Inspiring Philanthropy A Study of Houston Board...

Inspiring PhilanthropyA Study of Houston Board GivingJune 2020

©2020 Marts&Lundy, Inc. All Rights Reserved.www.martsandlundy.com

Many thanks to the participating institutions and to our Houston Board Survey Advisorsfor helping begin this important conversation.

Mark Dini, St. John’s SchoolKevin J. Foyle, University of Texas Health Science Center

Anne Murphy, Planned Parenthood Gulf CoastAmy Purvis, The Museum of Fine Arts, Houston

Darrow Zeidenstein, MD Anderson Cancer Center

Strong boards propel philanthropy for their organizations. But what makes a strong board? Since 2012, Marts & Lundy has studied board giving by focusing on nonprofits in New York City. This study was designed to illuminate board characteristics that are associated with heightened philanthropy. Over the years, more than 125 organizations have participated in our research.

When we wanted to learn whether our findings held elsewhere, we turned to Houston. It is one of our nation’s most philanthropic cities as measured by the diversity of its nonprofit sectors, the quality of its organizations and the scale of its fundraising. Its philanthropic scene also is relatively young when compared to the cities of the Northeast or Far West. Houston’s combination of characteristics makes for a fascinating study.

While this report focuses on Houston, it occasionally references findings from NYC. The purpose of these comparisons is to enrich the way in which the data is interpreted and understood.

Number of Respondents by Sector

Page 1

As this report was drafted, the global COVID-19 pandemic was at its height. Unprecedented as the situation is, we believe that this crisis presents an opportunity for nonprofits to revisit strategies in order to exit the COVID era with strength and sharpened focus. It is our hope that the data and implications detailed here will inform your discussions with your leadership and your board.

Houston Board Giving

A Marts & Lundy Special Report

74%


Across seven years of research, we observed that larger boards donate more than smaller boards. This is unsurprising. More surprising was the discovery – reinforced year after year – that larger boards raise more per board member.

Bigger Boards Are Better

But then this, too, seems intuitive. The larger the board, the greater its ability to move the needle. Larger boards realize that their philanthropy can chart the course for their organization’s philanthropy. Perhaps that awareness encourages board members to ’step up.”

We would not suggest that boards be enormous; that would impede effective governance. But in Houston and NYC, we saw philanthropic value to having a board with 30+ members. (In both cities, a 30-member board was about average, with half having fewer than 30 members and half having more than 30 members.)

13%

51%

22%

30%

$6.1K

$51.1K

$25.7K

$63.6K

Median % of Philanthropic Revenue from Board Median Giving per Board Member

HOU <30Board

Mmebers

HOU 30+Board

Members

NYC <30Board

Members

NYC 30+Board

Members

HOU <30Board

Mmebers

HOU 30+Board

Members

NYC <30Board

Members

NYC 30+Board

Members

13%

51%

22%

30%

$6.1K

$51.1K

$25.7K

$63.6K

Median % of Philanthropic Revenue from Board Median Giving per Board Member

HOU <30Board

Mmebers

HOU 30+Board

Members

NYC <30Board

Members

NYC 30+Board

Members

HOU <30Board

Mmebers

HOU 30+Board

Members

NYC <30Board

Members

NYC 30+Board

Members

There may be a concern that a large board encourages some members to ‘sit back’. But our data suggests this does not happen. Perhaps this is because large boards realize the need for effective internal management, and so are more likely to implement formal training and issue clear guidelines. In turn, these structures make giving more likely, rather than less.

There may also be concern that even a 30-member board on average is too large for good governance. Our experience is that boards of this size are well able to fulfill their fiduciary and other governance duties with an effective committee structure and decision-making processes that engage all members.

$1.2M

$480K

$1.1M

$192K

$1.6M

$1.2M

$305K

$849K

<$10M $10M-$24M $25M-$99M $100M+

Give Only Give or Get

While on the issue of guidelines, a common question: Should boards institute a Give Only policy, or should board members be allowed to Give OR Get their philanthropy? Through Houston and New York, our data has been consistent: Boards with a Give Only policy raise more. (There is one exception: smaller organizations – those with an operating budget beneath $10M – may benefit from the flexibility of a Give or Get policy.)

