I am always hesitant to talk about what’s happening on the corporate side of the aisle for fear that people will assume incorrectly that I’m holding it up as the model of all that is good and right. But, I do believe that there is value in looking at what is trending in the for-profit sector to find lessons we should learn. (I also believe that the for-profit sector should equally be looking at us to see it can learn from nonprofits). After all, as what follows demonstrates, we simply aren’t that different.
The National Association of Corporate Directors and Partners recently released the findings from its work to identify the concerns that are on the minds of corporate directors in 2018; this easily could have been a look at what should be on the minds of nonprofit boards in 2018.
For example, the 2017-2018 NACD Public Company Governance Survey, which involved 600 board members of nonprofit companies, identified the top five trends that board members say will play big in the business world in 2018.
Fifty-eight percent of respondents identified “significant industry change” as the greatest influencer for businesses in 2018. It is fair to say that significant changes in the industry of nonprofits will also be at play in 2018, although I am not confident that this is on the minds of the majority of nonprofit board members. In fact, I’m not confident that most board members would be able to identify any of those changes.
Two other trends to make the top five were “business model disruption” and “competition for increasingly scarce talent.” Business model disruption may be the easier of these two trends to address, as I don’t know that many boards have even considered the business model of their organizations. If you don’t know what the model is, you can’t identify, let alone take steps to be prepared for, disruption of that model.
But the challenge of scarce, quality talent has been a topic of concern for nonprofits for quite some time, but what, actually, have boards done to try and lessen the burden of securing such talent? Have they added more money to the coffers in order to provide better compensation? Have they done what is necessary to provide better equipment—from desks and chairs to new technology—that makes a workplace easier, and perhaps even more welcoming? Have they identified and supported some low/no cost benefits to make up for the low(er) salary?
The failure to address the concerns surrounding scarcity of talent is compounded by a piece that accompanied the NACD’s findings. Titled “Workforce Disruption,” the Deloitte authors opine on the challenges of the changing demographics of the workforce, new ideas on jobs versus careers, the rise of the gig economy, and the dwindling lifetime employee.
According to CNN Money, 34% of the workforce is in the gig economy, with the expectation that the number will rise to 43% by 2020. The World Economic Forum reports that CEOs see “the changing nature of work” and “flexible work” as the key drives in their changing worlds, supported by Global Workplace Analytics finding that 80% of the workforce would like to work remotely. These are not influencers unique to the for-profit market; they are the nonprofit sector’s influencers, as well.
The last two items rounding out the top five trends of concern were “changing global economic conditions” (with 46% of board members citing this) and “uncertain political environment” (35% noted this). Every nonprofit board should be discussing the implications of these trends for their organizations. To not do so is playing with the organizations’ viability.
There was one very disappointing, and, truthfully surprising finding of this study, given the increased interest in corporate social responsibility. Very few of the for-profit board respondents see social and environmental issues of concern in 2018, and less than a quarter see it as “important or very important” that they do better in their oversight of social, environmental and governance matters. While many nonprofit boards may pat themselves on the back for being socially compassionate because their mission is all about helping others, they aren’t being good stewards of society if they aren’t paying livable wages. If they don’t have a policy (preferably) or a position that outlines how they are active guardians of the environment, they aren’t being good stewards.
And though talking about what a board should do to take care of itself is a step in the right direction towards actually assessing itself and developing a plan to do even better, it is neither sufficient for, nor should it count, as governance oversight. So, maybe nonprofit boards aren’t doing any better than their for-profit counterparts here.
These 600 respondents to this survey identified five priorities for improving their own practices in 2018. Nonprofit board members should take note.
- They must do a better job when it comes to strategy: 67% said they must (a) “improve” their participation in the creation of corporate strategy and (b) do a better job of monitoring the implementation of that strategy.
- The majority of boards believe they must improve their participation in monitoring risk, with perhaps the greatest concern being the management of cyber risk. (I’ve yet to meet a nonprofit board that is even discussing this. Perhaps with the City of Atlanta being held hostage by cyber attackers, more nonprofits will start seeing this as a reality for them).
- Again, a majority (56%) of board members see a “need for improved rigor in board decision making,” 58% want boards to do better in following through on the boards’ recommendations and 58% want to see more candor in board discussions. And, yet again, a majority (58%) cited “improving CEO succession planning” as a critical area for improvement in 2018.
There isn’t one of these items on corporate boards to do lists that shouldn’t also be on every nonprofit board’s list for 2018.
One place where for-profit and nonprofit boards seem to be in a similar, but not the same, boat is with board composition and turnover. Both seem to suffer from the risk of stagnation and overstaying board members. Just under half of for-profit boards did not appoint a new member in 2017, and 73% have a mandatory retirement age (with 42% setting that age at 75 or older), while 65% of the bylaws expressly deny term limits. But as with nonprofits, for-profit boards are experiencing external pressures pushing back on such practices as these that encourage rigidity and stagnation: both investors and funders are looking for greater diversity and responsiveness to changing realities.
Now would be a very good time for nonprofit boards to take a page from for-profit boards, something you will rarely hear me say.