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Integrating Strategic Plans with the Operating Budget
Curious about how folks think about and integrate strategic plans, incremental expenses associated a strategic plan, and the operating budget.
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4 Replies
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Mike, our webinar on the 15th on budgeting will help with a framework to integrate the two processes.
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I tend to believe that the strategic plan should play a pivotal role in the budgeting processes. I work with my board to identify what are the operational investments, required to maintain the core strategies of the plan and what, additional capital investments are needed to fund the innovations, expansion strategies in you strategic plan. The trickier part is to identify and match the revenue streams that will support your core functions operationally and will give you access to the capital required to support growth. Sometimes strategic growth needs to be deferred because of fundraising headwinds and other times, you may have to dig into savings or reserves to fund growth. It can be a source of difficult conversations or collaborative problem-solving, depending on the sophistication of your board.
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In my many decades of work in the nonprofit sector, the major issue with strategic planning is ignorance of the organization’s staff and financial resources. Most plans focus on growth and demand additional personnel and money without any thought of where this investment capital is coming from. This is especially true in human service organizations that exist on government contracts – these contracts offer little opportunity to stash money away to use for future endeavors.
The budget and strategic plan have to be developed simultaneously and both have to be realistic. Always choose a strategic planning consultant that demonstrates a good understanding of the organization’s financial position.
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If you don’t fund your strategic work (i.e., integrate your strategic plan and budget), you will never achieve your strategic goals. So, it’s critical that your strategic planning process aligns with your annual plans and budgeting process. I’ve seen many strategic plans fail because they budgeted for the same work they’ve always done.
Anthony
Nonprofit Financial Leadership Academy
