Now that you have affirmed, clarified or amended your mission statement, and have conducted an honest appraisal of the impact and sustainability of your current business model, it is time to begin looking into your future to see what the world will probably look like. This step is a necessary prerequisite to actually trying to project your position into that future simply because the environment in which you currently operate is bound to change and the future environment in which you hope to be effectively positioned may exhibit qualities for which you are inadequately equipped.

In my experience working with nonprofit, mission-driven organizations, a common mistake I frequently observe is neglecting to do the hard research into future trends that is necessary to understand the world, how it is changing, and how it will likely affect the organization’s ability to fulfill its mission. I have seen organizations immediately move from an internal assessment (How are we doing?) to a projection of the mission into a future based on a set of assumptions, usually around things like the rate of inflation, turnover, cost of administration, market demand, and a host of other environmental factors. Too often these assumptions are expressed in some kind of incremental fashion, such as “employee turnover will remain at 35% per year.” So, organizations cast their vision by articulating strategies based on the false assumption that the rate of change of environmental factors will remain constant. I remember suggesting in a strategic plan that I was facilitating about ten years ago that an average annual return on investment of 5% could be assumed through the duration of the plan. Then August of 2008 came along, the economy went into recession, the endowment lost 35% of its value, and my assumption went up in smoke.

Admittedly, predicting the future is very difficult and if I could tell you with certainty what the world will look like in five years, I wouldn’t be writing about it. But there are macro trends that can be recognized with some good research.  These trends must be thoughtfully considered before putting a stake in the ground to claim your preferred future.

Let me suggest a number of critical areas that should be investigated. Searching out the best available research in these areas isn’t necessarily easy, but knowledge specialists within the organization as well individuals in the same service industry or academia should be conversant in the primary literature for trend data around relevant variables. Professional associations also are repositories of data collected on behalf of member organizations (e.g., AARP, Leading Age, AAIDD, etc.).

Technology

No area changes as rapidly as IT. New systems and applications are rolled out on a daily basis. New uses of technology to support people and deliver services are in abundance. Technology facilitated learning is changing the face of training and certification. Business data is becoming business intelligence as new technologies enable predictive forecasting and support proactive positioning based on statistical inference. Because of the rate of change, however, the challenge is to anticipate what technology in service to your mission will look like. This is so important because of the growing percentage of operating budgets comprised of IT hardware, software and support. Advances in technology also have the potential to affect other areas of operation such as employment, direct care, finance, competition, funding, and many others.

Population Changes and Demand for Services

Nonprofit organizations are by definition in the people business. Organizations which serve those in need must understand the populations they serve and how the target population might change. Moreover, changes in the attributes of those populations must be understood. For example, if you are in the senior services sector, it is one thing to understand population distribution in various age cohorts and an entirely different thing to understand how people think as they age with respect to the kinds of services they need or desire. You might ask, “How do the current models of independent living, assisted living, memory care, etc. align with growing preferences about aging in place?” In the world of intellectual and developmental disabilities (IDD), we know that prenatal screening for birth defects and genetic anomalies is contributing to higher rates of abortion. A pertinent question might be, “What is the rate of decline in the population of individuals with Down’s Synodrome or other disabilities who would benefit from our services?”

Studies of birth rates among ethnic and racial groups, reports on immigration and areas of settlement, descriptions of age cohorts in the future, longevity and life expectancy studies – all of these may be consulted to develop a best guess about the people your organization will serve in the future. As people live longer, their needs for services increase.

Competitive Market

Your organization is probably not the unique snowflake you think it is. I’m guessing there are other agencies in your area that offer the same or similar services. The reason your agency came into existence and the reason it is still operating is, to be sure, noble. But the fact is that nobody has exclusive dibs on people and there is going to be competition for the people you serve from some source. As long as there is a market that can be further penetrated, businesses are going to continue to grow. Your agency may be the equivalent of the local mom and pop corner grocery store. You may have a loyal customer base.  But when Walmart decides to open a megastore on the outskirts of your town, you are going to be challenged to compete. Understanding the market and your competition is critical for survival and positioning. The mom and pop grocery store may survive, but only by differentiating itself in ways that are of value to its customers.

Knowing who your competitors are and the relative shares of the market you and they serve is incredibly important for another reason. It just may be that your competitors are also opportunities for collaboration. I especially see this happening in health care, but it is also increasingly common in social services, foundations, and philanthropy. On a mega-scale, think about Bill and Melinda Gates’ Giving Pledge in which the world’s billionaires have been challenged to pledge their wealth to do good in the world. On a smaller scale, think about how several private school foundations can create pooled investment funds instead of competing for the same donors. Collaborations don’t have to mean mergers or acquisitions. There are myriad ways of collaborating with competitors for mutual advantage. Knowing the competitive landscape in your future environment will help shape your thinking beyond the narrow confines of your current mission and open up a future of possibilities.

Government Policy and Regulation

Elections have consequences and the most recent presidential election is a stark reminder of this fact. There is no debate about the exponential expansion of regulation that occurred under the previous administration. The new administration is in the process of rolling back many of those regulations in areas such as environmental protection, health care, tax reform, immigration, entitlement reform, financial institutions, small business regulation, and others. Whether this is good or bad is for others to judge, and what this will mean for nonprofit charitable service organizations is anybody’s guess. However, assuming the current leadership will be in office for the next four years, some predictions are possible. Reform of health care and the tax code seems inevitable. This actually may be good for smaller organizations that have been hit hard by rate increases in health care. On the other hand, possible changes in the administration and funding of Medicaid could be catastrophic to nonprofits that rely heavily on reimbursements for services. Closely monitoring government policies is of critical importance for organizations whose very existence depends upon the largesse of government.

