The Board as Partner in Risk-taking

Warhol Initiative Convening

June 24, 2011 Facilitated by Nancy J. Lee, Managing Consultant
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Welcome

What well explore today Elements of good decision-making Ways to increase capacity for good decisionmaking and smart risk-taking Presentation, dialogue, idea exchange

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What do you want to gain from this session?

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What is Risk?
1: possibility of loss or injury : peril 2: someone or something that creates or suggests a 3a : the chance of loss or the perils to the subject matter of an insurance contract; also :the degree of probability of such loss; b: a person or thing that is a specified hazard to an ; c: an insurance hazard from a specified cause or source <war risk> 4: the chance that an (as a stock or commodity) will lose value OPPORTUNITY is risks positive aspect

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Copyright 2001 Susan Kenny Stevens. Excerpted from the book Nonprofit Lifecycles: Stage-based Wisdom for Nonprofit Capacity. All rights reserved. 3

Your Organizations Recent Experience

What risk / opportunity has your organization faced recently?

What was the process for considering it? Who was involved? Was a decision reached? How?

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Has action been taken? Did you achieve the intended outcome? What went right; what went wrong?

Legal Duties of the Board

Duty of Care Duty of Loyalty Duty of Obedience These are standards of conduct the law requires board members to uphold.

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Board Profile; Appetite for Risk

Monitor and protect

Dare to dream and decide

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From Opportunity to Action

OPPORTUNITY / CHALLENGE

Knowledge, Information

Generate it alternatives

Process it

Weigh

MAKE DECISION

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IMPLEMENT DECISION
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PASS/DEFER

Elements of Good Decisionmaking

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I. Build a Decision-making Team and Culture

1. Diverse membership backgrounds, expertise, ability to represent important constituencies 2. Culture of mutual trust and respect; listening and open dialogue are valued 3. Regular discussion about external as well as internal environment 4. Habit of considering long-term as well as short-term challenges and successes 5. A network that provides additional information, perspectives What are your teams strengths and challenges? How did they advance / hinder your organizations recent experience with risk evaluation?

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Fear Is Natural; Develop Antidotes

Open communication Information that contextualizes, quantifies the risk Talk about past failure & what has been learned Focus on the ultimate goal for which this decision is an intermediate step Others?
All learning involves some failure. The only true failure is the failure to take action and try something new.

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The Role of Board Structure, Systems

Processes for engaging and delegating the board in research and decision-making Clear boundaries around
Board / staff work Committees scope of work

Board member term limits

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II. Gather Information

1. Survey the environment; build situational awareness 2. Get help as needed
inner circle informed, unbiased supporters outer circle - weak ties; advice from detached point of view oracles exceptionally clear-minded about what the future may hold

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3. Look to the future instead of rethinking the past; use information to avoid being trapped by history

II. Gather Information (cont.)

5. 5. Combine dispassionate assessment with passionate commitment 6. Focus on doingsomething smart over sounding or looking smart. If you develop an elegant plan or set of strategies, make sure you know how you will implement. 7. Assess which constituencies are on board and which are not
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III. Break into Manageable Steps

1. Outline the questions to be answered; work methodically to answer them
By what date must we make a decision? Is the decision affordable? Is the decision reversible? Can we test the decision? How will the organization be affected by a yes? and by a no? For how long?

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2. Set intermediate goals and tangible targets that add up to larger, ultimate aims

IV. Establish Shared Values, Priorities

1. 2. Align leaders understanding of
Vision and mission, and how they are enacted Core values Business model and long-term financial viability Critical issues and risk areas

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3. Outline the tolerance for mistakes, acceptable failures 4. Establish clear priorities and adhere to operating procedures, especially in emergency

IV. Establish Shared Values, Priorities (cont)

4. 5. Stay away from opportunities where decisions are improperly constrained 6. Set self-interest aside

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V. Establish Who Decides

1. 2. Clarify authority among all leaders
Identify / review the implications of responsibility and authority

3. Appreciate the decision-making capabilities of others; devolve decisions where appropriate

Build decision-making capacity in others

4. Pull back decisions if necessary 5. Keep everyone informed about objectives of the moment and the organizations situation
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VI. Be Proactive, Responsive, Action-oriented

1. Take swift action when necessary 2. Trust intuition only if it is well-informed 3. Measure & track what matters what can help turn knowledge into action

IMPLEMENT DECISION PASS/DEFER

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4. Keep surveying to determine whether current strategy will continue to win in months/years ahead; change course if necessary 5.

Resources

The Go Point, Michael Useem The Knowing-Doing Gap, Jeffrey Pfeffer & Robert I. Sutton Managing the Nonprofit Organization, Peter Drucker

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Contact Information

Nancy Lee, Managing Consultant LarsonAllen Nonprofit and Government Group 220 South Sixth Street, Suite 300 Minneapolis, MN 55402

651.261.5670 nlee@larsonallen.com and nlee@visi.com

www.larsonallen.com/publicservice
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