How to Minimize Risk While Staying Open to Opportunity: Shared Strategies

Several speakers at Independent Sector’s annual meeting offered their insights about how to make wise financial decisions in these trying economic times.

Above all, they said, nonprofit leaders need to develop a sound plan that fits their organizations. Relying on hope or mounting debt to try to ride out this time of shrinking revenue simply won’t work, they said.

“Fundamentally, vulnerable organizations cannot serve vulnerable people,” Dione Alexander, vice president of the Midwest region for the Nonprofit Finance Fund, told conference participants.

“You can only do so much,” she added. “Figure out what it is.”

‘Crash-Test Dummy’

Rick Sperling, founder and chief executive officer of Mosaic Youth Theatre of Detroit, said he feels something like “a crash-test dummy” as he tries different approaches but has yet to hit on the ultimate answers.

He says his group has shifted its thinking from one that was all about risks at its start 17 years ago to one that is focused on sustainability.

After realizing that the typical life span of a youth arts organization in the city was 10 to 15 years, Mr. Sperling said he made it his personal mission “to create an organization that would be around for the grandchildren of the kids that are in the program now.”

That has involved making tough choices, he said. The group has decided not to take on any debt, it has a line of credit available to it, and it has not yet dipped into its reserves. “That’s the good news,” he said.

The bad news is that there’s a cost associated with those decisions. “We are serving less young people, we are doing less programs, and we had to cut a significant number of our staff to get there,” he said, all painful decisions.

Open Finances

Mr. Sperling said one lesson he learned the hard way has been the need to be open with staff members about financial concerns right from the start and not “try to control the message.”

“Everything I was afraid of, that people would jump ship, that people would be upset, it all happened later when people found out how bad things were, and then I had lost their trust by that point,” he said.

The challenge now is figuring out how to still be bold while exercising financial restraint, Mr. Sperling said. He said his group recently and unexpectedly found a building that seems an ideal home for the organization. It leaders must now figure out if there’s a way to take advantage of the opportunity while justifying the added risk that would go with it.

“If we do this wrong, this could kill us,” he said. “If we do it right, it could make us sustainable and a destination in Detroit, it could help us do our mission exponentially better, serve more people in a better way. So we’re at a crossroad.”