2016 comes to a close - Summing up the nonprofit sector and what we can look forward to from OPTIMUM NFP in 2017.

For all of you involved in the nonprofit sector, 2016 has been a very challenging year, and every indication is that 2017 will probably be more of the same.

Activity in the political and economic sphere has seen the sector coming to grips with what it all means for their own organisation. 

• The ongoing roll-out of the NDIS has seen a  myriad of responses, ranging from thoughts of risk and downside through to opportunity and expansion, whilst responding to the financial sustainability challenges associated with a previous supply-driven model moving to a generational-change demand-driven model;
• The ongoing children abuse Royal Commission has seen many organisations tighten their risk frameworks to ensure such obscene activities are not part of their culture, and for those caught up in the findings, an in-depth look into their own organisational mirrors in order to introduce fundamental change;
• The strengthening of the ACNC has seen a degree of confidence introduced into the sector with regards a range of  compliance issues;
• Changes to Australian Disability Employment frameworks has seen many in this aspect of the sector revise their current business models, in line with similar challenges in the disability services sector;
• Ongoing reforms to residential aged care has seen organisations in this sector review their own business models to address long-term sustainability challenges;
• An industry-wide focus on governance within the sector from wide-ranging sources that have resulted in many organisations in this sector carefully looking at what they currently do as compared to what they perhaps should be doing, especially with regards risk management, financial management, and board structure and development.

OPTIMUM NFP has been heavily involved in many of these nonprofit issues and over the 2016 period has further involved itself with many such organisations undertaking projects such as:

• Transitioning Incorporated Associations to Companies Limited by Guarantee;
• Organisation-wide strategic planning activities using a bottom-up approach to develop and launch strategic plans
• Mentoring executive team members;
• In-house board governance workshops;
• Change management planning;
• Structuring boards with new non-executive directors
• Conducting public Action Learning Question Programs
• Delivering 4 post-graduate units at the Australian Institute of Management MBA course, including 1 in Strategic Organisational Change and 3 in Managing Financial Resources

2017 will continue the challenges for the nonprofit sector, as well as bringing new ones, to which the sector will once again be challenged to consider innovative ways of moving forward. The confused nature of public policy will no doubt add to these challenges, in a very unhelpful fashion.

OPTIMUM NFP is looking to 2017 with a continued sense of anticipation and optimism, whilst also being realistic in recognising that many nonprofit organisations may face substantial risk if they fail to grasp and implement the governance and strategic planning frameworks that they must seriously consider.

During 2017, OPTIMUM NFP will be focused on the following activities:

• David will be completing his PhD studies at Macquarie University. This has been a long but personally rewarding journey (commenced in late 2010). Currently there are three papers that have been published in international peer reviewed journals, whilst a fourth paper is currently under review. My fifth and final paper is currently being prepared for submission. The papers, by title, have included:
• "Action Leanring Intervention as a Change Management Strategy in the Disability Services Sector - A Case Study", published in the Action Learning Action Research Journal
• "A Longitudinal Qualitative Case Study of Change in Nonprofits", published in the Journal of Management & Organization
• "Applying Grounded Theory to Investigating Change Management in the Nonprofit Sector", published in Sage Open
• "Planned Organisational Change Management - Forward to the Past? An explorative literature review", currently being considered for possible publication in the Journal of Organizational Change Management
• Applying the findings in the PhD research, OPTIMUM NFP will be launching a consulting service that seeks to ensure that nonprofit organisations can undertake an organisation specific change readiness analysis which will outline potential challenges within their organisation that can be addressed prior to changes being implemented, thereby increasing the likelihood of successful change outcomes. The service will be launched during the fist quarter of 2017 and is called the 'CARC' program - Culture Assessment for Readiness of Change, and uses the outcomes of the latest nonprofit specific research derived directly from David's PhD. Watch out for the launch announcement.
• During 2017, OPTIMUM NFP in conjunction with Action Learning International, will launch a further public Action Learning Question Program, which has been critically acclaimed and continues to be supported by the Australian Institute of Management Business School. This will be further expanded as purpose-designed in-house programs for larger nonprofit organisations. Keep an eye out for the program dates.
• In mid 2017, OPTIMUM NFP will leverage its success in executive team mentoring through the launch of its "Manager Development Groups" which utilise Action Learning as a key process in leadership development. Look out for the formal announcement of these.

