Does Strategic Planning Matter?

Lori Roth Gale, MPPM, Principal Strategic Learning Associates, LLC www.strategiclearningassociates.com

Staten Island Not-for-profit Conference College of Staten Island April 10, 2015

2

Today’s Focus

•  Introductions – who is in the room?

•  Strategic Management Basics

•  CEO Succession Study Findings

•  Discussion

What’s Strategic Management?

Strategic management is the process of building capabilities that allow an organization to create value for consumers, stakeholders, and society, sustainably, while operating in a competitive environment.

Components: ●  Mission, Values ●  Strategy: Consumers, Offerings, Timing, Competitive Advantage ●  Organization: People, Structure, Culture, Activities, Leadership ●  Performance (output and impact): Goals, Metrics, Milestones

3

Strategic focus shifts at each lifecycle stage

4 Source: P. Connolly, Navigating the Organizational Lifecycle, Boardsource, 2006.

Why develop a strategic plan?

● Clarify mission and articulate a vision for complete achievement

● Engage stakeholders through an inclusive process to set the organization’s future direction (incl. in response to crisis)

● Define priorities to guide choices when facing conflicting demands for limited resources, and changing environmental conditions

● Build support for your priorities as a sound response to these conditions

● Focus stakeholders on their roles in support of these priorities and on learning from each others’ experience

● Develop a means to evaluate performance based on clear measures

● Demonstrate progress on issues that are critical to the org’s success

5

Golden rule of strategic management

Alignment Performance

6

Research problem and context

● NP executive transition was increasing in the 2000s.

–  UWNYC study (2003): 45% of EDs intend to leave by 2008.

–  Annie E Casey Foundation study (2004): 65% intend to leave by 2010

–  CompassPoint – Meyer Foundation study (2006): 75% intend to leave by 2011

● Difficulty measuring impact of SP on Performance

–  Numerous studies 1970-90 with conflicting findings

–  Validated measures indentified through meta-analysis in 1991 (Boyd)

–  These measures were applied successfully to a large sample of YMCAs in 1996 (Siciliano)

7

Purpose: to explore the impact of strategic planning after CEO succession, a potential means to stabilize organizations facing leadership change.

Research: Strategic planning among successor CEOs

Independent variable: Dependent variables

Organizational Performance:

Financial Performance

CEO satisfaction and retention

Strategic Planning Process

Stakeholder involvement Formal Planning Committee

Planning assistance

Planning Outcomes: Strategic Priorities

Incremental change Strategic reorientation

Control Variables

Successor attributes (Origin, Identity)

Organization attributes (Size, Transition post-2008)

Strategic Planning Indicators

Moderator Variables:

Source: Lori Roth Gale, 2015 8

Methodology and sample

●  Survey (online) ●  Financial data drawn from IRS Form 990s ●  115 Candidates identified through 24 referral sources

–  Philanthropic foundations, federations (grantee/member lists)

● 73 executives responded, 68 fit the study’s criteria

–  Chief execs of human service orgs in NYC, tenure of 3-10 years

–  Budgets range from $1.1m to $245m (46% are $1-5m)

–  39 of the respondents entered their jobs in 2008-2011

–  74% outsiders, 21% succeeded founders; 31% succeeded interim EDs

9 Source: Lori Roth Gale, 2015

Study measures

Strategy Development

1. Clarified mission

2. Clarified obligations (contracts, legislation)

3. Assessed external opportunities and threats

4. Analyzed competitors’ offerings to same stakeholders

5. Assessed internal strengths and weaknesses

6. Identified critical issues to address in order to succeed

7. Articulated a vision of success (stretch goal)

8. Selected and documented a strategy

9. Identified broad goals and measurable objectives for each

10. Created an action plan

Planning Outcomes

●  Financial performance: profitability Δ

●  Satisfaction at the end of year 2

●  Current intention to remain in the position

●  Intention to seek a future ED position

Planning Process

●  Formal strategic planning committee

●  Stakeholder involvement in planning

●  Formal planning assistance

Strategic Priorities

●  Incremental change

●  Strategic reorientation

10

Findings: “main effects”

● Strategic planning is positively associated with financial performance

–  Planners: 6% increase in “profitability” vs non-planners: 6% decrease, between predecessor’s last full year and successor’s year 3.*

● Planning is positively associated with CEO job satisfaction and retention

–  Extent of engagement in “ identified goals and objectives” (satisfaction), “articulated vision” and “documented strategy” (intention) are positively associated with CEO job satisfaction and retention.*

● CEOs attribute job satisfaction to: –  Identification with the mission or program model –  Strong, supportive board –  Strong, supportive staff –  Organizational success and/or progress with the plan –  Pleasure derived from work, the challenge, learning and growth in their jobs.

11 Source: Lori Roth Gale, 2015 * CEOs entering 2008-11

Findings: structured stakeholder involvement

●  Stakeholders involved to the greatest extent: CEO and board chair, and to the next greatest extent: senior managers, subset of senior mgrs, subset of board.

●  Formal planning committees are associated with greater engagement in strategic planning practices, and greater board involvement in planning. Over half of the users of such committees used outside facilitation. Funders engaged in planning to a limited extent, but with positive impact on profitability.

●  Successors hired from outside the organization engage in several planning practices to a greater extent: assessments of the internal and external environments, use of formal planning committees, broader staff engagement in planning, and priorities that expand scope and reach

●  Of the 24 participants who used formal planning committees the vast majority were hired from outside the organization.

●  A combination of 7 “SP” and “SI” variables best explains the variation in profitability, including articulating vision, engaging board chair and senior mgrs

12 Source: Lori Roth Gale, 2015

Findings: strategic priorities

●  Two types of priorities have significant, positive financial impact by year 3: improve efficiency (+5%) and change to organization’s structure (+6%)

●  A combination of 7 variables – strategic priorities and use of formal planning committee – best explain the variation in profitability, including addition of a new service and change in organization’s structure.

●  “Outside” successors report pursuing 2 types of strategic priorities to a far greater extent than insiders: “improve enrollment” and “add new service.”

●  Participants report a rich array of org changes resulting from strategic plans:

–  Expanded scope of services –  Original strategic plan goals met; subsequent plans developed –  Improved, standardized, and/or integrated service model –  Increased and/or diversified revenues –  Improved fiscal health and/or financial management –  Increased staff development and/or human resource infrastructure

13 Source: Lori Roth Gale, 2015

Strategic planning fuels organization learning

14

2. Interpreting

3. Integrating 4. Institution-alizing

1. Intuiting

Adapted from Crossan et al., 1999

● Do we have a clearly defined purpose?

● Do we have a challenging but achievable medium-term goal?

● Do we know who our consumers are, and who they are not?

● Does our offering meet the needs of our consumers?

● Do we have a source of competitive advantage?

● Do we have a short-term action plan with deliverables, responsibilities and dates?

● Do we have a means to measure performance, evaluate and revise?

● Does everyone in the organization understand the above, and have a means to share what they are learning?

Does your organization have a strategy?

15

Discussion

16