CRITICAL SUCCESS FACTOR ANALYSIS OF NON-PROFIT ORGANIZATIONS:
A CASE STUDY
by
MICHAEL M. SCHNITZER B.A., HARVARD COLLEGE
(1975)
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF MASTER OF SCIENCE
at the
MASSACHUSETTS INSTITUTE OF TECHNOLOGY June, 1979
c MICHAEL M. SCHNITZER 1979
Signature of Author 0
; a
...
,flAlfrQd P. Sloan School of Management
May 14, 1979 Certified By .
1/ Thesis Supervisor
Accepted By -- . .- ,
MASSACHUSETTS INSTITULthai rman, Department Committee OF TECHNOLOGY
1ARCHIVES
JUN.
2 5
1979
-2-CRITICAL SUCCESS FACTOR ANALYSIS OF NON-PROFIT ORGANIZATIONS:
A CASE STUDY by
MICHAEL M. SCHNITZER
Submitted to the Alfred P. Sloan School of Management on May 14, 1979 in partial fulfillment of the requirements
for the Degree of Master of Science ABSTRACT
This report presents the results of a case study of critical success factor analysis and application at the Appalachian Mountain Club, a non-profit organization. This study is part of a larger research effort at the M.I.T. Center for Information Systems Research to fully determine the characteristics and uses of critical success factors as management tools.
The study, which involved interviews with nine AMC staff members and volunteers, is oriented toward three spe-cific goals: (1) analysis of the versatility of CSF analy-sis; (2) establishing new applications of CSF analysis; and (3) examining the relationship of CSF analysis with the larger body of management planning and control theory.
This report includes a brief summary of the critical success factor concept, results and discussion of the nine CSF interviews, descriptions of detailed applications of the CSF findings, and a discussion of the CSF/planning interface.
The results of this study suggest the following. (1) CSF's are a versatile concept, intuitively
ap-pealing to managers and applicable in many different organizational settings.
(2) CSF's are a valuable management diagnostic technique, helpful in identifying areas where change or improvement is desirable.
-3-(3) There is a natural complementarity between CSF analysis and the strategic planning process,
which suggests that the two should be integrated in organizational practice.
Thesis Supervisor: Title:
John F. Rockart Senior Lecturer
-4-ACKNOWLEDGEMENTS
Thanks to Thomas Deans and the other AMC staf f members and volunteers who gave so generously of their thoughts and time.
Thanks also to Chris Bullen and Jack Rockart for their guidance and support throughout the process.
And finally, thank you Sara for your help, for your understanding, and for your boundless patience.
-5-TABLE OF CONTENTS TITLE PAGE ABSTRACT ACKNOWLEDGEMENTS LIST OF TABLES LIST OF FIGURES Chapter I. INTRODUCTION
II. STUDY DESCRIPTION The Organization Focus
Methods
III. RESULTS AND DISCUSSION Results
Discussion Applications
IV. STRATEGIC PLANNING APPLICATION Need for Planning?
General Considerations Near Term Changes
Long Term Considerations
V. FINANCIAL CONTROL SYSTEM APPLICATION Automated Systems
Manual Systems
VI. INTEGRATION: CSF'S AND STRATEGIC PLANNING VII. CONCLUSIONS BIBLIOGRAPHY Page 2 4 6 7 8 14 14 15 18 20 20 23 40 42 42 49 52 58 62 64 76 79 88 92
-6-LIST OF TABLES
Page
Table 1. AMC CSF Classification 26
Table 2. Adaptive Integrative CSF Classifi- 29 cation
Table 3. CSF Comparisons 37
-7-LIST OF FIGURES Page Figure 1. Figure 2. Figure 3. Figure 4. Figure 5. AMC Staff/Volunteer Table of Organization Departmental Summary Exception Reporting Trend Analysis Management Measures 16 66 68 72 75
The practical literature on management planning and
control has been recently augmented by a new technique called Critical Success Factor analysis, or CSF analysis. The con-cept of critical success factors was first introduced by Daniel in 1961,1 but until recently had received little
2
additional attention. However, Rockart and his fellow re-searchers at the Center for Information Systems Research, Sloan School of Management, have had substantial success in further defining the concept, and in applying it in a number of organizational settings to the benefit of practicing
3 managers.
What are the critical success factors? Daniels first defined them in the context of a company's information sys-tem, stating that "It [the information system] should focus on 'success factors.' In most industries there are usually three to six factors that determine success; these key jobs must be done exceedingly well for a company to be
success-ful."14
Anthony, Dearden, and Vancil added the following a decade later in reference to management control systems.
The control system must be tailored to the specific industry in which the company operates and to the specific strategies that it has adopted; it must identify the 'critical success factors' that should receive careful attention if the company is to be
-9-successful; and it must highlight performance with respect to these key variables in reports to all levels of management.5
Rockart defines them as follows:
They are for any business, the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance
for the organization. They are the few key areas where 'things must go right' for the business to
flourish. If results in these few significant areas are good, the business will be successful. If results in these areas are not adequate, the organization's efforts for the period will be less than desired.6
The essence of the critical success factor concept should now be clear. Among the myriad areas and facets of any organization, there exist a few that are of overriding importance to the success of the organization as a whole. It is these areas that must be closely monitored by operat-ing managers, so that success can be realized. The tech-nique of critical success factor analysis is oriented toward helping managers to explicitly identify these areas, and to consciously, creatively, and successfully manage them.
In developing and utilizing this concept, Rockart has concentrated on applications to management informations system design. From this work with operating managers in organizational settings, four types of critical success fac-tors have been identified. First, as suggested by Daniel, are those that derive from the structure of the particular industry, facets of the business that are critical to every company within the industry.
