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Jun/12

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AZENet Week: Kori Kanayama on Using Business Model Assessment to Approach Organizational Sustainability

Hello, my name is Kori Kanayama of Kaoru Kanayama Consulting.  I’m going to share an approach to assessing a nonprofit organization’s profitability and mission impact as a springboard to organizational sustainability. I presented this assessment methodology at the Spring AZENet conference.

This methodology can be done by nonprofit leaders, and by internal or external evaluators. It requires two kinds of data.

The first type of data is financial, and the task is to determine if each of the organization’s programs is making or losing money. The second type of data is mission impact data where a decision must be made on which indicators will be used to measure the impact of each program.  Examples of indicators that could be used to assess impact include: Alignment with Core Mission, Program Excellence, Community Building Value, and Leverage.

After determining whether each program (or line of business) is making or losing money and whether the impact of each program is high or low, the data can be displayed on a simple quadrant matrix.  Each program will end up in one (or could straddle two) of the four quadrants which show implications for the programs:

  Low Profitability High Profitability
High Impact HEARTAvoid making the choice to either shut it down or raise more money. Keep it, but control its costs. Too many of these make an organization unsustainable. STARSeems to run itself, but resist the temptation to loosen oversight. Invest in these programs because this is where strategic growth opportunities are. 
Low Impact STOP SIGNInstead of holding onto this program, close it down or give it away.  If making one last effort, do it with a budget and a deadline. Do an analysis on the impact of closing a business line, and pay attention to its effect on shared administrative costs. MONEY TREEPrograms in this category need to be nurtured to increase their impact. Until impact is increased resist expanding, adding, or growing the program. 

Hot Tip: Allocate income and expenses as accurately as possible. Trying to prop up unprofitable programs defeats the purpose of the analysis.  The point is to clarify the subsidizing relationships between business lines.

Hot Tip: This analysis can be incorporated into strategic planning, implemented at a board or senior staff retreat, or used as a stand-alone operational planning tool. See Jan Masaoka’s Blue Avocado blog post on alternatives to strategic planning which highlights the need to look at program impact and financial stability together.

Rad Resources:

Source Document: Nonprofit Sustainability by Jeanne Bell, Jan Masaoka and Steve Zimmerman.

My presentation at the AZENet conference.

The American Evaluation Association is celebrating Arizona Evaluation Network (AZENet) Affiliate Week with our colleagues in the AZENet AEA Affiliate. The contributions all this week to aea365 come from our AZE members. Do you have questions, concerns, kudos, or content to extend this aea365 contribution? Please add them in the comments section for this post on the aea365 webpage so that we may enrich our community of practice. Would you like to submit an aea365 Tip? Please send a note of interest to aea365@eval.org. aea365 is sponsored by the American Evaluation Association and provides a Tip-a-Day by and for evaluators.

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5 comments

  • Beth Holtzman · June 19, 2012 at 12:18 pm

    Kori,

    Thanks for this post. Very interesting. Could you explain more (or point to existing resources) about the rating scale for measuring impact and how that plays out in practice?

    Thanks,

    Beth

    Reply

    • Kori Kanayama · June 27, 2012 at 4:39 pm

      Hi Beth: To measure mission impact of programs, select up to 4 criteria and rate each on the scale of 1 to 4 and average out the scores. The book lists 7 criteria, and says to use no more than 4. I suggest selecting criteria that most matter to your organization and its business model. Then decide who participates in the scoring: the management team, board of directors, other staff groups and/or external parties knowledgeable about your programs. Weighting scores according to relative importance of the criterion is an option. Thanks for the question and please let me know this helps, Kori

      Reply

  • Jessica Manta-Meyer · June 14, 2012 at 7:20 pm

    Thank you for this post. I have experience with this matrix as a staff member at an agency going through strategic planning. It prompted a clear and profound “a-ha” moment for many people, even though we came from otherwise very different perspectives on the strategic planning process.

    Reply

    • Kori Kanayama · June 15, 2012 at 11:21 pm

      Thank you, Jessica, for your comment. I’m glad to hear of an example of using business model assessment providing a common ground for internal discussions. I hope the matrix helped your organization produce a strategic plan that joined voices.

      Reply

  • Kori Kanayama · June 12, 2012 at 9:08 am

    The table format didn’t translate. Please view another version of this post at: http://dl.dropbox.com/u/39370431/Kori%20aea365%20blog%20post%20final.doc

    Reply

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