[Note: Second in a series of a community discussion spurred by Dan Pallotta at the 2013 Partnership for Excellence Conference. Click here for a related article.]
Why is it accepted and encouraged for the for-profit sector to invest heavily and take significant risks on a new product (and potentially fail) while the nonprofit community and related funders are often risk-averse?
What factors contributed to the nonprofit sector’s view of risk and innovation? How would nonprofits taking bigger risks (with related scale) on success and failure affect those who depend on nonprofits? How do we view return on investment (ROI) in our sector?
This week, the Nonprofit Resource Network (NPRN) asks three authors weigh in with a wide variety of viewpoints on this issue. Our guest opinions are from Jon Clark, executive director of the James S. Bower Foundation, Erik Talkin, CEO of the Foodbank of Santa Barbara County, and Kim Davis, executive director of CASA of Santa Barbara County. Join the discussion, what do you think?
Please leave your thoughts below, or on the Nonprofit Resource Network site, or post on your social media!
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￼Jon Clark on Nonprofit Risk Taking
In response to Dan Pallotta’s reference to nonprofit risk taking, I disagree with the premise that nonprofit organizations are risk-adverse. I think nonprofits launch new “products” regularly, perhaps even too often. Some succeed and some don’t.
More often than not, the challenge is success in terms of the mission is hard to judge and then the default measure of success is down to whether the effort got more funding. That is obviously important, but, not fundamentally what it’s all about (and puts the judgment of success in the hands of funders — who, while important, are not necessarily the best or only folks necessary to make that call). We do need better ways of figuring our ROI.
What jumped out at me from the Pallotta talk is the issue of scale — what does it take to succeed big. With the exception of fundraising (which is what Pallotta talked most about), most of us are small fish in a big pond. We are, in ourselves and probably even banded together in perfect collaborative (even collective impact) formation, small compared to the issues we care about.
In between us and our dreams for a better world are huge systems, often in the hands of government, sometimes in the marketplace, and our success ultimately depends on changing the way those systems work. This strays far away from the “nonprofit-as-service provider” model most of us are used to.
All of this raises a different set of questions: Are we ready to make that jump? What skill sets do we need? How do we share what we know? How do we bring others along?
— Jon Clark is executive director of the James S. Bower Foundation.
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￼Erik Talkin on Nonprofit Risk Taking
One of Dan Pallotta’s points is that for-profit organizations systematically invest in innovation and do not expect an immediate return on that investment. He contrasts this with the nonprofit world in which the need for immediate results through provision of service prevents investments in major projects that could bring long-term change.
That is certainly a valid point, but I take the view that if this is the result, it is also due to you not having a bold enough idea, one that will be able to rally enough support, both from social investors and traditional philanthropic sources. An idea so big that it just won’t die.
Cleary the Foodbank of Santa Barbara County took the risk of losing traditional sources of support when we evolved our mission to move beyond placing a Band-Aid on hunger in the county and committed ourselves to moving people directly from hunger to health, making a lasting transformation in the health of the community through good nutrition. We reframed the issue from a negative one of charity for "the needy" to a positive and empowering people around their family’s nutritional health.
This "risk" has transformed the long-term impact that we and our 300 agency/program partners throughout the community are having. But the idea is bigger than this. We are wanting to export this evolved goal across the entire nationwide network of food banks, recasting them as powerful preventative health-care organizations providing education, empowerment and food, and leveraging the largest improvement in our nation’s health since indoor plumbing.
I think any sized organization can take the risk of pursuing a huge goal. If it is worthy goal, then supporters will be inspired and materialize. It might mean we have to give up some of our own self-importance by collaborating with others.
Hopefully your organization will have developed your "theory of change" about how you are going to reach your goal and the measurable indicators of success along the way to that destination. You will take chances and they will fail, but if you innovate based on empathy and understanding of the true needs of the people with whom you are working, you will succeed. There can be no other option for you.
Surely the biggest risk of all is to take no risks today, and to continue doing what you have always done.
— Erik Talkin is CEO the Foodbank of Santa Barbara County.
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￼Kim Davis on Nonprofit Risk Taking
Without the risk taking and entrepreneurial spirit of for-profit companies, all of us might still be tied to a huge mainframe computer, and phones might still be tied to a wall in your home or office. Instead, through risk, innovation and the competitive environment of businesses, we see lines forming to purchase the latest version of the smart phone or tablet. Customer demand and company profit margins bring new products to market in record time.
In the nonprofit community, similar risks are discouraged. This may be due to the fact that the ultimate recipients of the services provided by many nonprofits are not a segment of the population that is funding the existence of this same nonprofit. While there is demand for the services by those who depend on them, the difference between those funding the service provided by the nonprofit sector and those who are the beneficiary of the services can be extreme. The message of WHY the service is needed, and HOW it improves the lives of those who fund the nonprofit, can be lost.
We attempt to solve this problem through effective communication. This can prove difficult, because the very solution — marketing and advertising — is often seen as unnecessary spending by a nonprofit. Sources of funding can run dry if philanthropists feel their contribution is not being used for the purpose intended.
If our goal is to serve 100 percent of the population needing a service or product that is delivered by a nonprofit, it may seem obvious that we should take whatever measures necessary to achieve that goal. Yet, if we stray from our comfort zone and take the risks of trying a new approach, we may fail. In a year that such a risk is attempted, would the funding for that nonprofit decrease significantly and as a result provide less service to its intended client? It’s possible. And yet, without trying new a new approach, nonprofits can become stagnant and unable to meet the needs of those they seek to serve.
— Kim Davis is executive director at CASA Santa Barbara.
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