-10-Second, as implied by Vancil et al., certain critical success factors are related to the individual company's strategy for dealing with its competitors. One would not expect these to be the same for all organizations within an industry, and indeed they are not.7
Third, some critical success factors result from environ-mental considerations broader than strategy or industry type. Considerations of the magnitude of GNP, recession, and
po-litical trends often are the origins of CSF's of this type. The fourth type of CSF's are those that are temporal, of critical importance today, but once dealt with, become only a minor concern. Rockart suggests that these temporal CSF's result when an activity sinks below some threshold
level of acceptability, and hence for a short time becomes
8
critical to the organization's success.
In addition to these functional classifications, CSF's have also been found to vary hierarchically within an
organi-9
zation. Often higher level managers identify critical
success factors related to competitive strategy, while lower level managers are more concerned with task oriented, quanti-fiable CSF's.
This analytical framework has proven very useful in
information system design. Using the critical success factor approach, systems can be designed which are specifically
tailored to the environment, to the industry, to the par-ticular company, and to individual managers, and which are
-11-also relevant to the company's current strategic position. Critical success factor analysis also helps to make
infor-mation systems dynamic, rather than static. As CSF's change, the information system can be modified as appropriate, and hence remain current.
It can be seen from the above that critical success factor analysis has been well developed conceptually, and has been successfully applied in a number of organizations. However, there are still a few areas where further research would be valuable. The first is in regard to the
versatili-ty of the concept. While critical success factor analysis has been well received in a number of settings, ranging
from high technology to large health care institutions, the sample is still quite small. Additional applications in different types of organizations would be helpful in establishing the universality of the concept.
Second, what are some other uses of such analysis? Rockart has demonstrated its value in information system design, but can such analysis be helpful in other areas? Two candidates for further study are (1) strategic planning, and (2) organizational structure and the delegation of
authority.
Third, what is the relation of critical success factor analysis to the existing body of management planning and
-12-is the "new kid on the block" in planning and control. A theoretical or conceptual linkage would broaden the under-standing of CSF's and would also place them in a larger con-text so that they might be more successfully utilized by the practicing manager.
-13-NOTES FOR CHAPTER ONE
1. D. Ronald Daniel, "Management Information Crisis," Harvard Business Review, Sept.-Oct. 1961, p. 111.
2. See Robert N. Anthony, John Dearden, Richard F. Vancil, Management ControlSystems, "Key Economic Variables,"
Irwin 1972, p. 147.
3. John F. Rockart, "Chief Executives Define Their Own Data Needs," Harvard Business Review, March-April 1979, p. 81.
4. Daniel, op. cit., p. 116.
5. Anthonl et al., op. cit., p. 148. 6. Rockart, Op. cit., p. 85.
7. See Gladys G. Mooradian, "The Key Variables in Planning and Control in Medical Group Practices," Sloan School of Management Master's Thesis, 1976.
8. Rockart, op. cit., p. 87.
9. See Charles S. Leto, Erika Williams, "Critical Success Factors in the Marketing Department of a High Technology Company," Sloan School of Management Master's Thesis,
-14-CHAPTER TWO STUDY DESCRIPTION
THE ORGANIZATION
This research is a case study and application of
critical success factor analysis. The organization studied is the Appalachian Mountain Club (AMC), a not-for-profit charitable institution. The AMC, now in its 103rd year, is the nation's oldest recreation/conservation organization. It is a membership organization, with over 23,000 members throughout the world, although the vast majority is concen-trated along the Atlantic seaboard in New England and mid-Atlantic states.
The AMC's current activities fall into four major cate-gories. First is an active organized outings program in hiking, camping, skiing, canoeing, rock-climbing, and the like, with an associated training and instruction program. The second is a number of family vacation oriented seasonal camps in such places as Lake Winnipesaukee and Mt. Desert Island. The third is a unique hut system along the Appala-chain Trail in the White Mountain National Forest which is open to the general public, although owned and operated by
the AMC. The fourth is an extensive array of public service activities including conservation, environmental education, guidebook and map publication, backcountry research, trail
-15-Financially, the AMC is of moderate size for a non-profit, with a current annual operating budget of over $2 million. The huts and camps account for about half of the total, with the remainder being allocated primarily to the various public service activities along with modest support for membership services and outings.
The AMC's structural organization is fairly complex. The Club does have a professional staff numbering approxi-mately 50, with an additional 200 staff on a seasonal basis. For the most part, these positions are functionally defined. However, there is some geographical emphasis, which is in-creasing. This is resulting in a more matrix-like structure. Paralleling the professional staff structure is a complicated volunteer structure of boards and committees. The matrix nature of the volunteer structure is even more pronounced than that of the professional staff. In addition to the complicated reporting network within each structure, there is also a strong staff-volunteer working and reporting structure. The major elements of the AMC staff and volun-teer organization are summarized in the attached table of organization.
FOCUS
While the general purposes of this research is to study critical success factor analysis in relation to the Appala-chian Mountain Club, there are a number of specific areas of interest.
)
AMC STAFF/VOLUNTEER TABLE OF ORGANIZATION
Executive Director* - - - -President*
Dir. Sp. Al
Dir. Dir. of Fin.
of Programs*- -- - V.P. rograms*
Res.* - - - -
-v.P.
Memb. & PlanningDir, of FinanceK - --- -- -
-V.P.Operationsc
(vacant)
Dir.
.C.
Ops. - --- -- - V.P. Northco(vacant) ffairs
Education, Research& - Chm. Ed. Res.&
Trails Directors Trails Committees
Dir. of Pubs.*- - -- - Ch'm. Bd. of Pubs.
Controller*- - - Chm.
Finance Com.*
Huts Manager - - - --
-Ch'm.
