by Dr. Kevin Dean, President & CEO, Tennessee Nonprofit Network
There’s nothing worse than a stagnant organization, except maybe a nonprofit that is a sinking ship. In my 20+ years in nonprofit organizations, I’ve seen (and worked at) examples of both of these kinds of organizations. Change is difficult, especially in a culture of scarcity or fear of personal loss, but part of our roles as nonprofit leaders is to inspire change in the face of adversity. People can be naturally resistant to change, and your board of directors, a group of well-meaning individuals, can sometimes seem to be perpetually stuck in the “safe zone.” They flinch at the mere mention of risk, clinging to the status quo like a life raft in a stormy sea. How can you navigate these choppy waters and inspire your board to embrace change, even if it means stepping out of their comfort zone? I’d like to introduce you to “prospect theory,” the unsung hero of behavioral economics, as a way to better understand how to combat complacency and risk aversion on your nonprofit board!
Prospect Theory: A Brief History
Before we dive into the strategies, let’s take a quick trip back in time. In the 1970s, two brilliant psychologists, Daniel Kahneman and Amos Tversky, shook the foundations of traditional economics with their groundbreaking work on prospect theory. They challenged the prevailing notion that humans are rational decision-makers, always seeking to maximize their utility. Instead, they proposed that our choices are often influenced by cognitive biases and heuristics, leading to seemingly irrational behavior.
Prospect theory, in essence, reveals that we humans are inherently loss-averse creatures. We feel the sting of losses far more intensely than the joy of equivalent gains. This simple yet profound insight has revolutionized our understanding of decision-making, with implications spanning fields as diverse as finance, marketing, and, of course, nonprofit management.
The Prospect Theory Playbook
At its core, prospect theory reveals that we humans are inherently loss-averse creatures. We feel the sting of losses far more intensely than the joy of equivalent gains. This explains why your board members might be hesitant to embark on new ventures, even if the potential rewards are substantial. They’re not necessarily being difficult; they’re simply wired to prioritize avoiding losses over pursuing gains. Armed with this knowledge, let’s explore how you can leverage prospect theory to inspire change within your nonprofit.
1. The Art of Framing: Turning Losses into Gains
The way you present a proposed change can make all the difference. Instead of focusing on the potential risks, try framing the change as an opportunity to avoid future losses. For instance, if you’re advocating for a new fundraising strategy, instead of saying, “We might not raise as much money if we stick to our current approach,” try saying, “We risk missing out on significant funding opportunities if we don’t adapt.” This subtle shift in language can trigger a sense of urgency and make your board more receptive to the change.
The goal is to reframe the narrative, highlighting the potential losses associated with maintaining the status quo. Appeal to your board’s innate desire to avoid negative outcomes, which will make them more likely to consider alternative paths.
2. The Power of Small Wins: Overcoming Loss Aversion
Big, dramatic changes can be overwhelming, even for the most adventurous board. Instead of proposing a complete overhaul, consider breaking down your vision into smaller, more manageable steps. This will make the change seem less daunting and increase the likelihood of buy-in. Each small win will build momentum and confidence, making your board more open to taking bigger risks in the future. Everyone likes bullet points so break that big vision apart on your PowerPoint, your strategic plan, or your presentation to the board.
Think of it like a staircase: you wouldn’t expect someone to jump to the top floor in one go. Similarly, introduce change gradually, allowing your board to experience success at each step. This incremental approach not only reduces the perceived risk but also fosters a sense of accomplishment, paving the way for bolder initiatives down the line. Normalizing change is difficult so you have to take baby steps and help your board members get comfortable with the smaller changes before they fully embrace the full scope sometimes.
3. The Storytelling Advantage: Making Change Personal
Data and statistics are essential, but they often fail to ignite passion. To truly inspire your board, weave your proposed change into a compelling narrative. Share stories of individuals whose lives have been transformed by your organization’s work, and paint a vivid picture of the even greater impact you could achieve with the proposed change. Make it personal, and your board will be more likely to connect emotionally and embrace the change.
