Saturday, July 7, 2007

Management information aids effective governance

The vast majority of not-for-profit organisations in both Australia and New Zealand are small. a minority are sufficiently large to have a need for an executive management team, yet every not for profit organisation requires some form of governance. The issue for many is that those making up the governance are community volunteers; many of whom have become involved in the governance due to some form of past contact with the organisation and empathy with what the organisation seeks to achieve. Having such empathy is good for the organisation, it helps those in governance to remain concious at all times that the organisation exists due to people; both those that work within it and those it seeks to help. The converse situation would be to have governance groups comprising people with little or no empathy that went about making decisions based upon very narrow criteria and without any consideration for the impact or consequences of their decisions.

Just as it is clearly undesirable to have governance groups making decisions without taking into consideration the impacts and consequences; it is equally as undesirable to have governance groups making decisions, or failing to make decisions, based upon personal feelings rather than effective governance.

A contributing factor to poor decision making by not for profit governance groups can be the lack of clear and concise information provided to them. Poor, unclear and confusing information leads to uncertainty. In the minds of those within the governance group this leads to higher risk. The majority of governance groups are adverse to risk and they will make decisions aimed at reducing their exposure to risk rather than aimed at increasing their exposure. The key is for the management team to conduct research into the benefits and to present evidence to the governance group in a manner designed to minimise fear of the unknown.

Governance groups require the management team, in particular the CEO or Executive Director, to have researched the question before it is bought to the table for discussion. They require the information to be presented as evidence rather than as opinion. They do not need to know what is to be done, or even how it will be done, rather they need to understand how the planned activities will benefit the core business of the organisation. And as many governance groups do have a high level of empathy with both staff and consumers they want to know how both of those groups will benefit from any planned activity. Often if the CEO or ED is seeking approval from the governance group to proceed in a certain direction then that person should take the time to elaborate on the consequences of not doing so; just as much as the benefits of doing so.

It is important for governance groups to focus upon the future and not upon historical events from the past. Yes, an understanding of history is helpful in explaining the context within which an organisation formed and evolved but it is of little relevance with strategic decision making for the future. When the focus is on the past the risk is the governance group will miss opportunities for the future. In doing so, they are being negligent in their duty to all stakeholder groups and they may well condemn the organisation to extinction.

The role of governance is not easy, neither is it simple or straightforward. Increasingly, funding bodies and other stakeholders are holding governance groups more accountable for their activities and for the outcomes. Increasingly, legislation is being directed at the operations of those in the not-for-profit sector. Increasingly, the environment is becoming more dynamic. The level of competition for funding is increasing. Not for profit organisations are becoming more diverse in some instances and even larger, or both, in other instances. The level of predictability is decreasing. The level of governance discomfort is increasing. It is time for governance groups to focus on effective governance.

The basic premise is that governance groups focus upon setting the strategic direction of an organisation. I believe this should apply regardless of organisational structure or of size. Yet the smaller the organisation or the more localised the organisation the more inclined members of the governance group are to become involved in (meddle) the daily operation of the organisation. This should be avoided at all costs.

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