Hut
antry Ops. I Com. * - Interviewed for CSF's Staff Volunteer CD I-'
---Public Service Programs Huts Camps Outings Program Director, Directors of Education, Research, Trails, Publications Director of North Country Operations Huts Manager Pinkham Manager Director of North Country Operations Director of Publications V.P. Programs Chm'n Education, Research, Trails, Publications Comm's V.P. North Country Operations Chm'n Hut Committee V.P. North Country Operations Councillor of Camps Councillor of Excursions Chm'n Interchapter Outings Area I 7) Figure 1 (continued) Staff Volunteer
-18-First, as summarized above, the AMC is a very diverse and complicated non-profit organization. As such it is an interesting test of the versatility of critical success
fac-tors analynis. Do the staff at the AMC find the concept useful; do the volunteers? Are the identified CSF's similar
to those found elsewhere.
The second area of interest is in relation to other CSF applications, in particular strategic planning. As the AMC is in the process of evolving a planning structure, it
is an excellent opportunity to explore the relation between
CSF's and contemporary strategic planning theory.
The third and last specific interest is to demonstrate the applications of critical success factor analysis--in effect, what good does it do you to identify them? The
applications emphasis at the AMC will be limited to the CEO's level, that is applications that derive from th6 CEO's criti-cal success factors.
METHODS
This analysis was essentially undertaken in two stages. In the first phase, a number of staff and volunteer positions were selected for analysis, as shown on the attached
organiza-tion chart. These positions were selected both to provide diversity within the organization, and also to illustrate
any differences between volunteers and staff members ful-filling similar roles. Each of these individuals was then
-19-interviewed to determine his or her critical success factors. At the beginning of each interview the CSF concept was ex-plained, as was the purpose of the interview. In the follow-ing discussion, the individuals' critical success factors
were identified. The interview times generally ranged from one-and-a-half to two-and-a-half hours. In some cases,
follow-up interviews or phone conversations were necessary. The second phase of the study was the applications
phase. The executive director's CSF's were defined and ana-lyzed in the context of the CSF's of other interviewed staff and volunteers. Next, a number of areas with applications potential were identified. And finally, two areas were
selected where change seemed both feasible and desirable. In these two areas, new systems and structures were then developed as appropriate.
-20-CHAPTER THREE
RESULTS AND DISCUSSION
RESULTS
A total of nine people were interviewed to determine their critical success factors, five members of the staff and four volunteers. Their positions are denoted by aster-isks on the attached organization chart and include the executive director, two presidents (one oncoming, one out-going), the director of financial resources, the director of programs, the vice president for programs, the controller, the chairman of the finance committee, and the director of publications. The results of these interviews are summarized below and on the following pages.
Executive Director
1. Financially healthy organization - performance to budget, favorable financial trends.
2. Membership support and effective use of volunteers. 3. Effective programs.
4. Successfully represent user populations. 5. Planning structure, future direction.
6. Maintain at least current level of output, despite inflation.
President One
1. Credibility/respect in the field, especially with agency managers, other organizations.
-21-2. Effective public service programs. 3. Performance to budget.
4. Organizational flexibility, capacity to deal with unanticipated problems/opportunities.
5. Modest growth in public service program output. 6. Removal of barriers to membership.
President Two
1. Internal organizational consistency in terms of policies, plans, and budgets.
2. Effective public service programs. 3. Public image and perception.
4. Membership growth.
5. Involvement and effective utilization of volunteers. 6. Performance to budget.
Director of Programs
1. Performance to budget. 2. Creativity of thought.
3. Staff skill level.
4. Effective utilization of volunteers.
5. Credibility/respect in the field, especially with agency managers and other organizations.
6. Effective programs. 7. More southern programs.
-22-Vice President for Programs
1. Process and structure for volunteers to deal with planning, allocation, and evaluation decisions. 2. Membership awareness/support, also support of the
backcountry users, i.e. hikers, campers, canoeists, etc.
3. Performance to budget.
4. Staff skill level, professionalism. 5. Development of market niche.
6. Program effectiveness.
7. Effective utilization of volunteers.
8. Growth--to achieve sufficient program department size to realize internal economics, and to be
insulated from the effects of staffing fluctuations. Director of Financial Resources
1. Number of new members. 2. Membership drop rate.
3. Number of donors, donations. 4. Performance to budget.
5. Public image, particularly with foundations. 6. Attractive programs.
Controller
1. Performance to budget.
2. Provision of timely and reliable information. 3. Staff skill level.
-23-4. Effective cash management.
5. Awareness of important external financial condi-tions.
6. Accurate and reasonable budget construction.
Chairman Finance Committee 1. Performance to budget. 2. Income emphasis.
3. Program effectiveness.
4. Growth in public service program output. 5. Adequate management information.
6. Number, skill level of staff.
Director of Publications 1. Performance to budget. 2. Quality of book list. 3. New titles pending.
4. Successful marketing program.
5. Meeting information needs of the membership.
DISCUSSION
A number of observations follow from these results. First, critical success factors appear to be conceptually useful in an organization such as the AMC. None of the managers interviewed had difficulty in understanding the concept, or in identifying their CSF's. Most found it to be intuitively appealing, and several, in follow-up
-24-focusing their thoughts and defining some of their problems and challenges. These broad findings seem to support the notion that critical success factor analysis is a versatile management tool, applicable in many organizational settings.
More specifically, the CSF's identified by AMC managers appear to fall into the four categories identified by Rockart. CSF's such as performance to budget, program effectiveness, new book titles and the like are clearly 'industry' CSF's as they apply to the AMC. CSF's such as representing the user population in the northeast, new members, more southern programs, etc., are strategic critical success factors, re-lating to the future course of the AMC. Those CSF's such as a strategic planning sturcture, removal of barriers to membership, better summary financial information, and better definition of the AMC program market niche are all examples of temporal CSF's.
