Skip to main content
Feb 11, 2015

A Foundation That Anticipates Risk

“The world is unpredictable” reads the banner on the website for the Open Road Alliance foundation.  This foundation is unusual because it assumes that “many well-conceived programs and initiatives can run into roadblocks to success. [The foundation] partners with high achieving non-profit organizations to turn unforeseen circumstances into positive impact.“

The foundation recently surveyed a range of domestic and international nonprofits to learn how they thought about the likelihood of disruptions that could negatively affect a program, project, or even the entire organization.

While all of the respondents could list potential disruptions, less than a handful actually had a process to evaluate the likelihood of those risks and to develop an appropriate contingency plan.

Since this foundation is premised on the existence of disruptions, it was dismayed to learn that the nonprofits surveyed did not gather data on where developments deviated from plan nor their causes nor frequency.

When the foundation probed it found that the nonprofits did not have the resources, nor incentives, to analyze the causes of these disruptions so that they could better anticipate or mitigate them next time.  The biggest disincentive:  “fear of negative judgment by the donor and consequent possible loss of future funding.”

For many respondents this fear was a reality.  Said one, “we had a funder pull out after we didn’t reach an annual milestone due to changing circumstances on the ground.  We had set out with the most ambitious …plan we felt we could promise.  If we had been more cautious, we may not have gotten the [original] funding at all.”

The reader should not conclude that funders and nonprofits are unique in this behavior. Any angel investor in for-profit ventures would voice a similar complaint: rosy projections before the investment and virtually no communication to investors after the investment.

But nonprofits and funders serve the higher purpose of supporting our community, so we as a community want this situation to be better than the typical investor experience.  To this end, the foundation’s report offers several suggestions.

To funders:  “Be more flexible, patient,…risk tolerant….Give [nonprofits] a leaner, faster, less repetitive application process.”

To the nonprofits:
•    “[Nonprofits] must be willing to try to have these nerve-wracking conversations with funders about risk and to discuss serious derailments when they occur.  Funders can’t fix problems they don’t know about….
•    “Manage expectations with funders for success – not for funding.  Communicate a need for patience and focus on outcomes of the project rather than simply pitching to secure funds.”
•    And from Laurie Michaels the founder of Open Road Alliance: “Don’t couch your challenges or disruptions as ‘failure.’”

If your nonprofit runs into a hurdle to completion or you find a big opportunity that requires a quick response, talk frankly to your funders.  Laurie Michaels, the founder of the Open Road Alliance, wrote in the Chronicle of Philanthropy recently, “instead of scouring the horizon for a sexy new project to fund, committed donors like me—and foundations of all sizes—should focus on adopting our own new, better, more effective processes and approaches to funding the charities we care about. If we did, we would change the way we do business and adapt to the needs of the nonprofits we support. ”

One more effective approach to helping the nonprofits is for more funders and foundations to embrace impact investment and grants to support development of social enterprises.  If we can help nonprofits to generate recurring revenues, we will be leveraging our grants and using investment to magnify our impact.  In Central Ohio, here are some upcoming programs to advance this approach.