What’s the purpose of the environmental scan and how do we get this?
Is that the same thing as a SWOT analysis?
An environmental scan is an objective review of the current and anticipated environmental factors that impact your organization. These can include, for example, the political, economic and demographic environment in which you’re operating.
A few other important areas to consider are: the regulatory environment, philanthropic and donor trends, and other organizations providing similar services or competing for the same funds. The latter point is often overlooked, but it’s extremely important. You can use services like Charity Navigator (www.charitynavigator.org) to get a good sense of who is operating in your area and providing similar services. Keep in mind, this need not be a negative. You might find that someone is doing something complementary and you can actually enhance each other’s work. Another place to gather intelligence is the Foundation Directory Online, a database of grantmakers and grantees (www.fconline.foundationcenter.org) developed by the Foundation Center. This is an efficient way to learn who’s funding organizations like yours.
The environmental scan helps you to understand the broader context in which you’re operating. By investing the time to identify key trends and environmental factors that impact your nonprofit, you can begin to think through the implications and, where appropriate, plan a course of action.
Organizations frequently choose only to look at the external factors, although a strong case can be made for considering your internal environment. This includes looking at your organization’s internal capacities and resources, and projecting how those may need to change in the future to meet your objectives.
A SWOT analysis is derived from your environmental scan. “SWOT” stands for strengths, weaknesses, opportunities and threats. Identifying these can help to focus your scan’s findings. For example, let’s say you represent an organization that provides small loans to low-income entrepreneurs. Your environmental scan may reveal that a new regulation is being considered that changes how you track and report on beneficiaries. That’s an objective observation in your scan. However, as you drill down into your SWOT analysis, you might note that such a regulation would create privacy issues for your clients or cost significant money to be in compliance. Those are identified “threats” in your SWOT analysis.
Strengths and weaknesses tend to be associated with the internal environment, or the situation inside the organization (operations, performance quality, infrastructure, governance, etc.). These also tend to be in the present. Opportunities and threats, therefore, relate to the external environment – the situation outside of the organization. These tend to be posited in the future (competition, trends, political landscape, etc.).
When you conduct a SWOT analysis, be direct, be concrete and focus on constructive observations. For example, under “strengths,” it isn’t particularly useful to say your staff is committed to your mission. Many nonprofits share that trait (although the opposite would certainly be a weakness). Instead, focus on areas that indicate a distinctiveness and that result in action. Here are a few examples to stimulate your thinking:
- If yours is the only organization providing X and Y services within 300 miles, that is probably a strength. The resulting action could be that you plan to expand services to the surrounding counties.
- A weakness could be that you rely too heavily on certain types of funding. A possible resulting action? Develop and implement a strategy to diversify fundraising.
- An infusion of new government funding aimed at your target audience and the services you provide would present an opportunity. In that event, you’d probably want to identify strategies to make your organization known amongst the decision-makers and, of course, apply for the funding.
While there are many consultants who specialize in this area of analysis, many smaller organizations find they have little choice but to go it alone. An excellent place to start is to consider your target market. What, for example, is the current and projected population? What trends affect your target audience as it relates to education, health, income, employment, etc.?
Another useful component to the assessment phase is to survey external stakeholders (e.g., funders, clients, community leaders, etc.) about your organization. External perspectives on such issues as your organization’s greatest contributions, challenges observed, anticipated (or missed) opportunities, and even basics like how others would describe your organization, can lead to some surprising insights.
It should also be noted that the environmental scan and SWOT analysis should be key parts of the assessment phase.
There are many resources that can assist you in the development of an environmental scan. For example, government agencies such as the U.S. Census Bureau (www.census.gov) and Bureau of Labor Statistics (www.bls.gov) can serve as rich sources of demographic and economic data. Local United Way affiliates (www.liveunited.org) also produce periodic reports that offer valuable information to nonprofits. In addition, colleagues in your field should be able to provide valuable insights.
Of course, current and potential clients should also be tapped as key resources to understand subjective points of view regarding realities on the ground.