Category Archives: Board Leadership

Why ‘Risk’ is an Unloved Word in Philanthropy

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By Derrick Feldmann (Originally posted on Philantopic – a blog of opinion and commentary from PHILANTHROPY news digest.)

“There are risks and costs to a program of action, but they are far less than the long-range risks and costs of comfortable inaction.”

– John F. Kennedy

Whenever I visit my financial advisor, he almost always gets around to talking about risk. The subject usually comes up when I ask him how I can increase the value of my portfolio. His response is almost always the same. “What’s your tolerance for losing money?” He always has ideas for new investments, but he’s quick to point out that many aren’t “sure bets.” Anyone seeking bigger investment returns in this environment — and lucky enough to have discretionary resources to invest in the first place — has played this game at one point or another.

So why are risky investments something most of us are willing to tolerate in our personal financial lives, but something we avoid like the plague in our philanthropic work?

The answer is simple: We’re afraid to make risky philanthropic investments because we don’t want to “lose” money.

As funders and donors, we’ve grown accustomed to making investments in organizations we know will succeed. They have a history, proven track records, and staff and leadership that can execute. Pressure from boards and other stakeholders who view philanthropic investments only through the lens of success contributes to this predictability. Typically, these stakeholders are most concerned about protecting the corpus and in signing off on decisions that won’t get them into trouble. This isn’t all bad. It ensures, among other things, that people in need will be helped, especially during times when they need it most. But as an investment approach, it does little to encourage innovation.

Think about your own work for a minute and ask yourself the following questions:

  • What is the riskiest grant we ever made?
  • What was our motivation for making that grant?
  • How many times have we given a grant to an organization that didn’t have a track record of success?
  • How much money are we willing to set aside to fund riskier initiatives?

If you’re like a lot of program officers, it may not be easy to think of a grant you made that could be classified as “risky.” But you need look no further than your own personal giving for examples of risky philanthropic investments. Indeed, we make these kinds of investments every time we support a friend, colleague, or family member in a run/walk/race for a medical cause or cure. As a country, we invest more than $20 billion a year to find cures for diseases such as cancer, Alzheimer’s, and stroke. And those investments are “risky” because there’s very little measurable return on our donations short of a cure or significant new discovery. But we choose to fund this type of research anyway, knowing that most failures in the lab bring us closer to the ultimate goal.

Unfortunately, many problems today — whether social, environmental, or economic — are every bit as large and complicated as finding the cure for cancer. And the only way we’re going to solve them is to take our approach to medical research and apply it to other areas. In other words, we need funders and individual donors who are truly willing to embrace risk and invest significant dollars in potential solutions that may not yield immediate results but get us closer to our ultimate objective, even if it’s only by demonstrating what doesn’t work.

Here are four things I believe philanthropy can and should do in order to embrace more risk.

Emulate the founders. On the road to building great fortunes, the founders of some of the biggest foundations in the country took risk almost every day of their professional and business lives. Whether they played a leading role in forging the modern steel or oil industry, made it easy for people to use a computer or reap the benefits of globalized supply chains, or created online social networks that connected the world, our greatest entrepreneurs and philanthropists were great risk-takers who never lost sight of their objective: To deliver the most value to the greatest number of consumers. That’s precisely the kind of entrepreneurial spirit we need today as we look to provide and fund solutions to the most intractable problems affecting our communities.

Set aside funds for riskier ventures. If foundations were for-profit companies and had to compete in the marketplace, they almost certainly would rush to set up research and development arms with a mandate to innovate, develop new programs and initiatives, and evaluate how existing programs and initiatives were performing. But as endowed tax-exempt entities, foundations rarely have to compete and so have little incentive to set aside funds to invest in anything other than proven organizations and concepts. Now, I get that foundations and donors can’t fund every risky investment and innovation that comes along. But I’m convinced that they can and should begin to pool and earmark funds for investments in organizations and concepts that don’t have a track record of success but do have potential to bring about dramatic change in our communities.

Ask new questions. Donors and foundations need to start asking new questions when a risky investment presents itself. Instead of the historical “proven impact” questions typically posed during the proposal and due-diligence stages, funders should focus on questions designed to help them understand the level of risk involved in the proposed idea or solution. Questions like:

  • Why is this a risky concept/approach?
  • Why is your approach to the problem better than existing approaches?
  • What’s the worst that could happen if you fail?
  • Even if you fail, what do you hope to learn from the approach you’re proposing?
  • Who are the experts/mentors you look to for guidance in your work and what do they have to say about the approach/concept?
  • If the approach/concept demonstrates success, how do you plan to sustain it?

