Episode 120 : Accepting and Dealing with Risk

Welcome to another edition of "Around with Randall" your weekly podcast for making your nonprofit more effective for your community. And here is your host, the CEO and founder of Hallett Philanthropy Randall Hallett.

It's great to have you back here on another edition of the podcast, "Around with Randall", of course I'm Randall. As we continue to sail into murky waters so to speak, when it comes to the finances of some of our nonprofits some of that is based on industry or sector challenges and education, healthcare, some of it is economic. In terms of just overall economy, inflation, we're left with challenge. And I find it interesting that I'm having a number of conversations with clients around the concept of risk. How do you choose what to risk when making changes and I've heard someone say, and I can't even remember where it was but I think it's appropriate, risk is the place where hope and fear meet. It's kind of in between the two. I'm hopeful that we can get something done but I'm fearful it might not work.

We deal with risk and this idea of risk-reward, which will keep coming up when we make change. What is the positive side of it, and all kinds of things. Let me give you a couple of examples risk reward. And the idea of risk was ever present in Covid, in the pandemic. Some people looked at it as less risky and so they were more normalized or more quickly normalized in their daily life. Some others to this day are still concerned, risk, will you wear a mask, where do you wear a mask, or you're around you go out.

Another one is investing. This one's pretty common in that we're asked to evaluate if we've got money in towards, hopefully, towards retirement. How much am I willing to risk? And as I get older I risk less because if it goes down I don't have as much. Betting, gambling is all about risk. If you've seen the movie 21, which was a fixing of of blackjack or not fixing but counting cards, really, and a system and a team or you've seen other movies... of Molly's game as a recent one with Jessica Chastain. That was fabulous. They're all about risk. What am I willing to risk when I gamble, or involved with gambling?

Insurance is all about risk. The insurance company calculates how much risk there is, and you might have seen stories recently about Louisiana and Florida and the Gulf Coast having trouble even getting insurance companies to come in because the risk has gone too high. Risk is something we deal with all the time. The interesting thing is we all deal with it differently. So according to a 2019 study at the University of Tennessee, scientists have identified more than 100 genetic variants that are part of our brain and our decision-making process is different for everybody when it comes to risk-taking. That's why some people look at risk one way and some others see it totally different. It's also why when you're in Risky situations some people are more apprehensive than others.

All of us are having to challenge ourselves and I think we'll continue to as the economy continues to evolve. And there's challenges with finances in many different places that we're gonna have to figure a way to change what we do, and those decisions may cause risk. There's also the term or thought process of what a term I love, cognitive dissonance, meaning that I am facing discomfort, mental discomfort because what I think I know is actually being combated by other facts. And I think that's for a lot of people, in particular the people I have been working with over the last couple months, they're in they believe that we can keep doing things the same way. And what I keep saying is no you can't.

And a couple of examples, if it's Healthcare dealing with some CEOs who are, you know, commenting that they think that the financial challenges in healthcare are cyclical. And I said they normally are. This is a transformational moment. The way we provide healthcare is going to change. Cognitive dissonance, or that the pressure going on inside our foundations to deliver more for those nonprofits that are seeing other revenue streams become more challenging. We just got to keep doing what we've always done. We just got to do it better. No you need to do it differently.

Some examples. Maybe you look at how your board is structured. I've worked with a couple of nonprofits where I'm constantly talking about your 9, 12, 14 member board should be closer to 30 or 40. If the data shows that the best new referrals to leading to a major gift actually come from volunteers, board members, by the way that's what the advisory report says, then we need more board members, more connectivity. Maybe it's new ways of implementing programs. There are some late bloomers on the grateful patient side where I've entered into new contracts, very fortunate, feel very honored to work with these two really good organizations. But they've been slow to accept grateful patients as a manner in which it should be a lot of priority. Maybe for you it's artificial intelligence. Maybe it's increased goals. I'm getting paid more, they want more, and the data showing that you should be performing at a higher level.

In some ways the whole concept of planned giving is a risk. Somebody makes a promise today, particularly if it's revocable, meaning they can change it. That whole effort is about risk. All of these things are about figuring out how we accept risk, and that reward that comes. I would also be remiss in terms of that kind of thought process around cognitive dissonance is the more things get complicated, we tend to do one of two things. We retrench more, which is really the wrong area. Or we accelerate our willingness to get into the new. I gotta do something different. The ones that were trench are usually the ones that aren't there very long. They hold on for as long as they can and then they're gone because the organization says we got to make a change. The board says it about a leader, the chief philanthropy officer, a gift officer just keeps doing the same thing without the same results. I think covid with gift officers was really interesting because there were some, like well we can't fundraise. What do you mean? There's lots of ways of communicating.

