The business case for diversifying an organization’s workforce is well-documented in both for-profit and nonprofit institutions. Though this article will focus on nonprofit boards of directors, it has been proven that diverse teams at all levels of the organization drive better business outcomes. It is not a new idea. For example, in 2013, Harvard Business Review found that “without diverse leadership, women are 20% less likely than straight white men to win endorsement for their ideas, people of color are 24% less likely, and LGBTs are 21% less likely.”

The same research also found that “when at least one member of a team has traits in common with the end-user, the entire team better understands that user. A team with a member who shares a client’s ethnicity is 152% more likely than another team to understand that client.” When we understand our clients better, we are more effective at tailoring solutions to meet unique needs. Simply put, companies cannot survive long-term without hearing every voice, and underrepresented populations benefit from having allies within leadership groups: “Leaders who give diverse voices equal airtime are nearly twice as likely as others to unleash value-driving insights, and employees in a ‘speak up’ culture are 3.5 times as likely to contribute their full innovative potential.”

It’s 2021 and we are facing many of the same challenges. Workplace diversity is one facet of a larger conversation about racial equity in our society. A lack of diversity in an organization begins far earlier than its employees’ hiring dates. Systemic inequities starting as young as elementary school can limit access to educational, financial, or other opportunities in ways that privileged individuals never even have to think about. The paths diverge at the very beginning, and they lead to Black people holding a disproportionately low number of senior leadership positions (Black professionals hold only 3.2% of all executive or senior leadership roles and less than 1% of all Fortune 500 CEO positions).

Racial Inequity at the Board Level

I have worked with numerous nonprofit academic and philanthropic organizations, and I have seen how racial inequities lead to underrepresentation at the board level. The issue is not exclusive to nonprofits—since 2010, the rate of representation for Black men on Fortune 500 boards has increased a mere 0.5% year over year. BoardSource’s recent board diversity findings from its Leading with Intent Report found that while nonprofit boards appear to have slightly higher percentages of Black board members in 2019 (22%) as compared to 2017 (16%), only 38 percent of executives felt that their boards represented the communities they serve, and 66 percent of executives expressed dissatisfaction with their boards’ racial and ethnic diversity.

I have addressed several facets of white resistance to racial equity in previous articles. There is one element of white resistance that is highly unique to nonprofit boards: fear of donor loss. It is one of the most common objections to racial equity initiatives I hear. For nonprofit organizations, their very survival depends on the generosity of others. Losing significant funding could have very real consequences for an organization’s ability to fulfill its mission and sustainability. It is an understandable fear.

However, this fear is rooted in several erroneous assumptions. The donor loss narrative is another covert attempt to legitimize white resistance. When a lack of progress can be attributed to the fragility of the donor base, resistant board members can preserve a comfortable, homogenous culture without taking personal responsibility for it. As one board member stated, “It’s important to us that potential board members fit in.” 

False Assumptions: Gatekeepers to Black Board Membership

The first flawed assumption is that the purpose of the board of directors is to fund the organization. In this context, the rationale for maintaining a white supermajority on nonprofit boards is rooted in a wide variety of stereotypes about what Black board members are unable to bring to the table financially. Despite a lack of data or evidence, these stereotypes come up repeatedly. The donor loss narrative is predicated on the assumption that Black board members:

• Do not have the capacity to give,
• Do not have wide enough personal and professional networks to connect with potential donors,
• Cannot reach out to high-value or high net worth individuals and institutions, or
•  Do not have adequate corporate or professional support.

None of these claims are true. This narrative also relies on misguided assumptions about the donor base:

• Donors are equally resistant to racial equity as the current board.
• Donors will not be impressed by a board with unfamiliar names or faces; they expect to see familiar community leaders in positions of influence.
• If donors are not “impressed” by the board membership, they will lose confidence in its ability to lead the organization and manage its resources; they will alleviate their personal risk by taking their donations elsewhere.

These assumptions also feed into a board’s recruitment and nomination processes. It is simply easier to recruit people you already know and who are most similar to you. Psychologists call this the functional bias, wherein, people are most likely to recruit and select individuals in their own image. Therefore, white board members, whether they personally have access to financial resources or donors, express more confidence in the selection of board members who most resemble themselves. The myth is further complicated by the elevation of white board members as unanimously generous people who have access to extensive networks of colleagues and professionals that others do not have. Most nonprofits don’t report their board giving statistics publicly. In fact, through my experience with hundreds of board governance reviews, there are typically 30-50% of white board members who fail to contribute at all, who do not meet the requested donation minimum, who do not make any referrals of potential large donors, and who do not leverage their relationship to cultivate donors for the nonprofit organization. Therein lies the hypocrisy of this false assumption, white board members are unique individuals in their giving practices, yet they are not characterized as a group based on the actions of those who are unable or unwilling to meet the financial giving standards. 

