Adopting failure and risk in the non-profit world

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For-profit businesses publicly fail all the time. When they do, it’s not the end of the world – learning from one’s mistakes (and those of others) can be an enormous factor in long-term success. In the non-profit world, though, failures are often swept under the rug. But since non-profits deal with lives, not dollars, why isn’t “learning from failure” a more widely adopted practice?

A new service called Admitting Failure wants to change that. In this post, we’ll look at why the for-profit world is able to learn from failure, and examine what Admitting Failure is doing to help the non-profit world achieve the same thing.

Failure is natural in business

Failure never tasted so good.

When Apple came out with the $700 Newton PDA in 1993, it didn’t exactly vault the company to success. In fact, it was one of the company’s most ridiculed products. And when Pepsi launched a massive marketing campaign to convince us to drink Crystal Pepsi, the clear cola didn’t live long. But even successful companies prepare to fail from time to time. What makes failure such a natural part of the business world?

Reward for taking risk. Trying something new is often what allows companies to achieve breakthrough success, and that requires risk and the occasional failure. Sometimes “playing it safe” by not taking any risks is a sure way to slowly kill a company.

Investors tolerate failure. A good investor diversifies his portfolio, knowing that some companies will yield negative returns. It’s an expected outcome that factors into any good investor’s calculations.

Failures are made public. Talk show hosts and business blogs alike love to poke fun at “game changing” products that no one bought. Business schools thrive on doing case studies on corporate mistakes. Since everyone is exposed to failures in business, they’re not always a surprise. And even better, there’s a wealth of information out there for anyone who wants to learn from the past.

Non-Profits aren’t allowed to fail

Warfare might be a bit too risky for non-profits, but you get the idea.

If the world’s most successful companies fail from time to time, it goes without saying the even the world’s best non-profits are going to make mistakes too. But unfortunately, non-profits aren’t allowed to fail publicly the way businesses are. For one, there isn’t a massive reward for taking massive risk, so non-profits aren’t as encouraged to experiment.

Secondly, donors aren’t yet comfortable with their dollars being used for experiments, which means non-profits are less likely to try unproven ideas. And there’s no forum for failures to be widely publicized, so logistically, sharing failures in the non-profit community would be hard to pull off anyway.

Can Admitting Failure change the status quo?

Admitting Failure addresses the problem of “private failures” in the non-profit community primarily by addressing the logistical issue – no common forum for non-profit failures to be disclosed and discussed. The platform is a good start; take a look at this post from charity: water about the failure of one of their metrics:

…you have probably heard us say, Tweet or write: $20 can provide clean and safe drinking water to one person for 20 years. But earlier this year, we removed the “20 years” part from that messaging.

As with any retraction, this sparked a discussion with our staff about how we deal with failure… we knew that if we continued to promise that each $20 donation would provide one person access to water for two decades, we’d be using a number we’re not certain about. In effect, we’d be failing the faith of the public and our mission to “reinvent charity”—to restore peoples’ trust in charitable work…

In a way, showing the public where we’ve messed up or why we want to suddenly move in a new direction is like taking a deep sigh of relief. We’ve given ourselves the chance to share the hard stuff. We’re sparking important conversations and welcoming scrutiny because we really have nothing to hide.

Donors need to think like investors

Donors should be more like this guy.

charity: water deserves praise for taking the lead on admitting their own mistakes. But while Admitting Failure solves an important part of the problem, real change won’t happen until donors begin to act differently. In the business world, successes and failures are disclosed so readily because consumers experience and discuss them, and because investors demand disclosure.

So while example like charity:water are fine, non-profits won’t ever widely disclose failures until donors begin taking the approach of an investor. Donors need to encourage the non-profits they support to experiment, make mistakes, and share their learnings. They need to diversify their donations, to improve the odds of them supporting a truly successful project. And most of all, they need to let non-profits know that it’s OK to fail once in a while. Here are three ways Admitting Failure could help them do this:

  1. Give donors tools to encourage their favorite non-profits to participate on the site. They could even take a page from Invisible Children‘s playbook and give users a one-click method to target high-profile non-profits on Twitter.
  2. Rate charities, in the fashion of Charity Navigator, based on the knowledge they’ve contributed to the non-profit community. Messaged correctly, charities who developed a reputation for being honest could benefit from additional donor support.
  3. Allow aid recipients themselves to share their perspective on a non-profit’s work. Nothing’s more authentic than the experience of a person who was targeted by an aid program, so this would be a great way to build a 360-degree perspective of a non-profit.

What do you think – are non-profits likely to admit more mistakes, if only given the right tools? Or do donors need to become more involved before any real change can take place?

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