No environmental CSF's were identified by the AMC mana-gers that were interviewed, but that is probably because the environmental CSF's are latent at this time. However, such factors as dramatic changes in public recreation spending, inflation that led to significant membership drops, or gas prices that affected recreational activities are all potential environmental CSF's for AMC managers. One explanation of
the absence of identified environmental CSF's is related to the nature of the AMC planning process. As will be later
-25-discussed, environmental CSF's are often related to key plan-ning assumptions. However, such assumptions are difficult to identify in the absence of explicit organizational ob-jectives and an environmental scanning process. Hence it is not surprising that AMC managers have not explicitly
identified any such CSF's. However, in general the classifi-cation framework proposed by Rockart does seem to be applicable in this instance.
From a hierarchical perspective, the findings of Leto and Williams are also generally supported by this analysis. At the level of the executive director, four out of six
CSF's are adaptive, or building in nature. At the level
of the publications director, four out of five are integrative, or maintenance CSF's. Likewise, for the controller nearly
all the CSF's are integrative. In between these two levels, the managers have a more balanced list of CSF's. The director of programs, for instance, has four adaptive and four inte-grative CSF's, an even split. Even for an integrative or maintenance CSF, the emphasis and definition varied by level. While all managers cited performance to budget as a CSF,
the executive director phrased it as a concern for the finan-cial pulse of the organization, and the implications for
the future. At other levels, it was more narrowly defined as meeting the budget of the current operating year. While the AMC sample is admittedly small, it is generally consistent
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TABLE 1 AMC CSF CLASSIFICATION CSF Position Executive Director President One CSF TypeIndustry Strategic Temporal Environ. (Functional)
x x x x 'C x x 1. Financially Healthy Organization 2. Effective use of Volunteers 3. Effective Programs 4. Represent User Populations 5. Planning Structure, Direction 6. Maintain Current Level of Output 1. Credibility w/Agency Managers 2. Effective Programs 3. Performance to Budget 4. Organizational Flexibility 5. Growth in Program Output 6. Removal of Barriers to Membership x x 'C (page 1 of 3) x x I'
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President Two Director of Programs Vice President Programs CSF TypeIndustry Strategic Temporal Envjin. (Functional) x x x x x x x x 1. Internal Consistency 2. Effective Programs 3. Public Image 4. Membership Growth 5. Effective Utilization of Volunteers 6. Performance to Budget 1. Performance to Budget 2. Creativity
3. Staff Skill Level 4. Effective Utilization
of Volunteers 5. Credibility with
Agency Managers 6. Effective Programs 7. More Southern Programs 8. Definition of Market Niche 1. Planning, Allocation and
Evolution Process 2. Membership Support 3. Performance to Budget 4. Staff Skill Level
5. Development of Market Niche 6. Effective Programs 7. Effective Utilization of Volunteers 8. Program Growth xC x x 'C x x x xC x x (page 2 of 3)
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Table 1 (continued).)
x x x x I)I
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Table 1 (continued) Director of Financial Resources Controller Chairman Finance Committee Director of Publications 1. 2. 3. 4. 5. 6. CSF TypeIndustry Strategic Temporal Environ. (Functional) Number of New Members
Membership Drop Rate
Number of Donors, Donations Performance to Budget Public Image Attractive Programs 1. Performance to Budget 2. Provision of Timely, Reliable Information 3. Staff Skill Level 4. Effective Cash Mgmt. 5. Awareness of External
Financial Conditions 6. Accurate Budget Const'n
1. 2. 3. 4. 5. 6. Performance to Budget Income Emphasis Program Effectiveness Program Growth Better
Mgmt.
Information Staff Skill Level1. Performance to Budget 2. Quality of Book list 3. New Titles Pending 4. Effective Marketing Program 5. Meeting Membership Information Needs x x x x x x x x x x x x x x x x x x (x) (x) (x) xC (x) (x) (x) (x)
Wo
x x xC 'C (page 3 of 3))
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-29-TABLE 2 ADAPTIVE/INTEGRATIVE CSF CIL$SIFICATION CSF Type Position Executive Director. President One President Two Director of Programs
ptive/Bldg. Integrative Mntnce. x x x x x x x x x CSF Ada 1. Financially healthy organization 2. Effective use of volunteers 3. Effective programs 4. Represent user pop'n 5. Planning structure, direction 6. Maintain current level of output 1. Credibiluty w/agency managers 2. Effective programs 3. Performance 4. Organizational flexibility 5. Growth in program output 6. Removal of barriers to membership 1. Internal consistency 2. Effective programs 3. Public image 4. Membership growth 5. Effective utilization.. of volunteers 6. Performance to budget 1. Performance to budget 2. Creativity
3. Staff skill level 4. Effective utilization.
of volunteers
5. Credibility w/agency managers
6. Effective programs 7. More southern programs 8. Definition of market niche
x x x x x x x x x x x x x x (page 1 of 3) x x x
-30-Table 2 (continued) Vice President Programs. Director of Financial Resources Controller Chairman, Finance Committee 1. Planning, allocations & evaluation process 2. Membership support 3. Performance to budget
4. Staff skill level 5. Development of market niche 6. Effective programs 7. Effective utilization of volunteers 8. Program growth 1. Number of new members 2. Membership drop rate 3. Number of donors, donations 4. Performance to budget 5. Public image 6. Attractive Programs 1. Performance to budget 2. Provision of time, reliable information 3. Staff skill level 4. Effective cash mgmt. 5. Awareness of external financial conditions 6. Accurate budget construction 1. Perf ormance to budget 2. Income emphasis 3. Program effectiveness 4. Program growth 5. Better management information
6. Staff skill level
Adaptive/ Building x Integrative Maintenance x x x x x x x x x x x x x x x x x x x x x x x x x (page 2 of 3)
-31-Table 2 (continued) Adaptive/ Building Integrative Maintenance Director of Publications 1. Performance to budget 2. Quality of book list 3. New titles pending 4. Effective marketing program 5. Meeting membership information needs (page 3 of 3) x x xC x x
-32-with the hypothesis that the adaptive/integrative balance shifts hierarchially.
