Scenario planning as a tool for uncertainty

by Molly Penn

Our whole world has shifted in dramatic, life-changing ways in the span of four short months.  First there was (is) the global pandemic, which we now know will be part of our “new normal” for a long time to come.  Then there was the brutal murder of George Floyd, which was the latest incident in a long history of white supremacy and policy brutality – but there is hope that this will be the last of these incidents as we fight for social change.  We are all raw, vulnerable, angry, sad and ignited, hopeful, passionate and ready to fight.

CEOs have had to pivot their services, their management of now remote staff and stave off financial losses as best they can in only 4 months.  They are exhausted.  Now they are planning for the reopening process which just began this week.  With an atmosphere of triage all around us, how are we supposed to plan farther out than next week?  Yet we operate in a world that requires a degree of confidence from us that we know where we are going.  Boards need that, funders need it, our staff needs it, our clients need it most of all.

Scenario planning is not a panacea – it is not a magic process that will conjure certainty.  It is, however, a process that will help you feel prepared for how the future might unfold.  What stakeholders need from us is confidence, not certainty.

how does scenario planning work?

Scenario planning a much quicker process than traditional strategic planning, which makes it helpful in a quickly shifting environment. It is also typically not as long term in its planning horizon. Many people think of scenario planning as a budgeting process – budgeting for for various possible financial outcomes. That is definitely a part of scenario planning, but you also need to think about what you will DO – what programs you will run, whether you need to merge, what services you will provide. So, we’ll walk you through the process of scenario planning here.

first determine your strategic focus

What is it you are trying to understand by engaging in scenario planning? It could be as broad as how do we preserve our mission amidst this upheaval? Or it could be more specific, such as should we merge with xyz organization? It is important to understand and define the question you are seeking to answer as part of the scenario planning process.

then identify a list of driving forces of change

Driving forces are factors in the world outside our organization that will change in ways we must respond to in our organizations. Take the economy for example – it we go into another recession, that will affect how we lead and manage our organizations. Our process starts by posing a simple question:

“What do we see as the driving forces in our society that will most influence all of us going forward?”

You can ask this question of internal stakeholders (board and senior staff) or if you feel you need a broader perspective, you can ask some external stakeholders to weigh in (funders, educators, journalists, constituents).

now distill the list to the two most critical uncertainties

Now your task is to distill that list down to only two – those that meet the following two criteria:

  • Which are most critical to our organization?

  • Which are most uncertain?

Why most critical? Because you need to focus on the most critical issues in times of uncertainty. Why most uncertain? Because you are doing this to develop your preparedness for what might unfold.

use these to write scenarios

Scenarios are not predictions of the future. None of us has a crystal ball. They are different ideas of how critical uncertainties might interact with each other. They are meant to be extreme, but plausible futures that imagine high/low states of each critical uncertainty. Let’s use as an example, the rate of infection from Covid-19, and the economy. So in one future, the rate of infection is high and the economy is strong. In another, the rate of infection is low and the economy is strong. Now let’s flip it – the economy is weak and the rate of infection is high, or the economy is weak and the rate of infection is low.

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develop your strategy

After you have written four plausible future sketches of how the world might look in each of these scenarios, and how that might affect the nonprofit sector, it is time to begin developing some strategy to respond to each of these scenarios. Yes, you are developing four different sets of strategy, but we’ve developed a template that helps you simplify the process of developing your strategy. Our template follows these questions:

  1. How will the needs for our services change in this scenario?

  2. What are the implications for our strategic focus?

  3. Are there new or unique offerings we should create to further our strategic focus in this environment?

  4. Is there anything we should stop (even temporarily) or improve?

  5. What new capacities might we need to respond to this environment?

  6. Are there new or different partners we should work with?

  7. What resources do we have on hand (staff, money, space etc.)?

  8. What resources will we need?

By cycling through these eight questions, you will haves a roadmap you can use to develop your scenario budgets. In this way, your budgets are linked to real estimations of what you might have to do differently.

finally, monitor the environment

Obviously, you will want to keep track of how these critical uncertainties are unfolding. At some point things will begin to get clearer about which of these four scenarios seems most likely. As that happens, you can continue to iterate your strategy so it is more specific. Eventually, the rate of change will slow and you will be in a place where you can resume more traditional strategic planning.

Remember, this process is about helping you feel confident, as a CEO, about how you need to respond as the world around you shifts. As Louis Pasteur said, “chance favors the prepared mind.”

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