Foster new learning environments. As a funder, you have a tremendous opportunity to be transparent about grants and programs that worked — as well as those that didn’t. Here’s your chance to create a learning opportunity — indeed, a learning community — for social entrepreneurs and innovators. Share your knowledge about the grants you made, the internal reports that tracked the progress of those grants, and why the investments you made did, or did not, succeed. Take it a step further and create a forum on your Web site where grantees can come together and learn from each other about what worked and didn’t. At a minimum, it will help them think about new approaches to their existing work and perhaps lead to new ideas that you may want to support in the future.

There you have it. Let’s create a philanthropic marketplace where risk is celebrated, not avoided, and serves to bring us closer to solving some of the biggest challenges we face. History invariably shows that if we give good ideas a platform and a chance to succeed, they will. The sooner we get over our aversion to risk and instead support those individuals and organizations willing to think outside the box, the sooner we’ll prove history right.


Audio Interview with Carol Weisman, President of Board Builders

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By Derrick Feldmann    
 
I sat down with board expert Carol Weisman at the Association of Fundraising Professionals National Conference in March. In the interview she discusses how she thinks boards need to progress in the future. Plus, listen to how she was able to turn a near donor mishap into a donor succes story.                                        
 
“What is happening in a lot of board rooms is that instead of bringing really bright people together to read it and affirm it, is to actually have board members that are interactive so that people are actually talking.” – Carol Weisman, president of Board Builders.
 
Listen to the full audio nterview with Carol here.
 
For more information about Carol Weisman or her work with nonprofit boards go to: www.boardbuilders.com

Gail Perry Interview – Working with Your Board

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Achieve CEO Derrick Feldmann sits down with Gail Perry of Gail Perry Associates to discuss ways of motivating your board.

 
“Every board meeting
is like a cheerleading session“
“The Executive Director and the Board Chair have got to have go-go energy and be like spark plugs.”

“Reconnect board members to their personal passion about why they care about this organization, if you can re-awaken their energy for the cause and get them really back in touch for why they care so deeply – all of a sudden – they want to take action.”

Five Fundraising Mistakes We Make with Our Boards

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Too often nonprofit board members shy away from fundraising. When the subject comes up, many trustees suddenly become invisible or silent. Yet it is our responsibility to set up board members in active, satisfying roles that can support the fundraising process.

But we frequently make mistakes that hurt, rather than help, our cause. How do we go wrong when we approach them about helping in fundraising? Here are five common mistakes that cause board members to back off when they should be pitching in.

1.    Asking for money, not building and keeping friends. Many board members are mistaken about fundraising. They think it is “asking for money.”

The actual moment of asking for a gift, however, is only one small step in the long, time-consuming process of building relationships with donors.

Board members don’t realize the myriad activities that go into the fundraising process-identifying potential donors, cultivating and involving them in an organization, and, of course, finding ways to thank donors and foster their long-term relationship with our cause.
They skip directly to the most difficult and awkward part of the fundraising cycle.

If we can get our board members to change their point of view and have them focus first on making friends who then join our organization’s bandwagon as donors-then everyone wins.

We should never allow our good-hearted, well-meaning but nervous board members to get away with equating the entire process of fundraising with the act of soliciting.
2.    Cold or “cool” calls. Cold calls are the worst possible place to use the energy and good will of your kind-hearted board members, because cold calls have the highest rate of failure.

We should never subject our board members to this kind of rejection, which will incline them never to venture out for you again. Preserve their self-esteem and protect them from negative responses if you want their continued help. Why would they keep beating their heads against a wall if they are rarely successful?

Send them on easy calls that will create fun, shared vision, and passion for your organization, calls that will make them happy and give them confidence. Send them out to make friends for your organization and engage the community with their passion.

I work hard to preserve my board members’ good feelings about being involved in fundraising. I nurture their interest, starting them off with simple tasks to encourage them, such as thanking current donors or cultivating someone at an event.
Then, after they develop some confidence, I bring them along on a formal cultivation or solicitation call. I will rarely send a board member out to solicit alone, and only if I think he or she is a carefully prepared, experienced fundraiser.
After one of my Fired Up for Fundraising Board Retreats, a trustee once said to me,

“This was so helpful. Before when someone mentioned fundraising, I immediately imagined cold calls. You have shown me that I can help in fundraising in lots of much easier ways. Fundraising is not necessarily cold calls at all; in fact, good fundraising is everything but cold calls.”

