The voluntary sector should be bolder in customising classic business strategy tools, by Dawn Wood

Mitch Thrower, the entrepreneur and triathlete, observed ‘In any dimension of business or life, listening and asking the right, relevant questions leads to a clear understanding' (1)

A strategic review provides organisations with the context to ask itself the tough questions and make the big strategic decisions for the future. However, the degree to which the planning process generates robust strategic debate and decision making may still be questioned. The strategy boom took off for the private sector in the 1960s, but some 50 years later, the voluntary sector has drawn very cautiously on the armoury of tools designed to guide the commercial strategists over the years. A survey for the Performance Hub conducted in 2007 by Jackson and Irwin (2), identified the top strategy tools that were being used by 248 voluntary sector organisations (around 80 per cent with under £1m income). Although SWOT had been used by over 70 per cent of survey respondents, PEST had only been used by 40 per cent. Core competencies and stakeholder analysis had been used by 33 per cent and 31 per cent respectively. Other tools shown in Figure 1 had been used by less than 30 per cent of respondents.

Figure 1: Most common strategic planning tools in descending order of usage 1) SWOT 2) PEST 3) Core Competencies 4) Stakeholder analysis 5) Cost Benefit Analysis 6) Internal Health check 7) Mind Mapping 8) Strategy Mapping 9) Scenario planning 10) Balanced scorecard 11) Market share analysis 12) Life cycle analysis

The implication of these findings is that many, predominantly but not exclusively, smaller charities have been able to operate without the need to use tools to generate the analysis and debate that should accompany the planning process. This supports our own observations as consultants that there is a tendency for organisations to default to producing a strategic plan which in the main describes what the organisation already does and the decisions already made, without necessarily challenging the status quo.

The recession clearly places charities under greater pressure as they experience increasing demand with the prospect of falling income. Tools offer organisations an opportunity to view familiar territory through new perspectives. They flag up areas of potential as well as ‘distractions’ and they can help to place an objective lens on what is often an emotional attachment. Perhaps now more than ever, a wider range of strategy tools might find their way into regular use in voluntary organisations.

This article briefly reviews the tools already in most common use and offers suggestions on how they can be applied more effectively (3). suggests other tools which facilitate analysis for decisions around future programme delivery and offers some general thoughts on how tools designed for the corporate sector can be used more effectively in non profit organisations.

Planning activities and common tools

Pesh Framjee outlined the strategic review process in his article ‘At the controls’ (see Caritas, issue 6,May 2008). Whilst there are a range of tools available which can support each stage of the review, relatively few are in common use. The three tools identified by Jackson and Irwin as most commonly used are discussed below:

•

SWOT – Strengths, weaknesses, opportunities and threats. This tool is easy to understand and has the advantage of encouraging planning and thinking about what could be better. The degree of familiarity with the SWOT is its primary drawback. It has become part of the staple planning diet, leading to lazy usage. The boxes are completed but not always interrogated for implications. This tool is most useful at the end of all the environmental scans to draw out the most important internal (strengths and weaknesses) and external (opportunities and threats) findings from all the analysis so far. A number of strategic options should then be identified for discussion.

•

PEST – political, economic, social and technology. Like the SWOT, the PEST is very easy to use, stimulates thinking and focuses on the wider operational context. The additional version (PESTLE) incorporates legal and environmental concerns as well. But as Jackson and Irwin indicated ‘There is a danger with PEST that organisations simply compile a list of factors and then ignore them in preparing their strategy’. I would recommend the discipline of selecting two factors in each category which have the most potential to affect the organisation and ensure these are taken forward into a scenario planning exercise to establish real possibilities and implications.

•

Core competencies – a more recent discipline encouraging organisations to work out their competitive edge. This can sometimes confused with staff competencies and may explain why the survey found the level of usage to be relatively high. The commercial tool makes assessment against three considerations: access to markets, added value to the customer, difficulty of imitation. You should focus on competencies which differentiate from other organisations, rather than those that may be central to operations but are common to other organisations. (4)

Tools for tough decisions on service delivery

Some of the most difficult decisions affecting organisations today are in the need to prioritise resources between different delivery programmes. These decisions can be very subjective, based on historical and emotional association, the views of vocal staff and volunteers, and the short term funding situation. Portfolio analysis is a valuable exercise to review the range of programmes and services offered and there are a number of tools available.

•

Cost benefit analysis was, perhaps surprisingly, the most common tool identified in the Performance Hub survey for comparing potential programming strategies. At a basic level the tool compares cost of implementation against potential income generated. Whilst of limited use in this form, given the complexity of considerations for voluntary organisations, it offers an important dimension to build into other analyses. More sophisticated versions incorporate social and other benefits which have to be expressed in financial terms.

•

The programming grid (see figure 2) provides a framework for assessing projects. There are a number of alternative criteria headings that could be used and the findings of a core competency analysis, and cost benefit would also readily feed in. This is a descriptive tool which, though easy to use, does not particularly lend itself to comparative analysis in this format.

The more prescriptive tools developed for the corporate sector involve a matrix format, enabling the position of each programme to be plotted against significant axes. The simple visual expression of the relative positions indicate where future support should lie.

•

The BCG (Boston) Matrix developed in 1979 builds in the dimension of the market context into which services are provided. The market share of programmes is plotted against an axis of market growth to identify which programmes are stars, cash cows, problem children and dogs. Resource priority is given to stars whilst cash cow are milked for their profit, dogs are ‘put down’ and problem children have to prove their potential. The terminology used in this tool is not particularly conducive to the voluntary sector and neither is the concept of market share or market growth per se. The combination of high share in a fast growing market place is the mark of success for products or services in a market economy. But the voluntary sector market is far more complex, requiring not just a market demand, but also a propensity to pay for the service which usually comes from a different source than those accessing the services.

