ASSIGNMENT #4 – THREE-PAGE MEMORANDUM
Your SWOT analysis was very compelling and would serve as a good first exercise in a strategic planning process. You have been asked to submit a memorandum, in which you will analyze the findings from the SWOT analysis that you prepared.
You should not bring up every issue identified in the SWOT analysis. Instead, highlight the two issues that most indicate that strategic planning is warranted at this time. The analysis will include why those issues are so compelling and such a strong indication that this is a time for the organization to enter a planning process. The SWOT analysis will be an attachment to your memorandum and support your findings.
Please upload to Courseworks by 5pm on the due date. Please name the file in the following format: YourLastName_Memo_UNI
A FAILURE TO FOLLOW FORMATTING REQUIREMENTS WILL RESULT IN A LOWER GRADE.
TO: Gail J. McGovern, Chief Executive Officer, American Red Cross
DATE: November 22, 2021
RE: Necessity of strategic planning to safeguard the future position and direction of ARC
Since the American Red Cross (ARC) was established in 1881, the organization has emerged as one of the most impactful humanitarian organizations in the US. The organization is particularly renowned for offering timely disaster relief and emergency assistance. As the organization continues to serve affected communities around the US, there is a need to be cognizant of the changes in ARC’s environment. Emerging trends and issues in the external environment present opportunities and threats to the organization in the long term. A recently conducted SWOT analysis (Annex 1) revealed the various trends that are projected to have an impact on the direction and position of the organization. As such, the memo aims to identify and analyze the most significant strategic issues facing ARC and that will necessitate the organization to initiate the strategic planning process. The first issue is the declining volume and size of donations to the ARC. The second issue is increased government regulation and intervention in the activities of non-profit organizations. The two issues are causes for the organization to undertake strategic planning to fulfill its mission and achieve strategic goals.
The current trends show that various factors are causing a decline in the volume and size of donations to non-profit organizations. The first factor is the decline in economic growth and an increase in the cost of living in the US which affects the dispensable income available to individual donors.[i] Starting in 2020, there was a notable decline in economic growth due to the interaction of various factors, chiefly the COVID-19 pandemic.[ii] The economy has been sluggish in recovery with projections indicating that the effects of the economic downturn of 2020 will endure in the long term.[iii] Furthermore, the cost of living in the US has been on the rise with current estimates showing that prices are rising at 6.2%.[iv] The combination of these factors has led to a situation in the US where people have less money to give away leading to a reduction in the volume of donations to humanitarian organizations.[v] Similarly, the worsening state of the economy and reducing revenues as an effect of the pandemic has caused a decline in corporate donations to non-profits.[vi] The problem is compounded by the fact that there is growing competition among non-profit organizations for donors.
The decline in the size and volume of donations to humanitarian organizations poses several strategic challenges for ARC. Firstly, ARC is heavily reliant on corporate and individual donations to raise funds. The diminishing ability of the organization to fundraise will have an adverse impact on the capacity of ARC to fulfill its mission.[vii] A smaller budget will constrict the resources available to ARC thereby hampering the organization’s capacity to offer disaster relief and emergency assistance. Therefore, ARC needs to undertake strategic planning to identify how the organization can survive within this environment. One possible solution is for ARC to improve its effectiveness and efficiency in funds utilization to continue offering humanitarian services in the same or expanded scope. For instance, ARC can cut down on administrative costs across its operations. The next solution is for ARC to seek other ways of increasing its funding such as through cost-recovery fees from offering services such as health and safety training to supplement individual and corporate donations.
Government Regulation and Intervention
Increasing government regulation and intervention in the non-profit sector is a trend that presents considerable strategic challenges for ARC going forward. Over the last decade, there has been an increase in the level of government interference in the activities of non-profit organizations and various levels of government.[viii] State governments have increased regulations on non-profit organizations by changing definitions and classifications of such organizations for tax exemption purposes.[ix] For instance, the states of New York, Florida and California require nonprofits to file IRS Form 990 as part of stringent financial reporting measures.[x] Some states have also imposed more stringent regulations around out-of-state donations. For instance, some states require any nonprofit organization that solicits donations in that state through online fundraising to be registered in that state.[xi] Failure to register opens the nonprofit to penalties such as deregistration.
The increase in government regulations and interference in non-profits will have an adverse long-term effect on the ability of ARC to offer humanitarian services and fundraise in different states. Stricter regulations surrounding fundraising sources will impede the capacity of ARC to meet fundraising objectives causing a decline in available funds for its operations.[xii] Government regulations and interventions threaten the ability of ARC to carry out educational and training programs in different states. Failure to comply with regulations could put ARC at odds with the federal and state government whose support the organization requires.[xiii] One possible solution for ARC is to improve its compliance capabilities to meet the changes in the external regulatory environment. The organization can achieve that in the long term by establishing an independent, well-resourced compliance office within its legal department. The next possible solution is that ARC can pursue greater flexibility in terms of its organizational structure, operations, and practices to counteract the effects of stricter governmental regulations. ARC could undertake an organization-wide restructuring of operations and activities to improve the capacity of the organization to adapt to a changing regulatory environment.
