Andromeda Yelton

Across Divided Networks

#litabd strategic analysis for fun and profit

May 13th, 2014 · 11 Comments · Uncategorized

I’ve had the pleasure over the last few weeks of having in-depth chats with several women who are top-notch strategic thinkers and have leadership roles in business and nonprofit organizations. Total contact high.

And this has been dovetailing with my LITA Board almost-a-year retrospective thoughts. Because you know I can’t find something interesting without totally obsessing over it until I understand it frontwards backwards and sideways, right?

And in the meantime I’ve checked out a book on nonprofit financial sustainability, which turned out to have a sticker in it saying it had been placed there by an ALA program on financial literacy, which is surely a sign. The book’s giving me a specific technique for analyzing nonprofit budgets, so I’m testing it out on LITA’s.

The tool is a matrix map – basically, put all your budget lines on a chart of impact vs profitability and see what happens. This gives you four quadrants:

  • High impact, profitable (winning)
  • High impact liabilities (labors of love: worth doing if you can subsidize them)
  • Low impact, high profit (the things you do to subsidize your labors of love)
  • Low impact liabilities (why are you doing these?)

Then you represent all those activities with circles scaled to their expense.

The book also gives 7 criteria you can use for determining impact that it claims to have tested (not clear how, but I’m also not done reading) with real-world organizations. It says using more than 4 tends to be unhelpful, so pick the up-to-four that make most sense for your organization; assign each activity a 1-4 score on each criterion; and total them up for your impact estimate. (You can weight them if you like, but that’s a whole other level of complexity I didn’t get into.) I picked the 4 I think are most relevant to LITA and did a back-of-the-envelope impact analysis:

  • Mission alignment (I can compare with the mission statement)
  • Effectiveness of execution (I think this is really important but I have no way of evaluating it)
  • Scale of impact (I assigned a 4 for thousands of people reached per year, a 3 for hundreds, and so forth)
  • Community building (I totally just made this number up on instinct)

(The other criteria it suggested are depth of impact on participants; leverage (how much does it increase the impact of your other activities); and filling an important gap in your competitive space. I found these both less interesting and harder to gauge – I think they’d need a lot more data to do right. Your mileage may vary!)

Results

I made graphs! (Impact and profitability normalized so they run -1 to 1, obvs.) These are based on FY2013 year-end data (aka “the most recent completed fiscal year”) – actual as-realized expenses and revenues. Sorry about the overflow on the legend – couldn’t figure out how to fix that.

Here’s what we do:

Here’s another version without Forum (which is so much bigger of an expense than everything else that it makes them hard to see; and apparently I normalized them to different axes, whoops):

Well now, that’s interesting.

Discussion

I’d love to have some people argue with me – did I pick the wrong criteria from that set? Estimate their values wrongly? Is this entirely the wrong analytical frame? Go for it. Tell me why :)

I also think there’s a hugely important caveat with this entire analysis, which is that our budget docs report staff expenses as a single line item, rather than breaking them out by time spent on each activities. This is important because it means every profitability estimate is an overestimate; not one of those lines accounts for the staff time it takes to make those things happen. This is especially relevant for Forum, which looks like a net profit, but clearly takes a great deal of staff effort (it’s a huge undertaking!) and may therefore be a net loss. That doesn’t mean it’s not worth doing – it reaches hundreds of attendees, who by all reports I’ve heard think well of it, and it’s a great opportunity for us to showcase our members’ accomplishments and help them advance their career goals. But not accounting for staff time does cloud the strategic analysis.

What do you think?

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11 Comments so far ↓

  • Cindi Blyberg

    The biggest issue that this highlights is that the reporting that we get is not as clear or granular as we need it to be in order to make decisions. This is a fantastic illustration of that.

    Governance support is clearly a huge loser, so we should stop that. :P

    I’m super pleased to see that the activities we do to support members make a positive impact. I also can’t say anything I see is a surprise, but it’s really nice to have a visual. Thanks, Andromeda!