Revenues and Expenses

Most nonprofit organizations depend up a mix of revenues to support their operations. In the world of senior services, public sources may include Medicare, Medicaid, Social Security, Supplemental Social Security, and state and local assistance. Personal sources may include pensions, retirement accounts and personal savings. To provide services takes a lot of money, so the question is: “Where will the money come from in the future to pay for these services?” The brutal reality is that, “No money, no mission.”

Most nonprofits also rely heavily on donor support. Revenues can come from any number of sources including special fund-raising events, annual direct mail campaigns, major gift solicitation, planned giving, and legacy and estate gifts. Many organizations also seek corporate and foundation support. Larger organizations may derive operating revenue from the return on investment of endowment funds. A few even have their own foundations. Most nonprofits, however, are too small and thinly staffed to capitalize on the many ways to raise non-operating revenue.

And then there is the whole area of social enterprise. When the people you support can be organized to produce a service or product that contributes to their own support, mutual benefit can be derived. Nonprofit service organizations have long used vehicles like resale or thrift stores as a way to engage volunteers and people supported to generate revenue. Others have incorporated green strategies to reduce utility bills and waste. Others have applied micro-financing strategies to support client business start-ups. There are many examples that can be found which may have potential for your organization.

It is tough to predict where the money is going to come from, especially when there is a dramatic change in the federal government. The future of Medicare and Medicaid is anybody’s guess as of this writing. So trying to predict the likely payer mix for services may be an exercise in futility until some measure of clarity is achieved in Washington. Remaining oblivious or fatalistic is not an option.

The expense side of the organization must also be examined, especially with respect to anticipated trends in how costs will likely change over time. Will technology be able to offset some of the administrative overhead or make service delivery more efficient and cost effective? Will changes in government regulation potentially raise or lower expenses? Will health care reform lower the cost of employee health insurance? Is it more or less likely that labor unions will attempt to organize your employees?

Last, just as we painfully observed in 2008, a downturn in the overall economy can have a devastating effect on nonprofit revenues. Some suggest that funding of nonprofit social services is a leading indicator of market decline and a lagging indicator of market recovery. Reimbursements for human services are among the first strategies state’s employ to balance budgets and restoring or raising rates usually comes later. I guess that makes some sense. What it also does is make predictions about the future of the economy very challenging, especially when big name economists can’t agree. All I can say is that leaders of nonprofit organizations better have trusted counsel when making assumptions about the future of the economy. Make assumptions about the future, but plan to be wrong.

Workforce Attributes

One of the biggest challenges facing most nonprofit organizations is hiring and retaining qualified and committed employees. Nonprofit wages are generally below those in the public sector. Entry level positions such as direct support, food service, housekeeping, transportation, and other unskilled jobs are plagued by high turnover rates due to low wages and/or the temporary nature of the job as employees finish school or pursue higher paying jobs. Even professional positions in nursing, management, executive leadership, or skilled administrative functions experience turnover due to wages and benefits.

Who will your employees be in five years? Where will they come from? What are their age, educational attainment, and aspiration attributes? How loyal are they to your organization? Do they work two or three jobs to make a living? What personal and family challenges do they face that can impact their reliability or longevity? These and other questions should lead the organization to develop an employee profile for the future.

Location/Location/Location

Where you provide services is the final critical planning element that warrants consideration for the future. If your organization is the only one of its type in a small town in northern South Dakota with the closest town of any size more than 50 miles away, this may not seem like much of an issue. At least it is quite different than if you are located in a suburb of the Chicago metropolitan statistical area containing ten million people. Regardless of your location, however, there are some important questions to ask yourself as you contemplate where you will provide services in the future?

If your services are facility-based, are there opportunities to grow by building or purchasing remote campuses? Can you “franchise” your service delivery model to others by creating a collaborative service agreement whereby you provide the service if they provide the capital? If your services are community-based and are not as dependent on buildings, are there population areas that need your kind of service? For example, if you serve chemically dependent children and their families through in-home services, your geographic footprint is probably determined more by how well you can manage your staff and the time it takes to drive to homes. This is also true of agencies that provide community-based residential services to people with IDD.

Finally, geography may be affected by collaborative efforts such as merger or acquisition. My own work in developmental disabilities began when I helped facilitate the affiliation and eventual merger of two large service providers, one in the Midwest and the other on the west coast. The resulting organization doubled the number of people supported and turned a regional provider into a national organization. On a smaller scale, geographic expansion may come about through competitive bidding for services, such as going after contracts to provide early childhood education. It may also come about through strategic acquisition, such as purchasing smaller for-profit agencies that help expand the niche of services. Whatever the circumstance, thinking deeply about location, facilities, geographic needs, reach potential, and acquisition opportunities will help eventually answer the question: “Where will we serve?”

You have been staring out your office window, gazing at the horizon, wondering about what tomorrow will bring, perhaps noodling about what challenges and opportunities await? You can’t help but worry about how your organization will respond and how well it will fit into that unknown future. I hope the foregoing has given you some food for thought as you contemplate your future. While we can’t know with certainty what will happen, we can be observers and learners who are attuned to changes in the world around us. We can make reasonable guesses as to what the future will look like. And, to paraphrase Abraham Lincoln, careful study of the trends in the areas I have described is an essential step in strategically thinking and acting to achieve your preferred future.

Next week – What does your environment look like today?