We need to figure out how to add risk in a way that is about all kinds of different circumstances, whether it's a new job and we should leave, whether it's about adding new people, or getting more resources, or adding new metrics. I think it's also very very important before we get to the Tactical, what can you do about it today that we realize that with risk there's also the concept of lost opportunity. If we don't take risk then it's a lost series of of outputs that are never even tried.

Let me use planned giving as an example. There's so many places that I'm getting a lot of conversation or having a lot of conversations with CFOs in particular. Finance officers say we need money now and I'm like but the wealth transfer is coming. And they're actually saying well why don't you go to those planned giving people that we know love them, love us, and let's talk to them about cash, and even if we lose the planned gift, I'm like that's a lost opportunity.

Quick decisions aren't good decisions. It's about figuring out how much risk we're willing to take. So what are the things you can do from a process perspective when you're looking at risk? Change to better implement and accept, understand way risk and reward change to be most effective for what you're trying to accomplish. We're going to kind of lay out a little bit of an eight-step process.

So the first is is to realize just overall that some people are really risk adverse. I think of people who are older, more established in life not wanting to change. And this has very little to do with philanthropy. I'm just talking about life. I've told this story before. My parents are really kind of amazing people coming up right on 80 is that they really adapt pretty well. Cell phones and this idea of of moving to the iPhone in our case, but a phone that's interactive, a smartphone it's really a challenge. They were afraid of it, and by the way they weren't alone. People who are older tend to not want to change what they're doing professionally. iIf you have somebody who's 55, 60, 65, 70 years old they're in a certain pattern of behavior, of deliverables, of routine that may be tough to move on. Don't forget that study from 2019 that indicates that there are a hundred different genetic variants linked to this idea of risk-taking in one's body in the brain. So as a result what we end up with is a scenario where sometimes people aren't very risk interested, risk opened, open in terms of opportunity, and you have to work with them to best understand why it's important.

Number two, I think it's always best to start with a story. Is there a parallel? Is there a metaphor that we can use to better understand the circumstance? And when you do that can you position the change, the risk? In two scenarios, one we take the risk and things happen and here are the options of what might happen versus if we don't do anything. This is what's probable to happen, we can be more accurate if we don't change what we do and what the outcome might be because we have a direct pattern. Or you know, if you graph something it's a line that's heading down and you can see where that line crashes into the x-axis. If we don't change, predicting what might happen requires a little imagination because there's a million variants and probably a million different possibilities. What are the most likely? And if we do the right things, what are the most positive? What stories are out there or other people that have gone through it that you can listen to to create kind of a commonality of understanding about what might be possible if we accept the risk and change.

Number three is you need to do your homework, need to understand the implications of change as much as you can. I'm not saying the outcomes what's it going to take to get this done, and is it realistic? What have others done? There's always the exception for those that are out there first and those are the people you read about. Whether it's Chuck Yeager breaking the sound barrier, or it's the Wright brothers flying, or it's Neil Armstrong, Buzz Aldrin stepping on the moon. There's a lot of flight there, it's the first testing of polio vaccinations by Jonas Salk, there's always those first explorers into this new area that really don't have a lot of previous experience to draw upon. But think about each one of those examples. They did their homework. The best example is the moon, the fact that when Neil Armstrong is coming down on Tranquility base there are alarms going off, if you listen to the broadcast from July of 1969, indicating challenges. I think they were called Master alarms. They were saying this and this and this, and he and Buzz Aldrin had run these scenarios so often that they knew how far they could push risk. So even when we don't know the outcomes or we've not had anybody go before us, we can do our homework and then there are those who follow and we should be doing that kind of testing and homework for risk as well as what somebody else has been through. We shouldn't have to guess. Homework is important.

