Over the course of the past few months we’ve spoken with a great number of directors and executives across the not-for-profit/charity and professional associations spaces and if there’s one theme that has consistently stood out for us, its that (a) the role of an organisation’s strategic plan, and (b) how it guides the work of directors is in many places critically misunderstood. For example, some directors have told us they’re struggling to engage their CEOs in discussions about goal-setting and long-term commercial performance, and conversely, CEOs are telling us their Boards “have no idea what they’re doing [in relation to] strategy”, leaving them effectively unguided, unsupported, and consequently, unmotivated. When we’ve asked to see these organisations’ strategic plans to establish further context, some we’ve seen happen to be a series of immediate term dot-point goals or worse yet, one was a one-page statement of their corporate values - why? Because the members like it.

Something is very wrong here, particularly when you consider the role of the board as an oversight mechanism, rather than a separate source of operational bench strength (all else remaining equal), or to borrow from legal discourse, a mere mouthpiece for company members. The Board’s fundamental role in acting as an organisational steward is twofold: (1) set and oversee strategy, and (b) employ and through the Chairperson, supervise the CEO (or equivalent) and the Company Secretary where there is one.

Defining your “True North”

Not-for-profits and social enterprises usually find themselves operating in sectors where change is the only constant. In these circumstances, a well-crafted strategic plan serves as the compass guiding an organisation in the pursuit of its foundational purpose(s). It enables boards and senior executives to define an organisation's purpose, establish clear goals, and deploy resources to achieve sustainable competitive advantage and/or social impact. A well-crafted strategic plan also facilitates effective decision-making, fosters organisational coordination, and provides a framework for measuring and evaluating organisational and individual performance.

You’ll often hear us refer to the importance of a firm’s True North, which refers to a fixed, definitive point on the globe at the top of its rotational axis (otherwise known as the North Pole) compared to Magnetic North which is where a compass points when it aligns itself with the Earth’s magnetic field - it is not a fixed point and shifts when the Earth’s magnetic core fluctuates and bends - usually over hundreds of years. The difference between the two norths expressed here is called “magnetic declination” and while the declination of Magnetic North is currently a mere 30 degrees Westward, soon the two will converge and bring them into a perfect, albeit temporary alignment. As you’ve probably guessed, our preference for True North is predicated on its certainty, while we regard Magnetic North as being representative of governance best practice (the exact standard for which is the subject of constant, vigorous debate) and/or innovation in this field: while an organisation’s strategic planning methodology may in the normal course deviate - even if only slightly - from best practice, they may on a rare occasion find a perfect alignment; setting the standard that others then follow, and in time beginning to deviate again as circumstances and practices change when other organisations discover innovations of their own.

Into the tempest

Ask board directors what their main skill area or interest is and chances are “strategy”/”strategic planning” will rank pretty highly. And so it should, its what they’re there to do in the first place. However, we must be conscious of confirmation bias in approaching strategic planning as past experiences in varying organisational/industry contexts may not readily translate into others. Consequently, all too often strategic planning endeavours fall prey to common pitfalls that hinder their effectiveness and like a withered topsail in a fierce tempest, fail to drive performance in the organisations they serve. As board directors and senior executives, it is imperative to recognise these pitfalls, understand the true purpose of a strategic plan, and implement measures to ensure its efficacy in driving organisational growth and sustainability. While we could go on all day about strategic planning and its intricacies, we’ve summarised a few common pitfalls we’ve observed in practice here:

• Short-term focus: You’ll recall that at the beginning of this article we mentioned a strategic plan that was a simple dot-point list. That particular dot point list was wholly operational in nature, and only covered a period of less than six months. One of the gravest mistakes firms can make in strategic planning - especially earlier in their life cycle - is succumbing to the allure of immediate/quick gains at the expense of long-term viability of the enterprise. While short-term wins are crucial not only for gaining traction but also as a motivational force, they must be subservient to and acutely aligned with an overarching vision that extends beyond quarterly targets. Otherwise, you may very well find yourself completely at the mercy of market forces, with no strategic foresight to guide the deployment of resources or foundation for the directing of social impact initiatives; meaning those initiatives usually end up smaller, more localised and largely unsustainable.

• Lack of clarity: Nobody wins in situations where instructions are unclear. A lack of clarity in strategic goals can sow confusion within an organisation, leading to misaligned efforts and wasted resources. One must remember that it is the board’s role to set distinct performance criteria through which the CEO’s achievements are inexplicably tied to the pursuit of strategic initiatives, setting the foundations for remuneration and reward. If a board cannot do this, they risk undermining their CEO - breeding conflicts in ideas and priorities, while destroying cohesion between the CEO and Chairperson leading to governance failures. The strategic plan should always be the starting point for any KPI setting exercise, and while it can be tempting to make your strategic goals as aspirtational as possible, overly complex objectives have the opposite effect of eroding your team’s ability to effectively execute the plan, hindering progress and sapping morale; which in turn tends to lead to staff and/or volunteer turnover.

• Insufficient stakeholder engagement: Boards love strategic planning and there is a tendency to design and agree upon a strategic plan in a wholly divorced exercise together with their executive team. A strategic plan that fails to incorporate input from key stakeholders, such as employees, customers, and partners, overlooks valuable insights and risks overlooking critical blind spots. As Andrew Hollo of Workwell Consulting would probably ask: when was the last time you asked a staff member if they understood how they contributed to your organisation’s overall strategy? Do your external stakeholders understand what you’re seeking to achieve and support it?

