Aus NFPs that Fail to Plan are Planning to Fail - Report

Not for Profit organisations with a more rigorous and structured approach to board measurement are more likely to expect success and an increase in revenue, according to new research by philanthropic fund managers, Perpetual.

Perpetual’s 2015 NFP Governance Survey revealed that there is a clear difference in optimism among those taking action to make an impact, versus those who are not.

Caitriona Fay, National Manager Philanthropy, Perpetual Private said NFPs with a plan were better positioned for success.

“The research shows NFPs with a more rigorous and structured approach to board measurement have greater confidence in revenue increasing as a result of enterprise development and investment,” Fay said.

“By mapping board performance, these organisations are planning for progress and taking action. Documenting their progress along the way, they have a clearer path to reach their goals and are optimistic about achieving success.”

Nearly three quarters (72 per cent) of those who expected board members to participate in formal skills and knowledge development expected revenue to increase from enterprise development compared to less than half (46 per cent) of those not expecting board members to participate in formal training and development change.

The report said the common characteristics of NFPs expecting revenue to increase included more focus on training, measurement of impact through revenue analysis, and having a documented investment strategy in place.

When selecting board members, 86 per cent of NFPs identified skills and background as the most important factor, but only 38 per cent are investing in formal skills and knowledge development to help board members develop their skills.

“Good business understanding does not necessarily translate into good governance capabilities,” Fay said.

“It’s important for individual directors and board members to understand where their skills and development opportunities lie and be open to strengthening these within a NFP environment.”

Fay said passion and enthusiasm for the organisation were rated by 84 per cent of NFPs as one of the main strengths of the organisation, but the findings suggest this is not enough to sustain the sector.

“More than a third (69 per cent) identified limited resources as their main issue, closely followed by lack of board experience (66 per cent).

“Resources will consistently be an issue for most NFPs, but lack of board experience is something which can be more easily addressed through training and selecting people with the right experience,” Fay said.

“Over the past three years there has been little change in the number of NFPs adopting formal processes to measure board performance, but the research suggests there is a need for NFPs to take action.”

The report said another surprising statistic was how NFP boards are measuring success.

“The overwhelming majority (72 per cent) measure impact through the analysis of revenue, but what about the impact and outcomes of their work on the communities they serve?” the report said.

“We didn’t expect to see revenue as the primary measure of impact,” Fay said.

“Every NFP has a mission and while a healthy balance sheet is important to get the job done, its meaning diminishes if the NFP doesn’t know whether they’re effective at meeting the needs of the communities they serve. It also makes it challenging to demonstrate to potential philanthropists what the organisation is achieving with the resources it does have.”

The findings are based on a survey of 165 participants in a scholarship program for 320 chairs and directors of NFP boards.

Funded by the Perpetual Foundation and the JS Love Trust, the scholarships are awarded by the Australian Scholarships Foundation and allow board members to attend the Australian Institute of Company Directors’ The Not-For-Profit Board or The Not-for-Profit Chairman courses.