How well does governance of your not-for-profit rate?

What is the purpose of having a governance group? There is only one answer to this question. The purpose of the governance group is to set strategy and hold the management team accountable for implementing that strategy.

Governance is a planning process. Governance is about bringing together all the elements required to ensure an organisation is moving in the desired direction. Governance is about monitoring.

Does your governance team have a dedicated time allocated at each meeting to review progress against its strategic plan? Does it even have a strategic plan? If you answer no to the second question then you are probably already in trouble. If you answered no to the first question then you will likely get into trouble at some point in the future.

For strategy to be implemented there firstly must be a strategic plan. It doesn’t matter if it is a single page document or a 100 page document; the plan must exist. Creating the strategic plan is a major function of the governance group.

Someone has to take responsibility for implementing the strategic plan. This is a function of the executive team, not the governance group. It is a function of the governance group to review progress, by the organisation, against the performance indicators contained within the strategic plan. Time should be allocated for this purpose at every governance meeting.

If your organisation has a complex strategic plan it is recommended the governance group discuss with the executive team a structure for review of the strategic plan. For example, it might be agreed that one key outcome will be discussed at each governance meeting. This is important to ensure all outcomes are monitored in a timely manner and to enable the executive team to prepare relevant information.

Holding the executive team accountable for implementation of strategy is a key performance indicator of the governance group. When an executive team falls down and fails to achieve the desired outcomes it is as a result of failure by both the governance group and the executive team. Before the governance group seeks to make changes to the executive team, the governance group should look at themselves first and ask what changes they might need to make within their own group and their own processes.

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
  

Damning report by Perpetual Trust

This report is a 'doosy', an absolute ripper. 1300 survey respondents and more than 50 focus group discussions and guess what the outcome was? Members of governance committees and Boards of Australian not-for-profits were described in the following words - inferior in strategic planning and financial management, self-interested, poorly skilled, involved in petty issues, interfering in management, didnt add value, didnt involve themselves in professional development, had bad relationships with CEO's . . . and the list went on.

As I read over the report and its summary my mind wandered over the activities of the various boards that I have worked with as a consultant and some that I serve on - and I found myself squirming in my seat at the memories.

This report deserves to be circulated to every not for profit board in Australia. It needs to be dissected, discussed, understood and acted upon. I plan to do my bit. I have downloaded the report and will be emailing to board members I serve with. If you would like a copy please email me on john@johncoxon.com.au

Technology use within not-for-profits

A number of small, seemingly, unconnected events have occurred in the past few weeks that have caused me to think a little more about this issue. A week or so back I received an email from Bill Wallace. Bill had found this blog through a Google search (which alone gave me the warm and fuzzies). Bill writes a blog on just about everything and I have found some of his comments interesting and thought provoking. Bill was seeking feedback on how not for profit organisations used technology such as blogging. You may see Bill's blog at www.billwallaceonline.com. Following my exchange of emails with Bill, I had a conversation with a client of mine, a not-for-profit, and it quickly became obvious they had absolutely no idea of the value and benefits that might be accrued from the use of online tools. The yesterday i received the monthly newsletter from Our Community. Within the newsletter was an article on trends impacting upon not for profit organisations. In that article was an piece about how the world is becoming more engaged through the use of online tools.

Now as you know I am no Luddite when it comes to technology but there is a limit to my knowledge and understanding. I have been using blogs and wiki's as marketing and communication tools for the past twelve months, I have had an online presence through websites for the past eight years, I was one of the original users of online banking when it was introduced. Yet my understanding of online space and online communication is restricted to ICQ and msn, neither of which I have used in years. Do they still exist? Since then I have heard about the likes of MySpace and a handful of others similar online places however I have never used them. Recently I graduated to an IMate phone which is effectively a mini-computer on steroids and the trouble I had setting this beast up so that it would do a small portion of the things I am paying for lead me to believe that I had reached saturation point in my ability to absorb any more technology. Unlike my 15 year old son who has been online in one form or another since he was five and knows nothing else, I, in my 50 years have had to shift from having a black ceramic box on the wall that routed all calls through a switchboard to todays situation where I have clients suggesting I install Skype and VoIP.

My point here is this. I am semi-computer literate, with perhaps an above average understanding of what is occuring within the online space, yet I am struggling to keep in touch with all the changes, never mind having a full understanding of how I may benefit from using this technology. Now I look at the not for profit organisations I have as clients and only one of them stands out as having the capacity to capitalise on this technology - yet they do not - that means there is little chance those that are smaller and even more limited capacity will do so.

Why are they missing out on these benefits? Simple. The information available is partisan, fragmented and confusing. What do they need? Someone to present them with a clear, concise overview of the various online options, an outline of the main benefits, some ideas on how to use this technology in a strategic manner and a step-by-step set of instructions on how to implement the technlogy in a low cost manner. When someone does this, and creates a white paper with this information, please send it to me and I, in turn, will place it on this blog and make sure every one of my clients recieves a copy.

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.