I am an entrepreneur and I believe in taking calculated risks. I have written often about the nonprofit sector and how, often, it is risk averse. I do believe that sometimes nonprofit CEOs and boards would much rather keep things the same if given the choice. However, another way of looking at the subject of risk is to say that nonprofits are staring at risk every day.
And, because they are dealing with risk every day, they should feel more comfortable with risk taking as it relates to their operations. So, how do these types of organizations face risk every day?
Nonprofits may not realize it, but when they first set out to address the most vulnerable in society, they are taking a risk. Nonprofit businesses start off as entrepreneurial endeavors where the profit comes in the number of lives they are able to change, not how much money they make.
Each day, the vast majority of these organizations operate with low budgets. Most monitor their money carefully because they have to do it. During the last economic downturn, many charities were forced to close their doors or consolidate with others because they were not able to survive.
Nonprofits also have regulatory and reporting requirements they must adhere to each year. Most organizations may not be aware that they can easily lose tax-exempt status. For example, startup operations in particular are exposed to potentially running into legal problems with the IRS if any of the funds received by the young charity are not firewalled. There can be no benefit whatsoever to an executive or board, for example.
I have sometimes heard of nonprofits that have wanted to get a political speaker, typically a candidate for office for their event and that is something that could be highly risky. A charitable event for a 501(c)(3) that favors one candidate over another runs afoul of IRS regulations.
So, in a way, nonprofit and social enterprises are ventures of risk. However, there is space for nonprofit executives to thread through more calculated risk. This risk can help even the small “mom and pop” shops to reach out to more in support of their mission.
When you look at it from that perspective, nonprofits are taking risks, even if they believe they are not. And, there is opportunity for them to take operational risks that may help position them to do just a little more, or do something more efficiently.
When I started founded Funds2Orgs, I knew that what I was taking a calculated risk. I wanted to provide nonprofits, schools, civic groups and others with an easy way to raise money. In addition, I wanted to help support the environment by preventing gently used shoes and sneakers from going to landfills. And, I wanted to help support small business entrepreneurs in developing nations, such as Haiti. That’s a lot to do. But, I took the risks, continually learn from mistakes and our company keeps growing.
When I take a look at risk taking, there are a few strategies that I use.
• The risk of inaction – I think something that many people miss is the risk of inaction. What happens if you always stay the same and do nothing? One of the greatest risks today is that you can become obsolete or another organization may end up doing something better than you. When I look at my businesses, including Funds2Orgs, I am continually asking myself what would happen if I don’t take the risk. More often than not, because of competitors and my own personal dissatisfaction in simply “the possible” I decide to execute on a new initiative or effort.
• Allow failure to happen – Failure is okay. It really is. We learn so much from failure and if an organization is not failing, it’s not really trying. We live in a world full of experiments. Think about it, today we talk about “personal brands”. Nonprofits, social enterprises and businesses start-up and then take off to unprecedented success. We live in a world full of innovation and disruption. We don’t need to look at the issues that have plagued society for so long as challenges we have to accept. Things can change for the better and today we do have the resources to implement great change. Failure is part of that process. Having a clear vision for the future and then working toward that is something that every nonprofit should be seeking to do. And, when a new initiative fails, it’s okay. There was learning in that effort and it helps inform your next steps.
• The art of “no” – I am an entrepreneur who truly enjoys the process of new things and seeing how they work and fit together. However, there are times when a vendor or team member comes to me with a new idea where I have to say “no”. I don’t like to do that, as I enjoy working in an environment with energy and where my team has a lot of responsibility and accountability. But, it’s always about the business. I am continually open to new ideas and I have fostered and environment where people can pitch anything my way. Still, I always think about how it fits with where we are in the business. It might be something we simply don’t have the resources to do at the present time, but it’s a project I would consider down the line. There are a number of those. In the end, I want people to speak to me and give me their best, so I am open to anything. But, it’s okay to sometimes say “no” if the timing is not right, or if you don’t believe it fits in with the direction you need to go with the organization. That said, foster a work atmosphere where people want to talk with you about their ideas.
Author of, “The Rise and Fail of Charities In the 21st Century: How The Nonprofit World Is Changing And What You Can Do To Be Ready.” Get your copy here.
© 2015 Wayne Elsey and Not Your Father’s Charity. All Rights Reserved.