Last week, BoardSource published its highly anticipated governance report Leading With Intent: BoardSource Index of Nonprofit Board Practices. This report highlights the results of BoardSource’s latest biennial study on nonprofit governance structures, practices, and performance.
Boards are disconnected from the communities and people they serve. Almost half (49%) of all chief executives said that they did not have the right board members to “establish trust with the communities they serve.” Only a third of boards (32%) place a high priority on “knowledge of the community served,” and even fewer (28%) place a high priority on “membership within the community served.”
Boards that prioritize fundraising above all else when it comes to the board’s role do so at the expense of organizational strategy, relevance, and impact. Executives that reported placing the highest level of importance on fundraising have lower ratings in several key areas of performance as compared to those that do not place such high importance on fundraising.
Boards and executives should reflect on what is prioritized in terms of board expectations and how time is spent. When asked to rate how much time is spent on each board area, executives reported that not enough time was spent on building a diverse and inclusive board with a commitment to equity, understanding the context in which the organization is working, building relationships within the community that help support and inform the organization’s work (Separate From Fundraising). But, when asked about how important these areas are, executives placed them very low on the list in terms of their expectations for the board.
The board chair’s leadership in ensuring that there are clear expectations of board service seems to matter most when it comes to the board’s overall culture. When executives rated their chairs higher in terms of the board chair’s performance in all categories, but especially in ensuring clear expectations, the executive was more likely to rate the board higher than the average across all areas of board culture. While we cannot determine causation or even directionality, it may be helpful for boards that are having culture challenges to consider the ways in which changes in board chair engagement could make a difference.
Highlights of Board Performance Ratings by Chief Executives and Board Chairs
|Area of Board Performance||Chief Executives||Board Chairs|
|Understanding the Organization’s Mission||B+||A-|
|Legal and Ethical Oversight||B||B|
|Setting the Organization’s Strategic Direction (In Partnership With the Chief Executive)||B-||B-|
|Building a Diverse and Inclusive Board With a Commitment to Equity||C||C+|
|Monitoring Legislative and Regulatory Issues||C-||C+|
There are many more insightful areas of board performance data in the report, but these 6 areas listed above were of particular interest to me.
In a CEO ranking of the board performance areas in terms of importance, Understanding the Organization’s Mission and Financial Oversight ranked highest, Setting the Organization’s Strategic Direction ranked in the top half, Legal and Ethical Oversight ranked in the middle, Building a Diverse and Inclusive Board With a Commitment to Equity ranked in the bottom half, and Monitoring Legislative and Regulatory Issues ranked lowest.
In a CEO ranking of the use of the board’s time, a strong majority stated that their board spent just the right amount of time on Financial Oversight and Legal and Ethical Oversight, but 62% stated that their board did not spend enough time on Building a Diverse and Inclusive Board With a Commitment to Equity and 76% expressed that their board did not spend enough time on fundraising.
BoardSource identifies the following three categories of the board’s most essential functions:
- Setting direction and strategy
- Providing oversight
- Ensuring resources
The report generally shows that CEOs and Board Chairs believe that their boards have a good handle on oversight but are less effective in setting direction and strategy, the category BoardSource consider the most important. My observation is consistent with this finding. And I agree that boards need to be more active in setting direction and strategy for their organizations. This will require greater education and facilitation by strong CEOs, Board Chairs, and other governance leaders.
One issue I take with the report is that it places Building a Diverse and Inclusive Board With a Commitment to Equity and Monitoring Legislative and Regulatory Issues in the oversight category. I strongly believe these areas are even more important to setting direction and strategy. Diversity, inclusion, and a commitment to equity are not primarily and collectively something an organization achieves; they represent a strategic journey the organization should take based on their mission and values. And laws affecting nonprofits are constantly changing and must be considered in setting strategy. Consider, for example, changes impacting the charitable contribution deduction, major donor identification and dark money in politics, crowdfunding, and all of the intended beneficiaries of an organization.
The Leading With Intent report is very rich with information and insight, and we only touched the surface in this post. We’ll have more to say about it in one or more future posts, but we strongly encourage you to review the full report with your boards. This may be most impactful if combined with reading BoardSource CEO Anne Wallestad’s recent article: The Four Principles of Purpose-Driven Board Leadership (Stanford Social Innovation Review, Mar. 10, 2021).