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January 30, 2019

Strategy in the social purpose sector: what’s critical?

SVA’s strategy consultants share their thoughts and observations about developing and implementing strategy in the social sector.

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We all know strategy is important – but how do you get it right?

Here six SVA Consulting directors share their experience on how to create and implement successful strategies in the not-for-profit sector.

Purpose and mission

The overarching feature of strategy in the social purpose sector is being unambiguous about your purpose.

Susie King: “It’s critical to have  clarity about your mission.”

“It is critical to have clarity about your mission and then to use that mission to align everything that the organisation does,” says Director, Susie King. “And a critical element of your mission is the impact that you want to have for the people that you’re serving.”Asking this question, ‘What is our purpose?’ looks different for each organisation.

For some like HoMie, a streetwear social enterprise set up to help young people at risk of, or who are, experiencing homelessness, it was about honing and focusing the purpose to get it crystal clear.

HoMie’s three young founders set up the business to make a difference for the growing number of young people confronted with homelessness, explains Susie who worked with them last year.

“Their challenge was that they wanted to do everything to support those young people whether that was housing, wrap-around support, employment, or making them feel good about themselves in what is a tough situation,” she says.

“We helped them to focus and they landed on their mission: to build confidence and provide job skills for young people and, in so doing, create unique pathways to employment and out of homelessness and hardship.”

Sometimes the board focuses on protecting the organisation.

For well-established organisations, it can mean having some hard and confronting conversations.

Malcolm Garrow has seen many organisations with inertia around the tough question: ‘why do we exist?’

Malcolm Garrow, SVA Consulting’s Executive Director spent 30 years in the for-profit sector as a partner of a strategy consultancy, as well as working in the energy industry. Since joining SVA three years ago, he has seen many organisations with inertia around the tough question: ‘why do we exist?’

“They say, ‘Well, we exist because we’ve always existed.’ And sometimes the board focuses on protecting the organisation and ensuring it continues to exist.

“But getting improved performance requires much sharper conversations at the board and senior management level.”

Malcolm cites as an example an organisation that he worked with that provides counselling services as well as wrap-around activities – vocational and pathways to employment training – for their clients. It also turned out that they had purchased some inner city properties a few decades ago which have appreciated significantly.

That was a challenging and powerful conversation for the board to have.

In the ensuing conversations, it became clear that the organisation’s program model wasn’t working as the management and board had believed.

“Different clients used the training services to those that used the counselling services – so they weren’t in fact wrap around services.

“They didn’t have data about the outcomes they were achieving, so they didn’t know if they were doing a good job. If they’d stopped existing, they predicted that their government contracts would simply transfer to other providers as would their staff. So nothing much would change for their clients.

“Which brought them back to the question: ‘Why do we exist? What’s distinctive or differentiated from others in the field about what we provide.’ And significantly, ‘How can we leverage our financial assets for the greatest impact?’

“That was a challenging and powerful conversation for the board to have.”

As a result, the board committed to getting their wrap-around services model together, and to measure their outcomes so that they would know (and could show) that they’re doing something distinctive and better than competitors. And they pledged to come back to the question ‘Should we exist or would we do better to liquidate our valuable property assets and transfer them to another for-purpose organisation that is having more impact, if the results didn’t add up’.”

Plans for growing impact and avoiding mission drift

Maia Ambegaokar:”We see a lot of organic growth that’s driven by available funding…”

Another way of looking at strategy in the sector is through the lens of how the organisation can grow – or increase its impact.

Director, Maia Ambegaokar has a background as a management consultant and policy adviser in health, international development and women’s rights. She is often struck by how little focus many social purpose organisations place on how best to grow their impact.

“We see a lot of organic growth that’s driven by available funding, which results in organisations with a huge portfolio of services and activities and no coherent overarching reason or vision for these.

“This explains a common strategic problem that we see: not-for-profits focused a little across so many different areas that, for all intents and purposes, they have no vision and no focus.

“Organisations like that eventually flounder because they’re not sure why they exist and they’re following funding whims – moving with whatever trends pass through the market.”

So organisations need to ask, ‘How should we grow?’

“The answer,” says Maia, “will depend on your starting point, on the state of the organisation and the operating context, but fundamental to any growth plan is still the vision, and the mission – the purpose you seek to achieve.”

One example of an organisation that suffered mission drift is RSL New South Wales, which Director, James Dudfield, worked with last year.

… driving strategy for purpose has to be a constant call that brings you back to your strategic decisions.

“We discovered that they’d drifted from purpose, and they’d lost the core element of why they exist – who they’re there to serve. Having lost sight of that, they were making incremental decisions that ended up putting them in a bad place,” says James.

“So staying true to purpose and driving strategy for purpose has to be a constant call that brings you back to your strategic decisions.”

Horizons of growth

Sometimes an organisation does achieve its social goals, or the problem context shifts and evolves. As a result, the organisation can stall, lose direction and need to rethink what it is going to do next.

Maia highlights the need to think concurrently about strategy over various time horizons as a critical skill.

“The real skill is managing across three horizons at once: the current operational horizon of doing what you do now, the medium term planning of what you’re going to do next (the second horizon), and then the third longer term horizon –where you could go after that.