Beyond this adaptive/integrative balance, however, the AMC information suggests a relation between hierarchical
levels and Rockart's classification schemes--in particular the industry related CSF's. This classification scheme was originally developed from research on top management--the chief executive level. It has been utilized as studies have broadened hierarchically, and indeed as stated earlier, it seems to be useful for describing the types of CSF's observed at the AMC. The question as to its hierarchical applicability will now be specifically addressed. To do so, the CSF's of
four specific managers at the AMC will be analyzed: the
executive director, the director of publications, the director of financial resources, and the controller. First, the nature of these positions will be addressed. Because the AMC is so diverse, the executive director's position is much like that of a group of V.P. , or the president of a divisionalized
company. For the AMC is really four businesses--a hotel business, a publications business, a membership business, and a public service business. The executive director is responsible for them all. The director of publications is really the director of one of the four businesses, with
complete responsibility. The position is not very different from the president of a small publishing house. The director
-33-of financial resources is a different type -33-of position, with some 'business' characteristics, but also of an increased functional nature. Finally, the controller's position is almost entirely a position with functional characteristics rather than business characteristics.
Turning now to the respective CSF's, some interesting observations can be made. The executive director's CSF's include some that apply to a particular business - program effectiveness, and some that apply to all the businesses -growth to keep pace with inflation. Yet the CSF's do not include specific factors from each of the business areas. Many of the director of publications' CSF's can be
classi-fied as publications industry CSF's, as might be expected. The director of financial resources' CSF's can be classified as those of charitable institutions or membership organiza-tions, but with an increased functional (that is fund raising) component. The CSF's of the controller can be classified almost exclusively on a functional basis--one would expect similar critical success factors from controllers in any industry.
For the general manager, that is the manager of a busi-ness unit, and for the manager of multiple busibusi-ness units, the classification scheme is substantially correct. However,
there are some interesting research opportunities in comparing the CSF's of the manager of a single business unit versus
-34-the manager of multiple units. Given that the CSF's of the multiple business unit manager will include some from
spe-cific business areas, and not from others, it may be that those units not included enjoy greater autonomy and have much more authority delegated to them. On the other hand, their exclusion may also say something about their importance as perceived
by the multi-unit manager. This raises issues of status, fu-ture, and power. And on a different plane entirely, given all the factors that are critical to his subordinates (them-selves general managers), how does the multi-unit manager choose those factors which he judges to be critical? How and why are some weeded out and others included? The personal,
or individual element is almost certainly important in these choices.
Below the level of the general manager, however, the industry type CSF's take on an increasing functional compo-nent. Based on this research, a fifth classification is indicated: functional CSF's. Functional CSF's are those related to a particular job or position, regardless of the organization or industry. In a sense, they are the 'job' equivalent of industry CSF's. It appears that functional CSF's apply mainly to staff positions, and to positions
below the level of general manager. Hence, in utilizing CSF analysis throughout an organization, partictlarly one-that is functionally rather than divitionally structured, one Taight
-35-expect that functional CSF's will begin to replace industry
CSF's in staff positions and in positions below the level of business unit managers.
In summary then, the AMC critical success factor ana-lysis supports the findings of previous research. The con-cept of critical success factors is appealing and useful to operating managers in this setting. The classification of critical success factors into industry, strategic, environmen-tal, and temporal groups was also generally applicable except that functionally grouped critical success factors were identi-fied by managers in staff positions and by those managers not responsible for an entire business unit. Generally, higher level managers had a higher proportion of adaptive CSF's than did managers at lower levels in the hierarchy.
There is one other interesting dimension to the results from the AMC interviews: that is the differences in critical success factors between people in similar positions. While Rockart has alluded to the personal component of critical success factors, there have been few opportunities to study it. With two presidents interviewed, and with the parallel staff/volunteer structure, this AMC case presents an inter-esting opportunity to do so. While it is possible that there are significant differences between corresponding volunteer and staff positions, it will be assumed here that differences in CSF's are attributable to the personal element rather than to differences in positions.
-36-Looking first at the executive director and two prese-dents, it is the similarity which is striking. All three individuals include program effectiveness, performance to budget, and some type of public perception. Two stress the effective utilization of the volunteer resource. The differ-ences seem to be concentrated on adaptive or strategic issues. One favors flexibility as a strategy, with growth in effec-tiveness, but not necessarily size. Another stresses
con-sistency coupled with membership growth. And the third stresses the representation of user populations and growth to prevent inflationary erosion.
At the level of the director of programs and vice presi-dent for programs, there is again great similarity. Both stress performance to budget, program effectiveness, develop-ment of a market niche, effective use of volunteers, and the skill level of the professional staff. The differences are less substantial here, but again they are strategic issues: growth, whether to emphasize southern programs, and .whether to 'market' the department capabilities.
There was much less similari.ty between the CSF's of the controller and the chairman of the finance committee, but in this case, the roots of the difference are probably the job descriptions, rather than the individuals. The chairman of the finance committee has a very external view, that is oriented toward the organization as a whole, while the
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Table 3 CSF Comparisons CS F Program Effectiveness Performance to BudgetEffective use of Volunteers Represent User Populations Planning Structure, Direction Maintain Current Level/Output Credibility w/Agency Managers Organizational Flexibility Program Growth Removal of Barriers to Mbrshp. Internal Consistency Public Image Membership Growth Executive Director x x x x x x President One x x President Two x x x x x x x x x x CSF Director of Programs Performance to Budget Staff Skill Level
Effective Use
df
Volunteers Effective ProgramsDefinition of Market Niche Creativity
Credibility w/Agency Mgrs. More Southern Programs Planning, Allocation, and
Evaluation Process Membership Support Program Growth x x x x x x x x
Vice President Programs x x x x x x x x (Page 1 of 2)
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(JJTable 3 (continued)
CSF Controller Chairman Finance Committee
Performance to Budget x X
Staff Skill Level x x
Provision of Timely, x
Reliable Information
Effective Cash Management x
Awareness of External x
Financial Conditions
Accurate Budget Construction x
Income Emphasis X Program Effectiveness X Program Growth X Better Mgmt. Information X (Page 2 of 2)
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-39-controller has taken a more functional, task oriented approach to job definition. These differing job descriptions are
probably appropriate to the needs of the organization, and hence this last example is inconclusive.
