The Not-for-Profit sector is a vital component of Australia’s economy. It consists of over 60,000 organisations, is worth around $43 billion and accounts for approximately 8% of national employment.
A Changing Paradigm
Since its early religion-based beginnings of the 1800s to the welfare-based paradigm of the 1970s, the Not-for-Profit landscape has undergone continual evolution but arguably never more so than in recent years. The sector has now fragmented into a complex marketplace of private and community businesses in an environment more commercial than ever before. Leaders of third sector organisations are now faced with the realisation that having a worthy cause may no longer be enough to ensure survival.
The aim of Governance is essentially to ensure that organisations act in the best interests of society. This is reflected in Management programs developed for leaders in the sector – for example, one-quarter of ACU’s Graduate Certificate in Management of NFP Organisations course content deals with governance, a topic the university also run frequent in-house workshops on.
ACU Honorary Professor Geoff Kiel identifies the 10 steps to good governance as…
1. Recognise that good governance is not just about compliance
Boards need to balance conformance (i.e. compliance with legislation, regulation and codes of practice) with performance and strategy
2. Clarify the board’s role in strategy
The board has a significant role to play in the formulation and adoption of the organisation’s strategic direction. This must be clearly agreed with management.
3. Monitor organisational performance
Ensure that corporate decision-making is consistent with strategy and owner expectations. Do this by identifying key performance drivers and establishing appropriate measures for determining success
4. Understand that the board employs the CEO
The board/CEO relationship is the crucial link between the board’s role in determining the organisation’s strategic direction and management’s role in achieving corporate objectives.
5. Recognise that the governance of risk is a board responsibility
Effective risk management supports better decision making because it develops a deeper insight into the risk-reward trade-offs that all organisations face.
6. Ensure the directors have the information they need
Better information means better decisions. Regular board papers will provide directors with information that the CEO or management team has decided they need.
7. Build and maintain an effective governance infrastructure
To ensure that the line of responsibility between board and management is clearly delineated, it is particularly important for the board to develop policies in relation to delegations.
8. Appoint a competent chairperson
As the “leader” of the board, the chairperson should demonstrate strong and acknowledged leadership ability, a sound relationship with the CEO, and the capacity to conduct meetings and lead group decision-making processes.
9. Build a skills-based board
A board should seek to ensure its members represent an appropriate balance between directors with experience and knowledge of the organisation and directors with specialist expertise or fresh perspective.
10. Evaluate board and director performance and pursue opportunities for improvement
Board effectiveness can only be gauged if the board regularly assesses its own performance and that of individual directors. It’s critical that any agreed actions from an evaluation are implemented and monitored.
By Lauren Hamilton-Thompson, ACU Executive Education
‘10 Steps to Good Governance’ courtesy of ACU Honorary Professor Geoff Kiel.