Why Non Profit Risk Taking Will Pay Off

We spend much of our time working with non profits talking about avoiding risk, transferring risk and mitigating risk. Certainly this always makes sense. But at the same time your organization must also become “Risk Aware” not “Risk Adverse”. Taking risks must be part of your every day life. It equates into “Organizational Success”. This will lead to innovation, possible new strategic partnerships, mergers and/or growth.

At the same time you need to have an excellent risk management program. This will enable your organization to achieve a proper balance between prudent risk taking and the paralysis of trying to avoid all or most risks. I see this often at the board level. Instead of looking down all the time at data and information, turn and look out the window and dream a bit about what could be. The board room is a place where you can think of opportunities and imagine all the possibilities.

A nonprofit that takes more risks than it avoids can innovate and explore uncharted paths to accomplish its mission, while remaining alert to emerging threats that must be avoided in order to protect critical assets.

In my post last June “12 Hallmarks of a Risk Aware Non Profit” I talked about the 12 Hallmarks that make up the list. Today I am going to focus on Hallmark #1 – Takes More Risk Than It Avoids. These Hallmarks were developed by Melanie Lockwood Herman, Executive Director of The Nonprofit Risk Management Center in Leesburg, Virginia. Take a minute to jump onto their site and learn more. In future posts I will share more of the 12 Hallmarks.

Here are the 12 Hallmarks

1. Takes More Risks Than It Avoids
2. Heralds A Risk Management Champion
3. Guided By Reality, In Addition To Scary Headlines
4. Is Bold But Smart
5. Cultivates a ‘Can-Do’ Attitude Among Paid and Volunteer Staff
6. Sees The Whole Iceberg Not Just The Tip
7. Understands That Hindsight Isn’t 20:20, But It’s Better Than A Blindfold
8. Tells It Like It Is
9. Is Transparent With Insurance Partners
10. Values The Journey, Not Just The Destination
11. Engages The Board In Battle
12. Looks At Risk From Everyone’s Perspective

 

 

 

In the equation of success, risk-taking does not equal making mistakes. Nonprofits that demonstrate Hallmark #1 know that. They take more risks than they avoid because they know that informed and thoughtful risk taking is an essential component of organizational success. Therefore, they take risks—all the time.

The Process

1) To manifest this Hallmark, your nonprofit will:

• Encourage thoughtful risk-taking:
• In a staff meeting, commend someone who has taken a risk.
• Create an award that is rotated monthly (or given when deserved!) for a staff person who took a risk.

2) Raise awareness of risk-taking:

• Ask a staff member to tell the rest of the staff about a risk taken at work and explain what happened. What was the outcome? What did you learn?
• Inspire the board’s awareness about risk-taking that occurs by describing when and how taking thoughtful risks is encouraging innovation and moving the organization forward.
• At any opportunity, engage the board in discussions of risk versus reward and the value of risk-taking.

3) Evaluate risk-taking: Explore why some risks do not pay-off but others do.

• Keep track of the risks the organization has taken and those it has avoided.
• Evaluate which risks resulted in positive outcomes—and which ones did not. Then think about why—and whether there were better alternatives.
• This works well as the topic for discussion in a staff meeting, or as a warm-up during the strategic planning process, or as a task force project.

Picture by Jam Adams from Flickr

 

I would love any feedback on these topics, please feel free to leave a comment.

How to Increase Nonprofit Funding - 5 Best Practice Traits for a Board

At a recent luncheon for the Association of Development Officers, collegues and I listened to a very informative presentation from Don Crocker, CEO of the Support Center for Non Profit Management. Don has been able to crystallize what I believe most non profit organizations strive to attain. Don touched on three important aspects essential to all non profit boards. Aspects including a board that is functioning well, one that brings needed value to the organization, as well as a board that supports the leadership team in all ways.

Right now more than ever due to dramatic economic downturn (severity and length still a question), increased regulation (Auditing, IRS 990, other), late and slow payments, credit markets tight, an environment full of fear and cynicism, and increased public scrutiny, boards now more than ever need to reorganize and rally for the common good of the organization.

As Don said during his presentation, status quo is no longer enough nor is it acceptable. Building this new board can take several years. A long sometimes frightening task, but one that can be best tackled piece by piece.  He referenced a few members from organizations that have done this very well, one being Geoffrey Canada.

Geoffrey Canada is the president and CEO of the Harlem Children's Zone in Harlem, New York. He has done a terrific job turning the organization and its board around. It was only 4 short years ago that he realized that 95% of his organizations revenue was funded by government sources. Looking at a downward spiral, Geoffrey took it upon himself to make a change. He began rebuilding his board, bringing in many new members that have now instilled a new found sense of value and support to his organization. The Harlem Children’s Zone now receives most of their funding from various foundations, corporations, individuals, and other sources causing the government funding to be only 28% of their operating revenue.  

Listed below are Don’s lists of the traits for the board of the future:

• Increased Board engagement is NOT optional!  Board must step up and govern and they must be “in-charge” of hiring and firing competent management.
• The Board as a body and as individuals must sharpen their understanding and ownership of finances.
• Board members must up their activity in engaging new supporters &   stewarding long-term supporters.
• The Board leaders and CEO must communicate openly and often.
• The Board must organize itself and its individual members to be effective and efficient, set clear goals for itself, and regularly measure its progress toward results.

Since having heard Don speak I have talked to many clients about this topic. There are mixed reactions to this. One of the big stumbling blocks is that many non profit boards still have not enacted term limits or don’t enforce them. It is hard to bring in new board members if there is not a spot to put them.

I would love any feedback on these topics, please feel free to leave a comment.

Photo By Okeefew from flicker.com
Don Crocker can be reached at:
Phone: 212-924-6744 ext. 306
Email: dcrocker@supportcenteronline.org