An analysis and action plan drawn from the ICDA Not-for profit Governance Survey 2019
This report would not have been possible without the expert input of the dedicated members of the Community Directors Council, who helped give shape to the data.
The Community Directors Council is ICDA’s advisory body. Headed by former ACNC commissioner Adjunct Professor Susan Pascoe AM, it comprises 10 top not-for-profit advocates and thinkers: Emeritus Professor Myles McGregor-Lowndes (Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology Business School); Professor Kristy Muir (CEO, Centre for Social Impact and Professor of Social Policy at UNSW, Sydney); Professor Cynthia Mitchell (Deputy Director, Institute for Sustainable Futures, University of Technology Sydney); Ms Jahna Cedar (Director, Policy, Evaluation and Indigenous Engagement, IPS Management); Dr Sonja Hood (CEO, Community Hubs Australia); Ms Jodi Kennedy (General Manager, Charitable Trusts and Philanthropy, Equity Trustees); Ms Sheena Boughen (culture strategist, community activist, arts leader); Mr Pablo Alfredo Gimenez (Social Enterprise Advisor, Centre for Participation); Ms Catherine Brooks (Associate Director and workplace relations specialist, Law Squared); Ms Anne Cross (Non-executive Director and former CEO, Uniting Care Queensland; Adjunct Professor, Health & Behavioural Sciences, University of Queensland).
Thanks also to the Community Council for Australia, particularly CEO David Crosbie, and to the CEO of Your Call, Nathan Luker, who provided valuable input.
The analysis of the data which forms the basis of this report was conducted by Our Community’s Innovation Lab. In particular, we thank data scientist Dr Paola Oliva-Altimirano for her dedication and intelligent analysis.
Thanks to ICDA trainers Patrick Moriarty and Lisa Jennings, and ICDA thinker in residence Chris Borthwick, who provided invaluable advice on the meaning of the data and tips on how ICDA can convert the findings into action; and to ICDA communications manager Matthew Schulz, proof-reader Maureen McGinnis and designer Amy Johannsohn for ensuring readers could easily navigate and digest the data.
If you’d like to provide feedback on any aspect of this report, or request a “mini analysis” of the findings as they relate to a particular cohort, contact us at service@ourcommunity.com.au
We all need to rethink what we know about not-for-profit governance. For too long, not-for-profit boards have put up with a second-rate reputation and second-rate support. They’ve been patronised, ignored, discounted, under-resourced, under-estimated.
For the past two decades, the Institute of Community Directors Australia (and its forerunners) have worked to lift the reputation of not-for-profit boards, and provide support and education for their directors, and the senior staff who support them. The release of this report heralds a new phase in ICDA’s development.
Here we’re drawing on the real-world experiences of thousands of board members and senior staff across the nation to help chart the next phase in our work. The 2020 NFP governance roadmap, whose insights are derived from the 2019 ICDA not-for-profit governance survey, provides a window into the conditions facing boards and management in Australia. We have learned about the composition and orientation of boards, and the issues affecting CEOs and management, and we’ve been able to glean comparative insights across sub-sectors.
Importantly, this report includes resources for not-for-profit organisations that want to act on the findings immediately to strengthen their own governance, as well as commitments from ICDA to provide support in areas where a deficit has been identified.
We recommend reading the report alongside ICDA’s 2020 Festival of Community Directors program (see the back page for more on this). The program is designed to provide learning opportunities in areas identified through the analysis in this report. Directors and managers are encouraged to make the most of these tailored, targeted, sensibly priced and free offerings to maintain and deepen their knowledge and skills.
We’d also like to draw your attention to the interactive data visualisation available at https:// communitydirectors.com.au/articles/data-visualisation-governance-roadmap-2020, through which you can explore the issues that are of most concern to community leaders who responded to our survey.
Our thanks to the 2000-odd people who completed the survey, to the team at ICDA and the Our Community Innovation Lab for their work on bringing the data to life, and to our Brains Trust – the smart and dedicated members of the Community Directors Council (ICDA’s advisory council), the ICDA training and communications teams, and David Crosbie from the Community Council for Australia – for providing brilliant insights and context that helped give shape to the data.
In this report we’ve eschewed an executive summary in favour of a cheat sheet for not-for-profit leaders – a list of actions you can take if you want to act immediately on the findings. We want the findings from this report to be not just interesting but useful. In compiling this list, we’ve drawn on ideas from our Brains Trust about where not-for-profit organisations need to focus first and hardest.
