When you want to learn something, it pays to tap into experience. Michael Zisser recently retired from his position as CEO of University Settlement and The Door, which help more than 40,000 vulnerable New York City residents with basic social services. University Settlement started more than 130 years ago, and currently has more than $11 million in assets and annual revenues of more than $25 million. Over the summer he sat down with me for a wide-ranging podcast interview about risk management education, analyzing risks, and a host of other topics (questions below). You will thoroughly Zisser’s wit and wisdom.
During the interview, Zisser and I mention his memorandum about risk management written during his work on a Human Services Council report on the collapse of FEGS, a report published by Seachange Capital, and an article Zisser wrote about leadership succession.
[01:00] Risk Management
When you think about risk management, does it include an evaluation of both threats and opportunities, or does risk only mean potential negative consequences?
During your work on the HSC subcommittee focused on governance and risk management, you wrote a very brief and important memorandum about risk management. I plan to post that entire memorandum as a blog post on our website. What led you to write that memorandum?
One of the points you made in that memorandum was that nonprofit leaders are not taught very much about risk management during their formal education. Why do you think that is?
Do you think that nonprofit leadership programs and graduate programs are beginning to focus more on risk management?
Why do you think risk management has received such short shrift relative to other sorts of nonprofit capacity building, like strategic planning, leadership development, and fundraising?
[19:45] Imbalance of Power with Government
Another point you raised in your memorandum on risk management involved the fact that nonprofits act at a disadvantage when they contract with government agencies. Tell me about that.
Municipal governments routinely delegate the provision of critical social services to nonprofits but don’t pay the full cost of those programs in their contract. Why is that?
Municipal governments delegate social services to nonprofits without asking whether those nonprofits have a risk management program. It’s remarkable to me that when they turn over essential services to a third party, they don’t try to make sure the third-party also applies risk management tools. What you think about that?
[33:45] Locus of Risk Management Within the Nonprofit
Should an organization try to spread risk management awareness from top to bottom, have it rise from below, or is there some third way to do it?
[39:15] Nonprofits and Risk Aversion
You’ve written that “there’s nothing worse in our world than a risk averse organization.” What you mean by that?
Could we say that nonprofit leaders are inherently more likely to have to deal with risk than leaders in the for-profit world?
You’ve written that nonprofit leaders are not praised or rewarded for taking on or resolving risk situations. What you mean by that? Do you think there are ways the sector could change that incentive structure?
[50:15] Nonprofits and Funding
We’ve seen the rise of purpose driven for-profit benefit organizations called B Corporations in recent years. What are some of the consequences of the rise of B corporations?
One possible consequence of for-profit corporations entering traditional nonprofit markets is that they may “cream” those purchasers of goods and services who are easiest to serve, leaving traditional nonprofits to handle ever more difficult parts of a given market. Have you seen any indication of that happening either in Manhattan or elsewhere?
[1:00:15] Creating Learning Organizations
One of the few points you made in your risk management memorandum that I took issue with was when you said there’s no way to protect an organization from incompetent, nice people who hurt the organization in unexpected ways. Isn’t part of developing an effective risk culture within an organization finding mechanisms to reduce error, incentivize people to admit and learn from their mistakes, and focus on small continuous improvements?
[1:05:30] Risk Management Resources?
What are your favorite resources draw upon when talking about nonprofit risk management?
If you were going to advise a nonprofit leader about risk management, are there any books you would recommend they read?