3.   Too many calls at too low a dollar level. If we are going to use board members in solicitations, then it is important to plan carefully the best use of their time in order to make the most of their valuable contacts and limited availability.

I have seen well-meaning but scared volunteers bravely step up to the plate, willing to make annual giving solicitations in person. Then the thankful but overly optimistic staff loads them up with far too many visits to make at one time.

Worse, the calls are for meager amounts of money. It is much better to focus our board members on fewer calls at much higher dollar levels. I believe in asking board members to make only three calls at any one time. Focus on quality, not quantity.

Use your valuable board members carefully where you need them the most, and where they will do the most good.

4.      Emergency fundraising, not long-term relationships. I am all for a sense of urgency when raising funds. But all too often we wait until a crisis to mobilize our board members.

Then the conversation really does become all about money rather than about the great work our organization is doing for community good.

At such times, we ask board members to help pull in money quickly to respond to a budget shortfall or cover some major financial loss.

Again we are setting them up for unpleasant fundraising experiences. In these cases, they will usually create a conversation about “money,” not about a vision for a stronger, healthier community or a better world.

5.   Lack of training, structure, coaching, and support. We often send our trustees out with too little preparation and backup. We tend to forget that they are volunteers.

They are not the pros that we are. Do not make the mistake of assuming that your board members understand fundraising, or how to talk about your organization.

Be sure they have a solid understanding of the underlying philosophy of fundraising-which is developing donors/investors/partners who will stick with your organization for the long run.

They need-and deserve-first-rate support from staff. You will find that board members deeply appreciate this kind of backup.

They need clear goals, clear organizational structure, and inspiration to wake up their passion and keep personal commitment to your organization’s success.

Get it in writing to get the story straight

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By John Thomas
JTPR Inc.

Not long ago, I asked a board on which I serve to do a little exercise. Each person on the board was to send me an email answering the following questions about one of our key programs:

  • What do we want to achieve – what are our objectives for this program and its subparts?
  • Are we accomplishing our objectives?
  • How do we measure success?

The initial reaction to my request was impatience. Some of the board members seemed to think it was a needless exercise. After all, the program had been going on for some time and “everybody knows” the answers to these questions. And, besides, couldn’t we just have a conversation and get this taken care of?

“Humor me,” I said.

As you might guess, when I got the emailed responses, they didn’t suggest the notion that “everybody knows” the program’s objectives. In fact, the answers varied widely in some cases. After that exercise, we were able to begin a process that resulted in radical change to the program, and a new level of success.

Unfortunately, this “everybody knows” mentality is common with nonprofit boards, and it develops for a number of reasons. For example, a board member often carries forward the mindsets and opinions of the person who recruited him or her; in other cases, a member might join a board with such a passion for the cause that he or she sees it as a moral commitment … that “must” be shared by everyone.

So, it pays to ask the question. But why ask for an email rather than a conversation? For a few reasons:

  • Everyone must contribute. In a meeting, it’s easy for people to drop out of the conversation.
  • People can’t simply nod and move on. Strong personalities can steer public conversations. In private, people have to deliver their own thoughts. Remember: If you’re seeking to gather information, go one-on-one; if you’re looking to deliver information broadly or generate ideas, the group dynamic often works best.
  • People think more when they write. Forced to put something into writing, we tend to consider it more deeply and, therefore, offer something that reflects a core idea rather than the first thing that comes into our minds.
  • You know who said what. Individual statements can get lost in meeting minutes. If someone says something that needs to be addressed directly, it’s much easier to have that conversation if you have a direct attribution.
  • You know who can deliver information succinctly, and who needs to be coached. You need your board members to be able to describe your organization and its mission in clear, simple terms. If you get their thoughts in writing, you’ll know right away if certain board members are struggling to deliver your key messages succinctly or if they simply have the messages wrong. From this exercise, you might discover that you need to have a Mission 101 session with your board, and a workshop on describing that mission.

Generally speaking, I’m a big fan of group discussions. The collective wisdom and big ideas that can flow from a good meeting cannot be matched by one person sitting alone. But there are times when you need to do a reality check, and when that’s the case, it’s often best to get it in writing.

If you asked your board for this kind of email, would you get what “everybody knows”? Or would you get the clear message that you have a lot of work to do with your board.