Non-Profit Strategy on Fire

January 12, 2023

Tumultuous Times for Non-Profit Strategic Planning

As we reflect back on another year at The Planning Group, it is striking that most of our growth came from non-profit strategy clients and for the first time, more than half our clients were new to us. In 2022, we were fortunate to work with smart people at charities, municipalities, regulators, trade associations, professional associations, public health agencies, accreditation bodies, benefit plans, school boards and universities. While there was a diverse sectoral spread, we predominantly focused on healthcare.

Although certain trends in our strategy work developed before and during Covid, 2022 saw the most pronounced and often hostile confluence of factors for non-profit sectors. “Unprecedented” and “perfect storm” are overhyped and overused, but they apply to the current and expected operating environment of many of our clients as they endeavor to make non-profit strategy.

• Costs are increasing across the board. Long before inflation became news, non-profit organizations were experiencing cost increases in every line item and predicted no end in site. News of record inflation only exacerbated the downward pressure on the ability and willingness of donors and governments to maintain funding levels.
• Funding is under pressure. Most non-profits will simply not receive funding commensurate with their increased costs. My clients predicted the impacts of government austerity and corporate and individual spending caution as a critical trend in 2020. Any hope of flatline funding has been shattered in recent months.
• Human resources are severely constrained. The war for talented people will disproportionately harm non-profit organizations as they compete with companies for their most important resource. In an increasingly complex technological, regulatory, competitive and financial operating environment, non-profit organizations are searching for more sophisticated resources.
• Politics and political expediency drive important decisions. We welcome governments to step up with more resources, but those resources are often misplaced. Politicians proclaim “we need more nurses” or “we need more foreign trained professionals,” but it often obfuscates the more complex path to long-term systemic change that many non-profits hope to foster.
• Consolidation is changing almost everything. Demographics, cost pressures and other market forces are dramatically changing the playing field in almost every industry and sector. Imagine an industry association serving a sector that has seen the number of firms, and members, shrink by 75% in under 5 years. Imagine that same association serving a disintermediated industry where entire links in the supply chain have evaporated.
• Technology and non-traditional market entrants fuel disruption and uncertainty. With so much flux, the environment for disruption is ripe. While new technologies and processes are assisting non-profit firms, they are also competing for value, attention and revenues. The presence of new competitors and new technologies also raises the bar in a host of areas. Many non-profits will not survive the next few years without, for example, highly sophisticated capabilities for digital marketing and engagement. This is now basic price-of-entry.
• Demand for impact and service is exploding. In the midst of all other operating conditions, we need every non-profit more than ever. Choose any area from youth mental health to support for start-ups. Our population is getting older and the resources to support them are shrinking. Conditions to start a business, or be a professional, or do just about anything supported by a non-profit is getting more complex.

It is in this context that so many of our clients made strategy in 2022. Every factor related to costs and demand increased while the factors related to funding and resourcing decreased. Productivity is no longer a dirty word as non-profit organizations must constantly increase their impact without a commensurate increase in resources. While many non-profits took a risk averse approach to organizational sustainability in the past, increasing impact in a dynamic operating environment is now the key to ongoing relevance and their own long-term sustainability. In short, organizations can’t do their good work if they don’t exist.

For the first time in 20 years, our clients are truly questioning, reassessing and reimagining their primary purpose and mission. In the past, we could usually assume that the answers to “what is our reason for being” and “who do we serve” were adequate as a foundation to formulate a sound non-profit strategy. This is changing.

Does a healthcare (or safety or financial) regulator have a role in ensuring adequate numbers of new registrants or do they just regulate them for the public good once those registrants are in service? Does a trade or professional association have a stake or an opinion in the consolidation of their industry? Should they help the shrinking number of independent firms in their space survive in an environment of consolidation? If they could, should associations protect those firms…or should they support and encourage consolidation? Should those same associations ban, allow or encourage private equity firms (who are active in consolidation) as members? What about the technology firms and non-traditional market entrants who are disrupting their industry?

Non-profits have lived through change in the past, but nothing as profound and blurred as the operating environment in 2022.

Non-Profit Strategy in a Hostile Environment