Being a Not-for-Profit. Business vs Purpose - Is It Really a Contest?

I recently found myself embroiled in an online discussion that appeared to view the not-for-profit sector as necessarily being one that conceptually needed to be split two-ways. The initiator of this discussion appeared to be suggesting that on the one hand there were those NFPs who were larger and operated within a more corporate environment, whilst the other group of NFPs are those that are somehow more community based, potentially smaller, and are more ‘grass-roots’ orientated. 

The discussion centred on the perceived need for the ACNC, in the context of the current Federal Government’s recently introduced legislation which would seek to effectively close down the ACNC without necessarily identifying what, if anything, would replace it. The discussion centred on the pros and cons of the current ACNC in the context of what was needed, from a governance perspective, for the efficient running of this sector. A further dimension to this discussion was the role that consultants are playing in shaping the ongoing debate regarding the need for an additional regulator of the type and style of the ACNC.

There are different aspects to this discussion which are worthwhile further considering, especially in the context of a sector which everyone agrees, plays an important part in the economic and social life of the Australian community.

The importance of ‘community’ cannot be overstated. At this level it is worthwhile remembering that the role of this sector is important because of its very heavy focus on individuals. An American author writing about what is often referred to as the third sector (van Til – 2008), suggested that “society is best organized if voluntary organizations are numerous, effective, and thick in meaning”.  He further suggested that in a Western style democracy, there were only four institutional means of solving society’s challenges, namely governments, business, the third sector and finally, what he referred to as the “informal sector”, constituted by family and neighbourhood. This structure very much focuses attention on the distance between services design and delivery at a policy level and at a front-line service delivery level. 

The grass-roots service delivery approach that smaller third sector organisations espouse and are very good at delivering, must also be considered in the light of the economic realities that now face this sector, and will continue to challenge their very existence. 

A well known Australian academic who researched extensively the Australian nonprofit sector, the late Mark Lyons suggested that third sector organisations needed to carefully balance the need to maximise their financial bottom line without becoming purely bottom-line focused, indicating that profit was necessary to ensure sustainability and the ongoing provision of effective front-line services into the future. His call was for an appropriate focus on improving business performance within these organisations. His 2001 publication entitled “Third Sector” highlighted this business performance issue and the management practitioner conundrum when he stated “Over the past 20 to 30 years huge resources have been committed to developing understandings and techniques to improve business performance. But not all of the management techniques developed by and for business are directly applicable to third sector organisations. Third sector organisations have special characteristics that require their own solutions but little effort is put into developing best practice management for the third sector.”

The current and future economic reality within which third sector organisations operate necessitates the consideration and application of a wide range of commercial and managerial issues. These will not disappear in an attempt to change back the clock to an earlier era. The economy has changed and the social structures have changed. The challenge is to ensure that the changes required to be made by organisations in this sector are made in a way that focuses on the outcomes necessary to enhance the lives of those that rely on the services that this sector provide, whilst doing so in financially sustainable terms.

In this context, there is no substitute for sound governance practices and structures within third sector organisations. The ACNC could prove to be a very strong and effective tool for driving such governance frameworks across the third sector and its potential demise, in the absence of any realistic alternative is a negative for organisations operating within this sector as well as those who interact with it. If it is going to be replaced, the sector and those that involve itself with it should be given a detailed picture of what will replace it. Simply going back to what was in existence pre ACNC, may not suffice, especially given the challenging economic and social issues that Australia face and will face into the foreseeable future.

OPTIMUM NFP has been supporting not-for-profit organisations through the provision of strong nonprofit-specific governance related consulting assignments in areas of Risk Management, Strategic Financial Management, Strategic Planning, and Change Management. Contact David Rosenbaum for a free no-obligation meeting to discuss your not-for-profit’s requirements and how OPTIMUM NFP could assist.

Leadership Development - It Can Be Done Better

In the January 2014 edition of the McKinsey Quarterly, Pierre Gurdjian and Thomas Halbeisen, both Directors of McKinsey in Brussels and Zurich, identified the 4 key reasons why many existing leadership development programs failed. They identified context, reality, behaviour, and results, as characteristics that such programs fail to consider when designing and delivering these programs.  

