Governing Through Nonprofit Instability: A Purpose-Driven Framework

The Center for Effective Philanthropy’s recent research tells a clear story: Nonprofits are carrying more demand with fewer resources. Foundations have responded, yet many still believe the response does not match the moment.

That gap is not about effort. It is about alignment. What nonprofits are facing and how foundation boards are making decisions are not fully connected — and when they are misaligned, foundation decisions can increase strain on the very organizations they fund.

This is where governance becomes visible. Many foundation boards decide how much to give, how long support lasts, and what risks are acceptable. These decisions shape whether foundations stabilize or strain the sector.

Purpose-Driven Board Leadership offers a way to turn CEP’s findings into the questions that guide real governance decisions. It shifts the focus from what boards observe to how boards interpret and act.

CEP’s data show a clear imbalance. Nonprofits report operational instability, while foundations report less immediate risk to their own institutions.

This calls for a shift in the role of the board. When the foundation is stable, but the mission of the foundation is under pressure, the role of governance is not to center on preservation of the institution. Rather, the priority becomes how the institution is used.

Purpose-driven leadership names this shift through its first principle, purpose before organization. Boards still steward assets, but through application of this principle, assets are treated as tools to advance purpose.

This reframes risk. The central question is no longer how to protect the institution, but how to respond to the conditions affecting the mission.

Through this lens, CEP’s findings prompt different questions:

• Does our payout reflect the scale of need nonprofits are facing right now?
• How are we defining risk — loss to the endowment or harm to communities?
• Are we treating financial strength as something to preserve, or something to deploy?

Foundations have capacity — this principle focuses boards on what that capacity is for. It links financial decision-making directly to mission conditions rather than internal benchmarks. If purpose defines what decisions are for, the next question is what those decisions affect.

CEP data documents shifts in foundation behavior in the years since the COVID-19 pandemic, including more unrestricted funding and greater flexibility.

These actions affect more than individual organizations. They shape the conditions nonprofits operate within. And as decisions shape the system, the next question is how that impact is distributed.

Purpose-Driven Board Leadership frames this through its second principle, respect for ecosystem. This principle requires boards to consider how their decisions affect the broader set of players and systems needed to achieve the foundation’s mission. It shifts governance from an organization-level focus to a system-level perspective.

Through this lens, CEP’s findings lead to questions such as:

• How do our funding practices affect the stability of our grantees?
• Are we absorbing risk or shifting it onto grantees?
• What norms are we reinforcing through our decisions?

These questions surface how board decisions distribute stability and strain across the sector.

Not all nonprofits are affected equally by current challenges and instabilities. Some organizations face deeper strain and more limited access to resources.

These differences reflect how resources move through the sector. Purpose-Driven Board Leadership frames this through its third principle, equity mindset. This principle focuses on how boards interpret and respond to uneven impact as well as critically examining the role they play in causing or exacerbating the uneven impact. It requires boards to examine how their decisions determine who benefits and who carries risk.

Through this lens, CEP’s findings raise questions such as:

• How are we interpreting differences in who is most affected?
• Do our funding patterns reinforce existing disparities or shift them?
• How do our policies shape who has access to resources during instability?

This moves boards from recognizing disparities to examining how governance decisions contribute to them. If impact is uneven, the next question is who defines what response is needed.

CEP’s data reveals that foundation CEOs want their boards to do more — respond to urgent needs, understand what communities are facing, and adjust how they act in this moment. This raises a governance question: Who defines what “more” means in practice?

This need speaks to a fourth and final principle of Purpose-Driven Board Leadership: authorized voice and power. This principle focuses on whose perspectives define the problems and shape decision-making. CEP data point to a gap: One in five foundation CEOs report board members do not understand how current conditions are affecting communities.

This pattern is not unique to CEP’s findings. It is reflected in BoardSource’s 2023 “Leading with Intent” data, in which 43.5% of CEOs report that they do not have the right board members in place to establish trust with the communities they serve.

At the same time, there is strong alignment on the importance of connection to the communities or populations served by their organizations:

• 91% of CEOs and 87% of board chairs rate understanding the communities or populations served as important or very important
• 85% of CEOs and 86% of board chairs rate building relationships within the community that help support and inform the organization’s work, separate from fundraising, as important or very important

These priorities are reflected differently in recruitment decisions:

• 33% of CEOs and 37% of board chairs identify knowledge of the community served or prior work with the population served as a high priority
• 24% of CEOs and 31% of board chairs identify membership within the community served as a high priority

This pattern also shows up in how boards spend their time: 69% of CEOs and 70% of board chairs say not enough time is spent building relationships with communities.

Together, these data points show how boards value community understanding while structuring for it to a different degree in practice. Who sits on the board shapes how boards define urgency.

Through a Purpose-Driven Board Leadership framework, CEP’s findings raise questions such as:

• Whose experience is informing our definition of what is required right now?
• How are nonprofit leaders’ realities reflected in our decisions?
• Are we creating direct pathways for community and grantee input into how we govern and deploy the organization’s assets?

Authorized voice and powershifts governance from being informed at a distance to being shaped by those closest to the work and its impact.

CEP’s recent snapshot shows a sector under pressure and a response already underway, but it also reveals gaps between need and action and between perception and lived experience. Purpose-Driven Board Leadership provides a way to interpret and act on those gaps by clarifying how boards approach decision-making.

Danielle Gilmore, Ph.D., MPP, CHES, is director of learning and research at BoardSource. Find her on LinkedIn.