3 Ways Foundations Squash Risk-Taking

There was a time not too long ago when you rarely heard the word “foundation” and “risk” in the same sentence…or paragraph…or entire document. Risk simply hasn’t been something formally and broadly associated with philanthropy over the past few decades.

However, it’s become pretty obvious to many people that the traditional ways of grantmaking are not enough to make a dent in the entrenched and intertwined social challenges of poverty, inequity, education or healthcare. Yes, one can’t blame philanthropy alone and other sectors very much bear their share of responsibility and obligation. But philanthropy can afford to take some risks that other sectors can’t.

The concept of philanthropic risk isn’t new; there have always been some foundations that are willing to fund “that crazy idea that just might work.” And now, with the uptick of younger, entrepreneurial philanthropists who are happily challenging the status quo, the idea of philanthropic risk-taking is becoming more palatable.

I’ve seen a renewed interest in risk-taking among some of my clients and in my travels within the field. There are some visionary folks out there who are embracing risk – and some who are trying hard but creating their own stumbling blocks. I’ve noticed three areas in which foundations that want to take more risks unintentionally limit their capacity to do so: planning, practice and policy.

1) Planning

Embracing risk doesn’t mean driving blind. Instead, address risk with a clear vision of what you want to accomplish and how you plan to implement that vision. Be particularly mindful of what you want to accomplish, what roadblocks you’re likely to encounter, how you might address them, and what you might still consider success even if your full vision isn’t realized. This provides a clear plan of action for staff and trustees and reinforces the notion that you’re all taking this risk together. A CEO can have all the vision in the world, but if there’s no plan to implement it, trustees will likely hesitate and put up roadblocks, and staff will remain uncertain, afraid of making mistakes and unable to move forward.

2) Practice

Saying you take risks is one thing. Actually making risky grants is another. Check your walk against your talk. Do a retroactive risk assessment; review past grants according to a risk meter and learn what percent of grants involved risk, what percent of those succeeded or failed and what you learned from it. Maybe you thought you were taking risks when actually you didn’t. Maybe you did and the failures weren’t as bad as you thought. Maybe you failed on a grand scale but emerged wiser, better educated, and with new partners and connections who are ready to help you get back in there for round two.

3) Policy

Even if you have the clear plan I mentioned above, assuming risk can still be uncomfortable for staff, especially if your internal policies don’t reinforce risk taking. For example, you may proclaim that your foundation takes risk, but if your annual performance reviews ding staff for “failed” grants in their portfolios, it’s not that likely you’re fully embracing the risk you claim. The same could be true for grantees. For example, if you want to fund smaller, less sophisticated organizations yet overburden them with reporting requirements, chances are you’re not helping to push the envelope as intended. Take a look at your internal policies and processes to find areas that are counter productive to risk taking. Then, think about what you’re comfortable modifying those policies and processes in order to support your desire to take risk.

Taking a philanthropic risk can generate exponential rewards, but I’m always a fan of undertaking risk in a well-planned, clearly expressed, actionable way that draws everyone in and reminds employees, grantees, partners and communities, “we’re all in this together.” I fully believe that when risk is assumed collectively, a foundation’s efforts are more likely to succeed.