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.
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.
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.
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.
It’s August – a month associated with vacations in many parts of the world—and a good time to contemplate the meaning of life from new viewpoints. As you break away from your everyday routine to view the big picture, be sure to give nonprofit board services some consideration. An educated guess would put the number of registered nonprofits worldwide at about 10 million—and in the United States alone there are 1.5 million charities, according to the National Center for Charitable Statistics. This includes about one million charitable organizations (501 c 3s), more than 100,000 private foundations, and nearly 400,000 other nonprofits ranging from chambers of commerce, to civic leagues, to fraternal organizations. All of them have boards of directors, and most are looking for volunteers. How about you? Here are five good reasons to consider the call.
Reason #1: Nonprofits Serve Worthy Causes
The first and foremost reason to serve on a nonprofit board is to make a difference in the world by advancing a worthy mission. Nonprofit organizations make the world a better place through a variety of channels including the arts, education, health, relief services, and public safety, and serve a variety of beneficiaries including both animals and humans throughout life cycles ranging from the very young to the very old. This is not to say that serving on a for-profit board lacks meaning; after all, businesses create jobs and provide useful goods and services. Still, for sheer moral pull, the typical nonprofit has greater “why” appeal. (If it didn’t the government wouldn’t grant it nonprofit status in the first place.)
Reason #2: Nonprofits Need Directors
Another good reason to consider serving on the board of a nonprofit is that you will have a fairly good chance of finding a seat; if you are a good match. Compared to for-profit companies, charities offer more opportunities for service, judging from turnover rates reported by the National Association of Corporate Directors (NACD). The 2014-2015 NACD Nonprofit Governance Survey, released this month based on responses from 750 board members, revealed high turnover: 88 percent of respondents indicated that their board had added or replaced at least one director in the previous 12 months. This compares to only 64 percent of public company boards and 57 percent of private company boards. This difference rate is understandable, as nearly two-thirds of nonprofits surveyed (64 percent) limit the terms of their directors, compared with only 8 percent for public companies and 14 percent for private companies.
Reason #3: Nonprofits Need You
Yet another reason to serve on a nonprofit board is that your particular skills are likely to be a good match. When asked what two skills were the most sought-after in their most recent director search, 35 percent of respondents to the NACD nonprofit survey said that experience in their particular field was a top consideration, but almost as many (31.6 percent) said that a top trait was leadership – a skill that all executives should have. Other popular choices (each selected by 10 percent of respondents or more) were strategy, finance, marketing, and diversity. Given the range of these criteria, most executives are likely to find a nonprofit board seat with their name on it.
Reason #4: Nonprofit Experience Can Help You Serve a For-Profit Board
A fourth reason to consider serving on a nonprofit board is the simple value of board experience. As you continue your career in the business world, chances are that you will eventually be reporting to or serving on for-profit board of directors. Do you know how boards work with their agendas, minutes, committees, calendars, and deep deliberations and decisions? You can read books and articles on the topic but the best teacher is experience. NACD has a Directors Registry where individuals can list their qualifications for board service, so that boards (both for-profit and nonprofit) can find them. Many for-profit boards looking for directors consider nonprofit board service to be a plus.
Reason #5: Nonprofit Board Experience Provides a Channel for Giving
As a nonprofit director, you won’t get paid much, if anything. NACD stats show that most nonprofit boards (88.7 percent) do not pay their directors, and those that do offer compensation pay very little (a retainer of less than $30,000 and meeting fees that are a fraction of that). The rewards, however, are great. This post has named four of them – including the worthy causes that nonprofits serve. But there’s more. By helping those causes you yourself will benefit. As Saint Teresa of Calcutta, aka Mother Teresa, once wrote: “At the end of life we will not be judged by how many diplomas we have received, how much money we have made, how many great things we have done. We will be judged by ‘I was hungry, and you gave me something to eat, I was naked and you clothed me. I was homeless, and you took me in.’” Nonprofit board service provides a channel to give in these important ways.
This blog was originally posted on July 29, 2015 at Bluesteps.
Here at NACD our annual governance surveys—public, private, and nonprofit—underlie nearly every aspect of the organization’s activity. From our Blue Ribbon Commission reports, to peer exchanges and our annual Board Leadership Conference, data collected from the thousands of respondents informs discussions, forums, topics, and future events. Beyond the boardroom, the trends, statistics, and perspectives captured in these surveys provide those in the C-suite, investors, and stakeholders with crucial information on the current state of corporate governance in the United States.
In the regulatory sphere, we use survey data to inform our comment letters and in-person testimony on behalf of boardrooms to regulators and lawmakers. Most recently, survey responses from NACD’s membership strengthened a December 2013 comment letter to the Securities and Exchange Commission on pay ratio disclosure.
NACD also uses the three annual governance surveys to create industry-specific one-page benchmark reports. Whether you use one of these or commission an NACD Custom Benchmarking Report, data broken down by industry, size, or both serves as an excellent starting point for boardroom discussions.
NACD is dedicated to providing directors with timely and pertinent content, but we need your input. As a thank you for participating in these surveys, NACD will send each participant a free electronic copy of the final report for each survey he or she takes. This is the sole opportunity for non-NACD members to receive a copy; once this window closes only NACD members and participants will be able to view the final report.