OPTIMUM NFP will of course continue to focus on its strengths in delivering consulting input into Strategic Planning and Governance.

2016 has been a very busy year. 2017 is going to be an exciting year as OPTIMUM NFP continues to build on its skills and expertise in delivering new and innovative services that will continue to add value to nonprofit organisations, ensuring that the focus on organisational sustainability remains a key deliverable in all our consulting assingments.

I would like to thank my clients for allowing me to be part of their solutions during 2016 and I look forward to being able to adding further value to their organisations in 2017.

I wish you all a very Merry Christmas and a Healthy, Prosperous and Safe 2017.

Board Practices - How Does Your NFP Stack Up?

Much is being written regarding the state of NFP Board practices across the western economies. It makes for some interesting reading and provides some good comparisons and benchmarks for your own NFP board. The latest "Leading with Intent" survey from the united States, which commenced annual collection in 1994, reflects board responsibilities across 10 leading indicators. Whilst it covers the board, the chair and the CEO, it is the board evaluation which I think provides the greatest challenges if considered in the light of the substantial strategic and operational issues that Australian NFPs face over the next 10 years or so. Despite  a number of social, economic and legal differences between Australia and the United States, there remain many similarities, and so it is worthwhile considering the output in this context.

Overall US NFP boards were generally better at technical tasks, such as financial oversight and compliance but less so at adaptive work related to strategy and community outreach. This measure was undertaken against a backdrop of great similarities between the two countries, namely economic challenges, declining government funding and continued growth in service demand.

As a moving indicator that has been measured over the last 22 years, it provides a good analysis of both improvement and decline over that period, meaning trending becomes important. In the case of financial performance of medium organisations, being those with turnover greater than $1 million but less than $10 million, 53% of those surveyed improved their results, 38% remained the same whilst 9% had in fact deteriorated. Those with operating budgets greater than $10 million reflected a similar profile excepting 36% were about the same whilst 11% reflected deterioration.

In the work that I do with boards reviewing their overall governance, I use a custom designed 100-point on-line survey covering board roles, board processes, board behaviours and board membership. The most challenging aspects of performance that I have tracked since the first use of the tool in 2010 across a number of varying sized NFPs, has been strategic planning capabilities, board accountabilities, board membership issues associated with the appropriateness of relevant skills, effectiveness of relationships with the CEO and mission alignment in terms of the board decision-making processes.

The overlap between US characteristics in this sector and the Australian experience appears to be at the strategy level. In the context of the current and future challenges for Australian NFPs, this is potentially concerning as the market and funding challenges require, in many instances, a rethink of the strategic future direction of many of these organisations. So a key question therefore must be, to what extent are Australian NFP boards ready to address the strategic direction of their organisations?

OPTIMUM NFP has developed a strategic planning process and board governance review mechanism that responds to conditions that many have described as volatile, uncertain, complex, ambiguous and diverse. Conditions that demand your board operating at levels that inform a potentially new strategic direction.

Contact David Rosenbaum at drosenbaum@optimumnfp.com.au or on 0411-744-911 to arrange a no-obligations meeting to discuss how OPTIMUM NFP can add value to your NFP by ensuring your Board has the skills and capabilities to adequately steer your NFP through these challenging market conditions. The experience of OPTIMUM NFP could be exactly what you need at this point in time.

Governance Models for the Nonprofit Sector - Are Current Options All There Is?

Many models of governance have been attributed to this sector in Australia - but are they all that exists and are they enough to carry this sector forward?

The Australian Stock Exchange model that is referenced in the Principles of Good Governance takes a very 'legal' and 'regulatory' approach with its emphasis on rules, relationships, systems, processes, control and mechanisms. It looks at things from the perspective of formality and rigidity and whilst it refers to relationships, it does so within a very limited notion of formal relationships, and in so doing keeps the board in an arms-length relationship with constituents. In many cases it keeps board members, other than the Chairperson, at arms length to the CEO as well. In such a legalistic and formal model the prospect of a wide range of stakeholders to potentially feel disengaged is possibly quite high.

