In the nonprofit sector, having the right Board of Trustees is essential to an organization’s success, especially financially, given that philanthropic dollars are an ever-more essential source of funding. As discussed in previous articles in this series, the increasing concentration of wealth in the U.S. is putting pressure on organizations to recruit ever-wealthier trustees and place greater expectations on them not just for bigger donations, but also for opening the door to other wealthy donors in their networks.
While this is an understandable fundraising strategy with potential benefits, it also comes with potential costs and risks. Most Boards are responsible for governance broadly, not just for fundraising. So, prioritizing the recruitment of extremely wealthy trustees can actually create challenges in effective governance.
Consider that today’s wealth is created through three primary business channels: technology, which often succeeds through aggressive disruption; finance and real estate, which succeeds by keeping a laser-sharp focus on return on investment (i.e., ROI); and entrepreneurship, which builds nothing into something by keeping a relentless focus on growth.
These perspectives may be important to organizational management in the private sector and can be helpful in thinking through the strategic priorities and challenges of nonprofit work, but applying them can be challenging, given that nonprofits are always mission-driven and primarily community-focused.
It’s important that Boards be constituted—and wealthy trustees be recruited—with balance in mind. Balance requires maintaining a range of perspectives on the Board, beyond just wealth, by including voices that represent the organization’s values-based and mission-driven priorities, as well as its program constituencies, regardless of those trustees’ wealth and giving capacity.
The goal should be a cooperative Board that works together productively and avoids any danger or disruption that ideological conflicts and lack of values alignment may cause, particularly to the fundraising program.
THOUGHTS ON BUILDING AND MANAGING BOARDS
Nonprofits face a future of increasing financial stress. A few months ago, ALG Associate Gregory Leet covered the critical topic of the narrowing of the giving pyramid, and his excellent panel with nonprofit leaders covered the practical consequences of that trend for fundraising.
We are also seeing significant cutbacks in government funding from social services and the arts to medical and scientific research, even international aid. In this changing landscape, Boards will be an ever-more essential part of the fundraising program. Below are some thoughts on how best to navigate the opportunities and challenges:
1. Look Beyond Just Wealth: When building or managing a Board, CEOs and foundation leaders face a lot of pressure to take the next person who comes through the door offering a big check. While giving capacity is a major concern for all nonprofit Boards, it cannot be the only concern. Most Boards have a governance committee that helps identify and bring on new trustees; if the Board doesn’t have such a committee, then it should create one. That committee needs to affirm “balance” as a guiding principle—i.e., balancing wealth and giving capacity with voices representing the organization’s mission, values, and constituent service.
2. Create Multiple Forums for Engagement: Some philanthropists have no interest in being on a Board, but sometimes that’s the only type of engagement that nonprofits are offering. Other philanthropists have overly high expectations for the amount of access and influence their donations will get them, sometimes putting undue pressure on the organization to adapt to the donor’s wishes, even if it’s at odds with the mission.
As the philanthropic landscape evolves, it may be wise for nonprofits, as a general practice, to create forums outside of board service where donors can engage with the organization’s leadership—e.g., advisory boards for individual programs, or a “philanthropic cabinet” for fundraising, or small quarterly strategy roundtables with the CEO. That way, the nonprofit has a variety of opportunities to bring the right donors to the table in the right way—balancing their interests and desires with the needs of the organization.
3. Be Clear About Expectations: A Board cannot function effectively if every Board member isn’t fulfilling their obligation. And one of the best ways to keep the Board focused is by having a written description of the roles and responsibilities of trustees. Such a document can be especially important if there’s ever a need for difficult conversations about an individual trustee’s performance.
That description should contain the specifics of a trustee’s financial obligations, which are often commensurate with giving capacity. It should also be specific about expectations for trustees to open their networks to the fundraising team, which is a common sticking point. Wealthy people often do not like being subjected to the quid pro quo of asking their wealthy friends to give because that establishes a precedent for those contacts to ask them for the same in return.
But opening their social and business networks to the fundraising program is an increasingly important Board responsibility as the middle of the pyramid shrinks and nonprofits rely more and more on the super-wealthy for philanthropic revenue. That expectation needs to be explicitly spelled out and agreed to by all Board members. Transparency should be the rule of thumb; if a potential Board member balks or declines, it’s better to know that beforehand, rather than bring on a trustee who cannot meet the organization’s financial needs and expectations.
4. Communicate Regularly: Regular one-on-one communication with Board members is essential to assessing the ongoing functionality of the Board, the satisfaction of individual trustees, and addressing any performance gaps. One-on-ones are an opportunity to reaffirm the goals and motivation of each trustee—an opportunity to ask what excites them about being on the Board. It can help guide their individual work and surface opportunities for greater engagement; you might, for example, ask: if you could dream of anything you wanted to do for the organization, what would that look like? It’s also an opportunity to review regular reports on board output to ensure that the overall goals and responsibilities of the group are being met.
5. Set and Enforce Term Limits: Every Board should have term limits. There is always a delicate balance of maintaining institutional knowledge while not getting too hidebound in one’s thinking. Term limits ensure continued access to fresh, outside perspectives that challenge the status quo and force the Board to reassess and reaffirm—or sometimes evolve—its priorities. In this regard, having alternate forms of engagement (e.g., an advisory council) offers outgoing Board members the opportunity to stay engaged even after their board membership ends, as well as preserving important historical knowledge and giving networks.
6. No Substitute for a Strong Chair: A CEO or foundation executive’s most important ally and strategic partner will be the Board chair—especially when it comes to managing the other Board members. The chair has the most leverage with other trustees because they are all volunteers, and when it comes to wealthy Board members, the chair will likely be a social and business peer who can speak credibly and bluntly in a way that a nonprofit executive may not be able to.
Having a weak chair is problematic in that it leaves nonprofit executives with less overall influence on the Board, less ability to address the underperformance of individual Board members, and less leverage in making a financial case around fundraising obligations.
In that event, one has to consider the difficult and time-consuming task of replacing the chair, which can take a year or more. One critical component of any such effort will be to identify and recruit a replacement before making any effort to remove the current chair. That way, the gentle narrative around replacement can be peer-to-peer and focus on someone bringing new energy and commitment to the role rather than making the current chair feel pushed out.
Building and managing the right Board is becoming a greater challenge for nonprofits that need to balance organizational governance and mission impact with bigger and bigger fundraising goals. Meeting this challenge will require an increasingly strategic approach to Board management by bringing the right people onto the Board based on explicit financial and governance expectations, then creating alternate forums outside of board service that offer participation and contribution according to each donor’s skills, desires, and giving ability.
Contributing authors:
Don Hasseltine, Managing Director and Philanthropy Practice Lead, Aspen Leadership Group
VIEW BIO | CONNECT ON LINKEDIN
Steven Wallace, Managing Director and Vice President for Stewardship and Strategic Partnerships, Aspen Leadership Group
VIEW BIO | CONNECT ON LINKEDIN
NEXT UP on April 15th: Steven Wallace will host an expert panel to explore governance challenges with a special focus on Board management and its role in fundraising. The panel will include two highly experienced philanthropy professionals, as well as an experienced nonprofit Board member.
Our newsletter subscribers receive additional content each month, in the form of our top five take-aways: action items and practical guidance for adapting to key trends and leverage them in fundraising programs. In addition, newsletter subscribers receive job postings, industry insights, and firm news. To sign up, fill out the form at the bottom of this page.