Given that it is a small sample, these cases nonetheless suggest two conclusions. First, there is a remarkable simi-larity in the way different people define CSF's for similar jobs, particularly in regard to integrative or maintenance CSF's. Second, where differences exist, data suggest that the differences will probably be in relation to strategy, a hypothesis which, though in need of further testing, seems plausible.
One possible explanation of this hypothesis relates to the CSF classification scheme. Industry CSF's, almost by definition, would be commonly recognized. After all, they are critical to every company within the industry. Similar-ly, one would expect the earlier defined functional CSF's to be commonly identified by different people in similar
positions. In addition, if Rockart's threshold definition of temporal CSF's is correct, these too should be readily identi-fiable. If performance in an area is so poor as to jeopardize the success of the organization, the problem is probably
visible to all. That leaves environmental and strategic CSF's as potential areas of difference. If environmental CSF's are related to the key assumptions underlying strategy,
-40-it is not surprising that these might differ from individual to individual, for such determinations are extremely sub-jective. As for the strategic CSF's, again difference is not surprising. For strategy is more an art than a science,
and it is here that the 'fingerprints' of individual managers are most visible. As strategy is quite variable from person
to person, differences in strategic CSF's are to be expected. In organizations with a more developed planning process, and hence a more explicit strategy, it would be interesting to note whether these differences in environmental and strategic
CSF's persist. APPLICATIONS
After the CSF identification phase, the adequacy of
existing procedures and systems was evaluated from the execu-tive director's perspective. Based on the executive director's CSF's, five areas were identified where some change was judged to be desirable. The first was the financial control system, which was too narrowly focused, and provided too much infor-mation,. The second area was program effectiveness, where neither the measures nor evaluation process were judged to
be sufficient. The third was the need for an explicit strategy, and for a more formal planning process. The fourth area was information concerning member perceptions, performances and information needs. And the fifth was information concerning the backcountry user's perceptions and preferences vis a vis
-41-backcountry management and organizations such as the AMC. From among these five areas, two--stragegic planning and financial control--were selected for further study. In
these two areas, change was determined to be both desirable and feasible. Working with the executive director and other volunteers and staff, new procedures and systems were designed
to better meet the needs of the organization and its managers. These applications are described in greater detail in the two succeeding chapters.
Table 4 Potential Applications Exec. Director's CSF 1. Financially healthy organization 2. Membership support, effective utilization of volunteers 3. Effective programs
4. Represent user popula-tions
5. Planning structure, direction
Problem
Financial control system too narrowly focused Little information of member perceptions and preferences
Informal and erratic performance measures, process
Little information concern-ing user perceptions and performances
Ambiguity as to best strategy, difference of opinion as to need for planning
CHAPTER FOUR
STRATEGIC PLANNING APPLICATION
The critical success factor analysis of the Appalachian Mountain Club identified, among other things, a wide
di-vergence in attitudes toward strategic planning. On one side, a number of individuals felt that there was a current need for strategic planning, citing a lack of direction or
the need to better define the AMC market niche. On the other side, a number of people were of the opinion that the AMC had numerous opportunities, and in effect that time invested
in strategic planning was time that might otherwise be spent taking advantage of the existing opportunities. In the mid-dle, there were those who were uncertain about or indifferent to strategic planning. Given this ambiguity, it would be valuable to explore this area more thoroughly, to determine whether these different views are inconsistent, and whether
there is a need for strategic planning at the AMC. NEED FOR PLANNING?
To effectively address this issue, the AMC's current strategy and planning process must first be examined. Stra-tegy can be either explicit or implicit. The AMC does have a set of official objectives, approved by the board of
-43-The objectives of the Club, derived from these common desires of its members are:
1. To take leadership in establishing protected land and waterways primarily in the Northeast and
Middle Atlantic states both to preserve the beauty and the integrity of the natural ecology and to provide for non-mechanized outdoor recre-ation.
2. To research and develop techniques for minimizing the impact of outdoor recreational activities on
the environment, to promote the use of these tech-niques primarily in the region where the Club has
chapters and to make them available to others for use elsewhere.
3. To contribute to ecologically sound, socially
and economically responsible solutions to selected environmental problems primarily affecting the area where the Club has chapters.
4. To install in the general public, as well as Club members, an enhanced appreciation for and
under-standing of the beauty and uniqueness of the natural environment.
5. To provide recreational opportunities and related safety instruction in those outdoor pursuits in which the Club has expertise, both for Club members
and for those of the general public intent on engaging in these pursuits.
6. To provide and maintain environmentally compatible camps and camping facilities to enhance the Club's other objectives.
7. To stimulate an awareness and understanding in. all who use the relatively undeveloped areas of man's potential adverse impact on the natural
ecosystem and to encourage these users to minimize this impact.
8. To maintain a specialized library and publication program for matters of environmental science, nature art and photography, and outdoor
recrea-tion as it pertains to the above objectives and the past history of the Club.1
-44-As can be seen, these objectives are really too broad to define an explicit strategy, or to guide individual deci-sions. There are many different options that can be pur-sued; each consistent with the broad objectives, yet
each reflective of a different strategy.
What then is the AMC's implicit strategy? Broadly, the AMC consists of six profit centers. By examining their
relative behavior, the AMC's implicit strategy can be de-duced. Two of the profit centers, the huts and the camps, together account for about half of the AMC's annual income and expense. Their charge has been essentially to break
even, a goal which has been consistently achieved in the last few years. Income and expense have increased with inflation, but the net has always been at break even. From a strategic standpoint, these two profit centers are autonomous.
