If you’re familiar with research and development philanthropy, you know that when a foundation decides to invest in R&D, they must be willing to take risks. But not every research opportunity is a good one, and not every innovative idea should be pursued.
In considering an R&D investment, assess each opportunity wisely and take risks that are prudent, calculated, and thoroughly explored. Likewise, don’t “bet the farm” on any single piece of research or in developing any individual idea, product, or service. Instead, think of each R&D investment as just one part of a diversified portfolio.
There are four criteria that can help foundations assess risk in any R&D investment:
1. Cost. What investment will this require in terms of grants, staff, outside expertise, new technology, time?
2. Benefit. What are the potential benefits to the foundation, community, field, etc.? Do the potential benefits outweigh the costs? How long until the effort achieves results?
3. Strategic fit. Does this opportunity fit with and advance the foundation’s mission and strategy? There are many great ideas out there, but no foundation should invest in great ideas that take it off course or off mission.
4. Risk types. Risk can come in many forms, from potential financial losses to a damaged reputation or strained relationships with partners or community. What kinds of risk are most likely for this particular investment? How severe could they be?
Brainstorming and listing risks with foundation staff, board, and partners can help clarify the realities (and dispel misconceptions) about the risk a foundation faces in each R&D investment. But don’t leave that initial list on a shelf! Instead, bring your “risk list” to every team meeting involving your investment and discuss what you’ve done, or can do, to continue to keep risk to a minimum.
Additional information about taking risks and utilizing R&D philanthropy is available in my article “Asking ‘What If’: Using Research and Development as a Strategy to Achieve Dramatic Impact.”
Kris Putnam-Walkerly, MSW, has helped to transform the impact of top global philanthropies for over 18 years. In 2016 she was named one of America’s Top 25 Philanthropy Speakers, and authored the book Confident Giving: Sage Advice for Funders, which was recently named one of “The 10 Best Corporate Social Responsibility Books.” For more ideas, tips and tools to improve your giving, visit Putnam Consulting Group to read an article, listen to a podcast, or check out a case study.
Kris has several upcoming speaking and training events in March. On March 2, Kris will join Philanthropy Ohio’s webinar “Let’s Talk Philanthropy: The Road to Equity” to discuss key findings and practices from foundation leaders who are embracing equity. She will also be presenting the results of a recent equity field scan on March 8 for Philanthropy New York, and on March 15 for the Association of Baltimore Area Grantmakers.
“We wanted to motivate other funders to support nonprofit talent and leadership by sharing the incredible work in process of our grantee partners. Putnam immediately understood the complexity of the work and distilled it into a variety of tools that the foundation is using now to promote the early successes and build momentum and support within the field.”
~Rafael Lopez, Associate Director, Annie E. Casey Foundation