Nonprofit leaders and management teams have to deal with uncertainty and complexity on a daily basis. Following risk management notes are prepared to help nonprofit leaders.
Organizational insight on risk management
We should stop talking about risk-taking and its importance for innovation. This assumes if we encourage people to take risks, innovation magically happens. Yet, when we interview people who create bold ideas, we ask if they feel like risk-takers. Most say no. They often say they found a better solution for an old problem. Our current way of viewing risk is not useful. We too often deal with new ideas by saying ‘no.’ Many innovative ideas are killed off without any proper analysis.
Managers often talk of shaping cultures of risk-taking without knowing what people would do differently in a culture of risk-taking. It is better to stop talking about risk-taking for innovation unless you can explain this in simple words. This is much harder than you may imagine.
Often, we use the term, calculated risk-taking. What exactly is that? What we really want are better solutions to our challenges. To solve our problems better should be encouraged, not held back.
I was asked to teach innovation as part of a certification in organizational risk management. After asking, “Why me?”, I saw how risk management and innovation use similar skills and principles. Both look to identify future possibilities. A simplistic perspective is:
The innovator wants to create possibilities for success
The risk manager wants to identify possibilities of failure.
A truly successful innovator wants to minimize the possibilities for failure as well. In challenging times, we need insight from both disciplines to make the best decisions for change. Perhaps it is even more important for executives in non-profits to improve the use of this important concept. People need to identify possibilities of failure and manage them and possibilities for success and manage toward them.
In the real world, managers and executives made decisions for solving problems or creating opportunities every day. We always have two options:
1. Do nothing
2. Do something
We observe again and again is that we focus on the risk of doing something and ignore the risk of doing nothing. This creates the risk of the status quo; the risk of not solving a problem or not taking initiatives to create ideas for tomorrow’s value. This is reflected by poor productivity and mediocre results in many organizations. The research tells us we avoid making decisions to solve problems until there is a crisis. Once a crisis happens, we invest in riskier actions as we feel we must act.
Story for a personal level of understanding
Creating your To-Do and To-Fail Lists.
At the most basic level, we start with strategies to create success.
These strategies cascade down to tactical plans, and then someone’s ‘To Do Lists’. Well-conceived strategies make it easy for people to see how their day-to-day work contributes to the goals of the organization. In other words, a good strategy is a roadmap that guides people in their daily work towards success.
The risk perspective adds a useful focus on the challenges that can create failure. The shadow perspective asks, ‘what could cause your project or strategy to fail?’ Think of this as a ‘To Fail List’. This is not cynical or skeptical. If this is well-conceived, it will highlight perhaps three to five areas that make it easy for people to see the serious consequences if they are not managed or avoided. Facilitate a planning session using two big flipcharts.
One was for the strategies and actions to succeed; the other for what could make the concept fail. Putting these concepts together, your innovation strategies contribute to your success by leading you to innovative results, while your risk strategies contribute by leading you to avoid failure. If you avoid what can lead you to failure, you can succeed by default!
Big mistakes when executives solve business problems:
1. Most managers got the definition of the problem wrong the first time.
2. They jump to a solution based on ‘experience’
3. They react to the ‘alarm bells of problems’ and ignore new initiatives
4. They fail to notice the spin-off problem
Improving our skills to solve problems reduces the risk of failure.
Ed Bernacki is a problem finder and problem solver who can turn solutions into innovations. He brings new perspectives to every role or project having vast innovation experience living in Canada, Australia, and New Zealand, and working internationally. His risk management notes for nonprofit leaders article is originally posted on the Vectors Group website.