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Room40 Group

All posts by Room40 Group

Want a great strategic plan? Pay attention to the process.

By | Cool Analysis, Growth strategy

Greetings from Room40,

The other day, I was asked what makes a great strategic plan.  I had a one-word answer, “Process”.  Not process for the sake of process – we don’t have patience for that.  Process that engages stakeholders, creates space for data and analysis, allows for iteration and sets up for testing and refining.  It’s a slightly odd answer from a bunch of self-professed data-junkies who like better decisions faster.  Not a lot of room for “process” if you’re oriented that way.  And that’s exactly why it’s important and is central to our approach.

“So, data-junkies who value process, what is this approach you’re talking about?”  We’re so glad you asked.  Here it is.  As always, if we can help you and your organization improve, grow, and change, drop us a line.

 

Seven Habits of Highly Successful Strategic Planning Processes
(How about we just use SHHSSPP for short?)

 

1. Engage people.  There are no great strategies, just strategies well implemented.  One of the most critical steps in maximizing impact is getting your team on board by involving them in the process.  We balance input and perspectives from national and local leadership at the staff and board levels, front line to executive, program to back office.  We build this in from the beginning to get important input, educate and empower those involved, and create support for the plan as it is developed.

2. Write your narrative. We start the project by defining the narrative for the organization: Where are we today? Where do we want to be tomorrow? What is our vision of the future? This simple, short story will align your leadership on the front end and ground future conversations with staff and stakeholders on the important values and vision underpinning the organization’s next chapter.

3. Develop a hypothesis. Next, we help you develop a strong and testable hypothesis for how you will move from today to tomorrow. This will help us identify and prioritize the most critical decisions you need to make, and the specific data we collectively need to validate (or improve) the hypothesis.

4. Conduct analysis.  With the narrative and hypothesis to guide our efforts, we overlay quantitative and qualitative data, judgement and opinions to inform, validate and revise our thinking.  We conduct both internal analysis (programs, operations, financials) and external analysis (competitors, partners, geographic fit, funding options). Our Internal work builds on what you already know about your organization, supplemented with interviews and additional analysis. Our external work brings to the table new research, data and analysis about different the different opportunities and challenges that shape the context for your work.

5. Create scenarios.  The narrative, hypothesis and analysis come together to inform your organization’s decisions about its future.  To facilitate the decision-making, we believe in the power of developing several scenarios that offer distinct and competing views of what the organization will be doing in the future.  These scenarios will be intentionally provocative.  They elicit reactions that help us identify what will be embraced and challenging among the options. They open up a conversation about why.  It’s not unusual to like the reach of one scenario, the depth of another and the funding model of the third.  Some things are incompatible. Others can be integrated. In the end we can’t do everything and so we’ll have to choose.

6. Put together the plan. With the future vision decided, we develop a plan for how to get there informed by all we have learned about the organization and its external context.  This becomes the document that guides you internally and rallies your supporters externally.

7. Get ready for Implementation and change management.  Finding the “what”, or answer, is only the beginning. Arguably, the harder work begins with the “how”, or changes in behavior, staff, systems, and process… and that requires a clear articulation of the “why.” We can’t do that for you, but we draw on our executive experience leading similar efforts, our wins and our failures, to help you do it better.

Tah-dah!  Just like that.  Drop us a line if you have questions or stories to share.  We’d love to hear from you.

Yours in pursuit of HSSPP,

Anna, Ben, George and Harleen
aka Room40

Know before you grow

By | Growth strategy

Whether you’re growing a local program or expanding to a new state, there is so much to know before you grow.  What program will you offer?  Where?  To whom?  How much staff do you need?  How much will it cost?  Do you have support of your Board, your partners, your funders, your volunteers, your staff?  Some questions are easier to answer than others.*

One question you rarely hear:  how much money is there to support my growth?  Sure, you might hear “will funders fund me?”, but never: “how much money is out there?”  Why don’t we ever ask how big the pie is?  Well, because no one knew!

Until now.  We mapped all the philanthropy in the U.S.  We know that 60% comes from the top 50 metro service areas (we call them “markets”); 90% comes from all 381 markets in the U.S.  And we can give you the detail on it.  What’s amazing is not the data (though it is pretty cool!), it’s what you can do with it.

“So, how do I use The Map?”  Here’s a typical story of an organization using the data to make better decisions, faster:

Our Favorite Educational Nonprofit (OFEN) was in three cities and growing.  They had an ambitious plan to expand in Boston, investing in physical space, staff and outreach.  Ultimately, they had visions of serving the whole region – the need is everywhere, and OFEN’s program is proven to help.  The Board and staff were itching to grow faster than their plan.  An opportunity presented itself in western Massachusetts, just an hour outside of Boston.  It was consistent with their mission and program.  The overwhelming urge was to go for it.

