Operational excellence never hurts during uncertain financial times
It's certainly an uncertain time for mission-driven organizations. Federal funding dollars hang in limbo. Jobs are being cut. Economic uncertainty looms. What should nonprofits do during this time to best prepare their organizations for what’s ahead?
While there's a lot of action to consider, the bread & butter levers of 1) revenue and 2) cost still drive the equation to running a solvent operation. As I thought about the topic of operational excellence, I drew out some levers this afternoon when writing:
Our two levers: Revenue and costs
Firstly, focusing on revenue and finding new funding is always top of mind for organizations and very important. However, Executive Directors shouldn’t depend entirely on more funding to solve their problems and decrease financial risk. With more funding comes increased programming, hires, and operations that come with their own costs.
For organizations seeking to mitigate financial risk (and optimize their operations), spending time looking at the cost breakdown of budget and actual spending can identify new opportunities.
When it comes to cost lever, a leader has two options: Be blunt and chop of limbs or spend time strategically “working out” each body part for optimal performance. I hope you get my fitness metaphor here, but my vote is for Option 2: Making strategic changes to strive for operational excellence. No one wants to cut programs or services that benefit clients, so how can we apply strategy to transform an organization?
Enter operational excellence.
What is operational excellence? It’s is a business philosophy focused on consistently optimizing processes and systems to achieve superior performance and create a competitive advantage. It aims to improve efficiency, reduce waste, enhance quality, and increase customer satisfaction. Essentially, it's about doing things better than the competition by executing business strategies more reliably and effectively.
And to clarify- it certainly embodies the efficiency spirit of “DOGE” while simultaneously being the complete opposite from an execution perspective. Operational excellence for mission-driven orgs involves team work, collaboration, tough conversations, behavior change, incentives, and short- and long-term goals. It’s a bumpy ride with a promise for a better future at the end of the road.
What does operational excellence look like in practice?
OpExcellence work always has three key components:
1) Current state articulation: We need to know what’s going on today. How are processes running? Where is data being stored? What data is being collected?
2) Future state vision: What does optimized processes and systems mean for this specific organization?
3) Gap assessment and Action Plan: How do you get from #1 to #2 and in what order do you do things?
For a workforce development nonprofit, this could be as high level as ‘deciding which type of curriculum to provide’ or as detailed as ‘can a new technology reduce manual data entry time for intake forms’.
For other programs, operational excellence means knowing why certain data is being collected (and using said data to make decisions).
At the end of the day, mission-driven organizations are businesses too and require innovation, optimization, and strategy to improve their service delivery and drive the largest impact for their clients. Operational excellence is a lever that Executive Directors can use to affect long-term positive impact on the organization’s financial outlook and performance, especially during times when uncertainty can lead us down paths of fear instead of paths of opportunity.