• Context – this suggested that the one-size-fits all approach of many of these programs fail to appreciate that leadership itself is contextual in terms of the situational context of the individual organisation and therefore the actual circumstances that this leader finds themselves operating within. 
• Reality – there is a potential detachment within these leadership development programs between course material and the real-life issues and challenges that the leader is facing when they reappear at work, armed with substantial theory which then needs to be aligned to the reality of the leader’s own organisation. 
• Behaviour – effective leadership requires a sound understanding of individual behaviour and in many cases, such behaviour may need to be changed in order for that leader to be more effective in the work environment. But in the case of formal leadership development programs there exists gaps between current mindsets and the shifting mindset which may go unchallenged during the entire duration of the program, in the absence of specific and real application, as distinct to role-playing type activities. 
• Results – formal leadership development programs tend to be less focused on return-on-investment type evaluation of the actual program itself. The benefits gained from such programs cannot necessarily be evaluated directly back in the leaders own organisation, either from a quantitative or timing perspective, save the participant feedback approach. The nature of these programs generally precludes such quantitative assessment.

The Australian Business Deans Council Report (March 2012) entitled “The Future of Management Education Scoping Paper”, also identified a number of potential shortcomings with existing tertiary business education, both in terms of content as well as delivery. The Report stressed the “fundamental point that improved people management skills, including the constructive engagement of workforces, will be critical to the development of high performance workplaces.”

 

Datar, Garvin & Cullen identified in their 2010 publication entitled “Rethinking the MBA: Business Education at a Crossroads”, a number of unmet business needs in existing MBA programs, including: “the development of leadership skills, acting creatively and innovatively, thinking critically and communicating clearly, and understanding the limits of models and markets.”

Last month, OPTIMUM NFP in conjunction with Growing People+Organisations, released a report entitled “Not-for-Profit Leadership Challenges Survey 2014 Report” which also identified key Australian NFP challenges as the effectiveness of management teams, the ability of organisations to adapt to change, and the lack of general leadership skills amongst management teams, as the most pressing of leadership challenges in that sector. 

Interestingly, the Australian Business Deans Council report identified Experiential Learning and Action Learning Projects as one of the top innovations in teaching and learning methods and approaches that should be deployed as part of management education programs.

One approach to the development of leaders that addresses all the Leadership Development Program shortcomings identified above, and responds to those challenges identified by Datar, Garvin & Cullen, is the Action Learning Question program (ALQ), which has been successfully in operation in the United Kingdom, operating in the commercial, public and nonprofit sectors, with well documented and evaluated outcomes. The process underscores the experiential and action learning related comments of the Australian Business Deans Council.

OPTIMUM NFP is pleased to announce its involvement and launch of Action Learning International in Australia through the application of the Action Learning Question Program, first developed by Professor Richard Hale of Action Learning International. Richard will be in Sydney for the launch in early June. If you are interested in an advanced booking for the Sydney launch  please register your interest by contacting David Rosenbaum at drosenbaum@optimumnfp.com.au

 

Should you wish further information on the Action Learning International ALQ program, please contact David Rosenbaum or alternatively visit the OPTIMUM NFP website at www.optimumnfp.com.au and follow the link to Action Learning International.

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.

Democracy: It has its downsides - Alan Jones is One of Them

Democracy is a wonderful thing. It allows people to live their lives as they want to live them. It provides opportunities for those that want to partake of them. It gives people the ability to be who and what they want to be. It provides the foundations for freedom and generally paints a picture full of hope and prospect.

As with everything in life, there is always two sides to the one coin and democracy is no different. It comes with responsibilities, at the individual and group level. Responsibilities such as the need to consider others, the need to treat people fairly, the need to ensure individual freedom and the need to improve the society that we live in.

Enter Alan Jones with his latest rant that truly goes beyond belief. Mr. Jones is obviously a lonely chap for unless he is at the center of the news, unless he is the focus of attention, be it negative or positive, he is not happy. And so it comes to pass that as a 'shock jock' the only thing to do is to constantly come up with raves and rants with the only intention of drawing attention to the one most important person in Sydney - HIMSELF.