Also, let’s be honest, most boards do not want to do the hard work of mapping out all the diversities, demographics, expertise, and other characteristics that should be represented. We call this a Composition Matrix. It is a tool that creates transparency around the current board’s make-up and allows board members to identify gaps that can be used to guide the intentional cultivation of potential board candidates. Individuals can also sit on multiple boards, compounding their workload. Nearly 75% of nonprofit board members sit on at least one additional board. The average is four. This is more validation that the nonprofit sector is tapping into the same community. I call this recruiting from the same zip code!

Changing the Narrative

There is no data to support the claim that diversifying a board of directors will harm an organization’s bottom line. Diversity is extraordinarily effective in driving innovation and revenue in for-profit companies; assuming this would be different for nonprofits is disingenuous. Diverse teams understand their clients and communities better, generate more creative ideas, and create solutions that better align with their mission and those that they serve.

Prioritizing financial giving comes at the expense of focusing on the board’s role in leading and driving performance. It also conveniently ignores the fact that white members of boards do not contribute equally. Some board members give nothing; some give far beyond what is expected. If a white person does not give, there is no automatic assumption that they did not give because they are white. It is considered a personal choice that could be attributed to many benign factors. If a Black person does not give, it is attributed to their race and presumed lack of resources rather than the same benign factors that might prevent a white person from giving.

The first step to driving performance from the board level is to abandon the financial approach to identifying candidates. Boards cannot achieve diversification without first achieving a shared understanding of the mission and how it aligns to diversity, equity, and inclusion. This commitment is the most important characteristic of a board member, even before race, gender, financial resources, or others. When driven by a common goal, a diverse board is better equipped to understand the unique needs of its communities and develop strategies to solve problems.

Donor Loss or Donor Transformation?

Board members must challenge false assumptions as they arise during strategic discussions about the real impact of increasing diversity. In many cases, this assumption persists even though the board has not directly asked its donors for their feedback on the issue. They fear what might be lost will never be replaced. Ongoing, regular giving is interpreted as tacit approval for the status quo.

In my experience working with boards, I have learned that the pool of potential donors who are highly motivated to support work that advances racial equity is continually growing. When CEOs, board chairs, and development officers speak with their primary donors, they are excited about diversity efforts. Philanthropic organizations are adding diversity disclosures to grant applications. Even the IRS wants to know—nonprofits are expected to outline strategies for maintaining a balanced and diverse board on Form 990. Some nonprofits will indeed lose donors who no longer buy into the organization’s mission, but there is no reason to assume that their contributions are not replaceable. Rather, other donors who are better aligned with the organization’s mission will step in and help move the organization forward. Rather than losing donors, nonprofits are experiencing a transformation of the donor base over time.

This demand can only increase, as Millennials already take a values-driven approach to choosing where they work, what products they buy, and which stocks they invest in. They are highly attuned to how an organization’s public face compares with its behind-the-scenes processes, and ongoing white resistance at the highest levels will deter them from donating, working, or even volunteering.

Building a Board Composition Matrix

Effective boards are diverse across several characteristics. A board composition matrix is an effective tool for evaluating the board’s current membership, identifying gaps, and crafting recruitment messages that attract qualified candidates. Boardsource recommends asking yourself this question: “What is the ideal mix of professional skills, resources, backgrounds and experience, demographics, community connections, and other characteristics that your board requires to navigate the organization’s challenges in the next three to five years?”

There is no one-size-fits-all board composition. The right mix of individuals will depend on the organization’s mission, its clients’ needs, geographic location, and more. As boards undergo this process of self-assessment and strategic planning, they will have to make difficult choices. There may be members who remain highly resistant to diversity and equity efforts. Despite their skills and abilities, this mindset puts them out of sync with the organization’s overall mission, so their role may need to be reconfigured or they may need to step down.

Conclusion

Boards have a fiduciary duty to look out for their organizations’ best interests. Given the substantial amount of research proving positive correlations between diverse teams and business outcomes, to resist these initiatives is to put the organization at financial risk. Boards must take responsibility for this by having transparent conversations about the board’s composition, priorities, recruitment methods, and alignment with mission and community needs. These conversations enable the board to rally behind the shared mission, overcome white resistance, and solve problems more creatively. A new generation of donors will follow.