax brackets for taxpayers as singles; and 2) the taxable income of the lower-earning individual may not push the couple’s combined income into a higher tax bracket. In such a case, it will probably be better from the tax standpoint to accelerate the marriage into this year if feasible. There are a number of other factors that should also be taken into account when determining the effect of a marriage on income taxes of the couple. As mentioned early in this post, the first decision is to verify that filing a joint return is preferred to filing separate returns. In addition, many provisions of the tax code phase out completely (or decrease partially) as adjusted gross income increases. In a perfect world, there would only be good surprises for a newlywed couple following their wedding. To avoid any unpleasant income tax surprises, we always recommend that a newlywed couple take the time to make a projection of what their income will look like when combined as a couple, and determine what the tax bill will look like, at the Federal and State levels. After all, planning ahead, communicating with each other, discussing finances, and avoiding unpleasant surprises are some of the keys to a long marriage.