Guides & Resources

What’s Your Board’s Risk Tolerance for Capital Campaigns?

Leadership and Teams: Boards and Volunteers
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Everyone has a different tolerance for 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.

Just look at your own family—one person may like jumping from airplanes for fun while another prefers to keep their feet firmly planted on the ground.

Similarly, your nonprofit’s board has a certain level of risk tolerance. And if you’re considering a capital campaign, understanding that risk tolerance is essential for getting your whole team on the same page and setting the campaign up for success.  

How much risk is your board willing to take? 

It’s wise to be mindful of the potential risks of taking on a capital campaign. For instance, according to our recent research, two of the most common challenges cited by nonprofits conducting capital campaigns include getting their board excited about the campaign and dealing with unforeseen external factors (like economic downturns and tense political climates).  

Unforeseen external factors that pop up mid-campaign are always a risk. For example, many of the organizations that began campaigns in 2018 or 2019 may have dealt with increased costs of building materials due to inflation.

There will always be some risk involved in running a capital campaign, and your organization needs to be comfortable with that to get the results you’re hoping for. If the board, for example, isn’t comfortable, they may never get excited about the campaign, which can have consequences down the road.

Knowing this, you should work with your board leadership to evaluate individual and organizational risk tolerances early on. Some organizations have a history of being risk-averse and won’t take on a project unless the likelihood of success is very high and challenges can easily be avoided or overcome. 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 adjusted slightly during the campaign, understanding what you’re working towards and roughly how much support 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 risk tolerance. Have them answer each on a scale of 1 (no, not confident or important) to 10 (yes, very confident or important):

  1. How important is it that our organization gets to the next level of service, even if there’s a chance we could fail?
  2. In your view, what is this organization’s appetite for risk (the lowest being 1 and the highest being 10)?
  3. How confident are you that we’ve thoroughly evaluated the risks of expanding our program/services?
  4. How confident are you that our organization would be resilient enough to overcome potential project and campaign setbacks?
  5. How confident are you that the executive leadership can guide the organization forward to the next level of service?

Ask every board member to fill out a form with those five questions, plus any others that would be valuable to know. Collect and collate the answers 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 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:

  • Whether your board is on the same page about the need and feasibility of a major campaign
  • What an appropriate scope and goal might be

You’ll need to clarify your organization’s view on both of these points and secure board approval before you can move ahead with a campaign, officially test its feasibility, and begin planning specifics.

And if you are engaging a consultant or coach to work with you on your capital campaign, ask them to consider your organization’s risk tolerance when recommending a campaign goal.

Our Perspective 

In our experience with capital campaigns over many decades, we have seen that organizations 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. The energy and enthusiasm they generate can create some incredible momentum.

So, while you should thoroughly prepare and ensure everyone is on board with your plan, don’t hesitate too much to take a big leap and launch a capital campaign!

That said, your campaign’s scope, goals, and risk must ultimately 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 is CEO and Co-Founder of Capital Campaign Pro. Her published books include: Major Gift Fundraising for Small Shops, Raising More with Less, and 50 A$ks in 50 Weeks.  She became a Certified Fundraising Executive (CFRE) in 2004 and received the ACFRE in 2013. For more information and free resources visit CapitalCampaignPro.com.

Amy Eisenstein

 

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