Governing Through Uncertainty: In Conversation About Newly Released CEP Research

In this conversation, CEP’s Vice President of Assessment and Advisory Services Kevin Bolduc talks with CEP Senior Research Analyst Seara Grundhoefer about data CEP just released that explores the role and responsibilities of foundation boards in helping their foundations effectively respond to the challenges posed by the current context.

Kevin: If there’s a foundation on which solid funder effectiveness is built, it has to be the board of directors. Even the most effective (or boldest) CEOs can be instantaneously checked by a board. The ineffective or craven CEOs — yes, they exist, and I’ve met some — can slide by when boards aren’t on their game.

That’s why since CEP’s earliest efforts 25 years ago, boards have been a focus of our thinking. To name a few examples: Boards show up in our definition of funder effectiveness, we researched what CEOs and trustees think it takes for boards to be effective, we’ve profiled how family boards guide organizations to maintain a focus on justice over generations, and we’ve analyzed their roles in getting early-stage grantmakers off the ground.

Today, we add another chapter to this ongoing narrative. Using the data from our recent “A Sector in Crisis” research, we highlight three key findings about the roles of foundation boards in guiding funders’ responses to the challenges brought by the federal government to nearly every issue and community that funders care about.

So, Seara, what are foundation CEOs saying about their boards in this moment of uncertainty for funders and nonprofits alike?

Seara: Well, the data we collected late last year suggest that foundation CEOs are feeling really challenged right now — 87% of those we interviewed for this study say that leading a foundation is now harder due to the current context. I thought that was really striking.

And for some leaders that we interviewed, they said these challenges are magnified when working with board members that aren’t completely aligned with them in terms of how they should respond — because of differing values or beliefs, or because they don’t fully understand the severity of risk posed to the nonprofit sector. We heard again and again about the difficulty of working in an environment mired with fear and anxiety, and at the same time, having to deal with this very real tension of helping both boards and staff that are grappling with whether and how to respond to immediate threats to the nonprofits and communities they support while keeping the long-term goals of their foundation in mind.

Kevin: So, CEOs are feeling challenged and sometimes their own boards are contributors to the difficulty. That tracks what I’m seeing in the clients we’re working with on our assessments. Some must feel the opposite, though. What do they say they are getting from their board members in order to be able to respond more effectively?

Seara: We found that the foundation CEOs who feel most supported by their boards in this moment say their board members are really mission aligned or have a lot of trust in the foundation’s staff and leadership.

On top of having those qualities, foundation leaders told us that they’re looking for more from their boards in order to increase their foundations’ ability to make an impact on the people and causes they care about. Practically speaking, some see their boards as impediments to increasing payout. More broadly, they see an opportunity for their boards to develop a deeper understanding of the realities faced by their grantees and beneficiaries and to increase their tolerance for risk.

I really liked the way one foundation CEO we interviewed put it, when speaking to their board’s decision not to increase payout in order to avoid taking any ‘risky’ actions:

“If it were up to me, I would like to see us make a stronger commitment to increasing payout this year — I think part of the reason [the board] hasn’t done that is that there’s a sense that a lot of the sector is being very reactive right now and not necessarily strategic. I think if we were humanitarian aid funders, it would be very easy to make the case that we just need to get more money out to save people’s lives.” 

From my perspective, for foundation CEOs whose grantees and communities haven’t been as directly or dramatically challenged by this moment as others, labelling actions like increasing payout as ‘unnecessary’ or ‘nonstrategic’ can be a way to avoid having to wrestle with larger — and harder — questions about the challenges facing the nonprofit sector writ large, and what role their foundation may play in maintaining the status quo or even contributing to those challenges.  

Kevin: That finding about building understanding seems crucial to me. Boards need to ask proactively for help to building understanding. Echo chambers are easy to get trapped in. To avoid that, I’m thinking about what Cathy Cha, CEO of the Evelyn and Walter Haas, Jr. Fund, said on our recent webinar. She talked about how important it was for her as a leader to consciously build a diverse set of inputs to her decision making; to ensure she had ongoing ways to hear from nonprofit voices, advocates on the ground, and youth, and not just the risk-minimizing experts like lawyers (and I’d add investment advisors) whispering into the ears of CEOs and boards right now…

Getting the right mix of people and skills on the board and building strong board-CEO relationships were key statistical predictors back in 2005 of trustees’ own sense of what it takes for boards to be effective in leading foundations. They showed up, too, in the profiles of family foundation boards that I mentioned above. Those boards talked about the importance of getting non-family members onto to the board to bring to life the perspectives and experiences that might be less connected to the experiences of the ultra-elites who often serve on foundation boards.

Seara: Absolutely — and I think that really tracks with the desire we heard from foundation CEOs for boards to make the effort to deeply understand the impact of not just the changed funding landscape facing their grantees but also the hostility to their missions, the sense of danger to their staff and those they serve, and the urgency brought on by rising demand that many nonprofits are struggling to meet.

Kevin, I’m curious, given that you are often in the room with both foundation boards and CEOs, what would you suggest foundation CEOs might do to move the needle on understanding and action with their boards?

Kevin: I was just talking to a board about a Grantee Perception Report, and the board, which was heavily made up of corporate types, offered a revealing take. I shared that nonprofits were making some reasonable suggestions about examining tradeoffs between too many metrics related to outcomes that forced them to produce guesses and too few focused on the funder’s role in sustainability of the programs and organizations they funded. I’ll paraphrase the board response: “nonprofits aren’t focused on outcomes the way businesses are. They’re just focused on self-preservation.”

Given that our research is clear about how focused funders are right now on their own self-preservation — sometimes in pretty clear departures from outcomes they were pursuing just a year ago — Seara, if I could have jumped through the Zoom screen, I would have.

To their credit, the CEO tried to gently push back, as did I. But there’s only so much a CEO can do. That’s why I’d suggest boards lead the way in trying some practices I’ve seen effective boards implement:

• Ask for diverse perspectives to be brought into the board room now — both in terms of data and in people.
• Spend more for a year and look back and see what happens — both to nonprofits and funder endowments. Take this as a learning opportunity!
• Design some unscripted good conversations (maybe even assign some board members as provocateurs) that can examine the ways boards and CEOs are thinking about the organization’s fundamental values in this moment.

Seara, as an author of this study, I’ll give you the final word. Any last words of wisdom?

Seara: You know, Kevin, like I mentioned earlier, we heard some foundations say that a lack of alignment between foundation staff/leadership and board members is compounding the challenges of leading a foundation in this moment. Because of this, I would recommend that foundation CEOs use all of the resources at their disposal — local news stories, data from CEP and others, anecdotes from grantees and grant applicants, personal experience — to underscore to board members that regardless of your foundation’s focus (arts, culture, environment, etc.) the issues facing the nonprofit sector are — or will — impact your grantees’ work.

We saw in our “A Sector in Crisis” research earlier this year that demand for nonprofits’ programs and services is rising. And communities across the country are under intense strain even as nonprofits are less equipped than ever to adequately support them. Ultimately, that makes it harder for foundations to carry out their missions, too. If that doesn’t indicate a need for greater foundation board engagement and action at this moment, Kevin, then I don’t know what does.

Kevin Bolduc is vice president, Assessment and Advisory Services, at CEP. Seara Grundhoefer is a senior analyst on the Research team at CEP. Find her on LinkedIn.