The ED knew what he needed to raise to fund his Boston expansion.  It was an aggressive target, increasing OFEN’s fundraising by a significant percentage year over year to fund a capital campaign and significantly higher annual operating expenses.  With some quick back-of-the-envelope calculations, he estimated it would take $500K annually to run the program in western MA.

Then he asked the critical question:  How much philanthropy is in western MA?  Looking at The Map, Boston is the 10th largest philanthropic market in the country at $6.9B.  No other cities or towns in Massachusetts show up in the top 50.  The smallest, #50 Providence, RI, is $1.1B, or 16% of Boston.  All the dots west of Boston are far smaller than Providence – so small, they are hard to see.  Think of the dots as dollar signs… and there aren’t many.  (Go ahead, click on the map to get a good look.)

 

 

He took a quick look at what peers were raising on an annual basis and the answer was clear.  Funding the start-up in western MA would require support from the Boston philanthropic community.  That means staff time, potential prospects and dollars diverted from the big push in Boston.  And, likely, it would require on-going support as well.

With this answer, the ED went back to his board: “If we do this, we slow down Boston.  Let’s focus on Boston and revisit in a year.”  It was an unpopular decision – until he shared the data. 

The data and approach OFEN used to come to a better decision, faster is captured in The Map of Opportunity: A Practical Guide to Philanthropy in the U.S.  It’s available on our website.

Let’s be honest, sometimes you have a chance to really plan ahead; other times, not so much.  Either way, take the time to know before you grow – use The Map to answer that all-important question “Where is the money?”.

Need help along the way?  Just holler.

Yours in pursuit of better decisions, faster,

Anna, Ben, George and Harleen, aka The Room40 Group

*With experience as nonprofit executives and strategy consultants, we specialize in answering these sorts of questions.  Want some help? Let us know.

We found a partner in crime!

By | Room40 News

We found a partner in crime!  A soulmate!  Our better half!*

We’d like to introduce our new BFF:  GuideStar. We share a love of data and analysis, travel, sunsets, long walks on the beach…  oops.  I mean, commitment to data innovation and data distribution resulting in nonprofits making high-quality, data-informed decisions.

GuideStar is the world’s largest source of information for nonprofit organizations.  Working together, we will create valuable tools, informed by data, for the nonprofit sector.

The first result of our collaboration is The Map of Opportunity, showing the distribution and concentration of philanthropy across the U.S. – and how to use the information to raise more money.  If you haven’t seen it yet, check it out.  It will change the way you think about how much you can raise for your organization.

“We strive to provide data and analysis to help nonprofits make better decisions,” said Adrian Bordone, vice president for strategic partnerships at GuideStar. “Our collaboration with The Room40 Group is a sensible step in this direction by strengthening fundraising strategy and execution.”

Partnering with GuideStar will raise the awareness of our work and help us build a community of nonprofit leaders who value data and learning from each other – which only makes our work better (and more fun).  So, yes, we’re a bit smitten.

We look forward to sharing the results of our collaboration with you.  Stay tuned!

Yours in pursuit of better decisions, faster,

Anna, Ben, George and Harleen
aka The Room40 Group

 

*Yes, that’s hyperbole.  We don’t actually commit crimes.  And we’re not leaving our spouses to run off with GuideStar.  We’re working with GuideStar to promote great tools for nonprofits, informed by GuideStar’s data and our analysis.  It’s a working relationship we all believe will improve the sector.

 

Had enough revenue Russian Roulette?

By | Cool Analysis, Philanthropy

A New Perspective on Philanthropy and Fundraising
Post #4: Had Enough Revenue Russian Roulette?
Setting Revenue Targets in a Complex World

Oh boy, it’s that time of year: You’re working with your staff to set revenue targets. A third of your folks are setting targets that feel too high, a third too low, and the rest are in the middle… but no one agrees on which third is which! You do your best by looking at past history (10% higher make sense?), current pipeline (80% of target ok?), and team (they look burnt out, reduce by 5%?) but it can feel like voodoo and chicken entrails.

I may be exaggerating a little, but I think only a little. First, let’s acknowledge that setting revenue targets is hard. You often have a mix of public and private dollars from different sources and dynamics; even when we focus on philanthropy we’ve seen local markets are not equal in terms of size, there are lots of local idiosyncrasies and nuances; and your teams likely vary in tenure, ability, and capacity.

This means you are constantly trying to triangulate philanthropic potential (what’s possible), fundraising competency (how strong is the team), and capacity (how big is the team), all of which can swing performance significantly. As a result, making decisions on how much you can raise, and where feels at best like expensive trial and error, and at worst like Russian Roulette: spin the chamber, pull the trigger, pray.

