Blog: Nonprofit Capacity Building

Every 2 – 3 years Board Source conducts an in depth survey and publishes The Nonprofit  Governance Index.  This important report helps us understand how nonprofits govern,  benchmark our organizations and Board to others, and provide updates in trends and recommendations by BoardSource.   My articles about the Nonprofit Governance Index are always popular – and enduring long after they are published.  As always I mix in my commentary along with the objective results – so please don’t blame BoardSource which has diligently reported the data objectively.

Today I am publishing two articles on Data Report #1 from BoardSource.  This article covers:

• Organizational Characteristics
• CEO Characteristics
• Board Composition and Structure

The companion piece at my blog,  MarionConway.com covers

• Board Policies and Practices
• Board Performance

1341 nonprofit CEOs from across the country completed a detailed questionnaire with multiple choice and open ended questions – 66 questions in total.  Large, medium and small sized organizations are fairly represented across all nonprofit sectors. The median budget size was in the $1 – $5 Million range.

Organizational Characteristics

There is good news in many of the indicators that recovery from the downturn in the economy is underway.  Here are some of the indicators:

Strategic Planning – When asked if they completed a strategic plan within the last two years, 52% said they did versus 45% in 2010.

Salaries – 23% reported freezing or cutting salaries versus 41% in 2010.  This is the most striking data indicating recovery but it is still a concern that 23% of nonprofits are in this mode.

Operations – 19% reduced services or operations versus 26% in 2010.  I think that some of this is the new normal as many of the reduced services are due to reduced government funding.

Endowment – In 2010 28% of nonprofits reported dipping into their endowments and in 2012 it is 25%.  Many endowments are meant to be for a “rainy day” but too much endowment dipping can have permanent damage if overused.  Be careful if you are balancing your budget by endowment dipping rather than making operational changes.

Profile of Today’s Nonprofit CEO:

Amazingly, the race profile of nonprofit CEOs went in the direction away from being more diverse in the last two years.  In 2010 it was 88% white and in 2012 it is 93% white.  Gender and age profiles remain fairly constant being 2/3 female and 80% in the 40-64 age bracket.

57% of the CEOs have been on the job for 2 – 10 years and 21% say they plan to leave their job within the next 2 years.  An amazing 94% said they were very or somewhat satisfied with their job.

Board Composition and Structure

The average size Board remains at 16-17 Board members. Similar to the CEOs many Boards are overwhelmingly dominated by men and women who are white – 82%.  Only 8% of board members are Black and 3% are Hispanic.  In fact, an astonishing 30% of all nonprofit boards report that 100% of their members are white.  Unfortunately, I am not surprised at these statistics.  I have been a proponent of recruiting minority Board members and have seen it been done successfully when there is commitment to diversity and I do hope this changes in the future.  There really are benefits to having diversity on Boards.  And Board members from diverse populations introduce new people to the organization.   When a Board is 100% white you have to make a deliberate effort to recruit non white Board members but it is definitely attainable – go for more than one new member.  If there are more people of color at your board recruitment event there is a better chance of success in recruiting people of color.

71% of Board members are in the 40-64 age group and 15% are over 64 while only 12% are in their 30s and 2 % in the 20s.  Folks – if your Board has this type of profile – you are missing out on having people in the most energetic and capable part of their lives on your Board.  When recruiting – think younger!

Board Staff Relationship

BoardSource rec­ommends that the chief executive serve as an ex officio, non-voting member of the board.  40% percent of respondents are in this category and the CEO is not a member of the Board in 46% of the nonprofits responding to the survey.

There is quite a big range in how much time CEOs spend on Board work as shown in this chart:

Board Committees

The average number of board committees is 5.5 and I was surprised to see that 77% of CEOs reported that the committees have written charters.  This chart shows what percent of boards have various kinds of committees:

BoardSource has questioned the need for an executive com­mittee for most boards and speculates that boards have one essentially because of tradition.   However, as a Board President, I have found that having a small group to consult with informally very helpful.  As a Board President, I sometimes email other officers for their opinion and copy them on communication so others can see that officers are involved and on board.  The executive committee does not vote on anything independently but acts in an informal consultative role for the President.

I am surprised that only 26% of Boards have a standalone audit committee as this is a best practice and provides the check and balance for financial accountability.

Since fundraising is a basic responsibility of the Board I am surprised to see that only 56% of board have such a committee.

There is certainly room for growth on most Boards with having more and better organized committees.

Learn more about the 2012 Nonprofit Governance index:

My blog article at MarionConway.com on Board Policies, Practices and Performance

And

Download the 2012 Nonprofit Governance Index at BoardSource.org

——————

For more resources, see our Library topic Nonprofit Capacity Building.