What no-one tells you about the transition from corporate to NFP board

Two respected directors specialising in NFPs and charities say governance in the sector is complex and argue corporate boards should be the training ground, not the other way around. 

Darren Fittler pulls no punches. The founder and lead partner of the Charities and Social Sector practice at top-tier Australian legal firm Gilbert + Tobin thinks “doing time on a corporate board is your training wheels” for joining an NFP or charity board. 

“I often hear that people go into an NFP board to get it on the CV, get some experience and then graduate to a corporate board, where it’s going to be ‘harder’. I think it’s the reverse.”

He’s not alone in this view. Sandy Blackburn, an experienced NED and one of Australia’s leading social impact specialists, counsels that prospective directors thinking, “I can help this little organisation, they need me”, need to take a beat. “Actually, they need you to play a very specific role in a very nuanced way, and to hold back on some of your skills until you understand more deeply what’s going on in this new context,” she says.

There’s a lot to learn. 

A whole new world of legal complexity

“Because we are talking about charities, things like directors’ duties under the Corporations Act are turned off for companies limited by guarantee and other ASIC registered charities,” explains Fittler. 

“Instead of being governed by ASIC, you’re governed by the Australian Charities and Not-for-Profits Commission (ACNC) and bound by its governance standards. If you’re a charity that conducts overseas work, you’re also separately bound by the external conduct standards. These are all separate and different from what you’d normally find as an ASIC-regulated entity.”

Another key difference, adds Fittler, is that in the NFP world, instead of shareholders, you have members. There are myriad possible structures.

“You have cooperatives and incorporated associations, which are regulated at the state level, not the federal level, Aboriginal corporations, which are regulated by the Office of the Registrar of Indigenous Corporations. There are charitable trusts – you might be a trustee of a trust or you might sit as a director of a trustee board that administers a charitable trust. There are so many entity types. That’s just the baseline.”

These boards need your A game

As founder/managing director of Social Outcomes and founder/CEO of Impact Culture, Blackburn’s focus is on helping organisations to measure positive impact and develop strategies to improve it. Blackburn says another behaviour she sees in the transition from corporate to NFP is directors becoming risk-averse in a limiting way. 

“Some people get on these boards and seem to leave their acumen behind – they treat the charity as if it’s really fragile,” says Blackburn. “They say, ‘We can’t take any risks, we have to make sure we’ve got plenty of money’ and they hold it fairly tightly.”

Financial sustainability is important, but the bottom line is positive impact for the clients or the cause. “Otherwise there’s no point,” says Blackburn. “When I worked in the corporate world, we’d talk about risk-return. People often come onto NFP boards and say, ‘We don’t want to take any risk’. I say, if you didn’t take any risk in your corporate role, you wouldn’t have any return. The same is true here. Our return is impact.”

Blackburn argues that board directors who “try to derisk everything” imperil the very reason the organisation exists. “You have to give us freedom inside the organisation to take risks,” she says.

“You have to invest, try new things, put yourself out there – the same as you’d do to grow in a corporate. In our sector, it’s about growing impact, and must be evidence-based and well-considered in the same way a company would look at market data and the like. We look at impact data and say, ‘We think if we do this, it’ll be more impactful’. Our boards should enable that risk taking for greater impact.”