Organizational Strength through Diversification

by Virgil Carter

This is the time of year when many of us look back at the past year to see what we can learn and apply to the new year’s challenges.   This may be the time for CEOs, staff and volunteer leaders to do a quick check on the strength of their organizations.  2012 is likely to be as challenging a year as past years.  Is your organization economically strong?  Do you have the protection and advantage of economic diversification?  Or all of your eggs in one large basket?

A recent Strategy+Business article, “A Continuous Quest for Economic Balance”, by Richard Shediac, Chadi N. Moujaes and Mazen Ramsay Najjar, focuses on the important economic diversification of countries.  Much of what they write has equal application to the strength and well-being of many of our non-profit organizations.

For example, the authors write “Countries can be over-concentrated in any number of ways—for example, relying too heavily on large companies, exports, or foreign investment—and even countries that appear extremely diversified may still be vulnerable to unexpected events.”  How applicable is this to your organization?

A quick check of your annual budget will reveal the sources of your revenues.  If your major source of revenue accounts for more than about 35% of total revenues, you may question whether or not there is sufficient diversification (and protection) for your organization’s well-being.  If a single source of revenue counts for the majority of your revenue flow (over 50%) your organization may be at severe risk in the event of some disruption to the source of revenue.  Risk may be reduced and economic strength will be gained through economic diversification.

How to achieve strength through improved economic balance?  Certainly, continuing to support the elements that are at the center of an organization’s financial strength is obvious.  The answer for successful diversification is not simple.  And it is not achieved in a single step.  Diversification is a continuous, never-ending journey.  Perhaps the most successful journey is one that looks to increase the return of other key existing revenue sources, while also looking for new opportunities that are consistent with the mission of the organization.  Innovation and entrepreneurial efforts are a key in this regard.

For many non-profit organizations, economic strength through diversification is not easy.  No organization can be successful, however, without economic strength.  And if a conscious effort for needed diversification isn’t made, economic strength may never be achieved.   Is your economic balance where you’d like it to be?

For the full Strategy+Business article:  http://www.strategy-business.com/article/00064?pg=0

Three Processes to Align Mission & Money

By Virgil R. Carter

Beginning a new calendar year often means a new fiscal year for non-profit organizations.  Whenever a new fiscal year is imminent means a new annual budget cycle.  Does your organization have an annual process to align mission and money?  Is your annual budgeting cycle tied to your mission?  Can one look at your annual budget and see clear priorities for accomplishing the organizational mission for the budget year?  To link mission and money there are at least three interconnected processes that may be helpful.  Here’s a brief look at each.

1.      Innovation:  An annual budgeted innovation program, with staff and budget, is a good approach for encouraging and rewarding ideas for new programs, products and services that support the organization’s mission and are based on emerging customer needs.  One approach is to organize the process as an on-going annual grants program, where written proposals are reviewed and approved, if deemed worthy.  Caution:  care must be taken to carefully spell out innovation program objectives so that it’s clear the program is for new ideas, and not to perpetuate the status quo.  Review of proposals must also be carefully based on the innovation program objectives, so as not to simply fund continuation of existing activities.

2.     Existing Program Annual Review:  Most non-profit organizations allocate all of their available resources (financial and human) in support of annual operations. Thus, without the reduction and/or “sunset” of some annual programs, products and services, there may be no capability to add new activities through innovation or any other means.  One approach for annual program review is to implement a customer satisfaction review process, using the “voice of the customer” as a basis for gathering and evaluating data as to which programs, products and services are valued by your customers.  Goods and services not highly valued by customers each year are prime candidates for reduction and /or replacement. 

3.     Annual Program Planning/Budgeting:  Finally, with information from the previous two activities, an organization may conduct a rational annual process for the planning and budgeting of activities for the following 1, 2 or 3 year periods.  Instead of the annual budgeting cycle leading the process, it logically is the final phase of review and planning for the future.  This also helps to reduce status-quo program competition by incumbents for a larger and larger share of the financial pie every year. 

Aligning mission and money is important for a number of reasons.  Here are two:

• Non-profit organizations need to keep pace with their critical changing markets;
• In most cases, there are never enough resources for everything, and thus some priorities have to be established.

Thus the old adage is true for many non-profits, “If something new is to be added to the wagon, then something old must be removed.”  Are your mission and money aligned?

