Estimated Reading Time: 4 minutes
By Melanie Lockwood Herman
Are nonprofits “entrepreneurial”? Or is the term only applicable to for-profits? The website Dictionary.com offers the following definition of an entrepreneur: “a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.”
Effective nonprofit leaders demonstrate initiative and embrace risk-taking when they launch programs to address unmet community needs or when they take on societal problems that state and local governments can’t afford to tackle. Nonprofit entrepreneurs come to the rescue to provide critical services and resources when it isn’t possible to do so AND generate a profit for shareholders.
Most would agree that both “initiative” and “risk-taking” are key to success in an increasingly competitive, fast-paced and high-tech nonprofit sector. But what tools and resources are available to ensure that awareness of both upside and downside risk undergirds the commitment to being entrepreneurial?
The mission of a nonprofit starts and ends with the Board. Board members are the trusted custodians of the nonprofit’s mission and purpose. But board members aren’t like the “cars” that transport riders on a roller coaster circuit—connected together in a “train” and always in sync. Boards sometimes move in unpredictable patterns and a multitude of events and circumstances can lead to a breakdown in governance. In a healthy organization, the board will be alert to warning signs, spot red flags before the train goes off the rails, and respond accordingly. In an unhealthy organization, the board is more likely to overlook warning signs of an approaching disaster and may be eager to assign (rather than accept) blame once the damage is done. Some of the questions that can help a board guide entrepreneurial activity include:
Nonprofit staff leaders range from those who see their roles as limited to “implementing board policy” to executives who see themselves as innovators and partners (with the board) in mission fulfillment. Savvy executives recognize the potential glory associated with big risks that pay off, as well as the potentially severe penalty that may be due if the implementation of a “big idea” results in financial loss or reputation damage. Some of the questions that can help staff guide entrepreneurial activity include:
The word “entrepreneurial” has a nice ring to it. The word is used as a compliment when describing a business or nonprofit leader. Tapping your entrepreneurial spirit is likely to be a very good thing in an era of unprecedented uncertainty and fierce competition for scarce resources. Considering upside and downside risk along the way will help you promote experimentation, learn from success as well as failure, and better detect the warning signs that will enable timely mid-course corrections sensitive to stakeholder concerns.
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“BBYO’s engagement of the Center to conduct a risk assessment was one of the most valuable processes undertaken over the past five years. Numerous programmatic and procedural changes were recommended and have since been implemented. Additionally, dozens (literally) of insurance coverage gaps were identified that would never have been without the work of the Center. This assessment led to a broker bidding process that resulted in BBYO’s selection of a new broker that we have been extremely satisfied with. I unconditionally recommend the Center for their consultative services.
“Melanie Herman has provided expert, insightful, timely and well resourced information to our Executive Team and Board of Directors. Our corporation recently experienced massive growth through merger and the Board has been working to better integrate their expanded set of roles and responsibilities. Melanie presented at our Annual Board of Director’s Retreat and captured the interest of our Board members. As a result of her excellent presentation the Board has engaged in focused review which is having immediate effects on governance.”
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“The board and staff of the Prince George’s Child Resource Center are extremely pleased with the results of the risk assessment conducted by the Nonprofit Risk Management Center. A thorough scan revealed that while we are a well run organization, we had risks that we never imagined. We are grateful to know that we have now minimized our organizational risks and we recommend the Center to other nonprofits.”
Great American Insurance Group’s Specialty Human Services is committed to protecting those who improve your communities. The Center team has committed to delivering dynamic risk management solutions tailored to nonprofit organizations. These organizations have many and varied risk issues, hence the need for specialized coverage and expert knowledge for their protection. We’ve had Melanie speak on several occasions to employees and our agents. She is always on point and delivers such great value. Thank you for the terrific partnership and allowing our nonprofits to focus on their mission!