•

The strengths/attractiveness matrix, also known as the GE (General Electric) or McKinsey nine box matrix develops from BCG with axes that transfer more readily to charities (see figure 3). Charity Strength (horizontal axis) indicates capability of the charity in delivering the project. This axis is best completed after some pre-analysis work using other tools such as the programming grid and core competencies so that assessment of charity strength is reasonably comprehensive. Market attractiveness (vertical axis) allows a realistic overview of the market opportunity. Again, a pre-analysis grid may be used to take a look at a range of factors such as level and growth in need/demand, levels of funding interest, nature of competition, social/political agenda, entry barriers. All of these will enable a robust assessment of the attractiveness of the market for each programme. As with all combinations of factors, highs in some areas will compensate for lows in others and discretion will be needed in the overall final assessment.

The tool can be applied at a number of different levels within the organisation. Deciding what to plot can raise interesting strategic questions in itself (see figure 4).

Figure 3: Strengths/attractiveness matrix

Some organisations may be dealing with very particular issues, in which case the axes of the matrix can be amended to reflect the most important criteria. For example, an organisation might want to look purely at funding opportunity or impact, rather than wider market attractiveness. In a very competitive field programmes might be plotted in terms of added value or unique selling point.

These matrices from the corporate sector enable organisations to identify their priority programmes, assess how resources should be deployed and help to identify where the charity may need to let programmes go, in order to meet its other demands sustainably. The value of these tools is that they are very easily adaptable. The tool can be made to work for the charity, rather than trying to make the charity fit the configuration of the tool.

Are some tools more appropriate than others for the voluntary sector?

The tools most frequently adopted by the voluntary sector are the descriptive tools, which marshal observations about the world in a manageable and meaningful way.

Other tools which utilise commercial terminology and focus on traditional market dynamics can feel alien to the sector, and create a sense that the tool itself is not appropriate. The measure of success for charities is rarely as straightforward as quantity of ‘sales’, share of the market, or profitability, with the possible exception of organisations which are predominantly contract funded, or involved in social enterprise.

Some tools rely on significant levels of knowledge about the market place and competitors. Such information is less easily accessible in the voluntary sector. This can make competitor analysis and market positioning more difficult, when little is really known about sector trends and competitor activity. The time and cost required to access the information makes the tool less appealing.

Tools that deal with detailed financial analysis can also prove difficult to transfer as the financial systems of many organisations are insufficiently nuanced to deliver the figures required.

However, the real value of any tool is in the prompts and perspectives it provides for considering different aspects of the organisation. Revised terminology, resetting of criteria and settling for pragmatic assessment rather than accurate figures, may be all that is needed to embrace the tool in voluntary organisations. In this sense all the tools are appropriate, but some just feel easier to use than others.

Making tools more useful

Around 30 per cent of those who reported using a tool in the Performance Hub survey, said it wasn’t helpful. This is often as much to do with the way in which the tool is deployed as the value of the tool itself.

•

The tool should take the organisation to the next stage rather than becoming an end in itself. In our experience, many organisations start their strategic planning with a SWOT. The information is usually captured in a team brainstorm session, without any prior work. It is written up neatly and filed for inclusion in the appendix of the strategic plan. No further reference is made to the information captured, what it might mean for the organisation, or how it might affect strategic decisions. A tool is only useful when it takes an organisation somewhere different. This is more likely to happen when the purpose of using the tool is clear from the outset – an understanding of what the tool is expected to contribute. It also requires that the findings of the tool are interrogated and discussed at a strategic level to draw out the implications for the strategic plan.

•

Whatever a tool or discussion has produced, the most important question is ‘So what?’- what does this mean for us and for our strategic processes? It might mean more research, further discussion or following up with another analysis tool.

•

Make the tool work for the organisation – not vice versa. A study by Paul Knott (5) 2008 interviewed business managers around their use of tools for strategic thinking. He found that in practice, managers take parts from different tools and mould them to suit their own objectives and processes. It reflects a more general view that there is a shift away from the strict application of the tool towards a more informal, facilitative use, to provide inspiration and not ‘packaged solutions’. Knott argues that to do this effectively, managers need to have a wide knowledge of tools and be able to reflect on them critically. Lower levels of training and engagement with strategy tools in the voluntary sector inevitably means that levels of knowledge and confidence are low. This can result in a more slavish application of the tool with the emphasis on doing it right, rather than doing it effectively.

•

Adapt and amend the tool to fit the specific circumstance of the organisation. Use criteria and axes that are most meaningful. Move away from number crunching or excessive postponements for even more information or research, and draw on organisational knowledge and intuition of the leaders, stakeholders and staff. This is not to say that tools should be used without adequate preparatory or background work, but that the tool should fit the organisation and not the other way round.

In a recession, charities have the opportunity to take back control and plan their own future. They can do this by customising appropriate tools to ask themselves the difficult questions, and take strategic decisions that will redefine who they are and what they want to achieve, given the resources they can command.

Key points • Identify clearly why a tool is being used and what it will deliver • Customise the tool to fit the organisation. • Do the background research • KISS (Keep it simple stupid!) • Interrogate the findings to inform decision making

(1) www.mitchthrower.com
(2) Tools for strategic planning: What works best. A Performance Hub Report by Annabel Jackson and David Irwin October 2007
(3) See also: Tools for Tomorrow – A practical guide to Strategic Planning for Voluntary Organisations. NVCO 2008
(4) See also: www.tutor2u.net
(5) Strategy tools: who really uses them? Paul Knott. Journal of Business Strategy, 2008