Not-for-Profits and Their Boards

Upland Consulting - not-for-profits - Black and White photo - candle flameWhat about not-for-profits (better, for-purpose organisations)?  What about their boards, their governance, strategy and risks?  Not-for-profits represent a very large chunk of our GDP and our jobs market, and, as it happens, their governance requirements are not so different from the corporates.

The public and the regulators will hold NFP directors to essentially the same standards as company directors.  NFP boards also need effective strategy and risk management to achieve their mission.

What’s different?

It’s Harder

Governance in not-for-profits and community organisations can be harder for a couple of reasons.  For one thing, the passion that drives these organisations can send good governance down the priority list.  They exist for their clients, their members, their purpose: an investment in sound governance (or even office chairs) can look like diverting resources from their core purpose.

Second, benchmarking is much harder.  If I run a telco, I can assess profit per customer, or customer retention, or market share, and see if I’m in the game, and improving, or not.  If I run a mining company, I’ll have a pretty transparent view of the prevailing costs of production, recovery rates, or other benchmarks to compare with my own.  Any for-profit business that is out-performed will go broke if it doesn’t quickly get the message.

But the not-for-profits don’t generally have such signals.  Certainly in Australia, the sector is fragmented and niche-based, often for the best of reasons.  But that makes it very hard to tell if my dollar of public money is working harder than yours, or not.  Simply serving more clients, say, isn’t good if they are ill served.

These two reasons call for two courageous responses.  First, not-for-profits must find the courage to say to themselves, their staff and their donors that some resources are going to be invested in the long-term viability of the organisation itself.  Second, they must define their own performance measures and improvement targets, explain and sell these to all their stakeholders, and hold themselves accountable.

Corporate Relations and Not-for-Profits

To engage on equal terms with corporate donors, including the increasing number of benevolent funds and trusts started by wealthy individuals and families, takes mutual understanding.  As industry partners and sponsors, they look for the assurance of governance structures and processes they can recognise and assess.  They expect a common language and common concerns between their boardrooms and yours.  Sometimes the administrators of the trusts actually have trouble finding charities that meet the right standards of governance and risk management.

Company-like governance and compliance expectations are not going to go away.  Non-profits and community groups must learn the language and the rules of the corporate sector.

What to Do?

It is clear that community and funder expectations are that not-for-profit organisations, and their directors, will be as professional, as thorough, and as transparent, as other organisations.  The more you succeed, the higher the bar.

So, apart from the return to shareholders, a not-for-profit board has essentially the same 5.5 Core Tasks as a company board.  It must be just as aware of its own performance as a board, and just as diligent in improving.

I can help.  Contact me, and let’s start that conversation about how to lift the performance of your non-profit’s board.

Resources

The following articles from my blog may help you think this through:

Enjoy.

Clients Say…

“Professional and valuable content that is very relevant to my role as a board member.”
SG, NFP Board Member
“Strengthened my governance knowledge.”
NFP Workshop Participant

 

Print Friendly
Top