What happens when charities go from having everything to win, to everything to lose? Marcus Missen writes.

Reading The Global Innovation 1000 report got me thinking about innovation and risk appetite with the charity sector. We’re told the commercial sector is emerging from this latest financial crisis with an even stronger commitment to innovation than following previous meltdowns. In 2011 the top 20 innovative companies spent an average of 8.3 per cent as a percentage of sales on research and development, a 10 per cent growth on the previous year despite the continued economic downturn.

So, while they’re coming out fighting what’s our sector doing?

Cutting discretionary spend to weather the economic storm seems to have been the order of the day for many. But what is discretionary spend? For some it’s innovation budgets and for others it’s donor acquisition investment. Are these really discretionary spends or ‘survival spends’? If you cut them don’t be surprised when your income plateaus or falls.

We’re living through exceptional times and during exceptional times people feel the need to do exceptional things like cutting back. But I wonder if it’s less about the external economic storm of double or triple-dip recession driving this need, and more to do with an organisation’s inherent internal storm, irrespective of what’s happening outside.

The commercial sector thinks and so behaves differently. What we often call ‘failure’ they call ‘learning’. They try things out, fail fast and move on. Failure for them is repeating something that didn’t work first time. Failure for them is not seeing opportunities and grasping them.

As leaders we aim to deliver sustainable development through fostering adaptive capabilities and creating opportunities. Yet, as charities grow, many shift from being determined, brave, nimble and opportunistic to being cautious, slow and risk-averse. Their attitude shifts from having everything to win to everything to lose.

So what drives this change?

All through history and nature there’s a cycle of birth, growth, maturity, decline leading to death - in species, civilisations and organisations. Yet, is organisational decline always inevitable? For charities I wonder if it could sometimes come about through adopting a more ‘professional culture’. To become more professional we put in place more processes and more systems. Can we go too far and inadvertently drive the wrong behaviours in an attempt to drive the right behaviours, and put in processes that contradict what they’re saying as leaders? “Be innovative and nimble and fill in loads of red tape!”

Take risk management. If we ask our teams to fill in long risk registers and each month report on materialised risks, risk can become the predominant language. Talking too much about risk can create a belief that taking a calculated risk is a bad thing. Rather than ‘take calculated risks’ our people hear ‘don’t fail’ reinforcing our human hardwired phobia of failure.

Much has been written on organisation theory and design. One published theory defines the stages in an organisational life cycle as: 1. Entrepreneurial stage (need for leadership); 2. Collectivity stage (need for delegation); 3. Formalisation stage (too much red tape); 4. Elaboration stage (need for revitalisation).

Of course risk management is a good thing if it’s proportionate, enables and liberates. If it becomes disproportionate and restrictive then it’s a bad thing.

Are you at the ‘formalisation stage’ of your lifecycle? If so watch out. Here’s a simple test. Does your organisation talk more about risk management or opportunity management? And do you have a risk policy or an opportunity policy?

Next time someone says ‘we need a new process or system’, we should pause and consider the impact on our organisation culture. As we grow, the importance of keeping that appetite for growth and suppressing the phobia of failure is paramount. The key business challenge facing us as a sector isn’t managing risk but liberating creativity.