His latest murmurings re-appeared on page 10 of this morning's Sydney Morning Herald where he is now attempting to connect the unfortunate bombings in Boston - where Mr. Jones, people actually died and were maimed for life - with student activism and accordingly we in Australia need to be ever vigilant as to the students that we bring into this country. What a complete load of diatribe. I suggest that we start drawing conclusions now as to the Boston culprits and in that manner we can get ahead of the truth - remember what the truth is Mr. Jones?

Alan Jones is, and never has been interested in the truth. He has always, and forever will be, interested in the headlines and him being on them, or part of them.

I seem to recall when living in Melbourne back in the 80's that the Alan Jones road show came to town and he succeeded in getting a television version of his talk-show on one of the commercial channels. Thankfully it failed, quite quickly after first launching. He left town and was never heard from again. And that's the beauty of democracy. In Melbourne, people voted with their feet and realised what Mr. Jones actually stood for and what his central focus was.

So democracy does work and works quite well. For some reason, New South Welshman and their Qld counterparts still actively listen and encourage Mr. Jones - and so it is we continue to put up with the 'shock jocks" of his ilk. It is well known that Mr. Jones is a protected species in this State, but why?

So back to democracy. It is a great system and our country and many like us has prospered as a result. But as I said, their are individual responsibilities regarding those things that Mr. Jones loves to ignore - because it gets him headlines. Maybe we should do what the Victorians did so successfully many years ago - ignore him and he may eventually go away.

In the interim, how about we continue to support the US in their hour of despair, wait for the outcome of their investigations and not point fingers where they should not be pointed just for a story. The letters to the editor on page 18 of the SMH sum it up quite well regarding Alan Jones' comments. So lets all enjoy the fruits of democracy and put Alan's selfish, egocentric and totally illogical views where they belong - in the waste.

The Social Good - Have We Lost the Plot or Have Society's Values Changed Forever?

If martians or other alien life forms exist and they were to visit our lovely planet or indeed our lovely corner of the planet known as Australia, what would they see and how would they view us? Lets consider the following scenarios and then reflect on where we want to be as a nation and as a people in generations to come.

This is a very wide canvas from the physical aspects of our planet, in such things as the environment and how we use the planet's resources through to the social values of its inhabitants and how Australia's inhabitants treat and value each other's presence and activities within it. So let's narrow the focus somewhat so that we can keep this to a tidy neat little article as the thesis that I am currently writing on change management does not get duplicated here on this issue. Lets home in on social justice and caring for our fellow citizens.

So what sort of things would the martians notice at this level?

Well, had they have arrived in Sydney during the beginning of February they would have noticed that the NSW government threw in excess of $430,000 out one of the large windows at Railcorp defending their anti-discrimination case that was brought by Graeme Innes, a disabled individual, who successfully brought action against that auspicious organisation for not adequately addressing the need of blind people when it comes to ensuring they are able to identify railway stations. Oh and by the way, Mr. Innes is Australia's Disability Discrimination Commissioner, but that is just by-the-by. The case had been going for two and a half years

Let me put this in context. I deal with organisations in the NSW Disability Services sector that provide very important services to the disabled community and they do this under very difficult circumstances. They work with hundreds and hundreds and hundreds of families, carers and disabled people whose lives are very different to many other residents of this incredibly lucky country of ours and yet who face hardships that many of us seem to ignore. Quite a few of these organisations are of a small size, namely less than $5 million in turnover  So the NSW government throws out and wastes, without any serious consideration  nearly 10% of one of these organisations full year annual budgets. I'll let you do the maths as to how many lives that amount of money actually impacts. And by-the-way, can I ask who in Railcorp has taken responsibility or has been held accountable for this debacle? I don't think accountability is a strong point of theirs!

So far, our martian friends are slightly confused with this level of disparity. Why would the bureaucracy of its leaders be so wasteful when money is short and there is so much in peoples lives that needs to change and money can in fact assist?

Let's now go to the other end of the spectrum. They notice that there is a huge divide between those in this society who 'have it' and those that are being challenged and don't have it at all. I talk of the windfall gain of Marius Kloppers, outgoing CEO of BHP. A $75 million handshake seems like an interesting use of a public company's hard earned cash. Let me give you some quick mathematical parameters to this figure. At current bank term deposit rates of say 4% (and I doubt whether Mr. Kloppers would be investing in these) $75 million would equate to a weekly interest payment to that individual of $57,700. The martian on the left is looking at the martian on the right and wondering what does one individual do that can substantiate that sort of reward? The answer is not quite clear, either to the martians or to many others, excepting those that are shareholders in BHP - which then begs the question when is enough, enough?

