Setting the Tone

The board is the ultimate leader of your nonprofit. As the leader, your board is responsible for setting the tone for your nonprofit. That means in part establishing the culture. Part of every nonprofit’s culture is its willingness to embrace risk. During uncertain times most organizations lower their risk tolerance.

Our nation’s recovery from the most recent economic turmoil (several years ago) has been slow. It has been uneven. It has never really felt like a recovery for many people. As a result, even though many indicators tell us that the recovery has been successful, optimism about the future is low. It is understandable that nonprofit boards find it hard to be optimistic.

Competition is increasing, donor tolerance for the status quo is declining, and donors are expecting their gifts to have an ever increasing impact. The only way to respond to the competition and donor demands is to make changes. It is impossible to make any change without increasing risk, being creative, and experimenting.

Nonprofits must respond to those demands or they will experience a decline in sustainability. The decline may be hard to detect initially or the decline may already be happening but the momentum will build. As sustainability declines, supporters become less loyal, less generous, and less engaged. As a result, the perception of mission effectiveness and relevance begins to decline.

Is your board’s risk tolerance impairing your nonprofit?

It is hard for many board members to embrace risk. They take their responsibility for the financial health of their nonprofit seriously. In the short term, taking a risk has the potential for creating a financial loss. In the long term, failing to take the risk has the potential to create a much larger loss. Since they will only be serving on the board for a few years, they have a bias toward making decisions that will have the least negative impact on the nonprofit’s performance during their time on the board.

Do your nonprofit’s board members look far enough into the future before making a decision?

Board members need to be reminded that they are responsible for the future of your nonprofit. When making decisions their first priority must be the future impact. The future impact is what creates value for the community, attracts donors, influences sustainability, and demonstrates mission relevance and effectiveness.

Next Step:

Remind your board members that your nonprofit needs new ideas to retain its leadership position in your community, attract more donors, improve sustainability, and increase the relevance and effectiveness of your mission

Ask your board to view risk as strategic imperative rather than a threat to your nonprofit’s success

Remind your board members that they are the architects of your nonprofit’s future and your staff is the guardian of your present

Every nonprofit is too complex and fast moving for its board to manage. Proper management requires the full time attention of a highly trained and experienced professional (your executive). Your executive has successfully guided your nonprofit through the past several years and will probably be successful over the next few years. Beyond that, your executive’s success depends on the decisions your board makes over the next few months and the foundation those decisions lay for the future.

If your board is optimistic, risk accepting, willing to experiment, comfortable with periodic failures, and encourages creativity, your nonprofit will have a long and successful future.

Take It Further:

Ask donors who are anxious to see your nonprofit prosper over the long term to speak to your board about their willingness to support a higher level of risk

Recruit entrepreneurial board members

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