ASU Lodestar Center Blog

Current nonprofit sector research and recommendations for effective day-to-day practice from ASU faculty, staff, students, and the nonprofit and philanthropic community.

Tuesday, August 20, 2019 - 2:45pm

Illustration by Jocelyn Ruiz

posted by
Jordyn Shafer-Frie
Fall 2018 Alumna, ASU Master of Nonprofit Leadership & Management

What is risk culture? 

“...staff at every level appropriately manage risk as an intrinsic part of their day-to-day work. Such a culture supports an open discussion about uncertainties and opportunities, encourages staff to express concerns, and maintains processes to elevate concerns to appropriate levels.” 

– Australian Government Department of Finance

The nonprofit sector is in a delicate and unique position compared to the for-profit sector. Amazon took over 14 years to turn a profit with many of those first years spent entirely in the red. Can you imagine if nonprofit organizations were able to operate this way? Can you imagine pitching to donors that “Yes, we will create social change, but it’ll take a few years to get there. When can you write a check?” Needless to say, the nonprofit sector doesn’t operate that way. In fact, the nonprofit sector has been guilty of leaving the topic of risk out of necessary and influential conversations. There’s a hush-hush culture regarding risk and failure. Sure, it may never be able to operate in a manner that allows for 14 years without some kind of profit. However, changing the attitudes within the sector from being risk averse to the embrace of a risk culture could mean the difference between how much impact organizations make. 

Open Road Alliance believes that in order to get the greatest social impact out of philanthropic dollars, funders and grantees must have open conversations about the risks involved in each project. Funders recognized that an estimated 20 percent of funded projects would experience an event that would negatively impact the outcome. Despite this, only 17 percent reported having some type of contingency fund for these situations. We simply are not discussing risk and potential failures that come along with projects as well as innovation. That needs to change.

So, what can you do today to create a culture within your organization that embraces risk and failure? One organization implemented a “Worst Grant Contest” in which staff told stories of, and voted on, the worst grants and projects of the year. The intent of the event was for staff to become more comfortable and open with the discussion of failure. But your transition into an organization that embraces risk does not need to be so overt. Start with the following three stages in making the transition: 

  1. Build awareness of risk culture:  Do not assume that staff understand what is meant by “risk culture.” Education regarding risk is built from the top down; educate staff either informally or through formal training about which goals are key. Prepare real examples and scenarios to demonstrate the capabilities and reasons for the cultural shift. Only you know the best way to approach this. 
  2. Changing your culture: This stage can be summed up as: Support your staff as they take risks and encourage conversations about failure. Develop and utilize motivational systems that reward desired risk behaviors and discourage behaviors that condemn risk and failure. Be careful on reactions to everyday “failures.” Remember the saying “do as I say, not as I do”? Forget that. Exemplify the culture that is sought after. Let’s normalize risk and failure!
  3. Refining the culture: Risk should be a part of your organization’s culture before this stage. Here, culture should be monitored in regards to performance versus expectations. Measure and compare how risk is perceived. Are staff more open about their failures? Have any notable changes taken place? Where does work need to be done? Be flexible. Organizations that are able to adjust accordingly are the organizations that will be able to maintain a positive risk culture even when an organization goes through various changes.  

Only when we as a sector become comfortable discussing and accepting the failures that come with risk can we push our impact to reach full potential. Cultural shift within the sector starts with you and your organization. 

Remember the words of Peter Drucker: “If you want something new, you have to stop doing something old.” 

Jordyn Shafer-Frie is a graduate of the Master of Nonprofit Leadership and Management program at Arizona State University. Shafer-Frie is a native of Alaska. She found her passion for education and the nonprofit sector after making the move to Arizona. She received her Master of Nonprofit Leadership and Management Degree in December 2018 from ASU’s Watts College of Public Service and Community Solutions. She is currently employed at ASU as a specialist in the Academic Transfer Credit Solutions office. She is interested in education attainability, inclusion and advocacy. 

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