Clear strategic objectives that are aligned to an organisation’s mission are critical to any successful business plan. Many find, however, that deriving these objectives can be a challenging process, as an organisation needs to ask itself tough questions about priorities, aspirations, and limitations. In our experience, the first steps of any business planning process should be 1) a rigorous analysis of the internal and external environment, 2) facilitation of iterative discussions about vision and goals, and 3) the articulation of a clear intended impact and theory of change. These activities will produce the outputs that provide a strong foundation for creating ambitious yet realistic objectives.

There are many tools that can be used to facilitate these three activities, and an organisation should make appropriate choices depending on resources and capabilities, organisational culture, levels of buy-in and participation, and their history. Below we outline each activity, highlight some potential inputs and tools, and give examples of how organisations have approached each activity.

Activity 1: Analysing the internal and external environment

Most organisations do not work in a vacuum, but are subject to a wide range of market forces that impact the work that they deliver. Understanding the external environment helps an organisation to make strategic decisions by highlighting key opportunities and threats, and enabling it to adjust and adapt based on perceived changes. Failure to adequately understand the external environment, as well as internal capabilities and challenges, will result in inappropriate plans that are based on false assumptions and incomplete information, and will not deliver the expected results.

There are several ways to develop a better understanding of the operating environment, which could include:

  • Market/needs analysis – the overall size of the market, our addressable market, our market share, the level and type of need of our beneficiaries
  • Competitor analysis – profile of our main competitors, their financial information, market share, strategic priorities, number and type of services, strengths and weaknesses, key partnerships and plans for expansion
  • Partner analysis – profile of potential partners, size of organisation, their strategic focus, areas of operational expertise, geographical spread, strengths and weaknesses, strength of brand/reputation
  • SWOT analysis – evaluation of our main strengths, weaknesses, opportunities and threats

These analyses should feed into a consolidated report on the external environment to provide a clear, detailed understanding of the market direction and what the impact will be for your organisation.

Example 1
A regional charity wanted to identify the trends in their segment of the market to inform both a strategy and decisions about their internal structure. Initially, desk research was used, drawing on publicly available data from a wide variety of external portals – from ONS to Local Authority data.
However, interviews and group discussions with key internal stakeholders were also carried out to provide more qualitative information (such as SWOT, partner, competitor analysis). Staff held great insights about how the organisation was perceived by its funders and what policy trends were likely to have the most impact on their services. Once quantitative and qualitative data was collected, it was possible to extract clear trends and opportunities in the addressable market.

Activity 2: Determining vision and goals

Most organisations in the social sector will have an emotive way of expressing a compelling picture of their vision. However, for the purposes of business planning it is crucial to distil the organisation’s vision into well-defined goals that are actionable and achievable within a given timescale.

The most effective way of determining an organisation’s vision is through engagement with internal and external stakeholders. What do staff and volunteers think about the impact the organisation should have? Which direction do beneficiaries, trustees, and other stakeholders feel the charity should aim to achieve? This requires structured engagement, such as brainstorming sessions and consultations. A practical tip is to leverage existing forums or meetings, such as Board of Trustee, Management meetings, to ensure that all senior stakeholders are involved in the decision making process.

This activity needs to be supported by both the market analysis and the theory of change. The latter will provide the pathway to change that the organisation expects to follow, while the former will help target and prioritise by using evidence of gaps and need in the market.

Example 2
One children’s charity had experienced mission drift following a period of growth, and wanted to re-focus its vision and goals for its next strategic plan. Focusing on multi-stranded stakeholder engagement and group discussions, a participative approach was adopted to help clarify the strategic imperatives for the organisation. Both quantitative and qualitative information about the market was used to refine strategic objectives, by providing evidence that it was better to shift priorities to areas of the market where there were greater gaps and increased needs. Using a consensus-driven process helped to ensure buy-in, and enabled the organisation to agree on three new strategic priorities for the next 5 years.

Activity 3: Articulating intended impact and theory of change

Many voluntary organisations experience difficulty when articulating their intended impact, especially if they are vision-driven and ambitious in what they want to achieve. However, business planning requires a very concrete and thorough understanding of not just what an organisation hopes to achieve, but how they will be able to achieve it.

The most common tool to provide this level of detail is a theory of change. Although it can present a daunting prospect, the theory of change is in essence an articulation of how you will achieve your intended impact – what you will do, how you will do it, and what you expect to happen. There are no hard and fast rules in developing a theory of change – each organisation must find a process that works for them. Below is a guide that aims to demystify some of the terminology and provide some practical tips.

Theory of Change

Example 3
A small community based organisation wanted to use a theory of change to inform its new strategy. As with every step of business planning, the questions asked (i.e., what will we do; how will we do it; what do we expect to happen?) had to be supported by firm evidence. This included a segmentation of the beneficiary group to identify levels of needs and existing gaps, evidence around effective interventions, and benchmarking against similar initiatives in statistical neighbours. By engaging with stakeholders, including beneficiaries, we were able to identify which of the charity’s activities were aligned to the intended impact, where there was room for improvement, and current areas of gap. After completing their theory of change, the charity was able to finalise an action plan to refocus some of their activities, ensuring that it continues to deliver maximum impact.

As part of our series on business planning, we have developed a simple template to facilitate the process. Our template is a practical and concise resource that highlights the key areas that should be considered and suggests ways to structure the outputs of the planning process. In future blog posts, we’ll look at specific areas in more depth and provide additional tools and methodologies.

[groups_non_member group=”Registered”]To download a copy of the template, please register for the site. Once you are registered, you will be able to download the files.[/groups_non_member]

[groups_member group=”Registered”]Business Planning Template[/groups_member]