OFFORD GROUP SPECIAL REPORT. Boards Matter: Governance, Giving and Fundraising in Canada

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1 Boards Matter: Governance, Giving and Fundraising in Fall 2016

2 Boards Matter What is the impact of a board on fundraising? Is there an opportunity to cultivate boards that are highly philanthropic and whose members are successful fundraisers themselves? These are the questions we ve set out to answer. Marts & Lundy has done a series of surveys on charitable boards in New York City with the goal of accumulating data on board characteristics that correlate to higher board member giving and higher giving overall. The results of these surveys have become an important benchmark for charities across the United States. This research prompted us to explore what impact Canadian boards their composition, mandates and giving patterns have on an organization s overall giving and what governance-related recommendations Canadian charities might follow to better realize their fundraising aspirations. While the findings of this study are truly Canadian, we have used our experience with the New York survey to deepen our insights. Findings in our first year of Canadian research mirror the New York research in many areas. However, there are points of difference and important topics that bear further exploration and discussion as we work together to understand how to build and maintain a high-functioning charitable board. PAGE 5

3 About Our Respondents We surveyed 54 organizations across five charitable sectors including Healthcare, Arts & Culture, Social Services, Postsecondary Education and Independent Schools. Seventy-six percent of the organizations reported being in a campaign phase, whether planning, quiet, public or post-campaign. Respondents budgets ranged from under $5 million to more than $25 million. Participants in the New York research had a significantly larger range of budgets (ranging from under $10 million to more than $250 million). Even so, the trends we see across the four groups, though often different in scale, nevertheless represent interesting similarities. Our Respondents by Budget Size A Group A Below $5 million 29% 21% B Group B $5 million $9.99 million C Group C $10 million $24.99 million 25% 25% D Group D $25 million + PAGE 1

4 How Generous Are s Boards? The percentage of board giving as a proportion of total giving follows a roughly similar pattern in and New York: board giving makes up a larger portion of giving for smaller organizations. However, the Canadian survey reveals that Canadian boards give a far smaller portion of total revenue than organizations in New York. This may suggest that fundraising at these Canadian institutions is less dependent on board giving, but it also signals an opportunity. Given that board members contributions represent highly visible leadership gifts, then increasing the average board gift would certainly inspire others to give and to give more. Average Board Giving as a Percent of Total Giving by Budget 62% 34% 41% 10.8% 4.5% 5.2% 3.2% 16% A B C D New York A B C D Having a Nominating Committee Makes a Difference The majority of organizations reported having a committee responsible for nominating board members, and are realizing three times the fundraising revenue of those few organizations that don t have such a committee $15 million annually versus $5 million respectively. Board Nominating Committee: Average Total Giving and Average Percent of Giving from Board No Nominating Committee $5M 1% Has Nominating Committee $15M 6% PAGE 2

5 Involve Development in Nominations Having a development person at the table matters considerably in New York; we suspect it does in too, and the numbers appear to bear this out in this first survey. Average board contributions were about twice as high at organizations where the DOD or VP for Development is included in the process, when one outlier organization (at which the participation is unclear) is excluded. With that outlier included, organizations with DOD/VP involvement raise 3.5 times more from their board. In New York, those institutions that included one or both of these positions on the committee realized nearly four times the dollars raised than those that did not. This raises an interesting opportunity: Are there ways we can even more effectively use the knowledge of the fundraising professional as members of these nominating committees? Development Leadership Participation in Nominations Average Board Giving $18.3M $4.8M $1.46M $418K Development Involved in Nominations Development Not Involved in Nominations Development Involved in Nominations Development Not Involved in Nominations New York There is some additional evidence that supports the view that development s role in board selection does improve fundraising: organizations reporting that they identify the best potential board members upon Staff Recommendations reported stronger fundraising results, raising an average total of $18 million, with an average of 8 percent of this total coming from board members. Organizations selecting Friends and associates of current board members raised an average of $12 million total with an average of 6 percent coming from the board. PAGE 3

