How does board turnover affect nonprofit financial performance?
New research, published in the March 2021 issue of Nonprofit Management and Leadership, finds that a certain amount of board turnover is healthy and benefits nonprofits, as new board members bring new expertise and access to resources.
However, too much turnover can be harmful to organizations.
From the paper:
This article finds general support for a nonlinear relationship, first positive and then negative, between board turnover and financial performance—specifically financial resource acquisition and utilization by UW organizations. The results suggest that turnover in the governing board may increase the amounts of total contributions and allocations up to a certain point, after which it starts hurting both aspects of financial performance.
First, a modest amount of board turnover can be beneficial for nonprofit organizations. It can help organizations attract financial resources—immediately after turnover and also in the long run—as indicated by the results from the models on total contributions. This result provides strong support to the resource-based theory. Each board member can serve as a unique organizational resource that promotes the organization’s competitive advantage (cf. Barney, 1991), regarding its ability to raise funds from external environments.
Such positive effects of board turnover on financial resource acquisition can become harmful if turnover happens too frequently. This again resonates with the theoretical mechanisms hypothesized in this paper, as the departure of long-standing board member indicates a loss of unique organizational resource (Brown, 2005; Miller-Millesen, 2003). In sum, board turnover can provide organizations with both advantage and disadvantage (i.e. obtaining new resource networks, but losing long-standing resource networks), and thus, proper turnover management – such as achieving an optimal level of turnover – may help organizations accomplish competitive advantage in terms of attracting resources from external environments.