So let’s talk about how we can start to reduce that uncertainty and danger, starting with philanthropic potential. We will continue with our fictional “Nonprofit A” to explore how we might put this data to work… though purely for my entertainment we shall redesignate said fictional example “The George Chu Center for Folks Who Can’t Decide Good and Wanna Get Better Data Too”*, or GCC for short.

GCC operates in and raises money from five metropolitan areas including New York, Chicago, San Francisco, Boston, and Durham. The five sites range in age from one year old (Chicago) to ten years old (Boston). We are in the midst of our planning for next year, and also revising our five year plans. Here’s how we did it.

Understanding market size is a really helpful start — it explains about one-third of what you’ll raise if you recall from our third post — but it is also necessary to look at what folks are actually raising within each market. To do so, we gathered philanthropic data from a set of peer organizations who raise money from, and for use within each of GCC’s metropolitan areas.

By plotting these points for each market, we were able to create a distribution of philanthropic revenue by market. In Figure 1 you can see this distribution for each of GCC’s markets. Each blue dot represents philanthropic revenue of a peer nonprofit; the red dot is GCC; and the “box” is the middle two quartiles; the line in the middle is the median; and the “whiskers” a measure of standard deviation.

Figure 1: Distribution of Philanthropy by Organization for GCC’s Market

 

A rough gauge of potential is the median, or “typical” for the peer group. If you are above or below that line, that would indicate higher or lower performance, respectively, all else equal (note, obviously not all else is equal as these organizations range in size, capacity, strategy, mission, etc., but we find this to be a solid starting point).

Now, as always, this data is useful to inform judgement, but not good enough to replace it. So we need to overlay the story. For example, we might find that Chicago, which looks like a gross underperformer, is in fact in year 1 of operation. Perhaps San Francisco had an unfilled Executive Director position for half the year so performance below the median actually represents heroic efforts by the team. Maybe Boston was highly focused on building out public funding streams and divided their focus accordingly. Durham turns out to be a largely a programmatic outpost with minimal development staff. Context always matters!

Caveats aside, if we add up the red dots, we’ll find GCC is raising about $10.3M across all five markets. If we use the median or typical as a proxy for potential, we can add up these up and see GCC can raise up to $14.7M in these same markets. Perhaps an initial ballpark estimate for our five year revenue goals? Maybe a starting point for next year’s goal as we can see where we might increase a lot (Chicago?), or not at all (Durham?).

Hopefully you said “yes”, and then added “but we need to refine our ballpark estimate a lot before I feel comfortable committing my team to these as five year goals.” I hope you also said “knowing what is possible over time is a helpful, but our immediate need is to set targets for next year… this helps a little but don’t we need to take it further?”

Yes, the answer is yes. But I’m in the midst of an “Agents of Shield” binge, so we’ll save some for later. Stay tuned next week, same Bat Time same Bat Channel, for our next post where we will zero in on GCC’s annual and five year revenue goals!
* Inspired by The Derek Zoolander Center For Kids Who Can’t Read Good And Wanna Learn To Do Other Stuff Good.

Yes, market size really does matter!

By | Cool Analysis, Philanthropy

Peer Performance Insights: A New Perspective on Philanthropy and Fundraising
Post #3: Understand Your Markets, Part Deux:
Yes, Market Size Really Does #@$#@ Matter

In our first post we told you why we believe we need a new perspective on philanthropy and fundraising. In the second post we showed you that philanthropy is local, and all markets are not equal. “So what?”, you said. “Does it really matter?”, you said.

“Yes, Market Size Really Does #@$#@ Matter,” we say. Here’s why:

One-third of what you raise is determined by where you are, or where you plan to go.

Think about that for a moment…  one-third for market size ALONE. We aren’t (yet) looking at other market factors such as demographics, socioeconomics, culture, ratio of Red Sox to Yankees fans, and the implications of deflategate on local philanthropic giving. Nor are we (yet) looking at important organizational factors like, I don’t know, your mission, strategy, how many fundraisers you have, or how good they are! That’s a little crazy, no?

Crazy but true and we’ll show you how we arrived here… but a few notes before we do:

  • We are about to seriously geek out a bit, so brace yourself. If you love scatter plots and regressions, get ready to have some fun. If you are a normal human being and just want the bottom line before the Walking Dead comes on, bear with us… this is important. If you are busy and/or overconfident in our abilities, skip the steps and go to the “so what”.
  • For those of you who are serious geeks, know we recognize we are using incomplete, imperfect data of variable quality and comparability; and we are playing a little fast and loose with the laws of statistics. Below we make the case this is ok – we are helping folks make the best possible decisions based on available data, not proving the existence of the Higgs boson, but welcome your feedback and thoughts to the contrary!

Let the geeking begin!