“If you want to grow, you need to be investing and thinking and planning across all three horizons. For a not-for-profit, the question is how do you position yourself for maximum impact and how do you adapt across each horizon to achieve that impact.”

Complexity

Gillian Turnbull: “The needs of the individuals that we serve are complex, which makes driving impact more challenging…”

With a background in international development, Director Gillian Turnbull calls out the complexity of developing strategy in the social purpose market.

“The needs of the individuals that we serve are complex, which makes driving impact more challenging; there’s a lot more considerations when compared with strategy in the commercial world.

“You’re trying to deliver often a costly operating model, to work collaboratively with everyone in the sector, and to ensure you always keep the end user in mind. Combined, that makes for a complex situation.”

It’s about how you create a viable business model  as well as achieving your impact; that’s the challenge.

With a passion for leveraging business models to address social issues particularly through improving employment opportunities, Gillian has worked with a lot of social enterprises which exemplify this challenge.

“A social enterprise which is providing employment to a particular group of people as part of its mission has to also run a successful business model – selling quality products or support services – at the same time. And the people who are employed may have other challenges which impinge on their capacity to hold down a job, be it housing, or alcohol and drug problems.

“So it’s about how you create a viable business model  as well as achieving your impact; that’s the challenge.” (see The hidden business of social enterprises.)

Time horizons

The social sector is in the business of driving change on what are often entrenched issues. This change often needs to be viewed across generational timeframes. This is significantly different to the commercial world which assesses success across short, often annual or even quarterly, timeframes.

Strategy helps them articulate how we’re going to get there. What’s the road map?

Jason Eades: If it [strategy] runs over many generations, there’s a lot of things that you’re going to do along that journey.

Director, Jason Eades has worked mainly in the Aboriginal and Torres Strait Islander sector for the last 20 years.

“Most of those not-for-profits have been set up with broad purposes, to change the overall outcomes for Aboriginal and Torres Strait Islander people. So in terms of strategy, I instantly think about the time horizon because in many of those organisations, they are often thinking about the next generation, and the generation after that.

“Strategy helps them articulate how we’re going to get there. What’s the road map?

“If it runs over many generations, there’s a lot of things that you’re going to do along that journey. And we need to be able to ask, ‘What are the smaller steps that we’re going to take in the shorter-term?’ And this can shift dramatically over time.

So the strategy can, and often does, change quite a lot.

Jason cites the examples of Prescribed Bodies Corporates (PBCs). A PBC is a corporation set up by a group of Aboriginal or Torres Strait Islander people to hold or manage their native title rights and interests when the group has succeeded in having their native title recognised.

“The group’s initial strategy prior to setting up a PBC will be very different to later. Once they’ve received a determination they’ll start thinking about how to shift and change. They’ll still be fulfilling the same longer-term purpose, but asking, ‘How do we turn this set of rights into longer term benefit for the community?’

“So the strategy can, and often does, change quite a lot. This impacts on how they’ve tooled their organisation, their staff and their structure.”

Competition, cooperation and relationships

Susie King: “You need to be clear about your role versus other players in the broader ecosystem.”

Susie names another key factor in strategy development in the social sector, in that you have to consider the ecosystem, and the role of other players in that ecosystem.

“You need to be clear about your role versus other players in the broader ecosystem –to avoid duplication of services, fragmentation, and confusing clients.

“So sometimes a ‘competitor’ could actually be a collaborator, or a partner, or someone who could deliver a service better than you can.

For example, last year SVA worked with Lifeline Australia on a collaboration project with SANE. Lifeline is the leading suicide help line in Australia. SANE is a much smaller organisation that focuses on advocacy for people with severe and complex mental illness. It also runs a help line, much smaller and more targeted than Lifeline’s.

“SANE and Lifeline are very complementary . Sometimes they compete, but actually many of Lifeline’s callers, or help seekers as they call them, would actually be better off with SANE’s support rather than the support that Lifeline offers. They’re not at that crisis point, but need a much more ongoing, high touchpoint service, which SANE could offer.

“So, the two organisations wanted us to help figure out how they could do this more effectively. It’s a great example of two players in a complex system collaborating for a better outcome for vulnerable people.”

Relationships should be considered more deeply when thinking through and articulating the strategy.

Because of the role of collaboration and the complexity of the challenges, James believes that relationships are far more important in this sector than in the commercial world.

“Relationships should be considered more deeply when thinking through and articulating the strategy,” he says.

“With the sector trend to employ more people with commercial experience, competition seems to have become a greater part of operating a not-for-profit.

“I think that’s the wrong direction. We should all be working for a common good and optimise the things that are really limited: the time and resources, whether it’s money, people or capability.”

Also, this means looking at what your competition is doing so that you can learn from them – if they’re performing better than you are.

Understanding success

James Dudfield: “Embedding outcomes into strategy is essential.”

Another key challenge in the social sector, and one that differentiates it from the commercial world, is understanding what success looks like. In articulating your purpose, you have to define what success looks like.

“This,” says James, “means that embedding outcomes into strategy is essential.

