AICD Governance and Performance Study Unpacked

In October 2014, the Australian Institute of Company Directors released the 2014 NFP Governance and Performance Study. To explore the Study results further the AICD hosted a panel discussion to consider the key findings.

Here is an extract from the Discussion Paper:

Introduction

The Not for Profit sector has seen a range of reforms over recent years at Federal, State and Territory levels. While much of this reform has been positive, there is still uncertainty for organisations including regulatory changes, funding sources and changing business models. This uncertainty is causing many organisations to re-think their purpose and structures. What is also apparent is the evolving nature of governance in the sector, with the quality of governance continuing to improve.

In addition to operating in a state of flux, the Study reveals a sector contemplating a wave of change originating from within; some 30 per cent of directors report their boards have discussed or taken some action to merge their NFP with another in the last year.

This interest in formal amalgamations is probably not surprising in a sector where collaboration is common; however those who have been through such mergers urge a cautious approach. A linked trend is the desire by NFP directors to find performance indicators that clearly show how an organisation is achieving its purpose. This is complicated by the difficulty in gauging outcomes when an organisation’s impact can take years to become visible.

In some cases, outcomes may never be quantifiable. However, as one non-executive director (NED) pointed out: “We need to continuously align the board’s measurement focus with purpose. Sometimes we stray and our reporting becomes focused not on the ‘why’ but the ‘how’ of what we do.” Directors considering these issues might find the points below helpful in navigating this fast changing environment.

Governance, risk and innovation

Regulatory and legislative change in the last few years and the consequent focus on NFP governance has seen a continuing maturity in governance in the sector. Eight in ten of the NEDs who took part in the Study believe the governance of their organisation is better than it was three years ago. One panellist said governance was important not just for its own sake

but as a way to evolve NFPs to “for-social-purpose” organisations. “We should use governance  as part of our for-social-purpose advancement; let’s use it as a base and not get too trapped in old models but be looking forward  to new ones.”

Many of the NEDs and executives who participated in the Study still believe there is room for improvement; they would like their boards to attract more highly skilled directors and to further improve governance skills.

There was also a call for boards to be more innovative and risk-taking. “Many trusts and foundations have become more cautious over the years, particularly some of the bigger ones. They have forgotten that when those organisations started, they were quite the risk takers,” a panellist commented.

“Sometimes, when we talk about governance and compliance, we are checking to see we are doing things the right way. However, we forget this sector needs to be in the business of taking risks. That’s the only way we’re going to attack some of these really complex decisions.”…

To continue reading, download the full report HERE.