Step 1: First we take the data we showed in our last post – Philanthropic market size by metropolitan statistical area. See Figure 1 for a snapshot of the top 50 markets from big to small (note, we have this for all 381 metropolitan areas, but that makes for a tough graph to read). This data is going to become our X-axis in a moment, so hold it in your head.

 

Figure 1: Local Markets are Not Equal

Step 2: We collected philanthropic revenue data for a set of 13 multi-site organizations raising money in multiple metropolitan areas. Specifically, we obtained philanthropic revenue raised by each organization within each metropolitan area. For example, Nonprofit A raised $11.4 M across 8 metropolitan areas in the following amounts: $4.3 M in New York, $0.6 M in Chicago, so on and so forth. Keep this in your head as it will become our Y-Axis in a moment.

Step 3: The moment is here! We create a scatter plot with each of Nonprofit A’s sites becoming a “dot”. For example, Nonprofit A’s New York office would be ($27.4 B, $4.3 M), and their Chicago office would be ($10.9 B, $0.6 M), so on and so forth for the remaining six markets. This gives us Figure 2, a plot of Nonprofit A’s revenue by market for each of its 8 offices.

 

Figure 2: Philanthropic Revenue by Philanthropic Market for Nonprofit A (Observed)

 

Step 4: We performed a linear regression analysis to quantify the relationship between revenue and market size as you can see represented as the line in Figure 3. We’ve included two stats in the label, r-squared and p-value. The former, r-squared is a measure of “fit” between the observations (dots) and the predicted values (line) and indicates, for this example, market size “explains” 69% of the variation in revenue for Nonprofit A. The latter, p-value, is a measure of significance, and suffice it to say anything below 0.05 is solid, so we are fine at 0.01.

Here’s where I will again highlight the limits of this data and analysis… I wouldn’t call this capital “S” science. Data on philanthropy can be sketchy, compiled from various sources over various time periods, and we’ve made assumptions to fill in the gaps. Our approach is empirical in nature, but we also rely upon our judgment and experience to make some analytical leaps that might make some cringe.

For example, we need to be careful in how we think about correlation and causation. We know the world isn’t so simple as to say “big” automatically equals “raise more”. That said, this feels mostly true or at least highly related, matches our intuition, and that of a dozen or so nonprofit leaders with whom we’ve road tested our thinking. So, we make the case “Good Enough!”

 

Figure 3: Philanthropic Revenue by Philanthropic Market for Nonprofit A (Predicted)

 

Step 5: Rinse, wash, and repeat steps 1 through 4 for the other dozen organizations.

So What?

Once we’ve done this for our entire sample, we find the following:

  • All thirteen organizations have a significant correlation between revenue and market size
  • The correlation or r-squared for the sample ranges from 10% to 75% — a big range!
  • The mean and median r-squared of the sample are both ~33%

It is from this last bullet that we derive our rule of thumb:

One-third of what you raise is determined by where you are, or where you plan to go.

This insight can shine a powerful light on philanthropic potential and performance for markets in which you currently operate, and new markets to which you are considering expansion; particularly when you combine market data with benchmarking data from local peers.

We’ll start to explore the “how to” of using this data to make expansion and growth decisions for all your markets, and to set and assess revenue targets within individual markets in the next set of posts, coming next week, same Bat Time same Bat Channel.

Introducing the new Room40 Group!

By | Room40 News

Greetings from Room40, also known as Ben, George and Anna!

Room40 was founded not too long ago to help nonprofit organizations improve, grow and change. Ben and George, as nonprofit executives and former strategy consultants, experienced firsthand how the right analysis, knowhow, and better practices led to better decisions, faster.  Room40 was created to help nonprofits do just that.

Room40’s first 18 months has proven that lots of you agree! We have worked with over a dozen growing organizations across the country – many you would recognize – giving them a boost that makes it a little easier to change the world.  We also developed a new service unique in the nonprofit sector—Peer Performance Insights —that gives nonprofit leaders access to critical data about philanthropy.

Today we’re taking another big step forward!  Anna Fincke is joining The Room40 Group as a Partner.  Anna comes to Room40 with many years’ Executive and Board leadership experience.  Most recently, she was Vice President of Work Exchange Programs at CIEE, a nonprofit in Portland, Maine.  In this capacity, she led a $20M operating division bringing 30,000 young people to the U.S. each year for cultural exchange programs in a highly regulated and quickly changing environment.

We’ve known Anna a long time—the three of us all started in strategy consulting together many years ago.  We couldn’t be more ecstatic to get this particular band back together.

At Room40, we leverage our experience, our network, and data to help nonprofit leaders make better decisions faster based on lessons learned from others’ success.  Check out our website to learn more about what we do and how we can help your organization.

All the best,

Ben, George and Anna

The Room40 Group
Better decisions, faster.