“You need to link the strategy to a clear articulation of the outcomes that you want to achieve for the cohort or the issue that you’re trying to respond to. The way that we do this is through a theory of change –to understand the activities and what impact those activities have over time on the people you’re trying to help.” (See How to adopt an outcomes-focused approach)

Identifying the possible links between activities and impact, or pathways, for people is not difficult, however, finding evidence that supports these links is.

“There may be existing evidence that supports your initiatives, but you also need to put in place a suitable measurement and evaluation approach to build your own evidence – this helps you to improve your own practice, to iterate your strategy, and allows you to contribute to the wider body of evidence.

“When we work on strategy, we also identify what impact an organisation wants to have, what changes over time lead to this impact and how the organisation should measure these changes and evaluate the success of their programs or activities.”

How to ensure strategy implementation works 

Success requires consultation

Having a high degree of ownership, and accountability to deliver on the strategy is really important, says Susie.

“It’s about ensuring that all along the strategy development process, the key people and influencers in the organisation are really leading and are brought into the effort.”

As Jason says, “Often staff in social purpose organisations are there because they are passionate about the organisation’s purpose. So involving them in the development of the strategy is critical to being able to achieve it.”

Malcolm Garrow: “Organisations are often not strategic in thinking about how to engage with key stakeholders.”

Malcolm discusses this in the recent SVA Quarterly article, Strategy: to consult, inform or simply wing it?

“Organisations are usually clear that they want a new strategy, however they are not strategic in thinking about how to engage with key stakeholders”

“Not every strategy requires wide consultation – far from it. A well-designed consultation process requires stepping through each stakeholder group and asking the question ‘Should we consult or inform them about the strategy?’ and ‘If yes, how and when?”

Malcolm’s article provides a simple framework for doing this.

Cascading strategy

Maia has a particular passion for the implementation side of the coin. She calls out the need for a cascading strategy in order to ensure successful implementation.

“Unless you’re a very small organisation, you need an overarching strategy and vision for the whole organisation, but you need a series of implementation or operational strategies for the different divisions so that they all align with the overall strategy,” she explains.

“Then everyone is pulling in the same direction and is able to report back on how they’re contributing to the intended outcome and impact.”

Operational planning with those kinds of cascading strategies is what makes a strategy work.

“Operational planning with those kinds of cascading strategies is what makes a strategy work. What’s crucial is bringing people together around your operational and divisional plans, and helping them become excited about their role in the bigger strategy and how they can contribute to the organisation’s impact.”

Maia describes one CEO who did this really well. “She was not just a leader who could articulate the vision and make sure it was all written down, but she was a good manager.

“She worked closely with all her divisional teams to incorporate what they were already doing in a way that would allow them to contribute to a new vision and direction. That involved many, many meetings and redrafting of strategies and it also involved a change process, reinventing many positions and bringing in new people and allowing other people to move into other jobs. The process was somewhat painful, but it worked because of the strength of the leader who was determined to see it happen.”

Strategy must be realistic and agile

No matter the size of the organisation, all agree that strategy needs to bepractical and realistic, but also flexible.

James emphasises, “Overly complex strategies with too many initiatives aren’t going to work because most organisations are resource constrained. And the resources are around people and money more than capability. So the trade-offs in implementing the strategy need to focus on what’s really important, what canbe done.”

Blue sky thinking is really good. The problem is when you don’t allow for reality about the resources, people and time available.

In Jason’s experience, this requires deeply understanding how an organisation functions as well as the real needs of the people it seeks to serve and what’s required to make things change for them.

“Too often when I’ve helped an organisation with its business or operational level planning, I’ve come across strategies that are focused on blue sky –where they want to be –and they’ve missed the deep understanding of that organisation and how it functions.

“Blue sky thinking is really good. The problem is when you don’t allow for reality about the resources, people and time available to drive towards the outcomes you want,” says Jason.

“Yes, strategy can lead an organisation to change and improve its systems or the way in which it operates, but you’ve got to know exactly where that organisation is at.”

Strategy needs to be agile to take all of this into account.

Also, strategy should be seen as an evolving, flexible tool; it needs to be agile.

“Things happen,” says Gillian, “whether it’s a major policy change that disrupts everything like the NDIS, or a CEO leaves and the new CEO has different priorities and skills. Strategy needs to be agile to take all of this into account.”

Conclusion

Developing and implementing strategy in the social sector is essential but challenging.

Organisations need to be crystal clear about their purpose and embed the impact they want to achieve into that purpose. They must then ensure all their activities are aligned to achieving that.

And given they are operating within complex ecosystems, as well as addressing what can be complex human needs, organisations need to consider collaboration and relationships within that ecosystem and assess performance against competitors to learn how to do things better.

These considerations need to be managed across often generational long-time frames and achieved within the resource constraints that most organisations endure.

And to develop a viable strategy requires deep levels of stakeholder consultation, and a thorough understanding of the practical realities of the organisation and how it functions.

Creating and implementing a strategy in the social sector is challenging, but it is worth the effort to ensure your organisation is achieving the greatest impact possible for the people and communities you support.


To contact any of the directors, email consulting@socialventures.com.au

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