6 Where do you find the best candidates for your board? Friends and business associates of our current board members 44 Staff recommendations 28 From our donor lists (also members/alumni) 23 Other 10 The Convergence of Wealth and Talents and Expertise Three times as many Canadian organizations cited talents and expertise as a top criteria when seeking new board members as did those who reported wealth as the top criteria. However, those organizations that cited talents and expertise realized significantly lower average board giving: $200 thousand compared to $2.6 million. Perhaps the more compelling finding is that when both wealth and talents and expertise were cited as being top criteria, total average giving exceeded the two other stand-alone categories with $20.8 million in total giving. Most Important Board Criteria Average Board Giving Average Total Giving $2.6M $20.8M $16.9M $1.5M $11.3M $200K Cited Talent/Expertise but not Wealth Cited Wealth but not Talent/Expertise Cited Wealth and Talent/Expertise Cited Talent/Expertise but not Wealth Cited Wealth but not Talent/Expertise Cited Wealth and Talent/Expertise PAGE 4

7 Board Size Matters Larger boards do correlate with higher overall fundraising success. We see this clearly in the Canadian research as well as in the New York research. In, boards of 20 or more members realized an average board gift that was more than three times higher than boards of 19 or fewer members. In New York, larger boards also realized higher average board member giving with boards of 30 or more realizing nearly five times the average board gift than the boards with fewer than 30 members. These findings could indicate that the larger boards common to higher education and arts institutions may attract more affluent members than do smaller groups, such as social services organizations. Perhaps the takeaway is that we should not shy away from increasing the size of our boards; though smaller boards might be easier to manage, they might be limiting fundraising success. Board Size in Relation to Average Board Gift 1 19 Board Members $17K 1 29 Board Members $116K 20 or more Board Members $58K 30 or more Board Members $567K New York Orientation Pays Off A formal board orientation session directly correlates to three times higher total fundraising compared to organizations without orientation. Furthermore, when this orientation includes a fundraising component, total giving is nearly five times higher than at organizations without an orientation. Including fundraising in board orientation should be standard practice at all organizations. It is one of the fastest and easiest ways to have a positive impact on overall fundraising. With and Without Board Orientation Average Total Giving Board Orientation with Fundraising Component Average Total Giving Without $5M Without $9M With $16M With $23M PAGE 5

8 Giving Expectations Raise Sights, Not Fears Overall, about 80 percent of Canadian organizations reported having an annual gift expectation of board members, and 22 percent indicated that there is an explicit minimum amount for board members annual gifts. In (just as we saw in New York), board members clearly are not averse to minimum giving expectations. In fact, minimum giving expectations correlate to higher board giving. Average Board Giving Exceeds Average Gift Expectations $551K Average Actual Board Giving Average Expected Board Giving $200K $175K B C D Note: Not enough information was available to report an average for Group A Give Only vs. Give and Get Average Board Giving It is important to note that the Give and Get strategy may diminish giving. Our findings indicate a Give Only expectation resulted in 14 percent higher average board giving among Canadian Boards. The research in New York yielded similar results, with a Give Only expectation correlating to 23 percent higher average board giving. $1M $886K Give Only Give and Get PAGE 6

9 Engage Often and on Multiple Levels The 26 respondents who reported board members participated in between nine and 13 of the activities listed below raised nearly twice that of the 22 organizations reporting less engagement (one to eight activities). And the percent of board giving also was higher among the more engaged boards. The New York research revealed a similar pattern: the more activities the board members participate in, the higher total giving. Number of Board Activities Average Total Giving and Average Percent of Giving from Board 1 8 Reported Activities $9M 4.9% 9 13 Reported Activities $17M 7.0% How Can Board Members Get Involved? Make personal visits to prospective donors Provide names and contact information for potential donors Ask friends or business associates to give Allow use of his/her name when someone else at the organization contacts potential donors Personally make the introduction to a prospective donor Provide or secure sponsorship funding for events Participate in developing the fundraising plan Host events in their own home/business/club Chair event or campaign; attend events Rate/provide background information about prospective donors Send thank you letters or make phone calls to donors Serve on the development committee PAGE 7

10 Do Boards Matter? Absolutely! Meaningful relationships among board members and staff can create an atmosphere that promotes trust, a shared sense of purpose and an understanding of collective responsibility. However, maximizing board giving requires more than artful interpersonal skills. Our survey suggests that strategic approaches to board size, the nominations process, setting giving expectations and the education and engagement of board members correlate to higher board giving and higher overall giving. Offord Group will continue to research board giving in, and research is also underway in the United Kingdom, where Marts & Lundy has an office in London. The compilation of our ongoing work in and this growing body of international research will certainly enrich our collective understanding of how we can shape boards that give more and inspire higher total giving overall. PAGE 8

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12 TEL / WEB BETTER TOGETHER: THE OFFORD ADVANTAGE