The non-profit sector is a vital pillar of society, employing approximately 10 percent of the workforce in advanced economies and generating value of roughly 5 percent of global GDP. While the most well-known non-profit organisations deal with urgent global issues – be it humanitarian disasters or human rights – many smaller outfits operating at the local level play an equally important role in their communities.

Today’s non-profits are grappling with significant external pressures, with government cuts to budgets, staffing and projects intensifying competition for both funding and talent. At the same time, internal vulnerabilities are compounding the sector’s complexity. Notably, some 40 percent of non-profits cite governance as their primary challenge, pointing to a lack of strategic oversight, limited expertise and difficulties in maintaining accountability. In many ways, non-profit boards face even greater complexity than their commercial counterparts.

What sets non-profit boards apart from those in the business world? What unique obstacles do they encounter, and which best practices can help them navigate uncertainty to create lasting impact? To explore these questions, we convened a series of workshops with experienced, INSEAD-trained non-profit board members with deep sector expertise. Their insights offer practical guidance for both non-profit and commercial boards striving to govern with purpose and impact.

The unique dynamics of non-profit boards

The vast non-profit world boasts a sizable workforce and financial flows, with organisations advancing causes ranging from climate action and education to health and social services. Board members in this space are tasked not only with fiduciary responsibilities but also with upholding public interest – a principle that’s often difficult to define.

Non-profit boards face additional challenges that distinguish them from their commercial counterparts. For starters, non-executive members of non-profit boards tend to assume hands-on roles and get involved in operational tasks, often due to a lack of qualified staff within the organisation. This can blur the lines between non-executive and executive positions, putting independent strategic oversight at risk. Second, even if board members bring expertise in finance, legal or governance, a lack of deep understanding of the non-profit’s mission or sector can limit their effectiveness. 

Then there’s the moral dimension. When the non-profit organisation’s activities are seen as intrinsically virtuous, there can be a lack of organisational accountability. As a result, boards may find themselves struggling to enforce standards or push for change. Furthermore, as non-profit board members’ reputations are closely tied to the organisation’s success or failure, their bid to serve societal interest can lead to both public and severe consequences if things go wrong.

Key challenges facing non-profit boards

Our workshops highlighted several recurring challenges. For instance, Jane, a partner at an audit firm with a strong financial background, served on the board of a public health organisation but struggled to connect with her more sector-oriented counterparts. Alex, a lawyer by profession, was frequently drawn into drafting legal documents, even though his actual responsibility should have been oversight of the organisation’s management team. Another charity board member, Bob, observed that the non-profit’s executives were often unreceptive to feedback, as all the organisation’s activities were viewed as inherently positive, or “good work”. 

More broadly, we noted that many small non-profits are led by entrepreneurial founders whose leadership style tends to be autocratic. While this may be effective in the early stages, it can become a barrier to professionalisation and sound governance as the organisation scales. Nearly all non-profits also wrestle with qualifying and quantifying their true impact, as measuring societal change is far more complex than reporting financial results.

Through our workshops, we identified five critical challenges for non-profit boards:

1. Balancing professionalism and idealism: Non-profit board members with commercial backgrounds may feel isolated or less effective compared to those with more idealistic profiles or long-time sector practitioners, making cohesive governance harder to achieve.

2. Avoiding executive overreach: There is a constant risk of board members being pulled into the non-profit’s day-to-day operations, particularly when the organisation lacks internal expertise in key domains. Maintaining a strategic, oversight-focused role is essential, but can be tricky.

3. Driving change in resistant organisations: Non-profits may have well-intentioned leaders who resist necessary change. Boards must know when to adapt, accept or intervene – sometimes even within their own ranks.

4. Aligning organisational and board development: As non-profits evolve from start-up to scale-up, boards must develop accordingly and ensure that governance keeps pace with organisational growth and ambition.

5. Measuring impact and success: Identifying appropriate indicators to measure both success and risk is notoriously difficult in the non-profit sector, where impact is often qualitative and long-term. This makes it harder to steer the organisation in the right direction over a longer time horizon.

Lessons and best practices

Despite these hurdles, numerous non-profits advancing diverse causes have managed to do good work. For the board members at our workshops, adopting the following best practices – which are also relevant to commercial boards – have been key to their success:

1. Structured onboarding and evaluation: Conduct due diligence with stakeholders and apply a “warm-up phase” before assuming formal responsibilities. Agree on a board charter – a succinct document outlining objectives, activities, stakeholders, timelines, risks and more – and carry out regular evaluations of board performance to ensure effective governance.

2. Clarify the board’s role: Clearly delineate the board’s strategic role to prevent mission drift and non-executive directors being pulled into executive work. This can be as simple as listing “what we do and don’t do” in the board charter.

3. Collaborative change management: Approach change collaboratively, rather than through confrontation, to navigate organisational resistance. To pull this off, boards should leverage their collective experience both within and beyond the non-profit's sector.

4. External support and reflection: Board members can take advantage of sector-specialised board platforms, such as BoardCompanions, which help non-profit organisations find the most suitable board members and support professionalisation and growth by facilitating knowledge sharing and community building. Bringing in new board members in pairs and encouraging individuals to dialogue with external mentors or peers can also provide valuable perspective and support.

5. Impact measurement: Apply impact roadmaps – such as the Theory of Change framework or the Logic Model – and sector-specific metrics to enable more meaningful assessment of progress and outcomes.

Sitting on the board of a non-profit organisation is a complex, high-stakes endeavour, and the challenges demand a thoughtful and adaptive approach. By embracing best practices and fostering a culture of continuous improvement, non-profit boards can elevate their effectiveness and better fulfil their mission of doing well by doing good.