In the last decade, nonprofit organizations have faced rapid shifts in their environment due to reductions in government funding and increased expectations from the public. Management skills and techniques, once considered applicable only to for-profit organizations, are being emphasized; and nonprofit boards are encouraged to take an active role in the strategic management of the organization. To this end, board members with business backgrounds are suggested as valuable resources on the nonprofit board because of their managerial expertise.
This study addresses the issue of whether the composition of the board and its role in planning influence organizational performance. Also, whether Canadian associations differ from U.S. firms in these relationships is investigated.
Board members with business backgrounds are singled out, and board activities include strategic management, administrative duties and fundraising. Organizational outcomes are the level of planning formality in the organization and four performance measures.
Several hypotheses are tested. The proposition that formal planning improves organizational performance is verified in U.S. organizations with reference to the social performance indicator. In Canada, formal planning is negatively related to operating efficiency and level of funds raised.
Hypotheses regarding the positive association between board composition, board activities and organizational outcomes are supported in both groups, with strong explanatory effects revealed via path modelling of the data.
Board profiles for both U.S. and Canadian operations show that Canadian organizations have greater proportions of constituents represented on their boards. However, the involvement of these members is perceived to be lower in both countries, implying that representation may be at the expense of involvement.
For researchers, the findings suggest that studies relying on univariate methods of analysis may be misleding, since intervening variables are not considered. For managers, implications for the role of formal planning and for the design and utilization of boards are presented.