The Risk of Collapse! How Non-profit Project Risk Management Might Save the Day

RED FLAGS AHEAD!!!?? I recently had a professional peer ask a couple of questions about non-profit project risk management, and I had to admit there’s not a lot of public thought given to the subject. We have warning lights and dashboard displays for just about everything else, so maybe it's time to apply those principles to our non-project management.

Think about the non-profit organizations in your direct circle.? Your church. Your community group. Your animal shelter.? They all share something in common.? They only survive based on the will of their supporters.?

Think about it.? ChurchLeadership.org claims that there’s a net loss (church failures versus church starts) of about 3,000 churches a year.? The National Center on Charitable Statistics reports that roughly a third of all non-profits fail to exist after ten years.? And now think about your favorite charity.? Is it healthy?? Is it doomed??

For those who don’t know me, I’ve written three books on risk management and one on life in my own “stay alive” project, and as such, I have a pretty solid perspective on where non-profits should be going in terms of mitigating their risks of failure.

The first step in any potential problem scenario is to acknowledge that you may have a problem.? But how do non-profits know they’re in trouble? I would suggest that the risk triggers they should be assessing include the following:

• Transparency.? You’re a non-profit, for crying out loud!? You should be willing to allow others to not only see how money is being spent, but the thinking of the board behind the spending.? If you work for the non-profit, but someone comes to you with a question, do you have to get clearance to provide a definitive, fact-based answer with some approving authority?? Red flag (risk trigger).? Might there be a good reason?? Sure.? But the more open, honest and transparent you are, the more eyes available to see impending risks.?The more layers between the non-profit and the public, the more opaque the organization is.
• Mission clarity.? You have a reason to exist.? Non-profits must support some kind of belief system.? Whether it’s a mission of faith or animal rescue, the reason should be clear, succinct and shared openly.? Taking on any effort without a tie-in directly to the mission should be another risk trigger.? Failing to have a mission is a GIGANTIC risk trigger.
• Open, well-vetted financials.? My wife’s a CPA. She has cringed at how some non-profits manage their money.? Whether it’s in Quickbooks? or Microsoft Excel or a stack of paper ledger sheets, the financials need to be consistent with Generally Accepted Accounting Practice (GAAP) and readily available to anyone.? When the most recent reconciliation is not readily available, chalk up another risk trigger.
• End-user responsibility.? This risk trigger cuts both ways and leads to non-profits losing their support base.? They need to support the end user—the recipient of their largesse.? The end-user needs to be able to point to direct benefits from the non-profit’s assistance. If the non-profit cannot point directly to end users by name (although not necessarily for public consumption), the non-profit lacks a soul.? If the beneficiaries of the non-profit’s support can’t identify the non-profit or the nature of their help, it’s a similar trigger.

If any or all of those problems exist or have never been addressed, the non-profit is definitely headed down a high-risk road.?

So what should non-profits do in the way of mitigation?

1. Ensure a competent financial authority is in charge of the books.
2. Draft a mission statement and include it on every communication to donors, recipients and supporters.
3. Get a leader worth her/his salt in terms of sharing the mission publicly and often.?
4. If surviving on grants, treat every grant as a separate project, with regular interim reporting and broad awareness.? Know the life span of the grant, as well as what the grantor wants out of the deal.? Keep all of that awareness in the public eye.
5. Create the non-profit story.? Churches have this one all locked up.? They know the Christ story and how to tell it.? But does your favorite non-profit have a story?? Animal shelters often have “poster children” that are animals that seemed unadoptable, but who were ultimately adopted.? The Salvation Army and the Marine Toys for Tots Foundation have their Christmas stories, replete with mountains of toys and children screaming with delight.? (It’s one thing for a non-profit to ask for support of their mission.? It’s another to be able to clearly define that a child who couldn’t go out in the cold for want of a pair of mittens is now the owner of a giant snowman).?

What do we do?

We start by keeping all of this simple.? Even when we’re buried under a mountain of 501(c)3 regulation, we can stick to the basic tenets of faith in minimizing organizational risk.? First and foremost, acknowledge that every day presents an opportunity to fail at the non-profit mission.? And the inverse is powerfully true.? Every day presents an opportunity to build on our mission and drive to higher levels of support.?

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Carl Pritchard is the owner of Pritchard Management, LLC, and is the author of ten project management books.? He welcomes your comments here, or via e-mail at [email protected] ?? He also appreciates your support of his latest book, “The Stage Four Project”, https://www.amazon.com/Stage-Four-Project-Managers-Dealing/dp/B0CSV5N8D4/