What’s Your Board’s Risk Tolerance for Capital Campaigns?
Most big decisions in life involve some amount of risk.
If you look at statistics, I take my life in my hands every time I drive on the New Jersey Turnpike! However, it’s a risk I take on a regular basis.
Every individual has a different tolerance for risk. Just look inside your own family—one person may like jumping from airplanes for fun while another prefers to keep their feet firmly on the ground. Here’s another less dangerous example. You may invest in growth stocks, while your partner prefers the safety of bonds.
While every risk can be “calculated,” there’s not necessarily a right or wrong way to assess risk. Some people (and the organizations they make up) simply have more tolerance for risk while others are more risk-averse.
If your nonprofit is eyeing a capital campaign in the near future, understanding your board’s risk tolerance will be a very important part of its earliest stages.
How Much Risk is Your Board Willing to Take?
When planning a campaign, you’ll need to gauge how much risk your board is willing to take, ideally as early as possible. The risk tolerance of individuals on your board undoubtedly varies from person to person and is impacted by outside trends, all of which shape your board’s and your organization’s overall risk tolerance.
In the early days of your campaign, work with your board leadership to start evaluating these individual and organizational tolerances. Some organizations have a history of being risk-averse and won’t take on a project unless the likelihood of success is very high. Others are far more willing to reach for the moon even if they aren’t certain they will get there.
Your organization’s tolerance for risk will play a big part in shaping your campaign plan because it determines the size of the project you are considering and the attached fundraising goal. Although your working goal can be slightly adjusted over the course of the campaign, understanding what you’re working towards and roughly how much you’ll need to accomplish it is essential for kicking off in an organized, productive way.
A Quick Risk Tolerance Exercise
Here are five questions to ask your board to help determine their tolerance for risk. Have them answer each on a scale of one (no, not confident or important) to ten (yes, very confident or important):
- How important is it that our organization get to the next level of service, even if there’s a chance we could fail?
- In your view, what is this organization’s appetite for risk (low to high)?
- How thoroughly have we evaluated the risks of expanding our program/services?
- How confident are you that our organization would be resilient enough to overcome potential project and campaign setbacks?
- How confident are you that the executive leadership has the ability to guide the organization forward to the next level of service?
Ask every board member to fill out a form posing those five questions, plus any others you might add that would be valuable to know. Collect and collate them without using the names of individual board members.
Then, allot a portion of your next board meeting to discuss the findings and what they say about your organization’s risk tolerance for the project and campaign.
The anonymity of this exercise should open up a productive space to discuss the findings objectively. Quantify and compare your collective risk tolerance and the overall desire for expansion—are they aligned or misaligned? What are the main sticking points shaping board members’ opinions? Are these concerns non-starters, or can they be addressed either internally or by adjusting the campaign’s scope?
Use these insights to identify the areas where further discussions are needed. In the coming weeks and months, you should get a clearer view of 1) whether your board is on the same page about the need and feasibility of a major campaign, and 2) what an appropriate scope and goal might be. You’ll need to understand both of these points and secure board approval before you can move ahead with a campaign, officially test its feasibility, and begin planning its specifics.
And if you are engaging a consultant to work with you on your capital campaign, ask them to take your organization’s risk tolerance into account when recommending a campaign goal.
In our experience of capital campaigns over many decades, we have seen that organizations
that are willing to assess and embrace the risks of thinking bigger are likely to be more
successful than those that take half-steps out of fear. Bold goals, backed up with the right preparation and campaign strategies, can be extremely exciting for donors and the community, and the energy and enthusiasm generated this way can create some incredible momentum.
That said, your campaign’s scope, goals, and risk ultimately need to be tailored to your unique circumstances. Start by understanding your risk equilibrium or baseline, and then you’ll have a solid spot from which to realistically consider bigger goals and the impacts they could have.
Amy Eisenstein, ACFRE
Amy Eisenstein, ACFRE, has been a development professional and fundraising consultant for more than 20 years. Recognized as a leading expert in her field, she helps small and large nonprofits alike raise millions of dollars through major gift and capital campaigns. In addition to consulting, Amy is an author, speaker and trainer, as well as the creator of Mastering Major Gifts and the co-creator of the Capital Campaign Toolkit.
Andrea Kihlstedt, Campaign Expert & Co-Founder
Andrea Kihlstedt is a Co-Founder of the Capital Campaign Toolkit. She is the author of Capital Campaigns: Strategies that Work, now in its 4th edition, as well as How to Raise $1 Million (or More) in 10 Bite Sized Steps, in addition to other books. Andrea has been leading successful capital campaigns for more than 30 years. To learn how the Capital Campaign Toolkit can support you through a capital campaign, visit capitalcampaigntoolkit.com.