NACD Survey Examines Current State of Nonprofit Boards

Data from the World Bank show that if the global nonprofit sector were its own country, that country’s GDP would represent the sixteenth largest economy in the world. In 2013, the most recent year for which data were available, the nonprofit sector contributed $905.9 billion to the U.S. economy, which is representative of nearly 5.4 percent of U.S. GDP. The nonprofit workforce also accounted for nearly 10 percent of U.S. employment, according to the Bureau of Labor Statistics’ latest calculation.

Nonprofit organizations frequently are managed by an impassioned group of people with a focused mission or social objective. Often equally passionate are the organization’s board of directors, elected to oversee the organization and ensure its long-term viability.

Nonprofit boards, however, aren’t beholden to the same regulations from the government and listing requirements that their public company peers are, nor do their organizations experience the same pressures from investors that their private company peers do (though, in some ways, a nonprofit board may have to cater to donors in a similar way that private companies cater to their investors). Though all company and organization types face some similar challenges, it can be reasonably expected that the governance landscape for nonprofits might evolve differently than that of private and public companies.

NACD recently analyzed the current state of nonprofit governance in its latest 2015-2016 NACD Nonprofit Governance Survey. The survey report was based on the responses from more than 600 directors serving a variety of nonprofit boards that have 16.4 members on average—much higher than the 8.9 directors on public company boards and the 7.6 directors on private company boards.

Director Recruitment

On the subject of director recruitment, 49 percent of respondents identified “experience specific to the organization’s mission” as the most sought-after attribute a new director could offer the board. A significant portion of respondents also gave priority to leadership experience (34%) and financial expertise (22%). Other sought-after attributes for director candidates include fundraising experience and commitment to the mission.

Related findings include:

• 80 percent of respondents report that their boards use personal networking to identify new director candidates.
• 20 percent of respondents from large nonprofits indicate their boards use search firms to identify potential board candidates, up from 12 percent in 2014.

Fundraising

A distinct aspect of nonprofit board service is the expectation that directors will actively participate in fundraising efforts for the organization. Sixty-eight percent of respondents indicate their organization engages in fundraising as a part of their business model. Yet, 51 percent of all nonprofit survey respondents say they feel unsure about the organization’s expectations for them to fundraise.

Related findings include:

• 54 percent of respondents from organizations that do engage in fundraising indicate that there is a documented fundraising strategy for the board.
• 34 percent of respondents say their boards have a fundraising committee.

Information Flow

A strong majority of nonprofit respondents are satisfied with the quality of information provided to them on corporate performance (86%) and on strategy (84%). However, paralleling private and public company trends, nearly a fifth (19%) of respondents would prefer more information on the organization’s strategy—both short- and long-term objectives.

Related findings include:

• 60 percent of respondents report that their board does not receive enough cyber-risk information from management.
• More than one-third of respondents reported they are dissatisfied with the quality of information provided to the board on risks related to technology (37%) and cybersecurity (48%).

For more research and analysis on the current state of nonprofit boards, please click here to access the full 2015–2016 Nonprofit Company Governance Survey.