By Josephine Victoria Yam, J.D., LLM.
2016 July 26
According to Imagine Canada, there are about 170,000 charities and nonprofits in the country, which makes Canada’s nonprofit sector the second largest in the world. This number translates to some 170,000 nonprofit boards providing governance over this $106 billion sector. As in any sector, while many nonprofit boards are high-performing, many are unfortunately lacklustre.
David Simms, in his Harvard Business Review article, articulates the following 3 distinct features of high-performing nonprofit boards:
The maxim “Everything rises and falls on leadership” rings ever so true in nonprofit boards. The Chair of the board is primarily charged with leading the team of volunteer directors to set the strategic direction of the organization. It is within the Chair’s mandate to provide the inspirational leadership to her fellow volunteer directors to spend their valuable time providing strong governance as they work to advance the nonprofit’s worthy mission together with the Executive Director.
However, the Stanford Graduate School of Business’s “2015 Survey on Board of Directors of Nonprofit Organizations” found that “too many directors lack a deep understanding of the organization”. For example, 27% of directors believe that their board colleagues do not have a strong understanding of the mission and strategy of their organization. Likewise, 32% of directors are dissatisfied with the board’s ability to evaluate the nonprofit’s performance.
Diversity strengthens leadership. As the collective brain of every nonprofit, the membership of a nonprofit board should be reflective of the communities that the nonprofit serves. As noted in our earlier blog (Board Diversity: Why It Really Matters), the Conference Board of Canada explains that diversity includes a spectrum of human qualities such as gender, ethnicity, race, colour, age and sexual orientation. Unfortunately, according to a Harvard Business Review article, 81% of nonprofit boards experience great difficulty in recruiting highly-qualified volunteer directors to their boards. Thus, it is crucially important for a nonprofit board to have access to a pool of highly qualified and committed nonprofit directors with diverse skills, talents and networks to oversee the nonprofit achieve sustained success.
Depending on the nonprofit’s by-laws, board meetings are normally held once a month or once a quarter. Given the relative spaces of time between board meetings, it is extremely important that all board directors thoroughly review the board materials and do their homework before the meeting. It is only when this happens that they become deeply engaged to bring forth their wealth of knowledge and experience to the organization. Unfortunately, the Stanford report found that 48% of nonprofit directors do not believe that their fellow board colleagues are very engaged in their work, based on their absences at board meetings and their lack of reliability in fulfilling their obligations to the nonprofit.
What then should a nonprofit board do to achieve sustainable high-performance? The Stanford report lists several key recommendations including:
Nonprofits are a force for good in society. And it is through high-performing boards, together with the Executive Director, that nonprofits can successfully address society’s most complex challenges and positively change the world.