By: Steve Zimmerman, Spectrum Nonprofit Services

Nonprofit organizations are operating in an environment of unprecedented economic ambiguity and volatility. Every revenue stream is under pressure, with threats to government contracts, delayed payments impacting already tight cash flow, and a fluctuating stock market and consumer sentiment potentially shifting foundation and individual giving.

To navigate potential budget shortfalls and understand the implications, many leaders are turning to – or being urged to turn to – scenario planning. But is scenario planning really the right fit for nonprofits in the current environment?

I would argue that, for many nonprofits, scenario planning is, for now, a bad fit given the level of uncertainty and the multiplicity of external threats that nonprofits are experiencing. Rather, an approach is needed that more closely responds to the character of the threats being addressed.

This is not a new notion. As Kalle Heikkinen and others wrote in their April 21, 2023 Harvard Business Review article, scenario planning “works best for foreseen risks and stable uncertainties … It often fails spectacularly when firms are hit by shocks outside of leaders’ field of vision. And today, leaders are increasingly confronted with significant, and sometimes existential, events that they would not have contemplated even six months earlier.”

This new approach should address the vulnerabilities organizations and their communities face, while simultaneously centering the mission, providing a focus on purpose. This focus, with a dedication to agility, opens the “opportunity” doors that may otherwise be ignored amidst fears of loss – the very doors that provide new paths to success. It may resemble scenario planning, but is more overarching and prepares leadership to act quickly when clarity arrives.

Let’s consider for a moment the many federally funded programs focused on violence against women across the country. Over the last six months they have been threatened with defunding if they do not attest to “anti-DEI” certifications that run counter to their missions and principles. These demands, which emerged relatively suddenly, in short, forced organizations to consider the trade-off of sacrificing values for needed funding.

There was little likelihood the extent of this specific situation would have come up in anyone’s scenario plan. But domestic violence coalitions around the country knew their mission, financial context, and role in the landscape well enough to have a response ready and shift approaches to a legal strategy. Knowing the details of these variables going into the situation may not make the path forward easy or predictable, but it does allow for wise, timely, and informed decisions even under formerly unforeseeable circumstances.

Another organization might have other factors at play – dedicated staff that it does not want to lose, donor and stakeholder expectations, a dedicated building, or other fixed costs that might be difficult to eliminate. Knowing when and how various management considerations come into play is the knowledge that each nonprofit needs and can gather in preparation for future decision making.

Rather than jumping straight to projections, this data collection and education, which we call scenario positioning, allows organizations to prepare to take action and make strategic decisions as challenges become clearer.

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