Number four is write it down. Put it on a white board. Pluses and minuses, if we do this what are the possible pluses. If we do this what are the possible minuses. I have found when you get a room full of people and you put it up on a board so everybody can see it even better in person, everybody begins to buy in and that then also leads naturally to the costs that it's going to take to implement. I've had an interesting series of conversations with non-philanthropic CEOs here recently, a couple in healthcare, one in education of course, saying I need more philanthropic revenue. and I'm like oh I think it's possible, but you need to do X, Y, and Z. Well we don't have any money. Well why would you expect more output if there's no more input? That's a tough conversation, particularly if budgets are tight. But by putting it on the board and laying out a plan, I think people actually can see things more clearly - the hurdles, the challenges, the headaches that go along with risk and change.

Number five, if at all possible, be positive or at least neutral, at a minimum, to change. Nobody dislikes change more than your podcaster right here. I get up at the same time, I eat the same breakfast, I have the same general day other than what's you know scheduling. but I mean my routine - I live by it. I'm a team guy. I wouldn't have survived the pandemic if I wasn't willing to change my routine so I had to. And you see the possibilities of change and just a little bit of a positive light, or at least a neutral one to take a chance.

Number six, as you go through change be willing to hear the bad news. Realize that it's not going to be perfect. Back to the Moon, Neil Armstrong, those Master alarms are going off. They were prepared for all kinds of challenges. Risk in the same vein, Michael Collins in 1969 is circling the moon and he had been trained and been through the thought process of what happens if Armstrong and Aldrin can't come up from the Moon back to the capsule to come back to to Earth. That's not a good thing. Are you open to negative? Are you open to challenges? Are you open to hearing the bad things and adjusting as you go?

Number seven, play the long game. Be resilient. Much of the time, in my opinion, risk reward is all about the long game because the minute you hit a bump and you don't play the long game, you stop the change. And that bump might have been the best thing in the world for you to make an adjustment. I just had a conversation last night with my son about this as we're laying in bed and we were talking about Susan Boyle and British got talent, and for those who don't know she was about 2006, 07, 08, something of that nature, she was the one who came out and everybody kind of laughed at her and then she sang the song from Les Mis. If she had taken that reluctance from the audience and the judges who didn't take her seriously based on something we should all remember, what I taught my, what reminded didn't teach reminded my son, you don't judge a book by a cover. You judge it by what person does, what the character is. If she wasn't willing to take that risk think about what we would have all missed. Play the long game because the bump in the beginning might get you on the course that gets you to the best outcome you can imagine.

And lastly, monitor change and report on it. Measure it so you know what you're dealing with don't just guess at the end result and whether you got there. Find a way to measure it so you know you're there.

The last thing I'll mention is this idea of Peter Jennings. Not that Peter Jennings who is an author about change and he writes a lot. He's written a lot of books but he talks about this concept of small bets that you need to take, change and risk based on how much you can accept at any one time from an emotional perspective, from a financial perspective, that you can measure, that you can adjust, to realize that a series of small changes is better than trying to do one enormous change. Unless it's absolutely necessary. That's a small bets concept, as many small bets as you think you can win without compromising all the bets at once, basically.

We have to be willing to accept risk if we're going to get better. And the way in which to do that is to realize people aren't always open to it, that we're going to start with a story and create a metaphor that we can all understand, that we're going to do our homework to know what's possible. We're practice, be involved, knowledge, find people who've been through it. We're going to write it down so we can see it. We're going to discuss the inputs and outputs. We're going to be positive about what's an opportunity. Possibly we're going to be willing to hear the bad and adjust. We're going to play the long game. And most importantly, we're going to monitor and report on it. We can do those things. You'll accept risk for you as a leader, for the people you work with, for your organization on the much more effective way. And right now those that are willing to take the right risks are going to be the ones that succeed, and we need more success in our world.

Don't forget, check out the blogs at hallettphilanthropy.com. 90 second reads, two a week or so. And recommend this podcast to three people if you can. Maybe they find it helpful as they're thinking about their world and what they need to do. And maybe a few out there in the for-profit side might find some of these concepts helpful to them as well. If you'd like to reach me it's podcast@Hallettphilanthropy.com. Please don't forget what you do is important, critical. It makes a world of difference. Remember my all-time favorite saying, some people make things happen, some people watch things happen, then there are those who wondered what happened. We live in a world where we need more people making things happen for too many people and too many things that are wondering what happened. The genius of the concept of philanthropy, love of mankind, helping others. And you're a part of that. Don't forget that tomorrow. Find a new way, take a little bit of a risk in making a difference for somebody else. I'll look forward to seeing you right back here next time on "Around with Randall". And don't forget, make it a great day.