Non-profit performance evaluation: strategy (part 5 of 6)


Paul Penley

Paul Penley

Paul Penley

Recently a financial advisor asked: what has surprised you the most when evaluating charities? I did not have to think long about the answer. It’s an outstanding juxtaposition: I constantly find good intentions and big dreams, but I rarely observe well-executed strategic plans.

Most often, optimistic goals are mislabeled as the strategic plan. Visionary leaders see point B in the distance. I come in and see point A. And no one can find the line between the two. The next time you read or hear about an organization’s strategy, look for step-by-step instructions about how they will get from here to there. If you can’t find a sensible price tag tied to a timeline of action items assigned to specific staff members, you are probably looking at goals rather than a good strategy. Chasing goals without a sound strategy is a high-risk proposition.

That’s why testing the substance of non-profit strategies is step five in our six-step process for evaluating non-profit performance. As a reminder, the six steps involve measuring charities against 30 standards for non-profit performance arranged in the following categories: (1) Leadership, (2) Financial Management, (3) Financial Sustainability, (4) Leverage, (5) Strategy, and (6) Impact. We explored the first four categories in my last four articles.

How do you evaluate strategy?

Strategy boils down to an executable plan that directs and gauges progress toward goals. Strategic plans comprise clear milestones and deadlines with specific assignments for staff to complete along the way. The plans tell charities when to cut a program, create a new program or expand a successful program. Well-executed strategic plans leave a trail of improvements to what has been, while taking advantage of new opportunities that fit the plan. Good strategies don’t make organizations overreach, but they do capitalize on their strengths.

When you are looking for indicators of a good strategy, ask these five questions:

•       Does the 1-5 year plan have specific milestones and deadlines?

•       Is the plan for the near future realistically based on previous results and growth trends?*

•       Is there a specific and significant recent program improvement?*

•       Are the opportunities to further the mission concrete rather than vague or generic?*

•       Are the areas/countries of operation clustered regionally for effective oversight?*

The questions marked with an asterisk (*) do require a judgment call rather than a simple calculation. After all, charity evaluations are both a science and an art. In the end, the answers to these five questions should be ‘YES’. Here’s why.

A good plan

If you plan to get somewhere but don’t have directions or an estimated time of arrival, then you don’t have a plan. You have a dream. It’s good to have big dreams, but it’s better to have a strategic plan to make them come true. That’s why the first question to ask about strategy is: does the 1-5 year plan have specific milestones and deadlines? Milestones and deadlines grow out of a roadmap to success and create accountability. They indicate whether sufficient progress has been made toward a goal or if a mid-course adjustment is required.

A good strategic plan for the future also has to take into consideration the past. A charity is not beholden to past performance, but it cannot ignore the trends. A couple of years ago, one charity reported serving 2,600 people with a strategic plan to reach 220 million in 10 years. That 220 million-person plan for the future did not realistically base itself on previous results and growth trends. Another children’s charity recently reported a three-year growth rate of clients served at 127%. The strategic plan called for 100% more growth in the next two years. Although the planned growth rate increased from previous years, the charity had a track record for rapid growth. Those types of realistic elements to a strategic plan are what you want to find when you ask: is the plan for the near future realistically based on previous results and growth trends?

Constant improvement

No charity is perfect. Every organization can improve. When TCC Consulting surveyed 700 non-profit leaders, the flourishing organizations were found to have great leaders who could make mission-related adjustments. Making improvements to how a charity does what it does is essential for success. If a charity wants to communicate that all systems are perfect and ‘no improvement is needed’, I get concerned. That’s why we all need to ask the third question above: Is there a specific and significant recent program improvement? Vague answers to this question may indicate that an organization is resting on its laurels rather than upgrading its services.

Opportunities to further the mission

Many charity leaders are optimistic about the future. They see endless possibilities for how their programs could expand. That inspiring vision makes them great pioneers, but it needs to correspond to legitimate opportunities that fit an organization’s capacity and strengths. The simplest way I know to sift through the endless possibilities is a quick reality check. Here’s the question to ask: Are the opportunities to further the mission concrete rather than vague or generic? Organizations that complete a SWOT analysis and report general opportunities to ‘capture growing national interest’ or ‘reach more kids than ever before’ have not identified concrete opportunities. Concrete opportunities contain specific parameters. When CURE International has the opportunity to ‘double the number of patients served through more effective use of existing facilities’, then we are staring at a concrete opportunity. Those opportunities should get donors excited.

Strategic expansion

Not every new opportunity is a good opportunity. Charities that chase new opportunities wherever they arise can run into a geographic dispersion of programs that are difficult to manage.  Program locations can spread out rapidly without rhyme or reason. As a result, transportation costs increase for key staff members to perform frequent on-site visits. For international charities, cultural and logistical particularities for each region and country complicate operations. It’s not uncommon for miscommunication, absenteeism and even embezzlement to occur among newly chosen in-country partners or staff. Expanding into locations that are far apart rather than geographically adjacent risks compromising quality control. That’s why you should ask: Are the areas/countries of operation clustered regionally for effective oversight?

The last step

Reviewing the five (above) indicators of a good ‘strategy’ gets you past step five of the six-step charity evaluation process. The next post will explore the holy grail of charity evaluations: impact. No charity evaluation process is complete without it.

If you are wondering where to find the data needed to do these cursory evaluations, provides it to subscribers in two-page non-profit Analytical Overviews that can be acquired for any US-based 501(c)3. Remember these six steps and 30 standards comprise only a cursory evaluation. It’s not the level of due diligence appropriate for major gifts. But these simple questions do empower donors of all sizes and sophistication to get informed quickly and give more wisely.

Do you know any other easy-to-measure indicators of a good strategy? Or do you disagree with the validity of any standard described above?

Paul Penley is director of research at the philanthropic advisory firm Excellence in Giving and creator of

Further articles from Alliance magazine related to these topics:

Tagged in: Charity analysis evaluation strategy

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