Compete or……..?

by Steven Worth

As a rule whenever anyone faces competition there are four healthy ways in which to react:  1) we can choose to compete heard-on, if we feel we have a competitive advantage; 2) we can abandon the field to the competitor and choose a less crowded and more profitable area in which to compete; 3) we can find ways to co-exist with the new competition through partnership or some other form of accommodation; or 4) we can retrench and redefine the way in which we are going to compete.

Each one of these four options are different and worthy of book-length discussions of strategies in their own right—depending on the field and the nature of the competition; but they all share a common attitude—a realistic look at the competition and a desire to find a winning strategy.

When one looks at the growth rates of the BRICS countries (Brazil, Russia, India, China and South Africa) in a wide variety of fields, it is possible to forecast when each will surpass the US—provided all current conditions remain the same.   This last phrase is key, and therein lies the future for US-based organizations.

The four options outlined above are not the only options we have of course.  Here are four more options that some find appealing:  1) keep doing what we have been doing and ignore the competition; 2) resort to brute force (such as the threat of litigation or government-imposed trade barriers for example) to frighten the competition away; 3) keep focused on positive thoughts until they become reality; or 4) accept the inevitability of being something less than number one. These options too share something in common—they all ultimately lead to failure.

How to Define Success?

By Virgil Carter

The beginning of each year is often a time of analysis and planning for many non-profit organizations.  It’s often a time for analyzing past performance and planning for next year’s activities.  Has the past year been successful?  Are you planning to improve your organizational success in the coming year?  These questions raise the issue of how your association defines success.  Success comes in many flavors.  Perhaps the important thing is to identify and implement what works for your organization.  Thereafter communicate, communicate, and communicate. 

So, what does your association value most?  Is it performance?  How about relationships?  Perhaps its competencies or credentialing.  Each organization is different when it comes to what matters most, not to mention why it matters to us.  So, to define success, there has to be agreement on what matters most.  The situation, which may change over time, has a lot to do with defining success.  For example,  an association in a protracted, downward financial spiral may define success very differently than an association whose growth has been 30% per year for the past five years.

Here are some important success categories, with suggestions how they might be used. 

1. Strategy--Does our association have a sustained record of performance to plan over time (successful strategy is not measured in 12-month cycles and someone’s pet agenda for the year)?
2. Voice of the customer—Who are our (right) customers and how do you know if they are satisfied (yes, there may be “wrong” customers)?
3. Financial—Do we have sustained performance over time meeting budget or ending each year with positive variances (no margin, no mission)?
4. Business operations—What is the record of new program development and existing program retirement over the past 5 years (are you still doing what you did 5 years ago)?
5. Learning & growth—What investment do we make on a consistent annual basis for volunteer’s & staff’s learning and growth in their association roles (no investment, no dividends)?

When you have figured out what matters most to your association and how you will measure success, it’s time to think about annual communications planning and the year’s key audiences and messages.  Key messages are important for association leaders—volunteers and staff—to focus on, repeat and reinforce.  The messages help everyone to understand and stay on the same page.

There are many useful ways to define organizational success.  And to communicate effectively about it.  When there is consensus about success, your volunteers, staff and external relationships will thank you, knowing what to expect and how to help.  How will you measure organizational success in 2012?

Globalization’s Influence on the Rise of Nationalism

By Steven Worth

      President, Plexus Consulting Group

It is counterintuitive that the more globalization takes root, the more nationalism asserts itself.

But it is a fact that there are more nations in existence in the world today than ever in the history of our planet.  The number stands at approximately 196 countries and counting.  South Sudan was the most recent nation to be added to the list, with more sure to come.  For those grappling to understand the forces exerted by globalization this seemingly contradictory trend is key to understanding a critical facet of globalization’s impact on our economy and society—that it allows us to celebrate our differences as well as those things that link us together as human beings.

The underlying reason for this growth of nationalism in this era of globalization is twofold. 

First, the circumstances that have made possible the largely peaceful co-existence of the planet’s nations since the Second World War have also made it safe for long suppressed nationalities to assert themselves.  If nations are a form of extended family, then it is natural for them to take pride in their identities at a time when they no longer need to be subservient to a foreign power.

Second, as individuals we instinctively resist conformity.  Yes, we want to benefit from access to the wealth and technology and goods and services from anywhere in the world that strikes our fancy, but we don’t want to lose our identities in the process.  Globalization is not the Faustian bargain that it is often portrayed to be.

So what does this mean for managers of organizations that aspire to be global?  It means that nations are here to stay and that you ignore them at your own risk.  It means that you need to think long and hard about tailoring products to meet local needs and customs.  Having free access to sell to the global market does not mean one size fits all.        