The two identified issues have long-term adverse effects on ARC which necessitates the organization to address the potential challenges through a comprehensive strategic planning process that includes changes to the fundraising approach, efficient resource utilization, enhancing compliance capabilities, and organizational restructuring. Strategic planning is required for the organization to develop a practical and achievable strategy for responding to the decline in the volume and size of individual and corporate donations. ARC also needs to develop a strategic action plan to allow the organization to substantively address the changes in the regulatory environment. Failure to initiate strategic planning processes will impede the capacity of ARC to achieve its mission of alleviating human suffering in the face of disasters and emergencies.
· ARC has accrued over 140 years of experience offering disaster relief and humanitarian assistance across the US and abroad.
· Dedicated and competent team of over 20,000 employees and around 300,000 volunteers offering effective and reliable services.
· ARC is respected and trusted by people for its quick responsiveness to disasters and emergencies across the country.
· Capabilities in blood services such as nationwide blood drive to build up lifesaving blood supplies for effective health assistance during disaster response.
· Offering credible health, safety, and disaster preparedness training and education programs in line with the mission and vision of ARC.
· Affiliation with the International Federation of Red Cross and Red Crescent Societies builds ARC’s capacity to offer humanitarian aid and disaster response outside the US.
· Wide fundraising network that draws donations from corporations, organizations, foundations, education institutions, and individuals with total contributions of $936 million in 2020.
· Close relationship with the federal government with the US President as an honorary member of the board of governors.
· A highly hierarchical and centralized organizational structure with decision-making functions concentrated at the top of the hierarchy.
· Lack of effective integration of all relevant stakeholders such as communities in the operating model.
· ARC is heavily reliant on volunteers in offering a range of critical humanitarian and disaster response services across the US.
· Lack of a comprehensive and updated strategic plan for the accomplishment of the organization’s mission and vision related to disaster response.
· Partnerships with corporations such as Apple, Walmart, and Amazon which have gained outsized influence on the governance of ARC.
· Increasing focus on public relations while relegating the significance of critical operations such as disaster response.
· Low investment in the development of the organization’s technological and telecommunication infrastructure.
· The large size of the board of governors, 19 members, hinders timely decision-making, governance, and oversight.
· Increased engagement of businesses in corporate social responsibility projects can increase revenues from donations.
· Collaboration with governmental agencies to provide disaster relief and humanitarian services in the US and abroad.
· Growing size and frequency of individual donations towards humanitarian organizations.
· Technological advancements especially in the area of information technology offer an opportunity to improve operational and communicational effectiveness.
· Expansion of tax benefits to spur corporate and individual donations to non-profits.
· Increased competition from other non-profit organizations that threaten the volume of contributions to humanitarian organizations.
· Increased government regulation of and intervention in the activities of non-profit organizations especially concerning funding.
· Increasing polarization about COVID-19 and COVID-19 vaccinations threatens the volume of blood donations in the US.
· Growing divisions and politicization of society threaten the provision of humanitarian services and aid in communities.
· The deterioration of the economy and declining incomes due to the COVID-19 pandemic threatens funding to non-profits.
[i] Dam Parks. 2020. 73% of Charities Worldwide See Decline in Contributions. https://www.philanthropy.com/article/73-of-charities-worldwide-see-decline-in-contributions
[ii] Reade Pickert, Yue Que and Alexander McIntyre. 2021. US Recession 2020: When will the economy recover? https://www.bloomberg.com/graphics/recovery-tracker/
[iii] Al Jazeera. 2021. US economy shrinks 3.5 percent in 2020, worst decline since 1946. https://www.aljazeera.com/economy/2021/1/28/us-economy-shrinks-3-5-percent-in-2020-worst-decline-since-1946
[v] CBS News. 2021. Only half of U.S. households donated to charity, worst rate in decades. https://www.cbsnews.com/news/charity-donations-us-households-decline/
[vi] AFP Global. 2020. Nonprofits Hit by 6% Decline in Giving Due to COVID-19. https://afpglobal.org/nonprofits-hit-6-decline-giving-due-covid-19
[vii] American Red Cross. (n.d). Mission and values. https://www.redcross.org/about-us/who-we-are/mission-and-values.html
[viii] Brianna Rauenzahn, Jamison Chung, and Aaron Kaufman. 2020. ‘Tis the season for nonprofit regulation. https://www.theregreview.org/2020/12/05/saturday-seminar-season-nonprofit-regulation/
[ix] Jeremy Barlow. 2017. Government regulations for nonprofit organizations. https://www.boardeffect.com/blog/government-regulations-nonprofit-organizations/#:~:text=The%20federal%20and%20state%20governments,purpose%20stated%20in%20their%20charter.
[x] IRS. 2021. Federal filing requirements for nonprofits. https://www.councilofnonprofits.org/tools-resources/federal-filing-requirements-nonprofits
[xi] Karen Wu. 2018. “Click to Donate”: Which States Have Jurisdiction over My Online Fundraising? https://nonprofitquarterly.org/click-donate-states-jurisdiction-online-fundraising/
[xii] Joseph Radiga. 2019. Liquidity, regulation among not-for-profits’ top challenges. Journal of Accountancy. https://www.journalofaccountancy.com/news/2019/jun/liquidity-regulation-top-nonprofit-challenges-201921418.html
[xiii] American Red Cross. (n.d). Our federal charter. https://www.redcross.org/about-us/who-we-are/history/federal-charter.html
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