People are far more likely to be moved by stories than by numbers. Use anecdotes to illustrate the human impact of your work and the potential consequences of inaction. By appealing to your board’s empathy and compassion, you’re creating a powerful motivator for change. (But don’t forget data always helps drive those emotional moments home!)
4. The “What If” Game: Tapping into Loss Aversion
Sometimes, the best way to inspire change is to highlight the potential consequences of inaction. Engage your board in a thought experiment, asking them to imagine what might happen if your organization fails to adapt. Will you lose ground to competitors? Will you be unable to meet the evolving needs of your community? This “what if” game can trigger a sense of loss aversion, motivating your board to take action to avoid these negative outcomes.
This strategy plays on the fear of missing out (FOMO). By painting a picture of a future where the organization falls behind, you’re creating a sense of urgency and prompting your board to consider the potential losses associated with maintaining the status quo.
5. The Power of the Pilot: Mitigating Risk
Even the most risk-averse board can be swayed by the promise of a low-stakes experiment. Propose a pilot project to test your idea on a smaller scale before committing to a full-fledged implementation. This allows your board to dip their toes in the water without feeling like they’re taking a giant leap of faith. If the pilot is successful, it will provide concrete evidence to support your vision and make your board more comfortable with scaling up.
Pilots are a great way to de-risk innovation. They offer a controlled environment to test new ideas, gather data, and learn from mistakes without jeopardizing the entire organization. A successful pilot can serve as a powerful proof of concept, making it easier to secure buy-in for larger-scale initiatives.
Quick side tip: pilot projects are also very helpful to propose when pitching a program funding idea to a risk averse funder. Get a proof point with the pilot, then make the bigger ask!
6. Celebrate Successes, Big and Small: Reinforcing Positive Change
Acknowledge and celebrate every success, no matter how small. This positive reinforcement will create a culture of innovation and encourage your board to embrace future changes. Share success stories with your board, highlighting the positive impact of their decisions. Here’s a great article on the power of “small wins.”
Creating a positive feedback loop reinforces the benefits of taking risks. This will not only boost morale but also make your board more receptive to future change initiatives.
7. Build Trust and Transparency: Foster Open Communication
Open communication is key to overcoming resistance to change. Be transparent with your board about the potential risks and rewards of any proposed change. Encourage questions and concerns, and address them honestly and directly.
Building trust with your board is essential. The goal is not to shut their concerns down or get defensive, which erodes trust and breaks down communication. Foster an environment of open communication by demonstrating respect for their concerns and creating a safe space for them to express their opinions. This transparency will go a long way in building consensus and securing buy-in for your vision.
Real-World Examples: CEOs in Action
To illustrate how these strategies can be applied in practice, I’ve included a few real-world examples of CEOs in Tennessee who successfully inspired change within their risk-averse boards:
- The Tech-Savvy CEO: When faced with a board hesitant to embrace digital fundraising, this CEO organized a “technology showcase,” inviting board members to experience firsthand the power of online platforms and social media. The CEO made the change tangible and less intimidating, leading to the the CEO securing buy-in for a digital transformation.
- The Data-Driven CEO: This CEO, armed with compelling statistics and case studies, demonstrated how a shift in program focus could significantly increase the organization’s impact. The board, initially skeptical, was ultimately persuaded by the evidence and approved the change, especially with the emotional story at the end that drove the data home in a personal and inspiring way.
- The Visionary CEO: This CEO, with a knack for storytelling, painted a vivid picture of the organization’s future, showcasing how a bold new initiative could transform the lives of countless individuals. The board, inspired by the CEO’s passion and vision, enthusiastically supported the venture. One key strategy the CEO employed was to frame the opportunities as potential losses if they didn’t move forward in a different way. Yes, the crux of the presentation was optimistic and future-thinking, but the CEO framed the choices as a loss if they stayed the same. Research show that people tend to take more risks when choices are framed negatively.
Conclusion: Embrace the Adventure
My grandmother used to always say, “Change is inevitable, but progress is optional.” So true. Inspiring change within a risk-averse board is no easy feat, but it’s far from impossible. Prospect theory helps us understand the psychology of decision-making and employ the strategies outlined in this guide. Now that you’re a prospect theory warrior, you can turn your board members into champions of change!