Non-profit internal investment decision making

We know that in the non-profit sector the majority of organisations don’t have the funds or resources to do all the things they would like to particularly in terms of spending money on their own systems, staff and processes. This results in making trade-offs when it comes to making decisions about where internal investments should be made. For example, do you spend money on internal organisational infrastructure like a new CRM or IT platform or on staff training or hiring new staff? It’s not always easy to know which investment will produce the greatest outcomes for both your organisation and for those you serve.

So how do you make these investment decisions for your organisation? One approach is go on your gut feel but if you’d like to add a little more science and data to the process you could try using a simple framework to help compare and consider the different investment options.

When we work with organisations looking to prioritise their options for investment, we suggest they initially consider the following 4 steps in making a broad assessment of their requirements:

Identify– what exactly are you spending the money on, why would you want to do it, expected costs and timeframes

Evaluate– how important is it, what is the likelihood of success, do you have the capacity, likely shareholder reaction

Compare– compare the potential projects/investments based on scoring them in the evaluation phase

Decide– invest in the projects/investments with the best likely business outcomes and ability to deliver the most impact

We consider step 2, Evaluation, to be the most critical. We use a matrix and give each decision criteria a weighted score to enable the organisation to generate a clear picture of the suitability of the investment option. The criteria we use for the matrix can include:

1.     Size of opportunity- how much revenue can it generate or cost can it save

2.     Probability of success – how do you rate the chances of it succeeding

3.     Ease of implementation - is it easy & quick or long, complex & difficult

4.     Capacity - do you have the funds, skills and bandwidth to do it now & see it through?

5.     Uniqueness- who else is doing this in the market, could you collaborate?

6.     Stakeholder reaction – how will stakeholders (staff, participants, supporters etc.) react to this activity?

As an example, a client we worked with this year had engaged us to review their systems and processes. Our discussions lead us to discover that there were far broader organisational issues around strategy, leadership and culture at play. It quickly became clear to us that investments needed to be made in these areas first as any investment in new systems and processes would potentially fail if the organisation’s strategic and cultural problems weren’t solved first. By using the decision-making framework, it was clear to see that there was a need to prioritise and phase any changes implemented within the organisation. Capacity is a big issue and there is also enormous value in understanding the most effective order in which to implement change.

No one process is perfect and as a leader you have to display judgement, and there will always be judgement required in whatever decision making tool you use, but something like the one we have described at least gives you a framework and justification for your decisions.