The Australian Institute of Company Directors has released its annual not-for-profit governance and performance study. Why have you been to Newcastle to present the findings?
The Not for Profit (NFP) sector is of critical importance to Australian society as it touches all of lives in so many and diverse ways. Whether it is through our local sports clubs, other recreation or the arts or a multitude of charities which care for the most vulnerable in our communities, these organisations are vital to our community. And of course, in Newcastle and surrounding districts we have many of these wonderful organisations, so it was important for AICD to be able to discuss the findings of the Study with many leaders of these NFPs.
A key finding is that NFP directors are spending more time on their roles due to increasing complexity. What is driving that?
We have noted over the 10 years of the study that directors' workloads have increased, and this year saw that almost a quarter of directors were spending more than 5 days per month on a single NFP. They also noted an area of improvement would be a greater focus on strategy, so by implication the compliance burden appears to be driving this increased time commitment. And of course, the changes of business models with the introduction of client-directed care in the aged care and disability sectors has also increased the workload of directors.
The changes of business models with the introduction of client directed care in the aged care and disability sectors has also increased the workload of directors.Phil Butler
What unique pressures does a NFP director face?
Non-executive directors of NFPs need to keep that helicopter view, of overseeing the organisation and non-getting too much into the details of its operations. However, for many smaller NFPs it is also expected that directors are required to do some volunteer roles or extra areas (such as the treasurer role which is more of a management role than governance). This can sometimes blur the lines between governance and management
What did the study find on remuneration and succession planning?
We have tracked remuneration of NFP directors over the years of the study, and there has not been a substantial increase in the percentage of directors being paid despite the increased complexity of their roles. About 19% of this year's respondents said they were being paid. And they were generally from much larger NFP's turning over more than $20 million.
Succession planning remains a challenge for many NFPs, particularly in regional areas where the 'pool' of suitably qualified directors may not be as large. The study also noted that there was a lack of younger directors with only 5% of respondents being under 40 years of age.
What does AICD recommend to ease stress-points for NFP directors?
One suggestion is to consider succession planning early rather than waiting until it's too late. By looking at the skill sets the organisation will need in the future and considering some potential people to meet those skills is a good way to future-proof your governance. Also, thinking about your governance practices such as meeting agendas and scheduling is useful. Don't continue to do things just because "that is how we have always done it" - new directors may be turned off by 'old-school' governance.
What was the response from the Hunter directors as far as issues they raised?
Some were initially surprised by the time commitment. However, when they reflected on the time they were spending (particularly those who were Chairs of NFPs) they quickly saw how the various meetings, reading of papers and visits to facilities added up
What advice was given in Newcastle?
One of the other findings related to the mergers of NFPs appeared to have slowed. It was noted however that NFPs generally collaborated very effectively and this was an area that was a point of difference from other sectors. Such collaboration may include sharing of back-office services such as payroll or finance, or in delivery of services.
How significant is the AICD study?
This is the 10th edition of the study and it continues to make a substantial contribution to our understanding of governance issues in this diverse and critical sector. Close to 20,000 respondents have contributed to the study since it began. The learnings from the study are really useful for NFPs and in particular the questions in each section give boards and leadership teams thoughts to consider. The study is often referenced by regulators and all levels of government.
To you, the most surprising study result?
The slowing of mergers was one of the greatest surprises but upon reflection it makes sense. Two years ago we saw an upward trend towards mergers with almost 40% of organisations considering mergers (not that anywhere near that number proceeded). This has dropped considerably this year both in terms of actual mergers and consideration of mergers. Many directors have said they are now waiting to see the success (or otherwise) of mergers that have taken place before embarking on more.