FYI Blog

Risk-Taking and Planned Failure

Risk - Reward

Organizations frequently talk about how much risk is appropriate for their fundraising programs in the search for a big breakthrough. We know it’s impossible to find big wins if we don’t take some risks—but every company, every nonprofit, every person must define risk on their own terms.

I recently attended the DMA Nonprofit Federation’s Leadership Conference, and one of the many key takeaways for me was this tension between the desire to take risks in order to make progress, and the need by nonprofits with inherent risk aversion to stay on firm ground.

For smaller nonprofits that survive on shoestring budgets, caution can equal survival—because one misstep in testing, messaging, or rebranding can be catastrophic to the bottom line. And that’s a real hurdle to taking any risks at all.

Larger corporations and nonprofits might have an R&D or “innovation” budget and might even have a department devoted to analyzing the risk/reward equation. But for all nonprofits, the key is to understand your organization’s level of risk tolerance. And that tolerance for risk can include:

  • Financial considerations: What would happen if a test bombs and those donors and income you count on don’t come through?
  • Reputation: What if you change your brand or messaging to completely rework your approach and your donors don’t respond—or, worse yet, respond badly?
  • Mission impact: What if you shift your focus to a bold, new initiative or call to action and it’s not what your donors are looking for?
  • Resources: What impact will risk-taking have on staffing and other tangible resources?

When calculating your organization’s acceptable level of risk, look to your data. Analyzing possible scenarios will help you measure and minimize risk. More importantly, it will enable you to hold your program accountable to these decisions. It also helps down the road when you need to justify, explain, or even rationalize the need to do more. Knowing what risk is reasonable for your organization is key.

As individuals, we also have to be ready to embrace failure in these situations. It’s much easier to take a safe win to our bosses than to have to explain, justify, and defend a big failure. But periodically we have to be tough and willing to sit in the hot seat. That’s easier to do on the back-end, if we’ve explained the possible outcomes of risk to the people we are accountable to within our organizations from the very start.

My message is this: Take risks, but know exactly what you are risking. Push yourself—within limits—and be proactively prepared to account for these risks.