THE DUAL BOTTOM LINE MATRIX: A STEP BY STEP GUIDE

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1 Mission Impact THE DUAL BOTTOM LINE MATRIX: A STEP BY STEP GUIDE Adapted from Finance & Strategy, by Steve Zimmerman, CPA, MBA The Dual Bottom Line is the idea that an organization s strategic choices must be designed to achieve both mission profitability and finance profitability. To these ends, Blue Avocado columnist Steve Zimmerman summarizes a matrix evaluation and planning approach in this article adapted from the book he co-wrote with Jeanne Bell and Jan Masaoka: Nonprofit Sustainability: Making Strategic Choices for Financial Viability. The Dual Bottom Line Matrix tool helps YWCA leaders analyze YWCA programs and events and their suitability for continuation, given the aim to plan for both mission impact and financial vitality. The process involves identifying each major YWCA effort, then categorizing and placing it in a quadrant of the matrix - the quadrant that most closely matches its YWCA mission contribution combined with its contribution to YWCA s financial sustainability. Once the chart is populated recommendations to consider emerge: Heart: High Mission Impact but Low Sustainability: The suggested course of action for efforts in this quadrant is to keep them but build their financial sustainability. Star: High Mission Impact and High Sustainability: The suggested course of action for efforts in this quadrant is to continue and strengthen them. Attention: Low Sustainability and Low Mission Impact: These are candidates for closure or transfer. Purse: High Sustainability but Low Mission Impact: The suggested course of action for efforts in this quadrant is to continue them while steadily increasing their mission impact. More than just a picture, the matrix can engage board members in strategic discussions about how to strengthen the organization s business model understanding that the implications of their decisions will affect both impact and finances. And, all can see the whole organization at a glance in a way that focuses attention on efforts and impact. Sustainability $ Steve Zimmerman, CPA, MBA, is principal at Spectrum Nonprofit Services, a finance and strategy consulting firm based in Milwaukee. With Jeanne Bell and Jan Masaoka, he co-authored Nonprofit Sustainability: Making Strategic Decisions for Financial Viability. Please note: This information is presented only as a resource and/or sample. As YWCA needs and situations differ, this information is not to be considered as advice, a prescription, or as any type of recommendation. This resource may include content that has been adapted or developed from one or more articles or guides by other authors for reference by YWCAs, and copyright restrictions apply. Be sure to engage appropriate counsel/expertise for the development and implementation of any YWCA plan, event, policy, procedure, practice, contract, agreement, and/or action. 1

2 It s easy to embrace the concept of the Dual Bottom Line, but harder to apply it in a realworld board setting. For example, board members and many staff are seldom familiar with all of the programs and activities of the organization. While there may be a strong sense that all our programs are great, there may not have been any discussion about which programs are, in fact, those with the greatest or most important impacts. Even people with financial expertise may feel uncertain about how to make decisions that are more nuanced than stick to the budget and at least break even. Many board meetings unintentionally support this kind of fragmentation. Each subject is taken on its own: first the financial report, then the program report, and then the fundraising report. The Dual Bottom Line Matrix Map aims to change that. The Matrix Map is a visual tool that plots all of the organization s activities not just its programs into a single, compelling image. By illustrating the organization s business model through a picture of all activities and the mission and financial impact of each one it supports genuinely strategic discussions. Four steps to make a dual bottom line matrix Identify your lines of business, meaning major programs, services, campaigns, activities and events Assess the mission impact of each Assess the finances of each Map the results, analyze, and identify the most viable strategies to move forward. 1. Identify the YWCA s major efforts all of them. This task includes listing programmatic, advocacy, and fundraising activities, e.g.: childcare, teen programs, health services, safety services, citizenship classes, and resident programs as well as advocacy forums, the annual fund drive, and the organization s annual special event(s).. Determine each effort s mission profitability In many nonprofits, there s an implicit assumption that all programs are effective and important and that s typically true. But everyone also realizes yet seldom says that some programs have higher impact than others. Impact levels may not be discussed in depth in order to avoid criticizing a worthwhile program (or its director), but it s precisely these judgments about which programs have the highest impact mission-wise and financially that the management team and the board need to discuss as strategic choices are made. To start, conduct a survey or discussion with the management team and the board that asks individuals or the group to rate each effort (program/activity/event applying at least four criteria. Organizations can identify their own criteria for impact, however, it is suggested that the criteria include: Mission alignment: To what extent does this program forward our mission? A list with several specific ways that improvements are made in the areas of racial justice and civil rights and/or the empowerment of women and girls should accompany any effort deemed to be highly aligned. Excellence in execution: Many organizations are better at delivering some activities than others. A service or special event may be important to the mission, but are there the right skills and ample financial resources to implement it with excellence? This is a nice way of separating planning from execution. Service volume: How many people does each effort involve and affect? Depth: How broadly and deeply are the lives of those involved and affected improved as a result of the effort? Essentiality: To what extent does the effort fill an identified need? If the service/activity were to go away, would constituents have a place to go?

3 Profitability. Establish each effort s mission impact score and financial profitability Enter the following information for each YWCA program/effort. -Cost and Profitability: Using YWCA budgets and financial reports, note the total cost of each program/effort and figure its surplus or (deficit) after subtracting all costs (direct and indirect) from revenues received. -Program Mission Impact Score: This is the average of the scores entered across the criteria above. For example, if the infant childcare received the following scores: Mission Alignment: 4 Excellence in Execution: Service Volume: Essentiality: 4 Its overall mission impact score would be the average of.5 Once all the programs/efforts are listed with the called-for information, open an Excel spreadsheet and build the mission matrix chart, using the following headers and columns: Mission Impact Score Total Expense Program Then fill in the information gathered, e.g.: (keep columns in this order) Mission Profitability Impact Score Total Program Annual Expense Program -$,59.5 $57,997 In-School Violence Prevention -$15,519.5 $66,99 Sexual Assault Crisis Services -0,567 4 $5,000 Infant Childcare -$10,000 4 $0,581 Leaders of Tomorrow -$6,500 $,9 Ship Shape Conditioning -$7, $6,807 Drop in childcare $10,974 4 $5,974 Women s Employment Bureau $00 4 $5,000 Anti-racism training $5,000.5 $160,000 Shelter Services $7,000 $7,000 Annual Promotional Luncheon -8,500 1 $18,500 Community Garden Workshop Next, generate a bubble chart which will show each program/effort's contribution to the YWCA mission and financial bottom line. A sample, template, and further directions follow. 4. Analyze the results: Finally, referring to the recommendations outlined on page and given the results represented on the matrix, identify the YWCA s strategic imperatives. Then plan your work and work your plan!

4 Here is the mission matrix chart that matches the table on page. Further Directions for Generating the Bubble Chart When the chart is first generated, it may look like this: The chart label at the top and header labels at the bottom can be deleted, as can the '1 to 5' scale showing down the middle and the 'Profitability' scale at the bottom. The profitability scale on the template can be covered with a new one if the range doesn't turn out to be correct for a particular set of figures. Configure the chart so there is no fill and no outline. A different color fill can be chosen for each bubble A program label may need to be added to each bubble Take a screen shot of the template and paste it into the analysis/reporting document that will be used. Once the chart is ready, overlay it on the template below the "Bring to Front" command may be needed, and its size may need to be altered to match the template. Mission matrix template follows 4 4

5 4 -$5,000 -$0,000 -$5,000 -$0,000 -$15,000 - $10,000 -$5,000 +$5,000 +$10,000 +$15,000 +$0,000 +$5,000 +$0,000 +$5,000 1 $ 5 5