4 Decision-Making Errors That Cripple Nonprofit Boards

Matt D’Arrigo had to make a tough decision.

Matt had brought his nonprofit from a personal method of coping with pain all the way to a full-fledged organization.

It was approaching its 10th anniversary and ARTS (“A Reason To Survive”) had already achieved much. ARTS teaches art as a way to help sick or disadvantaged children deal with their pain. They had opened a major facility in San Diego and helped comfort countless children. For many, ARTS was a kind of second home.

Matt should have been happy, but there was something gnawing at him. He had always imagined the organization going national–he wanted to be able help children outside of San Diego.

Matt was faced with a decision:

Should he focus on ARTS work in San Diego, or leave and start something elsewhere?

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How to Make Better Nonprofit Decisions

While the decisions that confront our nonprofit organizations aren’t always as dramatic as Matt’s, we do make strikingly important decisions every day.

While it’s easy to see when other people’s decisions are off base, it’s much more difficult to spot flaws in our own decision-making.

In Dan and Chip Heath’s latest book, Decisive: How to Make Better Choices in Life and Work, the authors work to help readers identify the decision-making errors–as well as how to correct them. The book is one of the best of 2013 and I can’t recommend it enough.

Read on to discover…

  • The Four Biggest Enemies of Good Decision-Making
  • Four Ways to Make Better Nonprofit Decisions
  • Solutions to Difficult Everyday Nonprofit Decisions
  • How Matt D’Arrigo Made His Decision About ARTS

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The 4 Biggest Enemies of Nonprofit Decision-Making

All bad decisions stem from predictable errors. Once you identify these biases, they’re easy to avoid. It’s noticing them in the first place that’s so difficult.

1. NARROW FRAMING

Nonprofit Decision: “Should I fire this board member or not?”

One of the biggest reasons we make bad decisions is because we make our choices more limited than they have to be.

While the question above seems reasonable, in reality, it’s only one choice! A classic sign of narrow framing is presenting a “whether or not” question. Instead, try to Widen Your Options (discussed in detail below)–how else can you deal with your board members? What’s the root of their behavior? Can their responsibility be altered? Avoid a narrow frame.

2. CONFIRMATION BIAS

Nonprofit Decision: Does the world need what my nonprofit is offering? 

Unfortunately, when we want something to be a good idea (like starting our dream nonprofit), all of us go looking for reasons that it is and actively ignore any reasons it might not be.

The truth is, no one wants to hear their baby is ugly–and very few people want to tell you, either. That’s why it’s so easy to give into the confirmation bias and be utterly certain you’re right, until you find out you aren’t. You have to Reality Test Your Assumptions (see below) or else you’ll end up with a bunch of ideas that don’t work–but that you’re totally invested in.

3. SHORT-TERM EMOTION

Nonprofit Decision: How should we allocate nonprofit program funding?

Behind every program and initiative, there’s a real human with real emotions working on it.

Already complex decisions are often fraught with people’s emotions, and that makes them even more difficult to deal with. In order to make a decision based on the best outcomes for your mission, you have to purposely Attain Distance Before Deciding (more below), and pursue strategies that sidestep the emotions­, whether those emotions below to us or other people.

4. OVERCONFIDENCE

Nonprofit Decision: “Will this direct mail campaign bring in enough money?”

Overconfidence isn’t the same thing as being arrogant. It’s simply being too certain about our predictions.

Overconfidence afflicts experts most. (That’s right: even you, the self-styled fundraising expert.) Financial guru Ramit Sethi notes that mutual fund managers–people whose full-time jobs are about making accurate predictions–fail to beat the stock market 85% of the time! We can combat overconfidence with a healthy dose of humility, and by Preparing to Be Wrong (described below).

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Four Ways Nonprofits Can Beat Our Biases

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Nonprofit Decision: “Should I spend budget on this program or not?”