The remaining four profit centers, membership, gifts-and grants, publications, gifts-and public service programs, have in aggregate had near static revenue growth, despite the impacts of inflation on expenses. At the aggregated level, there have been two major impacts. First, the relative proportion of these activities has decreased, as the huts and camps have 'grown' at a rate more consonant with infla-tion. Hence the internal business of the AMC has been
slowly shifting toward the break even operations. Second, in an absolute sense, the level of output from these profit
-45-centers has declined. Granted, inflationary inroads can be at least partially offset by productivity gains; this has certainly been the case at the AMC. But the inflation-ary impacts have included significant staffing reductions. Even given an allowance for increased efficiency, total output has certainly been decreasing.
There are also relative changes among these four profit centers. Membership and gifts and grants growth is nearly flat. Publications has grown vigorously, and it is hoped that it will continue to do so. Public service programs has increasingly moved from a cost center to a profit center, being held increasingly responsible for in-come generation. Not surprisingly, the nature of program activities has shifted. Increasingly, programs are under-taken on a fee-for-service basis, or at least a partial contribution basis. And the geographic concentration has perhaps slowly shifted into areas where such reimbursement is more readily obtained.
In sum, the implicit strategy of the AMC has three major components. First the huts and camps continue to operate on an autonomous basis, and assume a proportionally greater role. Second, publications growth and public
service fee-for-service programs are pursued to the extent possible. And third, to the entent that such growth does not keep pace with inflation, expense reductions fall in
the membership, gifts and grants, publications, and public service program areas. All of this takes place, of course, within the broader philosophical context established by the eight AMC objectives.
The current planning process at the AMC is decentral-ized, and almost entirely related to the budgeting process. The annual cycle begins in June, with preliminary revenue and expense projections for the following year. Major resource allocations for the next year are then made by
the board of directors. The process is essentially extrapola-tive, relying heavily on the proportional allocations made the year before. Through the summer and fall, detailed budgets are developed, and reviewed to ensure financial vi-ability. It should be noted that the programmatic substance
of these budgets is largely at the discretion of the indi-vidual department, and that the review is financial, not
substantive. The completed budget is then approved by the board of directors in December, and is then the basis for
operations the following year.
The planning process has two major characteristics, then. First .the resource allocation decisions are made on a top down basis. They are, however, made for only one year periods, and are essentially extrapolative, with few exceptions. Second, the programmatic decisions are pri-marily bottom up decisions. As importantly, these
-47-programmatic decisions are largely made independently of the resource allocation decisions.
Having analysed these two areas in some detail, the question as to the need for strategic planning can now be addressed. In the short term, it seems that the AMC
stra-tegy is only partially successful. While some inflationary impacts have been offset, total output has declined. The huts and camps make up a larger portion of the organization now than a few years ago. The continuation of this trend will dramatically change the character of the organization.
In the long term, the implications of this strategy, even if successfully implemented, are uncertain. For this strategy results in a sources and uses of funds relationship that is markedly different from the present, with publica-tions and a program area profit center as dominant components. It is not clear that this relationship would be desirable, even if achievable.
The conclusion here, then, is that strategic planning is needed. However, the earlier cited opinions of AMC per-sonnel are not necessarily inconsistent. A need for stra-tegic planning does not imply that there are no opportunities for the organization. On the contrary, strategic planning can be most valuable in determining which opportunities, among many, are the best ones to pursue. So it is with the AMC. There are many opportunities, but some will be more
-48-easily realized, and will be more consistent with the long term strength and stability of the organization.
In addition, there are segments of the AMC where strategic planning is much less critical. In the huts
and camps, for instance, it is not surprising that a strong need for strategic planning is not articulated. In sum-mary, then, strategic planning would be helpful to the AMC. Such planning, while for the entire organization, must be
flexible, to provide for the varying planning needs within the organization.
But what of the current AMC planning structure; is it well suited to the task of strategic planning? The
preced-ing analysis illustrates that there are some significant problems with the existing process. The purpose of a
stra-tegic planning process is to allow an organization to assess its future environment, to decide how it can best fit into that environment, and to then make the appropriate alloca-tions of human and financial resources. The AMC's process is a bit weak in three areas. First, it is focused on suc-cessive one-year time periods, lacking the milti-year exter-nal orientation that is needed. Second, the resource
alloca-tion decisions are largely extrapolative, and not specifically oriented toward the implementation of strategy. And third,
the linkage between resource allocation and programmatic de-velopment is quite weak. Resource allocation is top down,
-49-programmatic development is bottom up, and they are nowhere connected. Process and structure, then, are critical ele-ments of strategic planning. The remainder of this chapter will deal with issues and recommendations relevant to the AMC strategic planning process.
GENERAL CONSIDERATIONS
Before the specifics of the planning process are ad-dressed, there are a number of more general topics which merit some discussion. These are general considerations
or constraints which must be explicitly accounted for, if the planning process is to be successful.
First is the earlier mentioned need for flexibility. While the organization as a whole could benefit from
stra-tegic planning, the specific needs of the huts and camps vary from those of the other four profit centers. More precise-ly, for the foreseeable future the huts and camps will be concerned with operations and efficiency--a maintenance type strategy. The other profit centers have a need for growth, for change--a building or adaptive strategy. The planning process must be sufficiently versatile to
accommo-date the two.
The second dimension relates to the staff and structure of the AMC. Like most other non-profits, the AMC is staffed with professionals, who take great pride and interest in
-50-organization as a whole. This can result in a collection
of mini-'feifdoms' with the associated political difficulties. At the AMC, this is only heightened by a parallel volunteer
structure, almost by way of political constituents, and the historical decentralization of decision authority. The net effect here is to produce substantial inflexibility, resistance to change. Change, then, while possible, may not come easily.
