New Report Highlights Severe Shortage of Directors for Nonprofit Boards

New York, May 30, 2002 — Nonprofit organizations, already struggling to secure adequate funding in an era of tight budgets, are facing another critical shortage — qualified candidates to serve on their boards of directors. A new report by management consulting firm Booz Allen Hamilton, which was sponsored by the Volunteer Consulting Group (VCG), reveals a surprising shortfall in board candidates, and points to a possible new strategy for nonprofits.  The report is entitled "Board Recruitment in the Nonprofit Market."

Research by Booz Allen and VCG found that nonprofit boards in the U.S. have anywhere between one to three million open seats annually, as a result of natural turnover and standing openings. Just to fill the open seats arising from natural turn-over, senior management of nonprofit organizations would need to evaluate over 9 million potential candidates, a process that would take over 36 million person hours. To fill all open seats, over 60 million person hours would be needed.

During this study, Booz Allen and VCG conducted a series of in-depth interviews with nonprofit, civic, and corporate leaders from across the country. In addition, data was collected and analyzed from publicly available demographic data from the U.S. Census 2000 and tax-exempt filings from the IRS Data Book for FY2001. The study also examined detailed survey results from the Nonprofit Governance Index 2000, published by the National Center for Nonprofit Boards with Stanford University as well as data from the New Nonprofit Almanac & Desk Reference published by the Urban Institute.

"The shortage of qualified board members is creating a crisis of senior leadership for the nonprofit community," said Barry Jaruzelski, Vice President of Booz Allen. "Boards of directors play a critical role in setting a nonprofit's strategic direction, raising funds and guiding the management team. It's extremely difficult for such an organization to grow without a strong and talented board." In addition, Jaruzelski noted that "major foundations are increasingly evaluating nonprofit's board quality in making funding decisions."

These pressures are especially acute for the 95% of nonprofit organizations with revenues less than ten million dollars. "If you're well known like the Metropolitan Museum of Art or the Boys & Girls Clubs of America, chances are you don't have a problem finding qualified people to serve on your board," said Brooke Mahoney, Executive Director of VCG. "But for the majority of nonprofit organizations that lack a well known brand, board recruiting is a very serious challenge."

Chris Shimkin, Founder and Executive Director of Global Village Engineers, a Boston area nonprofit that provides technical consulting and education services in developing areas, agreed. "Building the organization to deliver our services worldwide requires leadership from individuals with diverse backgrounds and a wide range of skill-sets," said Shimkin. "Finding the right board members is a challenging dilemma for our young organization."

The report highlighted a number of problems facing nonprofits:

• Failure of organizations to identify and reach out to all potential director candidates. The Booz Allen/VCG report states that between 1 and 1.4 million potential director candidates are not being recruited. These are candidates from segments that are often overlooked in the traditional board recruiting process, such as up and coming managers and non-managerial technical and functional experts.



• Under-representation of minority populations. Hispanics/Latinos are the most under-represented, holding only 3% of nonprofit board seats while making up over 12% of the U.S. population. The situation is similar for Asian-Americans, who hold 2% of nonprofit board seats while making up over 4% of the U.S. population. Overall, men represent 57% of board membership, and women represent 43%.



• An explosion in the number of nonprofits over the past decade, to over 1.5 million tax exempt organizations in the U.S. Over 819,000 of these groups are classified as 501(c)(3) organizations, required by the IRS to establish a formal board of directors to secure their tax exempt status.

"The reality is, given the high demands of time and effort needed for effective board recruiting, these searches just aren't getting done," said Jaruzelski. "So what you see are boards with critical skill shortages and chronic board member openings."

The most under-represented segments include up and coming managers and non-managerial technical and functional experts. In these groups, only 15% to 20% of potential director candidates currently serve on boards. In addition, less than half of all independent candidates with potential to serve, such as the self-employed and the retired, are currently doing so. Not surprisingly, most senior executives of public companies willing to serve on boards are already engaged.

Although board positions are traditionally filled through personal connections, the research indicates that nonprofits need new strategies and methods for identifying qualified candidates.

"How can nonprofits find the 'hidden' board candidates they need? The key is to take a creative approach, and take advantage of powerful communication mediums like the Internet," said Mahoney. VCG has launched a new web service, boardnetUSA.org, that hopes to help candidates and nonprofit boards learn about and communicate with each other. "boardnetUSA leverages many of the same features that made several major Internet job search sites successful," said Mahoney. VCG hopes boardnetUSA, with its broad reach, will have a significant impact on helping facilitate nonprofit board recruiting on a national level.

In addition to the issues with board recruiting, a literature review done in support of the study highlighted other key insights into the makeup of nonprofit boards of directors:

• The average size of a nonprofit board of directors is 17 members.



• The average board member is 50 years old.



• Over two-thirds of the directors of nonprofit organizations serve for three years or longer.



• 42% of board members are employed full time by corporations or other for-profit organizations, 19% come from nonprofit organizations, 14% are self-employed, 12% are retired and 9% of board members work for government organizations.