5 Significant Insights from AICD NFP Report

Tuesday, April 7, 2015

 

The 2014 not-for-profit (NFP) Governance and Performance Study by the Australian Institute of Company Directors (AICD) revealed that the best boards and CEOs want robust strategic planning as a catalyst for innovation and performance improvement. Boards want better measures, including non-financial measures, while improving role clarity between boards and CEOs is still on the agenda.

 

1. Strategy is vital

The 2014 not-for-profit (NFP) Governance and Performance Study by the Australian Institute of Company Directors revealed that highly experienced non-executive directors divided their time between strategy (22 per cent), managing funding (16 per cent), reviewing performance (14 per cent), risk oversight (13 per cent) and compliance (12 per cent).

 

This is at odds with many club boards who lack the basics of a strategic plan. To fill up the board meeting, they spend their time on monitoring operational and business-as-usual activity, correspondence and donation requests.

 

 

 

2. Board improvement key to strategic success

When asked what three things would improve board performance, the significant responses were:

  1. More highly skilled directors and higher levels of governance

  2. Better information for decision making

  3. More innovation.

 

To realise these improved performances, boards are:

  1. Reviewing the organisation’s constitution

  2. Amending their board structure, for example changing to a skills based or independent board and changing the length of time directors can serve on the board

  3. Commissioning a strategic plan seeking external assistance.

 

3. Measuring performance needs improvement

Boards struggle with getting the right kind of performance indicators.

 

Many are familiar with the monthly operational report that shows the organisation is efficient, effective and sustainable at a macro level, and how many kegs are being sold at the micro level.

 

Boards also need a second report that shows if their strategy is achieving the organisation’s vision. To do this you need a strategic plan. The survey shows that organisations with income below $1m are twice as likely as larger organisations to state that they were ineffective at measuring their strategy.

 

 

4. Directors want more non-financial information

Approximately 60% of directors want more measures of achievement of their strategy and half want more non-financial performance measures in general. About 40% specifically want more information about risk, data on the sector and a plain-English executive summary on achievement of financial benchmarks.

 

CEOs are generally supportive of providing boards with what they need, but commented that club directors are not always aware of the resources required to provide data. In some cases, boards did not use the results.

 

 

 

5. Role clarity needs reviewing

Clarity in regards to the role of the board and the role of the CEO requires further education. Lack of role clarity can have a significant impact on the performance of the board and relationships between members. Role clarity is one of the fundamental outcomes of Integrated Governance's governance training.

 

Directors in AICD focus groups told ‘war stories’ of situations where conflict was so severe it resulted in director and CEO resignations. In nearly all cases this conflict was caused by a lack of understanding of how to operate in an environment of shared responsibility and delegations of authority.

 

They gave examples of both chairs and CEOs who behaved as if they were running their own business, not considering alternative opinions, withholding information and issuing orders. They also gave examples of the opposite, that is, chairs or boards that were passive or disengaged, and CEOs unwilling to make operational decisions without approval from the board.

 

Finally, there were stories of directors or CEOs who simply lacked the interpersonal skills and respect for others needed to work in collaborative environments.

 

 

 

 

Read the full report here:

Australian Institute of Company Directors. (2015). NFP GOVERNANCE AND PERFORMANCE STUDY: Examining governance practices and opportunities in Australia’s NFP sector. Online at www.companydirectors.com.au. 

 

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