Whenever you are thinking about a decision in terms of “Should I do X or not” or “Whether I should X or not,” you need to widen your options. Instead of firing a low-performing staff member, could you:

  • Talk with her about her performance and expectations?
  • Redefine her role to match her strengths?
  • Invest in her training and education?

A helpful question to ask: What is the next best thing I could be doing? Instead of asking whether or not to fund a new program, what’s your next best option? Could you use the money to market an existing program better? Could you invest this in fundraising training or education for your staff? Artificially restricting your ideas to one domain leads to worse decision-making.

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Nonprofit Decision: Does the world need what my nonprofit is offering?

To avoid the confirmation bias, base your decision-making in reality. If you are trying to figure out whether a new nonprofit program will be needed (and whether it will captivate your donors and bring in donations), don’t hypothesize or think about whether it’s worked for other people. Instead, try some tests!

  • Run a small, low-cost version of your program’s elements.
  • Send a low cost direct mailing or email to find out interest among current donors.
  • Take your major donors out for an advice visit, as per Gail Perry’s recommendation.

Nonprofit expert Beth Kanter often endorses the idea of taking little bets to improve your organization, embracing the risk of minor failure. Think of when businesses prototype or build a minimally viable product–they commit just enough resources to determine if their ideas are actually profitable. Your nonprofit’s decision-making deserves just as much care.

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Nonprofit Decision: How should we allocate nonprofit program funding?

If we want to avoid the influence of short-term emotion, we need to get some distance from our problems. It can help to adopt the perspective of an outsider (which is why nonprofit consultants can be so valuable). What would an unbiased person who isn’t caught up in your organizational history do?

Here are some questions to ask in order to attain distance when allocating program funding:

  • Would this program last? Will this decision look as good in 3 months? A year?
  • What are our core priorities? Which program brings us closest to our mission?
  • Fight the “status quo bias” by asking: If we weren’t already funding this program, would we start funding it today?

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Nonprofit Decision: “Will this direct mail campaign bring in enough money?”

When we’re overconfident, we bet too much on the success of our actions. To make sure we don’t gamble it all on an idea (or an ill-conceived fundraising event) that’s actually a bust, we need to prepare to be wrong.

Some ways to prepare:

  • Manage your expectations. Figure out all potential downsides of a new program, so that you can be prepared when you encounter them.
  • Set a tripwire: an “if-then” to determine when an action has to happen. For example, if a direct mail campaign fails to bring in $XX after XX weeks, plan on pulling the plug. This makes the decision less agonizing if the campaign does poorly down the road.
  • Build in extra time. If you calculate a program will take 2 weeks to produce outcomes, allow an extra week for buffer time in case of the inevitable-but-unexpected problems.

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Does This Mean Perfect Nonprofit Decisions All The Time?

Matt D’Arrigo of ARTS eventually came to a decision about his nonprofit.

Matt avoided a narrow frame and widened his options to make the decision to both embrace ARTS’s success San Diego and to expand ARTS’s national reach.

He did his best to avoid the confirmation bias by consulting friends and board members.

Matt attained distance by envisioning what was most important for the organization–and by imagining what outcome would be most important in 10 years.

Finally, he prepared to be wrong by hiring more staff to combat the thinning of organizational resources, and setting a tripwire date by which he needed to present a plan to the ARTS board.

Matt D’Arrigo and ARTS might not be successful in their expansion efforts. Your nonprofit decisions will never be foolproof. Even the best decisions don’t guarantee certainty. 

But if you follow this process and work to make eliminating your biases a habit, you’ll make better decisions long-term–and be able to better succeed at your mission and help the people you’ve pledge to serve.

Interested in Dan and Chip Heath’s book Decisive? You can sign up for free resources from Decisive. If you like these ideas, learn where you can purchase Decisive(no affiliation, it’s just fantastic)! We’ve only scratched the surface here. Check out the book.

[WRAP Image Source: Heath Brothers]

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