Effective management

The not-for-profit sector differs from the commercial, for-profit, sector. For a start, organisations in the nfp sector do not have to 'sell' something to earn revenue. In the majority of instances the revenue is donated from one source or another. Fee for service within the nfp sector is growing however still represents only a small amount of total revenue.

What are the management implications of the difference between the two sectors? In the commercial sector managers will be judged upon indicators such as revenue, profitability and growth. Some might suggest such indicators are not relevant for the majority of the not for profit sector. Is that true? Surely not for profit organisations are businesses, regardless of where they obtain their revenue from? Were that the case then managers within not for profits should be judged on similar indicators to those in the for-profit sector.

A possible outcome of managers not viewing their nfp organisation as a business might be that they focus on the wrong indicators, insufficient indicators or in some instances, no indicators at all. Not for profit organisations need to spend less than they earn - financial management. They need to make a surplus to remain viable - financial management. They need the right people in the right place to do the right job - people management. They need to tell consumers about themselves and how to access programs - marketing management. They need to satisfy the needs of those consumers - customer service. They need direction and strategy - governance. They share all these attributes with organisations in the for-profit sector.

Not for profit organisations have one attribute their counterparts in the commercial sector do not have. Not for profits are dependent upon the vagaries of political cycles and decision making. Unlike their commercial counterparts the not for profit organisation cannot easily change direction, implement a new strategy or introduce a new product or service - unless it does so by using its own resources - a powerful argument for making a surplus and having a mixture of funded programs and fee-for-service programs.

Not for profit organisations cannot manipulate their margins in the same manner commercial operators might. This places a greater emphasis on financial management within the not for profit, especially if the strategy is to create surpluses.

The one attribute not for profits share with those in the commercial sector is the use of people to deliver services. This is also the one attribute the not for profit has full control over. People are the key to an effective organisation. People implement strategy.

The board or governance group within not for profits are ultimately responsible for the ongoing viablity of the organisation. Their responsibility extends beyond simply setting visions and ensuring activities fit that vision. They have a responsibility to regularly review the activities and outcomes of the management team. Some of the issues the governance team might look for include; a lack of clear direction from themselves; signs the organisation is able to cope with its growth, complacency within the organisation, acceptance of poor performance, autocratic management or a lack of delegation, seemingly chaotic activity by management and poor communication.

Indicators that all or some of these issues may exist in your organisation include; a lot of activity with little in the form of clear outcomes, frustration by staff at barriers or a lack of clear understanding by management as to what it is they should be doing, an insistence on doing things they way they have always been done, people not challenging the status quo, high turnover of staff, low moral, criticism of the organisation, a lack of new ideas or new services, those patently unable to achieve the desired outcomes being protected by management, lack of trust, 'silo' mentality between departments or service areas, lack of information sharing, staff not knowing what is actually happening in their organisation or not being valued for their contribution.

Management failure is not terminal; often it can be an evolutionary process. Many managers are good at specific areas of management, for example, growth or change, and may become bored or complacent once the desired outcomes have been achieved. A good governance team would have understood this possibility when they recruited and looked to the future when a replacement might be needed.

The governance team is responsible for setting direction and strategy and they are responsible for holding the management team accountable. Effective implementation of strategy equals effective management.

Understand the stage of development for your organisation and plan ahead. In this way the resources are available and the transition will be smooth.

The management team must display leadership. Conduct an audit of your organisation, its needs and the gap between what it has and what it needs. Cut out the deadwood. Build an organisational structure that is designed to deliver the desired outcomes. Never try to make the outcomes fit the structure, that is a recipe for mediocrity.

Finally, foster and nurture the human resource. People are the key. The single most important characteristic of an effective manager is the ability to work with and get the best out of people. If your managers cannot do this then they are the wrong person in the job and they should be replaced with someone with those skills.

Rudd Government to remove gagging clauses

For the past decade the Australian Federal Government has inserted gagging clauses into service delivery contracts with the not for profit sectors. These clauses were designed to prevent service delivery organisations from speaking out on the state of their sector. The impact is muted advocacy. A Government that does not wish to hear off the problems does not have to work towards solving those problems.

The recently elected Rudd Government has moved quickly to indicate that such clauses will be removed from future contracts - a brief window of opportunity for meaningful dialogue - at least until the next authoritarian government is elected - or the current government begins to find the truth a tad unpalatable!

On the surface the removal of gagging clauses is a relatively easy political decision and it appears to have little downside. However the removal of gagging clauses is much more than a political stunt. It opens the door to dialogue between from the three sides of the social service triangle; those that fund service delivery, those that deliver the services and those consumers that actually need the services. It is important the channels of communication are open, in both directions and that the feedback to fed, unfiltered, to Government ministers.

The challenge for the not for profit and community sectors is to work with both the Government and their consumers to develop effective channels of communication. Government ministers are a long way from the coalface, there are a lot of layers of people in between those that dispense the funds and those that need the services. Many of those people in the middle are bureaucrats and many of them have their own agenda. Sector peak bodies, lobbyists and influencial organisations within the sector have a responsibility to gather information and present it to Ministers in a clear and truthful manner. There is little difference between a Government that gags sector representatives and a sector that tries to use information to manipulate for mislead Government; the outcome will be the same, poor information, lack of trust and poor political decision making.

The removal of gagging clauses opens up the potential for increased civil advocacy. Opportunities will be created for increased dialogue. Ministers can be made more aware of the real issues. The Rudd Government is to be congratulated for its moves in this direction, exposing themselves to the truth may from time to time be an unpleasant experience and there will be those amongst their adviser that will from time to time advocate a return to a more restrictive regime. It is a fundamental tenant of a fair and just society that all groups and all peoples are enabled to speak out and to be able to do so without fear of retribution.

Draft code of Governance

Our Community, an Australian community sector online clearing house, has released a draft Governance Code for discussion. A copy of the draft document may be downloaded from here.

Public comment is welcomed. Those making submissions should do so prior to Tuesday 15th April 2008. Fax (03) 9326 6859. Our Community is particularly interested in feedback on areas such as -

• the underlying principals of the code
• the specific detail of the draft
• the difficulties your organisation might face if implementing the code