Give Only Equates to Give More


We don’t want to maximize Boards’ philanthropic potential at the expense of boards’ other responsibilities. But the Wealth of board candidates should be given attention, as it positively correlates with Board philanthropy.

Surprisingly, when evaluating board candidates, just 26% of Houston respondents prioritized candidate Wealth, and 38% said that board members are often not substantial donors before joining their board. (By way of comparison, in New York, just 16% of respondents said that board members are often not substantial donors before joining the board.)

Wealth Matters

26%

45%

6%

29%

61%

16%

Enjoys and successfullychampions fundraising

Other

Wealth

Diversity that is representativeof our constituency

Specific talents and expertise

Leadership or influence in thecommunity

And yet Wealth is tethered to board philanthropy, with Boards prioritizing Wealth raising more per Board member than Boards that do not.

$3.5M

$1.3M

$1.1M

$1.3M

$113K

$430K

$28.6K

$36K

$33.7K

$19.8K

$44.8K

$4.8K

Median Givingper Board

Median Givingper Board Member




Other


Wealth


Page 5

This is all intuitive: Boards that possess more wealth have a greater capacity to share wealth. But does it matter whether the Board Chair is chosen for her wealth? It turns out it does. 46% of Houston respondents said that philanthropic capacity was “considered, but not a priority” in Board Chair candidates, and those boards raised substantially less, on average, than boards that did prioritize philanthropic capacity in their Board Chairs. Board Chairs set the tone. When they substantially support your organization, others follow suit.

$3.5M

$1.3M

$1.1M

$1.3M

$113K

$430K

$28.6K

$36K

$33.7K

$19.8K

$44.8K

$4.8K

Median Givingper Board

Median Givingper Board Member




Other


Wealth

We recommend including the Vice President of Development on the board’s nominating committee. During our years in New York, we have seen the percent of institutions who include their VP on their nominating committee rise. (In the most recent New York study, 83% of respondents included their VP on their nominating committee.) Houston is slightly behind – 75% of its respondents put their VP of Development on their nominating committee – but there is reason to catch up: We have found that organizations with the VP of Development on the nominating committee raise more from their Boards.

Finding the Right Fit


Page 6

We asked respondents to identify how they were improving their board diversity. In Houston and New York, ethnic/racial diversity was the dominant concern, followed closely by gender diversity and generational diversity. Although significantly less common, boards in New York were about twice as likely as boards in Houston to be pursuing socioeconomic diversity or LGBTQ diversity.

Diversity Enriches More Than Just Conversation

94%

74%

71%

16%

13%

6%

26%

29%

84%

87%

92%

69%

78%

28%

31%

8%

31%

22%

72%

69%

Houston New York

LGBTQ

Socioeconomic

Generational

Gender

Ethnic/Racial

Actively Pursuing Not Actively Pursuing

We asked those who had diversified their boards to identify the effects of that diversification. When given a half-dozen options, Houston and New York selected the same top three: Richer conversations; New/different issues addressed; and New/different community outreach and/or membership participation.

61%

50%

46%

47%

84%

34%

Houston New York

New/different community outreachand/or membership participation

New/different issues addressed

Richer conversations


When asked whether improved board diversity had at all affected board fundraising, Houston and New York replied identically. In both cities, slightly under a quarter of organizations said board giving increased; slightly more than half said board giving was unchanged; and slightly under a quarter were unsure.

We checked the data ourselves, and in one important way, improved diversity correlated with improved giving. Houston boards reporting an improvement in Gender diversity over the years 2016-2018 also reported increased board giving, while boards reporting less Gender diversity reported decreased board giving. (The other vectors of diversity were not correlated with either increased or decreased board giving, except for ‘Generational’ diversity, which was associated with decreased Board Giving.) This is consistent with findings from New York.

55%

13%

-17%

51%

14%

-38%

Median 3-Year Changein Board Giving

Median 3-Year Changein Board Member Giving

Less gender diversity

No change

More gender diversity

Growing the size of your board is the simplest path to accelerate change. Among boards that grew from 2016 to 2018, 55% reported an increase in Gender diversity; among boards that remained the same size, 43% reported an increase in Gender diversity; among boards that shrank, only 20% reported an increase in gender diversity.

Pursuing Diversity

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