The Debate

Should NFP boards be a training ground for board roles in the commercial sector? Three industry leaders share their views.

Governing NFPs

PHIL BUTLER GAICD
NFP SECTOR LEADER, AUSTRALIAN INSTITUTE OF COMPANY DIRECTORS

The question “should not-for-profit (NFP) boards be a training ground for board roles in the commercial sector?” implies that NFP boards are less complex or important than the latter. This is not the case. Perhaps the question could be better framed as “how do we develop appropriately skilled people to govern our organisations?”

A good director is borne from a range of skills, experience and personal attributes. They never stop learning and the experience they gain from a variety of different situations (as opposed to director experience in any specific sector) will help them face future challenges. Governance is a team game. It requires appropriately qualified, skilled and passionate directors to work together with the leadership team who are working day-to-day in the business. This may be a single executive officer, a team of volunteers or a group of C-suite executives. It requires the vision to ensure that the future challenges and opportunities for the organisation are understood and that an appropriate culture operates across the entire team. Most importantly, it requires a longer-term perspective of succession planning to ensure the organisation can be appropriately governed by, and for, the next generations.

The development of the Good Governance Principles and Guidance for NFP Organisations highlighted the sheer diversity of the NFP sector in terms of scope, purpose and organisational structure. In the process of developing the principles it was recognised that it was not appropriate to have “recommendations” on what constituted good governance. Rather, a series of “questions for consideration” was developed to help boards determine the “appropriate” governance for their organisation, and noted that this may change as the organisation evolved and matured. Such challenges also face many public sector organisations.

Our society is fortunate to have leaders prepared to take on the challenging and rewarding roles of governing organisations across all sectors – private, public and NFP. Each has their own nuances and subtleties which make any comparison of one being “better as a training ground” almost irrelevant.

ANNE ROBINSON FAICD
PRINCIPAL
PROLEGIS LAWYERS

The complexity of not-for-profits (NFPs) is attributable largely to two factors: the nature of their workforce, and the fact that they are dealing in social outcomes. The NFP workforce is a unique beast. Comprising a mix of volunteers and paid personnel, people are hugely committed to their cause and typically sign up for a lot more than just a pay packet.

Instead of focusing solely on return on investment for shareholders with perhaps a good eye on corporate social responsibility, charity boards must instead turn their attention to the nuanced and diverse, though still measurable, realm of social impact. This requires very special skill sets.

This is not to say that would-be commercial directors should not aim for a position on an NFP board to learn about good governance and directors’ duties. These skills translate to all board roles, whether the organisation is for-profit or not.

Being on an NFP board will teach you boldness in the face of adversity, resourcefulness in the face of scarcity, lateral thinking in the face of complexity and adaptability in the face of change. In fact, there is no better training ground for a commercial board than a role as an NFP director.

As the vast majority of charity directors are not remunerated, it can be easier to land a role on a NFP board than their highly sought after – and well paid – commercial counterparts.

Having said this, NFP organisations will not necessarily be interested in everyone who knocks on their door. Being a good commercial director will not necessarily make you a good fit for an NFP board, and vice versa.

NFP directors are by no means just “directors with training wheels”. The complex nature of the business of charities and other NFPs frequently means that their directors find themselves juggling multiple revenue streams – donations, grants, goods and services, and sponsorship. Often, the lives and welfare of real people are dependent on the quality of their work. Being a charity director is certainly good training, but not because it is any easier than being on a commercial board.

BILL D’APICE
PARTNER
MAKINSON D'APICE LAWYERS

My answer to the question “Should NFP boards be a training ground for board roles in the commercial sector?” is yes and no. Let me explain.

“Yes”, because NFP boards are in fact a very good training ground for people who wish to become directors or enhance their skills as directors. Particularly in the case of smaller NFPs, most NFP board roles are challenging. Often, NFPs are heavily involved in the fight for the charity dollar and can have limited resources to achieve their outcomes. Board decisions are critical to the survival of these smaller NFPs and the guidance that can be given by the board to management is invaluable.

However, other NFPs can be financially significant and sophisticated in their governance structures and will have substantial resources available to apply towards their mission.

In either circumstance, an NFP director gains great experience from facing such challenges and interacting with fellow directors and senior management.

There is no doubt that involvement as a director of a board in the NFP sector is helpful in one’s development as a director. NFPs are typically very mission-focused in their activities and directors can get a lot of personal satisfaction in seeing results that their NFP is able to achieve. It also looks good on the director’s resume.

I also say “no” to the question because NFP boards should not be considered only as a training ground. They are important in their own right and in many ways even more important than commercial boards because of the role that NFPs play in the social fabric of our communities.

Being on an NFP board should not be considered to be merely a stepping stone on the way to lucrative commercial directorships. Instead, consider the contribution to our community, personal fulfilment and the breadth of experience and insight that can enrich your expertise.

I encourage everyone who has considered doing so to join a NFP board, whether you are experienced at board level or not. The role will provide or enhance skills, allow you to feel part of a mission and achieve some good in our community.