Executive Perspective on Top Risks for 2014 – Comparison of for-profit concerns with those of tax-exempt organizations

Protiviti reported their survey results from executives in the for-profit sector regarding their Top Ten Risks for 2014:

  • Regulatory changes and scrutiny
  • Economic conditions
  • Uncertainty surrounding political leadership
  • Succession planning for key employees and board
  • Organic growth
  • Cyber threats
  • Organizational resistance to change
  • Privacy and identity security system protection
  • Compliance with healthcare reform legislation
  • Volatility in financial markets

Other concerns include setting appropriate executive compensation and addressing the growing demands of compliance oversight.

Not surprising, the risk concerns stated above are very similar to those experienced by executives in the tax-exempt sector. Why is that? To remain viable within a commercial setting, a for-profit business must remain healthy, relevant and profitable. To compare, a tax-exempt organization must also remain healthy and relevant in order to meet its mission statement into the future.  The similarity is the need for relevance and strong financial health.  The contrast is that the goal of a for-profit enterprise is solely profitability, not the specific product or service it provides. This differs fundamentally from a tax-exempt organization that exists to accomplish its mission. In other words, for the tax-exempt organization, financial health is a means to accomplish its goal, not the goal itself.

Succession Planning

Nonprofit organizations have all sorts of challenges to address as they move through their life cycle. Some are more urgent than others, and those usually get the lion’s share of the attention of the board and management. But organizations do themselves a disservice if they neglect to address succession planning.

Often the presence of a strong founder can inhibit the organization’s willingness or ability to effectively plan for succession. Dealing with this situation requires open discussion and planning in order to transition to a mature organization without damage to the nonprofit and its stakeholders.

Organizations looking to the future will examine their boards and management to see where gaps in talent lie, both currently and in the future. Is there a pool of available talent to fill in the gaps? What is the organization doing to attract that talent, both in the board room and in the office? What strategies might the organization employ in the future and what human capital will be necessary to achieve them?

Fortunately, there is a strong desire among many young people to “do good” and this is often reflected in the choices they make regarding careers and community engagement. Strong nonprofits with a view to the future are creating and communicating strong visions that engage and attract people to help them weather the inevitable turnover of staff and board and lead them into the next phase of their life cycle.

Time for Reflection and Planning

As summer winds up, my thoughts tend to look back over the season to review where I have been and what I have done. The inevitable next step is to look forward to where I will go and what I will do. Nonprofit organizations do this (or should) on a regular basis, whether formally or informally. Sometimes it is included in a facilitated strategic planning session and sometimes it is just a discussion including management and board. The actual approach depends on the organization – where it is in its lifecycle and the environment in which it operates. Whether big or small, formal or informal, a successful evaluation and planning process will include these basic elements –

  • An assessment of where the organization has been and what it has done – In order to determine where you are going, it is important to acknowledge where you have been. How has the organization evolved, what challenges has it encountered, and very importantly, what has been accomplished?
  • A determination of where the organization is going and what it will do – In order to successfully move forward, there should be a consensus as to the direction of the organization. Will it continue on the path it is currently on, will it grow or will it contract? What is the vision?
  • A plan to accomplish the new or revised goals – The plan should include specific steps, assign accountability, and benchmarks to measure accomplishments.

There are many good approaches to this process. However, regardless of the size, style or situation of the organization, a regular and honest review of where the organization has been and done and where it is going and will do is a necessary step.