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.

What are the key leadership challenges for nonprofit organisations? - Read the 'Not-for-Profit Leadership Cahllenges Survey 2014 Report' to find out

What do you believe are the key leadership challenges for the not-for-profit sector? Are these challenges reflected in the effectiveness of your management teams? Are they impacted by the ability or otherwise of your organisation’s adaptability to change? To what extent do your leaders posses a good balance between technical and people skills? Is your board providing true value to your organisation? How effective are the teams within your organisation? Is your CEO the initiator and driver of change and if so how effective is this? Are your employees adequately engaged with the key priorities of your organisation? Does your strategic plan have an effective monitoring process that supports it? Is your internal communication processes effective and efficient? Does the culture of your organisation support the achievement of your mission?

In 2013, these were the questions that I, and a consulting colleague ‘Growing People+Organisations’, put to a wide cross-section of not-for-profit leaders throughout Australia via an online survey, and the results are now available in the recently released paper entitled “Not-for-Profit Leadership Challenges Survey 2014 Report”

Key findings identified in the Report included:

-          More than half the leaders surveyed believe they are challenged by the ineffectiveness of their leadership team

-          Just over half are concerned about their organisation’s change ability

-          More than half see their leadership teams lacking the required leadership skills

-          One quarter of leaders feel they do not have a Board that adds value

-          The majority of leaders see evidence of effective teamwork in their organisation

-          Two thirds feel that the management team rely too heavily on the CEO to initiate change

Comments provided by respondents also highlighted that the amount of change and the challenges in seeing through the complexities and ambiguities was their greatest worry. Additionally, there was a clear indication in the results that NFP organisations are going through significant change and rapid growth at present and need to adapt their approach using strategic and change management skills more. As a result more CEOs are looking to recruit leaders with those skills rather than just the technical skills they looked for in the past.

Finally, leaders saw a need for more leadership development, including building change management skills. With regards the Disability Care sector, whilst the provision of resources and funding for up skilling organisations and leaders had begun, there was clearly a need to ensure all organisations can access these resources.

The Report also identified a detailed suite of solutions available to address these challenges. OPTIMUM NFP in conjunction with the collaborating partner is well versed in dealing with these challenges with a wealth of experience that can be harnessed to meet the needs of your organisation.

Should you wish to receive a copy of the Not-for-Profit Leadership Challenges Survey 2014 Report you can either contact me via email or alternatively visit the OPTIMUM NFP website and request a copy through the ‘Publications’ tab. You can also contact David Rosenbaum of OPTIMUM NFP for a free, no obligation consultation regarding your organisation’s leadership challenges.

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?