Data, Trends, and the Value of Written Policies

Data, Trends, and the Value of Written Policies

[Many thanks to Exponent Philanthropy for permission to reprint this blog post, which I wrote while on staff in June 2017. Although some details vary, such as for the types of policies used by nonprofits that are not private foundations, or the percent adopted over time, in my experience, the key messages apply to all sorts of nonprofit organizations.]

I can’t count the number of times a member has called with a sticky situation—how to handle a conflict of interest, or a board member not pulling his or her weight—but, when I ask about what expectations or policies are written down, I learn that there’s nothing in place. That’s an awkward time for the board to decide what the foundation’s policy is! Having policies in writing is one of the best ways to avoid being tripped up by such problems.

To learn more about which policies Foundations find most useful, while on staff at Exponent Philanthropy, I included questions on several key policies and documents. You can find the full results in Exponent’s annual Foundation Operations and Management report. I learned that foundations are most likely to report use of written conflict of interest statements (80%), investment policies (78%), grant guidelines (76%), and vision or mission statements (70%).You can put this data to use in your own foundation today (and most of these apply to nonprofit public charities as well!). Start with the most common policy and work your way down. Starting with a conflict of interest statement, ask if your foundation has this policy, and, if not, if this policy would be helpful in a pinch. Not all foundations need to have all these policies—for example, not all foundations need a donor intent statement—and there are others that your foundation may benefit from that are not on this list. You only want to adopt those policies that are meaningful and relevant for your foundation.

Staff or a board member or committee could review each policy or document in turn and bring a recommendation to a board meeting for discussion. Alternatively, if the foundation has a policy in place already, is the board reasonably familiar with it, or do board members at least know where to find it? Again, staff or a board member or committee could work to ensure awareness and access.

Increases in Policy Adoption over Time

From my vantage point, it’s been fascinating and heartening to observe, how, over the years, the adoption of these policies as formal written documents has increased (with one exception: donor intent statements, which have remained rather flat). This indicates that our members are taking the time to discuss and adopt them.

By way of example, check out the next figure: a sampling of some of the policies in the bubble chart above, showing how they’ve changed over time. In short, today’s most common policies weren’t always so common!As you can see, the percentage of foundations with conflict of interest statements was 30% in 2005 and 80% by summer 2016. Investment policies were a little more common at 52% in 2005, and are now at a comparable level at 78%. CEO succession plans are a bit of an outlier—they’ve only grown from 8% to 12%. I suspect this indicates how hard it is for many boards to grapple with the issue of succession, and I hope to see this data point grow too. We don’t have comparable historical data for board succession plans.

The other policies in the earlier bubble chart also show similar growth in adoption rate. Grant guidelines started at 64% and are now at 76%; vision/mission statements have grown from a 45% adoption rate to the current level of 70%; and strategic or long-range plans arrived at 23% after starting at only 9% adoption.

On the flip side, we also ask every year which foundations have none of these policies. That percentage has dropped, from 13% to just 3%. This tells us that the vast majority (97%) have now adopted at least one of the policies we ask about.

We think of the overall growth in policy adoption as good news for two reasons. When a foundation board has considered an issue and put it in writing for the future, this indicates that board members are being more responsible in fulfilling their fiduciary duty of care—a good sign of health for the organization. Written policies also mean the foundation is more likely to operate efficiently and fulfill its mission effectively, because board and staff know what Plan A is when situations arise that need quick response.