The third dimension involves the scale of the organiza-tion and the availability of its resources. The AMC is of modest size, and does not need a planning structure which
consumes a dominant proportion of time and dollars, par-ticularly when planning is classified as an overhead, rather than public service expense. The planning needs of the AMC as a very diversified organization for its size must be balanced against the ability of the organization to support such a structure.
In summary, then, any AMC planning structure must be flexible, sensitive to the organizational resistance to change, and modest in its demands for resources. For these reasons, a phased approach seems best, beginning with some changes and additions to the 1979-1980 cycle and continuing to evolve from there, with the ultimate goal of a process resembling the Lorange and Vancil model, outlined below.2
-51-Three StagePlanning Model
I. Objective setting - establishing objectives and poli-cies to guide organizational activities and decisions over a multi-year period.
A. Characterize the external environment - what are the key trends for the future. What are the like-ly opportunities, the threats?
B. Appraise the organization's strengths and weak-nesses. What does it do well; not do well?
C. Set organizational objectives - matching the ex-ternal and the inex-ternal.
II. Strategic programming - the broad mult-yearprograms to fulfill the objectives.
A. Brainstorm programs to fulfill objectives.
B. Make resource allocations, considering all candi-date programs.
C. Develop programs in detail.
III. Budgeting - prepare budget for following year, develop-ing the first year of the selected multi-year programs. The remainder of this chapter is divided into two parts,
one dealing with the changes being made in the 1979-1980 cycle, and the other dealing with some of the longer term issues.
-52-NEAR TERM CHANGES
Given that the 'normal' AMC budget planning process begins in June for the 1980 year, a decision was made to make a modest effort to build some strategic planning in
front of the 1980 budget process, subject to the considera-tions above as well as to the time constraint. The goals for this near term effort are three. First, to provide for the explicit consideration of the external environment and the identifications of key trends affecting the AMC. Second is to establish the strategic planning process as a credible basis for decision making, and not as an academic exercise. The third is to introduce some top down program-matic direction, and to begin to link this direction to the
resource allocation process.
To fulfill these goals, a somewhat abbreviated version of the Lorange and Vancil objective setting and strategic programming phases is being attempted. 3 In the objective
setting phase, the following opportunities and threats, strengths and weaknesses, and key issues have been identi-fied and discussed.
Key trends in the external environment 1. continued inflation: 7-10%
2. reduced public spending, particularly in recreation 3. more suburban/urban parks and recreation emphasis/
-53-4. increased inflation energy, unemployment vs. environment controversy
5. real disposable income steady or reduced, unless tax cuts made
6. large increase in the total market and competition for hiking books
7. increased burdens on state government as local governments cut budgets
Opportunities
1. replace services previously provided by government -- federal/state/local
2. more funding for suburban/urban areas, also special populations
3. if services cut, greater opportunities for user funded fee-for-service activities
Threats
1. less public funding available--budgets not currently structured to contract with non-profits
2. potential public sector union conflict, also private for-profit contractors
3. erosion of foundation support
4. energy availability impact on huts and camps markets 5. loss of competitive position in publications
-54-Strengths
1. good reputation and working relationship with agency managers
2. good foundation of active and involved members 3. acknowledged expertise in many program areas 4. capabilities of professional staff
Weaknesses
1. resistance to change
2. number of projects funded on a one-year basis 3. small amount of resources devoted to internal
management Key issues
1. growth in public service area - magnitude, content, geography
2. financial growth - balance of funding sources 3. new facilities, geographical expansion
4. nature of increased member involvement, committee vs. activity
This analysis has led to the formation of a number of draft objectives for the 1979-1980 period.
1. To maintain current level of programs in 1980 which will require a 10% increase in resources in
1980 over 1979.
2. To continue reallocation of program resources to southern regions of the Club.
-55-3. To facilitate the development of the membership commitment and participation in Club programs
(both Club activities and public service programs). 4. To realize the development of a southern public
service facility.
5. To improve the Club's internal and external image. 6. To emphasize programs which are partnerships with
private, state, and federal agencies.
Most of the objectives visibly follow from the analysis of trends, strengths, and weaknesses. Objectives two and
four, related to southern activities, also follow logically, if less visibly. They are included for reasons of equity
(better distribution among the membership base), to increase member involvement, and to place the AMC in a geographic
region with more abundant funding sources.
As can be seen, these objectives are considerably more specific than the philosophical objectives earlier mentioned, although there remain a few questions as to their internal consistency. As such, they are a reasonable basis for deci-sion making. These tentative objectives will be presented to the full board of directors in late April. If approved, they will be used as the basis for further 1980 planning.
The establishment of these objectives substantially satisfies the first goal of this near term effort, and partially satisfies the second and third. However, if the
-56-June resource allocation process proceeds in its usual manner, the second and third goals of this process will not be fulfilled. On the other hand, the organizational constraints to change must be considered.
There are perhaps three major options to achieve the goals of decision credibility and the programmatic-resource allocation link. The degree to which these goals are ful-filled varies substantially among these options, as does the degree of associated political upheaval.
The first, and most dramatic option is to have
pro-forma program budgets available at the June board of directors meeting, assuming for each profit center three cases: cur-rent level of resources, and plus and minus 10% of curcur-rent resources. These program budgets would be very rough and would emphasize the program substance, rather than revenue and expense. These programs could then be evaluated in the context of the 1980 objectives, and resource allocations made as appropriate. While this option is excellent from the
standpoint of planning structure, it does involve substantial change under severe time constraints. It is not likely to be viable in the first year.
'The second option is more moderate, and involves
explicit consideration of only the new programs implied by the objectives. For instance, various programs for increas-ing the AMC's resources, for establishincreas-ing a southern facility,
