What is Strategy?

PEG founder John Newsome answers the question and provides a list of helpful resources for non-profit leaders.

What is strategy?

Strategy is a management discipline, taught at the world’s leading business and management schools, used by organizations to determine how best to allocate scarce resources in order to maximize profits and/or otherwise achieve the greatest possible impact.  Strategy looks holistically at an organization’s major opportunities and challenges, and seeks to answer key organization questions – How quickly should we grow?   How will changing customer demographics impact our work? – using approaches and “tools” drawn from more specialized fields such as economics, finance, operations/project management, human resources management, and organization development.

Although good strategy recognizes the uniqueness of every organization and situation – for example, no two organizations should grow at exactly the same pace, nor respond in exactly the same way to changing client and customer demographics – in a few instances, strategists have been able to identify generalize-able frameworks and approaches that can help organizations understand and answer their key questions.  Strategy consulting firm McKinsey & Company’s famous “Seven S” framework (shared values, strategy, structure, systems, staff, style, skills) is used in corporate and non-profit boardrooms all over the country as a starting point for organization planning.  Likewise, Harvard Business School professor Michael Porter’s “Five Forces” approach generally is regarded as the Touchstone for leaders starting new organizations or entering new lines of business.

What is non-profit strategy

Like “traditional” strategy, non-profit strategy – also taught at the nation’s leading management schools – seeks to optimize resource utilization to maximize impact, again looking holistically at an organization’s challenges and opportunities, and drawing from many of the business and management fields noted above, as well as from fields and practices more specific to the non-profit sector (e.g., values clarification, social impact/double bottom line analysis, fund development).

Here, too, every organization’s strategy is unique, as are the opportunities and challenges it faces (a rose is a rose is a rose, perhaps, but a charter school in Houston is not a charter school in Oakland, which most definitely is not an AIDS prevention organization in Washington, DC).  Even so, non-profit strategists have been able to identify patterns and best demonstrated practices that can help inform organization planning and day-to-day management more broadly (e.g., at some point in its existence, every charter school and every AIDS prevention organization must reconsider its long-term goals and metrics, determine how best to recruit, develop, and reward staff, manage through financial complexity, and the like).

For instance, the approach to goal setting (Intended Impact and Theory of Change) popularized by the Bridgespan Group, America’s leading non-profit strategy firm, frequently is cited as a key planning tool for non-profits across the spectrum.  Likewise, the balanced scorecard approach popularized by organizations like the United Way, New Profit Inc., and McKinsey & Company, is regarded as one of the leading methods of social impact assessment[1].

How does non-profit strategy differ from non-profit strategic planning?

Although the terms are virtually identical, practitioners of “strategy” generally approach their work differently than do practitioners of “strategic planning”.  Generally speaking, practitioners of non-profit “strategy” depend heavily on values-based conversation – as well as on rigorous, quantitative and qualitative data analysis (e.g., demographic data, outcome data, economic data) – in their consideration of the “total” organization: its vision and mission, impact to date, goals, programmatic activities, organization (staff, skills, systems), and economics.  By contrast, most “strategic planners” tend to favor values-based conversation to rigorous data analysis, and may not consider as deeply questions regarding impact and metrics, organization and, especially, economics.

Consequently, non-profit strategy may be especially well-suited to larger and/or more complex organizations, and more complex and unique organization challenges – e.g., impact assessment, organization realignment, expansion (or contraction), replication – and non-profit strategic planning better suited to smaller and/or less complex organizations and challenges.

Until recently, non-profit strategy was the near-exclusive, pro bono domain of the leading for-profit consulting firms, like McKinsey & Company, Bain & Company, and BoozAllen & Hamilton.  However, as the complexities facing non-profit organizations have grown due to increased government and funder scrutiny, competition for funding, and other factors – and as concern has grown as well about the “uneven” output of traditional non-profit strategic planners and corporate pro bono teams alike – so too has grown the field of professional, non-profit strategy.  In general, non-profit strategy carries a higher price tag than do its aforementioned kin.  But according to strategy’s proponents: You get what you pay for.

Helpful non-profit strategy resources:

Prominent strategy articles

Business schools with nationally regarded non-profit strategy and management programs

Highly regarded strategy firms with notable non-profit expertise and/or practice areas

Highly regarded non-profit strategy firms

  • The Bridgespan Group (non-profit spin-off of Bain & Company, led by Harvard Business School professor Jeff Bradach)

  • FSG Social Impact Advisors (formerly The Foundation Strategy Group, founded by Harvard Business School professor and “Porter’s Five Forces” namesake Michael Porter)

  • TCC Group (formerly The Conservation Company)

[1] “Double Bottom-Line Project Report,” Catherine Clark, Columbia Business School et al.