Can a 9-Year Tenure Promote Nonprofit Director Effectiveness?

Can a 9-Year Tenure Promote Nonprofit Director Effectiveness?
Milestone:This blog-post is number 200, since late 2011, for my blog-site. Like this blog-post, I have attempted to show how board practice and research from other areas might help nonprofits to achieve better mission outcomes and impacts. In other posts, I have attempted commented on traditional issues, such as is the board or CEO primarily responsible for fundraising? That blog-post went viral on the Internet abut 10 days ago and continues to go viral today. Thanks to all who added their insights and experiences to my comments.

By: Eugene Fram

Having served on two nonprofit boards for a period of ten consecutive years, I was interested to read a current study of the optimal tenure for business board directors. The business study found that a director’s effectiveness peaked at nine years, after which it falls off.* If a parallel study were to be run with nonprofits, what conclusions might be drawn given that the usual nonprofit board tenure is two three-year terms? What, if any, might be the impact on nonprofits by extending directors’ term of office? Although there are differences in their missions, nonprofit and for-profit boards should be able learn from each other., As a result, it is fair to ask, what impact would the study’s data have if applied to a nonprofit?

As might be expected, in the for-profit environment as in the nonprofit environment, one size did not fit all in the study results. Those firms that had complex operations required a longer learning time curve for new directors, and the optimal time was 11 years for maximum director effectiveness. This contrasts with about seven years if the directors required greater monitoring efforts. If nonprofits were to follow these conclusions, it suggests that the traditional two three-year director terms are desirable for start-ups but not for those nonprofit boards that have matured.

Another overall conclusion was that high average board tenure did not impact the board’s ability to attract new directors, whether they are high performing or poorly performing firms. In other words, those boards with high tenure boards records would have little problems attracting new directors.

To replicate this study in the nonprofit environment would be difficult because the stock performance measures used by the for-profit researcher are not appropriate. Consequently, highly creative, well-accepted measures would need to be developed. The study does raises some questions that nonprofits need to ponder:

• What are the core characteristics of nonprofit directors by which to judge effectiveness? How can they be defined and how can they be measured?
• Is a board with a large group of long tenured directors a detriment to nonprofit progress, as commonly believed, or a board with human resource experiences to be admired?
• Should nonprofits experiment with offering directors three three-year terms, renewable each in three-year increments? After all it is not unusual to encounter nonprofit directors who have served for 10 or more years, by using some “escape clauses,” in the bylaws such as the director first filling an unexpired term of another director or a director after six years being able to stay on as board chair for another two years plus an additional year as past board chair.

*Ben Haimowitz (2013) “Why 9 Years is a Lucky Number for Board Director Tenure and Effectiveness,” CEO Briefing Newsletter, September 13th. Please note that tenure can be significant problem in the for-profit arena. Some boards can have several directors with 50 year of voting tenure
See: Richard LeBlanc (2013) “How Long Should a Board Director Serve?” Huffington Post, September 19th.

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