Has our society lost sight of people and the comparative values that we function within? Has society lost sight of what they value and what they don't? Is Australia continuing to clear the path of equality and focusing individual priority and forgetting what may be the glue that binds us as a nation?

I am not suggesting socialism as the answer, nor am I suggesting that democratic capitalism is all that its cracked up to be. Lets consider the GFC and the advent of financial engineering as evidence of that. I am however asking the question - when is enough, enough? At what point does society say that one individual earning $57,700 per week could be excessive whilst large numbers of lives are badly lived?

After this short visit our martian friends decide to return home, having had a pleasant trip, felt the physical beauty of Australia, but deciding that as a people, there is much work that needs to be done in order to improve the lives of ALL its inhabitants. Oh well - 2 less diners at one of Obeid's restaurants at Circular Quay. Never mind Eddie - there will be other opportunities.

Public Awareness of Nonprofit Sector - Overcoming the "Blue-Light Syndrome"?

The information is out there, it has been public since January 2010 when the Productivity Commission released its report entitled "Contribution of the Not-for-Profit Sector - Productivity Commission Research Report", and the statistics were quire surprising, especially to those outside the nonprofit sector, perhaps not so surprising for those within it or those that interact with it.

At that time there were 600,000 organisations in the sector. 59,000 of these were economically significant. The sector contributed $43 billion annually to Australia's GDP and represented 8% of total employment in 2006-2007. In addition the sector was growing at the rate of 7.7% from 1999-2000 to 2006-2007.

But there were other interesting bits of information that came out of that report which are not as widely repeated in the mainstream press. Amongst these was the fact that the level of understanding of the sector amongst the wider community was considered poor.

So the article appearing in this morning's Sydney Morning Herald (Tuesday 2nd April) by Kathryn Wicks did little to surprise me regarding the lighting of the Sydney Opera House to mark United Nations World Autism Awareness Day. Or should I say, the lack of support shown by politicians to fund the event (I'm sure there will be no lack of photo opportunities or commentary however on the evening - politicians appear to respond well to this as photo opportunities reinforce the message of what CAN BE DONE without supporting what IS done!) This is not the point of my comment here.

The point is that public awareness of the importance of the nonprofit sector, what it does, who it helps, how it goes about its activities, and the economic, political, and social environment and constraints within which it does so, should become more mainstream, especially if more and more public services are effectively 'outsourced' to the nonprofit sector. We should, as a society, better understand the attributes of one of the largest sectors of our economy. I think that the mining sector would attract far more attention and yet touches far fewer lives that the nonprofit sector. The former will eventually dwindle as the resources are extracted and dealt with. The latter will only grow, especially driven by demand. Putting this in perspective, in 2010 the mining sector contributed 8.4% to GDP and the nonprofit sector contributed 3.8% to GDP. Whilst slightly less than half, it is a contribution that ranks up there with the ones that everyone knows about. At another level the mining sector employs less than 3% of the Australian workforce compared to 8% in the nonprofit sector. These comparisons only reinforce that more Australians should understand the nonprofit sector better than they currently do - many rely on it on both sides of the supply/demand equation.

Where to from here?

One suggestion would be for the mainstream press to expand its focus on this sector in a slightly more coordinated and strategic fashion  An example here would be the way the Sydney Morning Herald deals with Local Government. Every Tuesday, the SMH produces a dedicated section entitled "Local government"  that captures key stories of that sector  jobs and tenders. I note that this morning's paper contained stories about bottle plans for the environment, amalgamation issues facing the sector and smaller articles regarding roads, online approvals and something on community groups signing a petition.

Consider what a section on nonprofits could look like - examples of well run outfits across the country, stories of success at the organisational and individual level, challenges of staffing, career opportunities  strategic partnerships and potential regular features of some of the less well-known nonprofit organisations that go about their business, Langley oblivious to outsiders other than those directly impacted by that organisation.

So there we go mainstream press. Who is up for the challenge?

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?