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Resilient Nonprofit Organizations are Not Risk Adverse

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Saunji D. Fyffe
May 15, 2019

Although today’s United States economy seems strong, several news outlets have reported that a recession could be coming this year or next. Going through a recession can be tough, especially for nonprofit organizations. After the 2007-2008 downturn I conducted research on the attributes of resilient nonprofits. Specifically, my study aimed to develop a better understanding of organizational resiliency as it relates to nonprofits impacted by an economic recession. I interviewed staff at seven small and medium-sized human services nonprofits in Virginia. The themes that emerged from the data found that resilient nonprofits:

  • Anticipate and respond to changes in their environments.
  • Embrace change, challenge the status quo and take risks, despite uncertainty.
  • Remain flexible in their structures and processes.
  • Place strong emphasis on forming strategic, successful, and mutually beneficial external relationships to fulfill their mission.
  • Have supportive and constructive internal relationships.
  • Have engaged, competent and effective leadership.
  • Continually seek new funding sources and have diverse revenue streams.
  • Have assets, systems and infrastructure needed to administer quality programs and enhance their ability to address and benefit from situations that emerge.
  • Rely on their mission and identity to direct their activities, establish shared meaning, and shape their image for external stakeholders.

As I think about the possibility of another recession and how nonprofits can prepare, I am reminded of four of the nonprofits in the study that appeared to thrive by capitalizing on certain situations during and after the recession to achieve positive outcomes, strengthen their capacity, and emerge more prosperous than before the recession began. The four case nonprofits that thrived not only embraced change—they were the risk takers. Examples of risks taken during and after the recession included expanding operations, starting new ventures, trusting volunteers with overseeing a signature commercial revenue stream and purchasing two pieces of foreclosed property.

Organizational resilience embodies risk and protective mechanisms that enable positive functioning in stressful conditions. The amenability of organizations to take risks raises questions about the organization-specific factors that encourage a leader to take risks and the background and personality attributes of risk-taking leaders. More research into the organization-specific factors that can influence a nonprofit’s approach to risk-taking is necessary to better understand the conditions under which risk-taking is likely to occur and the organizational factors involved in supporting and making these types of decisions. 

One example that illustrates how risk-taking paid off for these nonprofit leaders has to do with seeking new and innovative ways to generate revenue. The decision to enter into commercial and earned income ventures generally requires a leader’s willingness to take calculated risks. Unlike many small and medium-sized nonprofit organizations, the four nonprofits in the study that thrived during and after the recession all had systems and infrastructure in place that allowed them to capitalize on opportunities. This is especially interesting because securing funding to cover administrative and overhead costs to build organizational operations and infrastructure is often a challenge for small and medium nonprofits. All four of the thriving case nonprofits were firm believers in generating commercial revenue. Each nonprofit had established revenue-generating strategies that helped strengthen their organization during and after the recession. Commercial revenue streams supply unrestricted funds that nonprofits can use to build their infrastructure and strengthen their capacity to thrive.

Because leaders of small and medium-sized nonprofits typically make or are involved with virtually all strategic and operational decisions for their organization, the leader plays a central role in whether an organization exhibits a risk-taking attribute. Having the capacity to take risks could be a key attribute for nonprofit organizations facing a recession. This characteristic may prove valuable when responding to crises. However, not all organizations and leaders are equipped or willing to do so. 

More often than not, nonprofit leaders at small and medium organizations tend to be risk-adverse and opt to play it safe to protect their organization’s assets. Yet, avoiding risks could result in missed opportunities, stagnation or even failure to keep up with competing organizations. This could prove catastrophic should another serious recession strike the United States. As nonprofit leaders prepare for an impending recession I encourage those leaders who are risk-adverse to begin having conversations with their boards and staff and make space for calculated risks. As exhibited by the resilient nonprofit organizations in the study, finding ways to take calculated risks may create opportunities to grow income. This could help a nonprofit to not only survive, but thrive during the next recession.

Author: Saunji D. Fyffe, Ph.D., is a consultant specializing in program monitoring and evaluation. This article is based on her experience working with government and nonprofit agencies to build capacity and implement performance measurement and management. For additional information, email [email protected].

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