• Inflexibility: Chances are if you’ve ever served in the military you would have heard the phrase “the best laid plans never survive first contact”. This phrase is a re-interpretation of Prussian General Helmuth von Moltke’s observation in 1880 that flexibility was critical to success in military strategy, which applied to business simply means be prepared to adapt. But the thing about flexibility in strategy is it has to be guided by an underlying, solid, logical core or it quickly becomes disjointed and falls apart. Rather ironically in illustrating this point, General Moltke was not an overly adept commander and did not have a strong logic to his deployment of the German Army in WW1. His strategic decisions were myopic, reactionary and poorly coordinated, and led to the static, murderous trench warfare paradigm on the Western Front which lasted until the war’s conclusion.

  In a like manner, we live in a period of constant change and organisations must be prepared to meet uncertain operating conditions far beyond their effective control. Setting an overly rigid strategic plan may leave little room for adjustments, especially in response to macroenvironmental or government policy changes, and quickly become obsolete. Similarly, failing to adapt to emerging trends, disruptive technologies, or changing market dynamics can stifle growth and render the plan irrelevant. Charitable or not, it is important to ensure the core logic underlying your organisation’s strategic plan is strong so that any changes you make in response to these evolving conditions ensures that the pursuit of the organisation’s core purpose/founding objects remains paramount. While the ultra vires doctrine no longer applies in Australia or New Zealand, charities may very quickly find themselves unstuck if they fail to establish how their activities support the pursuit of their charitable purposes, leading to significant regulatory consequences.

This is of course not intended to be an exhaustive list of pitfalls. However, if there was one standout defect for us here at Steady Advisory based on the conversations we’ve had to date it would definitely be a lack of clarity, because once a board has set down a strategy with the assistance of management and other stakeholders it should own it: there should be no question about what purpose it serves, how it guides decision-making and what accountabilties stem from its adoption. For example, if you’re a director and have a strategic plan that includes a goal to increase your company or or charity’s membership by 25% by the end of the plan’s runtime, one should be able to readily progress that goal towards KPI setting for your executive team with a discrete, measurable metric for success. Unfortunately, there are many plans out there that simply provide for a vaguely aspirational goal (“be the market leader for service x or y“), without indicating the who, how, what, when and why of strategy, and in some cases we’re seeing organisations that don’t have a strategic plan at all. In those circumstances it’s no wonder why boards may find it hard to hold their executives to account, find their organisations losing their way or struggling to unlock value. But the good news is there is (usually) always time to get back on course for success - an example of a charity which did precisely that is Whitelion. You can check out Whitelion’s Strategy 2023 which describes their reorientation journey here.

Steadying the ship

We’ve spent some time talking about strategic planning piftalls however we’d be remiss in not discussing some best practice suggestions as well. In our view, a strategic plan which is written and then lives in a draw for 3-4 years is not worth the paper it is written on, and should be torn up and started anew. To land on a strategic plan for your organisation that captivates and drives outstanding performance, consider the following recommendations:

• Start with a compelling vision: A strategic plan must, at the most basic level, articulate a compelling vision that inspires and motivates your organisation’s stakeholders, and that includes your staff who may, especially in circumstances where they are volunteers, commit their time and effort to your organisation based on what problem it is fundamentally setting out to solve. Accordingly, the vision set out in your plan should reflect your organisation's governing objects, encapsulate its core values, and define its aspirations for the future. Be wary of not defining a vision that is unrealistically grandiose, as it may end up raising more questions for third parties than it answers. On the flip side, setting the bar for success too low may not motivate and inspire your stakeholders and may suggest a culture of restraint rather than openness to risk-taking.

• Foster an adaptive, organisation-wide culture of excellence: To ensure long-term value creation, organisations must embrace an organisational culture of trust that encourages agility, continuous learning, and innovation (which implies acceptance of risk and failure as opportunities rather than something to be shied away from). This adaptability-centric mindset enables your organisation to think critically about continuous improvement, encourages the development of measures which create and/or shore up competitive advantage, navigate unforeseen macroenvironmental challenges and capitalise on emerging opportunities. Be wary of the reality that adjustments may be necessary to reflect market dynamics, emerging trends, or internal organisational changes.

• Align objectives and resources: Strategic goals must be clearly defined, establish priorities and cascade throughout the organisation. Aligning resources, both financial and human, with these objectives ensures that efforts are concentrated on key goals which are critical to mission success and increases the likelihood of achieving sustainable growth. By establising not only which goals are going to be prioritised but how these are going to be tackled, your internal stakeholders can understand what role they play in their pursuit, while external parties, donors and funders can understand how resources will be deployed in the execution of the plan over time.

• Embrace data-driven decision making processes: There is nothing more important to a social enterprise than impact data, especially in markets where that impact happens to be your sole point of differentiation. In an era of unprecedented data availability and where AI promises to give you far greater analytics capacity than ever before, leveraging insights and analytics becomes essential to not only shaping your plan’s goals and ensuring they are realistic, but monitoring their pursuit and reporting on organisational progress. It should have its own, prominent place within any strategic plan.

Onwards, to success

Nowadays organisations of all types must accept that change is a constant force: like a tumultuous storm it can come from anywhere, and when you least expect it. Traditional economic literature describes firms’ response to change as their relative patience level, or how likely they are to sit through challenging circumstances and continue to generate value in the long term. An effective strategic plan acts as a compass for your organisation, guiding it towards long-term success. By steering clear of common pitfalls and focusing on the true purpose of strategic planning in directing your efforts towards a True North, you can ensure your organisation remains shipshape: agile, resilient, and well-positioned for sustainable growth into the future.

In your opinion, what other features define an outstanding strategic plan? Does your organisation’s strategic plan provide guidance, align decision-making efforts and motivate your stakeholders? Let us know your thoughts in the comments section below.