This model is however the one that appears to formally address many of the governance challenges that currently exists within the corporate world and perhaps, if adhered to in both principle and practice, would hopefully overcome many of the excellent examples of very poor corporate governance application that we have all become more and more familiar with in the Australian commercial world. Well known names have been embroiled in the aftermath of poor governance.

Another model often quoted in Australia is the Tricker model which seeks to delineate, along a mufti level plain, between functional aspects of inward and outward looking activity, past, present and future focus, and conformance and performance type activities. These plains are further categorized by reference to the key board functions of accountability, strategy formulation, supervision of executive activities and finally policy making.

But the question remains - is the way board governance handled in the nonprofit sector delivering for the 'communities'  that they serve, in terms of outcomes being consistent with those community expectations, and for that matter, societal expectations, or are we falling short because the focus is potentially too heavy on the legal and regulatory requirements that support the prospects of legal liability should something go wrong?

Is innovation being somehow starved for the sake of legal fundamentals? Whilst there is no doubt that efficient well run nonprofit organisations must be a fundamental aim of all who work and interact with these organisations, is there another way of delivering this whilst maintaining the confidence of those who fund these bodies?

Small to mid-sized incorporated nonprofits are experiencing massive resource challenges and yet boards remain, in many cases, stuck within the framework of complete separation between executive and managerial demarcations. In this manner, are nonprofits in Australia getting the most out of their boards?

Governance - A View from the Top - Is Your Board Delivering?

This is the question that all not-for-profit organisations should currently be asking themselves. From a performance perspective, the state of not-for-profit board performance is indeed a very mixed bag. Contrary to popular opinion, board effectiveness and efficiency is not entirely the product of the professionalism or otherwise of individual board members. Having worked with numerous such boards, I have seen individual professionals make themselves available for such voluntary positions, only to falter at the steps of performance as a collective group, to the detriment of the executive management team of the organisation. Not-for-profit board membership is seen by many aspiring professionals as stepping stones into the corporate world, in preparation for a ‘career’ as a fully remunerated board member. This approach is supported by lecturers at the Australian Institute of Company Directors, in its graduate course, who suggest that not-for-profit boards are an appropriate way in which to effectively ‘cut your teeth’ on boards as a precursor to the commercial world, where board membership as a non-executive director is financially rewarding, especially for those adopting the portfolio approach to their careers. Voluntary board membership within a not-for-profit organisation is a challenging engagement, even more so depending on the size of the organisation. Directors see themselves in a non executive capacity and yet, in many instances, are expected to involve themselves in far more activity than would otherwise be the case in equivalent private sector concerns.  I would also contend that board members of not-for-profits have extremely complex challenges, given the more diverse nature of the external stakeholder group and the involvement of substantial numbers of volunteers at the operational levels. In the current, and expanding, regulatory environment, and the potentially challenging financial environment, not-for-profit organisations need confidence in the boards that guide them. How confident is your organisation with its current board and what room is there for improvement? OPTIMUM NFP has worked with a number of not-for-profit organisations in evaluating board efficiency and effectiveness based on a 100 point questionnaire uniquely developed for the purpose. The questionnaire defines 4 board dimensions as:       The Role of the Board       The Processes of the Board       The Behaviours of the Board, and       The Members of the Board Within each dimension exist 5 categories and within each category are contained 5 questions. The result of the survey is a detailed report followed by an exhaustive list of recommendations, all undertaken in the context of a formal board presentation, where issues can be discussed and findings, as well as recommendations, analysed. Such governance reviews of your board are considered appropriate and widely undertaken within both the Not-for-Profit and the commercial sectors in the context of three contextual issues: Broader legislative frameworks surrounding incorporated entities which places an ever increasing demand on board members; Challenging and uncertain economic environment which places ongoing pressures on not-for-profit organisations to refine their service delivery programs, and Increasing demands on not-for-profits to provide expanded services in a social environment that heightens competition for government funding at the local, state and federal levels. Every board should regard this process as fundamental to ongoing refinement of their processes and structure, in order that efficiency and effectiveness remains high on the organisational agenda - at all levels