  • Andromeda

    …And of course NOW Grant tells me the title should have been “…for fun and nonprofit”. He’s right, of course. Titles are not my thing.

  • Coral

    This is a really useful way to look at budgeting, and I am glad that you are doing it!

    Maybe I’m betraying too much about how I think about professional organizations, nowadays, but I would have picked “filling an important gap in your competitive space,” because I think knowing what people can ONLY get from LITA, if anything, would be useful. Limited professional dollars means we compete with other organizations. It’s interesting that this didn’t stick out as important to you, though. (Reasonable people can look at things differently, who knew? :) )

    Just to play through the thought exercise, if we were going to add the competition metric, we’d have to remove something.

    I work in an organization with a useless mission statement, so my first instinct is to take out the mission alignment piece and replace it with the competitive space piece. But I think LITA’s mission might be clearer and more useful, so that’s probably a bad instinct.

    Since we don’t assess effectiveness (that I know of), that’s probably the one I’d drop, at least until an assessment framework is in place. It’s an important metric, but not a very useful one, currently.

    That’s me, though. I’m not suggesting redoing it, just thinking about … thinking. :)

    One request: I’m having trouble identifying some of the things on the graphs, because the legends cut off. Would you be willing to make a larger legend, with everything spelled out (and list the shortened version beside the spelled-out one, for the colorblind)?

    • Andromeda

      I think there are some important conversations we need to have about what gap we’re filling in the competitive space, and we’d be better off for having them – but I also think there are very few people who have a clearly articulated answer to that question right now, so it’s not a criterion we can usefully apply, today. (That said, I have the nuclei of some opinions, and maybe you do too, and I’d be happy to bat them around. :) And I’d be totally happy to use this criterion in lieu of mission if we could articulate it.)

      And I’d rather keep effectiveness to promote assessment ;) I think we do actually have some assessment data; I just personally don’t have it. We could have more.

      The legends…sigh. Google generated the graphs via magic and I don’t know how to reconfigure either the legend or the color. But I will handwrite it in a subsequent comment.

  • Andromeda

    LEGEND (text version, woohoo):

    MWA: Midwinter & Annual

    PRO: (Membership) Promotion

    GOV: Governance support

    EXT: External relations

    ITAL: Information Technology & Libraries

    CLS: Classified ads

    BKS: Nonperiodical publications

    PRE: Preconferences (at Annual)

    WKP: Midwinter workshops

    WB1: Web courses

    WB2: Webinars

  • Erin McJ

    Interesting! I’m a sucker for a graph. For the non LITAns among us, for whom the legend might not be so meaningful, can you give us a sense of what those three lower-right quadrant datapoints are?

    • Erin McJ

      Also with anything that involves money, sometimes plots on a log scale are helpful. That might help with your Forum issue — it should help you spread out the low points a bit while leaving everything on the same page.

  • Mark K.

    The Board and Senior Management Team at Free Geek (www.freegeek.org) used this model during their strategic planning process. It worked out well, in part because they aggregated impact assessments from the dozen or so strategic planning committee members representing management, labor and volunteers. We actually used the resulting data as a referee/reality check during the past year’s budget process. Good stuff.

    • Andromeda

      Thanks for the real-world story! I’m glad to hear a testimonial :)

      How were you assessing impact of your programs?

      • Mark K.

        Sorry for the slow reply!

        We assessed impact against our mission statement:

        “Free Geek’s mission is to recycle technology and provide access to computers, the Internet, education, and job skills in exchange for community service.”

        Individuals had discretion in deciding whether something that deeply impacted 5 people counted as “more” or “less” impactful than something that more lightly impacted 500 people, so that was part of the conversation.

        Another part of the conversation was, e.g., actual accessibility vs. theoretical accessibility (how important is free and open source?) and what counts as community service (do they have to volunteer for us?).

        I believe individuals used a Likert scale to record their assessments, but input and output measures were part of their deliberations.