What Can Be Done to Restart Growth

by Virgil R. Carter

In today’s “go-slow” economy, confronted with uncertainty, it takes vision and innovation to create growth.  “Growth Under Pressure:  What Business Can Do To Restart Growth”, is an article by Richard Dobbs, James Manyika and Charles Roxburg, published by McKinsey and Company.  Although aimed at the for-profit private sector and public sector, leaders in non-profit organizations may learn from the author’s proposals.  They identify five primary areas of opportunity for new growth in today’s economy:

·         Bring private capital to public works:  In many developed economies, degraded infrastructure now drags down the global economy’s long-term growth and competitiveness.  The American Society of Civil Engineers, for example, estimates in the United States $2.2 trillion is needed to be spent over the next five years to bring its existing infrastructure up to what ASCE calls a good condition.  Since government doesn’t have the money, a creative alternative is to create a new round of privatization and creation of jobs.  Private companies and consortia could take over the operation of new facilities and provide the investment to upgrade old ones. 

·          Strengthen Internet ecosystems:  In a study by MGI, in mature economies over the past 15 years, the Internet has accounted for 10 percent of DGP growth, which accelerated to 21 percent in the past five years.  An expansion of broadband access and performance is needed to cope with rising demand and innovation.  To encourage this, “policy makers must ensure the Internet’s openness and competitiveness, invest to develop and retain the human capital needed to drive Internet innovation, and ensure availability of capital so that fledgling innovative businesses can grow.  If conditions are right, private-sector innovation and jobs will follow”.

·         Meet the resource-productivity imperative:  The steady decline in real resource prices enjoyed throughout the 20^th century has now reversed course.  Three billion new middle-class consumers into the global economy has boosted demand for key resources and increased the risk of price spikes that could curtail global growth.  Expanding resource supply alone will not suffice to meet this new demand.  Resource productivity—increasing output for every unit of resource input—is also required.  Increased investment in resource systems is required by both public and private sectors.  “Green” investment is one such resource investment supporting the development of new jobs and industries.

·          Close the skills gap:  Many advanced economies are grappling with a severe mismatch between the skills developed by their education and training systems and those required in sectors where job growth will be strongest.  On current trends, the U.S. will produce twice as many graduates in the social sciences and business as in science, technology, engineering and mathematics.  It’s estimated that the country may face a shortfall of almost two million technical and analytical workers.  These needs may be filled by a combination of young and older workers, “with removed barriers preventing older workers from staying in the workforce longer”.  “Ultimately, the only reliable way to encourage students to develop skills in these growth areas is for companies to make these careers more attractive and market them better in schools and university campuses”.

·          Build public-private partnerships:  Governments need their own productivity revolution.  According to the authors, “to reap these and other rewards, however, cash-strapped governments—and their citizens—will need to be more open-minded about private involvement in the delivery of public services”.  “The case for public-private cooperation may be easiest to make at the city level, where most future global growth will occur”.  “A majority of successful cities are already notable for a high degree of collaboration between the private and public sectors”.

The authors conclude, saying, “With a few notable exceptions, business leader have been slow to raise these issues…It’s time for the private sector to take the lead in making the case for driving growth through innovation and investment.”  For a full copy of the article, go here:  http://www.mckinsey.com/en/Features/Growth.aspx

When Employees Talk and Managers Don’t Listen

by Virgil R. Carter

According to a recent article published in the Journal of Business Ethics, and written by Gerdien de Vries, Karen A. Jehn and Bart W. Terwel, dangers lurk if suggestions from employees are sought but are considered.

Managers may operate in an autocratic (making unilateral choices) manner or a democratic (inviting employees to  suggest improvements) way.  Research has shown that motivation, job performance and morale increase when employees have the opportunity to contribute their concerns and ideas.

The authors write, however, that there’s “a consequence to giving employees a voice:  a company has to listen.”  If employees believe that a manager is simply paying lip service to consulting with employees, and has no desire to act on their advice, they are likely to stop offering input and, worse, “act out their frustration by clashing with colleagues.”

Conversely, according to the authors, employees, who thought their managers were paying attention to the employees suggestions and comments, “spoke up more often and got along better with one another, improving the organization’s functioning as a whole”.

The article’s conclusion?  “Giving employees the opportunity to voice their opinions can be a positive force for change.  But don’t put out a suggestion box if you aren’t willing to implement at least some of the suggestions”.  

For a full copy of the article, go here:  http://www.strategy-business.com/article/re00160?gko=82a49