Scenario Planning: Tool to Manage Change
Scenario Planning: A Process for Anticipating Change in A Nonprofit Organization
Nonprofit organizations are facing rapid and challenging change over the next couple of years. Funders at all levels are cutting back and fundraising is expected to become increasingly more difficult. One method to plan for this type of change and an uncertain future is scenario planning.
Scenario planning is defined as a strategic planning method that organizations use to make flexible long-term plans based on generating a number of “what if” situations and then options for how they might respond to the situation.
Nonprofit organizations for years have generated “what if” budgets using a best case – worst case type projections for fundraising. Scenario planning takes this exercise a step further by reviewing the external environment and determining how an organization might need to respond to critical changes.
Organizations facing program cuts, service increased demands and funding limitations are undertaking scenario planning as a way to organize board, staff and volunteers into deciding on alternative futures. It makes many managers feel empowered to know that they can actively plan for the organization’s future without waiting for the next level of bad news.
Think of scenario planning as the “new” strategic plan for organizations experiencing rapid and significant change. We live in times that call for significant change and reorganization for nonprofit organizations. Funding from government, corporations and foundations has been dramatically impacted by the economic crisis. Doing business as usual or trying to ignore what is happening will get many organizations into trouble. One way to manage the change and stay one step a head of the funding turmoil is to prepare scenario plans.
Much like strategic planning, having a clear plan with strategies, tactics and financial projections gives us important tools to manage change. We are certainly living in a time now where scenario planning has become as important tool for nonprofit organizations wishing to chart their course for the future.
Description of the Process
Scenario planning starts by dividing our knowledge into two broad domains: (1) things we believe we know something about and (2) elements we consider uncertain or unknowable. The first category refers to trends occurring that may have an impact on an organization. Examples of trends in 2009 would be a severe recession that results in a decrease in corporate gifts, high unemployment and/or increased lines at food shelves. We need to be aware of these trends in order to consider adjustments for organization plans and goals. Understanding the specific trends helps us be smart in making decisions for the organization.
The second category refers to uncertainties in our world such as the election of a new president and changes as a result of the new administration, future stock market fluctuations and the impact on giving and endowments, and increased unemployment at unparalleled rates leading to more home foreclosures and homelessness. Another example would be decreasing tax revenues and the potential impact on future state and local government funding.
“The art of scenario planning is the blending of the known and the unknown into a limited number of internally consistent views of the future that span a very wide range of possibilities.” We call these Scenario Options – a third step in the process. Scenario options are those “what if” responses to a changing environment. Identifying two to four scenarios or alternative futures provides information for the organization to thoughtfully plan and consider.
A fifth step in the process is to create budgets and cashflow projections to reflect the scenario options that you have generated. This step can be made easier if you have a program based budget and financial statements well organized by programs or major lines of business in your organization. Worksheets exist to help with this step. It is important to have your financial information ready and organized for comparisons and careful scrutiny. Both a budget and a cashflow are needed in order to demonstrate the financial impact and the resulting in flow and out flow of cash in your organization.
Scenario planning can be done with a team or small group of individuals. It can be done by the entire staff or with a few outside volunteers or advisors. The underlying basis of scenario planning is the assumption of change coming in the near future. Groups often hire an external consultant to facilitate their discussions since change can cause reactions from panic and fear to spunk and opportunity.
Scenario planning can be done in a day or it can be done over the course of three to six weeks depending on the process that you design. The process can involve the board, management team and the staff or it can be a very small group composed of volunteers that know the organization very well. In some cases the Executive Director of the organization may conduct scenario planning and present the final results to the board of directors.
The process can vary but the end result must be an action plan for each scenario with the following:
o Environmental scan
o Scenario options
o Financial projections
o Action plan describing how the scenario would be implemented
Author: Kathryn S. Keeley
Artice Source: http://www.articlesphere.com