August 24, 2011

Last Call

It’s “last call” for the upcoming Risk Management & Finance Summit for Nonprofits, September 18-20 in Seattle, WA. General information on the conference is available on the main Summit page. The detailed agenda is available on the program page. If you’re looking for inspiration for your risk management efforts, register today!

Resisting the Urge to Assume

By Melanie Lockwood Herman

Assumptions undergird many of the decisions we make in our personal and work lives. We assume motivation, intent, perspective and more. We see and perceive things that may not exist, and hold tight to beliefs that support the decisions we’ve already made. Research on interviewing suggests that in an interview setting many applicants describe the employee they want to be to a prospective employer, rather than the employee they really are. The research also suggests that interviewers generally decide whether an applicant is suitable during the first 30 seconds of the interview. The remaining minutes of an interview are spent looking for validation of the decision made only seconds after the applicant has taken a seat. Without realizing it we routinely make assumptions about applicants based on personal appearance, the firmness of a handshake, gaps in employment history and more. Assumptions get us in trouble when they distract us from asking the probing questions that will enable us to effectively gauge an applicant’s suitability.

Assumptions also interfere with risk-taking in a nonprofit when we unwittingly “program” the results of an experiment. The term “pilot project” refers to an experiment with a new strategy for meeting client or community needs. A “pilot” is appealing because it allows us to test the waters of a new approach without the associated downside risk of diving into something whose effectiveness, feasibility and ultimate value are uncertain. The overarching goal of a pilot should be organizational learning. And if a “pilot” is indeed a test, the outcome should be uncertain. Yet according to Harvard Business School Professor Amy C. Edmondson, “pilot projects are usually designed to succeed rather than to produce intelligent failures—those that generate valuable information.” In her article, “Strategies For Learning From Failure,” featured in the April 2011 edition of the Harvard Business Review, Professor Edmondson offers a list of questions to help determine if an organization has designed “a genuinely useful pilot.” The list of questions includes:

• Is the pilot being tested under typical circumstances (rather than optimal conditions)?
• Is the goal of the pilot to learn as much as possible (rather than to demonstrate the value of the proposed offering)?
• Is the goal of learning well understood by all employees and managers?
• Is it clear that compensation and performance reviews are not based on a successful outcome for the pilot?

In their book, Surviving and Thriving in Uncertainty: Creating The Risk Intelligent Enterprise, authors Frederick Funston and Stephen Wagner write: “Challenging assumptions is necessary to unearth and understand risk in organizational life. When we base decisions on assumptions that may not be entirely valid, our goals are compromised.” But how should leaders go about challenging assumptions, particularly those that influence the organizational view of critical risks? The following questions, adapted from Funston and Wagner’s work, may help you get started:

• What are the “life and death” assumptions about the nonprofit’s mission, goals and strategies?
• Are there events, circumstances or experience that challenge the fundamental assumptions about mission, goals and strategies?
• What methods are being used to detect changes in the external environment that may necessitate a change in fundamental assumptions?
• Has the Board of the nonprofit explored strategic options should a fundamental shift occur?

The compelling mission of your nonprofit may inspire a fast pace and the belief that you can’t afford to take your eyes off the challenging goals for the current fiscal year. But what if your nonprofit’s goals and strategies are impaired by inaccurate or out-of-date assumptions? Rather than slow down mission-fulfillment, taking some time to revisit assumptions about your external environment and capabilities might bolster your mission for the long-term.

Melanie Lockwood Herman is Executive Director of the Nonprofit Risk Management Center. She welcomes your ideas about any risk management topic, feedback on this article and questions about the Center’s resources at Melanie@nonprofitrisk.org or (202) 785-3891. The Center provides risk management tools and resources at www.nonprofitrisk.org and offers consulting assistance to organizations unwilling to leave their missions to chance.

New! Summer Edition of Risk Management Essentials

The Summer edition of Risk Management Essentials is hot off the press and also available online. Featured articles include:

• How to Bring the Power of Intuition to the Discipline of Risk Management
• Background Checks, Screening and Your Nonprofit
• Let’s Get Entrepreneurial

The “turn the page” edition of Risk Management Essentials is available here. A PDF version of the newsletter (suitable for printing), is available here.

If Risk-Taking Is In Your Future, We Can Help

Whether you’re trying to understand your nonprofit’s appetite for risk-taking, sharpen your risk management skills, evaluate your Enterprise Risk Management (ERM) journey, or educate your board about risk-taking and risk management, don’t hesitate to reach out the team at the Nonprofit Risk Management Center for assistance. We can support you in a number of ways, from helping you draft or revise risk management policies to designing custom training programs (on-site, virtual/webinar, or online). We also offer in-depth risk assessments, Enterprise Risk Management engagements, and advice and consultation on topics ranging from developing or updating youth protection policies, to strengthening governance practices. Why make the journey alone when you can partner with a team of nonprofit specialists who live and breathe nonprofit sector risks? Contact Melanie@nonprofitrisk.org or call (202) 785-3891 to discuss your needs and learn how we can help.