Nonprofit Boards Are Largely Ineffective, Stanford Study Finds
A new survey of nonprofit board directors found there is room for improvement in board performance and suggests several steps boards can take to better serve their organizations’ needs.
Nonprofit board directors often lack in the skills, resources, and experience required to meet the needs of the organizations they serve, according to new research from the Stanford Graduate Business School.
The survey of about 900 nonprofit board directors, conducted in collaboration with BoardSource and GuideStar, found that a significant number of directors (27 percent) don’t believe their fellow board members have a strong understanding of the organization’s mission and strategy. Sixty-five percent reported they don’t think their board is very experienced, and about 50 percent don’t think their colleagues are engaged in their work.
“Our research finds that too often board members lack the skill set, depth of knowledge, and engagement required to help their organizations succeed,” Stanford accounting professor and lead researcher David F. Larcker said in a statement.
The “2015 Survey on Board of Directors of Nonprofit Organizations” [PDF] also found that boards could benefit from more formal governance structures and processes. More than 40 percent of boards don’t have an audit committee and rely on monthly bank statements to monitor financial performance.
Meanwhile, about 70 percent reported they don’t have a succession plan in place for their current CEO or executive director, and while 80 percent said they formally evaluated their executive director’s performance, less than half have explicit performance targets to measure his or her performance against.
To help improve nonprofit board governance, the Stanford study made nine recommendations, including ensuring the organization’s mission is focused and its skills and resources are well aligned, establishing explicit goals and strategies tied to achieving the mission, and developing rigorous performance metrics that reflect those goals.
These recommendations parallel recent research from the ASAE Foundation that found that three characteristics set top-performing association boards apart from others:
- a strong strategic orientation
- a culture of self-assessment and accountability
- healthy attention to board member recruitment and development
“The margin of excellence appears to rest in the ability of some boards to connect the dots,” Beth Gazley, associate professor at the School of Public and Environmental Affairs at Indiana University and co-author of What Makes High-Performing Boards: Effective Governance Practices in Member-Serving Organizations, wrote in Associations Now. “They learn to use board structural considerations not as a crutch or excuse but as a vehicle for asking the tough questions and engaging in a deeper level of introspection that leads to an effective understanding of what works well for them.”