Four lessons corporate boards can learn from NFPs

Startups are often viewed as the corporate world’s sexy, cool trendsetters – scrappy, willing to take big risks and often operating on an oily rag. But corporate leaders looking for tried-and-tested ways to get things done on a tight budget might find a more reliable model in the best-run not-for-profits. 

NFP leaders are routinely told to learn from the corporate sector. But organisations that must deliver hard-to-measure outcomes over the long term, without deep pockets or the ability to borrow their way out of trouble, have lessons of their own to offer. Where corporate boards might respond with bonuses, consultants or familiar executive appointments, the best-run NFPs have to rely on focus, creativity, judgement, talent development and a purpose made credible through daily decisions.

Here are four lessons ASX boards can learn from the NFP sector.

1. A laser focus keeps you lean

“NFPs have been governing under constraints for a very long time,” points out chair of 10x10 Philanthropy Michael Sirmai GAICD. “It’s in their DNA to work with too little money and too many masters. Those challenges require boards to work differently and harder. The sector has built a resilience and sharpness I think is really helpful.”

But he says the best NFPs are disciplined about never losing sight of their primary goals, which helps them to stay outcome-focused and productive, even under resourcing constraints.

“An NFP starts with a clear problem and the whole idea of the organisation is to make that problem smaller,” says Sirmai, who is also COO for fintech Inviva. “I can’t speak for all corporates, but where that singularity of purpose is missing, the tendency is to focus on growth and simply becoming bigger, in place of a really clear strategy.”

He says the best NFPs are experts in working out exactly what to measure and pay attention to those signals that matter most – without getting distracted by shiny objects in the data. “Corporates are very good at measuring everything because they can, but that’s not always helpful. NFPs have to develop thoughtful proxies for impact and articulate the outcome they’re trying to achieve.”

2. Think beyond the next quarter

Resource constraints do not just force NFPs to spend carefully. They force boards to look beyond the immediate transaction and consider what will make the organisation both effective and durable. As Darrell Wade, chair of Philanthropy Australia, says, NFPs tend to plan five to 15 years ahead, rather than just for the next quarter or year.

“The business world has a reasonably linear approach to problem solving. You do a piece of research about the addressable market, you allocate resources – technology, human, capital – and then you’ve got a relatively linear approach to business success. You almost follow a predetermined pathway,” says Wade, also co-founder of Intrepid Travel.

 “Often, the NFP or philanthropic space is not like that. It’s far more organic and far more holistic. Sometimes, business can become a little insular and not really consider multiple stakeholders as part of its journey – and it may well do better if it did.”

He says high-performing NFPs last by maintaining a much more holistic view of their role in the broader social context, engaging with community stakeholders, government, corporate partners and, of course, the people they’re hoping to help and/or influence.

"If you take that more all‑embracing view,” he says, “and really engage more broadly, you’ll get a more sustainable business outcome.”

The lesson is to extend the planning horizon before deciding what success looks like.

3. Look for potential, not just experience

When it comes to hiring, proven experience can reduce risk, but it can also keep the same people circulating through the same roles. NFP boards often have to identify and develop people earlier, because they cannot always buy experience off the shelf.

“NFP boards develop people better, on the whole, because they can’t buy them or bring them in as easily as corporate boards can,” says Sirmai. “When money is limited, you can’t simply recruit an experienced director, so you bring people in earlier. There’s a greater willingness to give someone an opportunity to be a first-time director.”

But it’s not about landing people on the cheap, says Dr Lisa O’Brien AM GAICD, current deputy chancellor at UTS, chair of the Australian Education Research Organisation and former CEO of The Smith Family. It’s about finding the right people with overlapping values and interests.

“In my experience, the people you attract to work in an NFP – either on the board or as part of the leadership team – the successful appointments are people who have a passion for the purpose,” she says. “But they’ve got to have a whole lot more as well. You still have to be a really effective operator, with good skills, who can perform at a high level. Your heart has to really be in it. It’s a bit of a vocation to work in an NFP.”

The lesson is not to lower the bar – it’s to identify capability earlier and give people the opportunity to grow into senior roles.

“There are lots of things that motivate people,” says O’Brien. “It can be that they value being part of a team making change in the world. Or perhaps they want to be with an organisation that really values their development, so while you won’t be getting a bonus you’re getting high-quality learning, development, coaching and mentorship.”

4. You can’t fake your values

Many companies are facing public scepticism about “purpose-washing” – talking up environmental and social governance values without doing anything concrete to make them real in day-to-day decisions. It’s not just something that impacts customer sentiment. Australian workers consistently rank a sense of purpose as the most important factor impacting how happy they are at work.

Of course, NFPs are usually purpose-led organisations, so they’re at a massive natural advantage here. But O’Brien says that’s one of the reasons partnering with an NFP can be so important for corporations. Not so a corporation can outsource its purpose to a charity, but so a genuine partnership can give employees a practical way to engage with values the company claims to share.

“Those partnerships are so important and they’re two-way,” says O’Brien. “For some big corporates, not everyone in their organisation will find their mission particularly inspiring and purposeful, so partnering with NFPs, where we can provide that for them, is a real win-win.”