Assess—Don’t Simply Term Limit—the Board of Directors

Should you limit how long someone can remain on your nonprofit board of directors? In William Meehan and Kim Starkey Jonker’s 2017 book Engine of Impact, the authors rightly address this question in the context of board member assessment. That is, term limits are really a way for an organization to shed itself of poor performing board members while side-stepping board evaluations. But requiring board member removal means losing benefits that long-standing board members can bring.

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The evidence on whether term limits are wise is mixed, but the findings from a number of studies should give nonprofits pause before they impose term limits. Meehan and Starkey cite a survey of New York nonprofits that found that “average board giving for those with term limits was $5.5 million compared to $16.3 million for those without.” The realization that term limits could contribute to a decrease in board member giving—to the tune of $10.8 million annually—should give organizations reason to consider the best approach.

A study of for-profit boards found that independent, experienced board members (15+ year tenure) were an important driver of strategic and monitoring decisions. Certain monitoring functions, such as the evaluation of the CEO and accurate financial reporting, were enhanced by a higher proportion of experienced directors, and successful strategic moves of the organization (such as profitable acquisitions) were positively associated with the presence of experienced directors. Additionally, experienced directors were more engaged in board work: they were significantly less likely to miss meetings and more likely to serve on critical committees. Despite focusing on for-profit boards (16 years-worth of data collected from S&P 1500 firms), the implications for non-profit boards are just as salient. What these studies suggest is that key responsibilities of nonprofit boards—strategic input, oversight, and fundraising—are enhanced by long-standing directors.

So why do 72% of nonprofit boards have term limits? In most cases because organizations understand that they need a way to remove poorly performing board members and bring on new members who contribute needed skills and represent important constituencies. But term limits are not the only way to achieve this goal. Absent term limits, the board can still hold as an expressed value and expectation that members will not serve in perpetuity, thus making room for new voices. As a pair of researchers seeks to show in a forthcoming article, diversity of board member tenure is likely to benefit the organization. Thus, the question is not whether boards should be refreshed and renewed, but how that renewal should be accomplished. The answer is board member assessment, which in turn demands that the board establish expectations for itself and hold the members accountable for meeting those expectations.

The authors of Engine of Impact recommend board assessment as part of their six principles of effective nonprofit governance. They suggest a clear evaluative approach that will help the governance committee decide whether to renew the member’s tenure. However, the nuance that they miss is that by going through this process only at the end of the term, the focus is purely on evaluation, not learning. In contrast, periodic assessment during the term of service contributes to a constructive process. The board member receives an opportunity to hear feedback and reflect on how they could deepen their contribution (or gracefully exit) and the board leaders can use the information received to consider how they can support and educate the board members during the upcoming year.

Board assessment may not be for the faint of heart, but nonprofit leaders are a courageous bunch. So be brave: assess your board members!