Executive SearchNo Profits But Big Returns
August 6, 2006
by Domini Stuart
Published in "Company Director", AICD, Vol 22, No 07, August 06.
The not-for-profit sector in Australia is both more diverse and much bigger in its economics significance than most people realise. It also involves numerous complex issues for Directors. Domini Stuart reports.
The economic contribution of the not-for-profit (NFP) sector in Australia is easily overlooked. Yet, in the 2000 financial year, non-profit institutions contribute as much as $30 billion, or 4.7 per cent of GDP. That's a percentage point higher than mining. Almost seven percent of the workforce – 600,000 people – are employed in the sector, and another 558 million hours contributed by volunteers equates to 285,000 full-time jobs. The giving of money, goods and services to non-profit organizations by individuals and businesses is estimated to total $11billion a year.
Stick a pin in a list of Australia's 700,000 NFPs and you're as likely to find a multi-million dollar national organization as a handful of local fundraisers. So much for the lingering image of a bunch of cardigan-wearing do-gooders.
"I propose that we are in a period of immense transformation for not-for-profit boards, both in terms of expectations and liabilities, and the capabilities and contributions that directors are expected to be making," says Peter Kronborg, Executive Chairman of OPPEUS Strategic Human Capital Advisors and National Vice-President of the Royal Flying Doctor Service (RFDS). "This sector is moving from committed volunteers – albeit individuals with the best of intentions – to more skills-based individuals or total boards. Advanced boards are recognizing that they must select first for skills and capabilities rather than select first for commitment and availability."
"In all fundamental respects, the legal liability and obligations for the director of a commercial company and a NFP are the same" continues Kronborg. "Public shareholding companies do have the extra compliance and shareholder issues, but then NFPs have the same complexity of multiple-stakeholder management issues in terms of both input and output. Input includes the various sources of funds from different government agencies, corporate donations, and sponsorship, plus retail or consumer donations, which are complex to manage. Combining professional and volunteer staff is also a fascinating exercise in complexity. A difference in output is the caring relationship between the client and the NFP which transcends a normal commercial relationship; the NFP wants to help and cannot equate the limits of help with simple commercial value".
OPPEUS has developed a series of tailored Board review and governance development processes. Some of these integrate the Leblanc Board Evaluation Diagnostic. Overall the important factors are the contribution and competence of the consultant as an independent reviewer coupled with the Boards' readiness to make change in the spirit of continuous improvement.
Contact Peter Kronborg for further details.