Here are your top five takeaways:
Put it on the agenda: Take a look at your board. Is it (roughly) representative of the community it seeks to serve? Consider its composition in terms of gender, Aboriginal and Torres Strait Islander people, people with disability, people from culturally and linguistically diverse communities, younger people, older people, people with different worldviews (country/city; socio-economic background; community/business background; skills). Start a conversation on your board about what “diverse” might look like for your board, and (if needed) how you might map a path towards greater diversity.
You might consider creating a diversity policy; and/or appointing a diversity champion. See chapter 3 for more information and resources to help you get started.
No excuses: When you’re busy fighting fires it’s hard to find time to do the preventative work for next year; but you know you have to do it, or you’ll face the consequences further down the track. It’s the same with boards. You might not feel as though you need or have time to think about how the board and the CEO are performing, but you really do need to do the minimum: a CEO review every single year, and a board review at least every two years.
See chapter 2 for more information and resources to help you get started.
Put out the welcome mat for new board members: Our study shows that the better your induction, the more quickly your new board members will get up to speed and the happier and more productive they’ll be. You need to invest now for payoff later. Audit your induction processes now. See chapter 4 for more information and resources to help you get started.
Trust everyone, but cut the cards: It’d be nice to think that it’s all unicorns and rainbows in Not-forProfit Land but our stats show that that’s not the case. Of course you trust your board members, staff and volunteers. They’re volunteering their time; they’re passionate about the cause; they’re good people. You’re right to trust and respect them. Our study shows, however, that crime and fraud do happen in not-for-profit groups – and more regularly than you might think. You have to be prepared for the worst case scenario.
There are many things you can do to help minimise the chances of your group becoming a victim of crime, from introducing basic rules, such as having at least two signatories to each transaction, to training in cyber-hacking, to putting in place a whistleblower policy.
See chapter 8 for more information and resources to help you get started.
If you don’t know where you’re going, any path will get you there: Many not-for-profits are not tracking their progress towards their mission – this is possibly the most important finding from our study. If Australia is to get better at achieving social progress, we have to get better at understanding what success looks like for each of us, and working out how to know whether we’re getting there. Each individual organisation – led by the board – needs to initiate a deep discussion about this topic. Start by putting it on the agenda for your next board meeting, and ask each board member to write down what success looks like, and how they think you would know if you were achieving it. Then fan out to the staff.
In time, every part of the community sector needs to come together to discuss what they’re learning so we can all move forward together.
See chapter 7 for more information and resources to help you get started on this path.
This report is based on data drawn from a survey of 1878 senior community sector leaders (board members and senior staff) in the six weeks leading to March 26, 2019.
The survey was overseen by the Institute of Community Directors Australia (ICDA) (see page 80), with analysis undertaken by staff from ICDA’s sister enterprise, Our Community’s Innovation Lab, and further context provided by members of ICDA’s advisory group, the Community Directors Council, the Community Council for Australia, and ICDA trainers, management and communications staff.
The report analyses general trends, as well as specific trends that apply to particular sectors, organisation sizes and locations.
Some survey results have been released previously in a series of “Spotlight” reports during the Festival of Community Directors 2019. This report draws together the findings from all those reports, plus a range of previously unreleased data, and additional context, action plans and resources. Some of the statistics shown in this report differ from findings provided in our Spotlight Reports; while the data has not changed, our decision about how to present the data has in some parts altered due to further consideration of context.
Our survey did not associate any responses with individual organisations; therefore, there may be some overlap in some of our results. While the total sample size was 1878, not all respondents answered all questions; our analysis indicates where a reduction in the sample size has affected statistical significance.
Where relevant, we have drawn in data from other sources – e.g. the Australian Charities and Notfor-profits Commission (ACNC) and the Australian Institute of Company Directors (AICD), whose 2019 Not-for-Profit Governance and Performance Study provides extra context for some of our results.
Read more about the ICDA survey at communitydirectors.com.au/survey
Dr Paola Oliva-Altamirano (pictured right) is a data scientist working at Our Community’s Innovation Lab (one of ICDA’s sister enterprises).
Dr Oliva-Altamirano – an astrophysicist who gave up examining galaxies to examine community organisations –oversaw the data analysis used in this report, and designed and developed the related data visualisation (see here).
She says she’s confident the study brings an important new perspective to the not-for-profit sector.
“The survey dataset is one of the largest of its kind, with 1878 participants,” she says. “Through analysis of this data we were able to confirm some findings that instinctively we thought to be true, such as that larger organisations are on average in better financial health than smaller organisations, and uncover new insights as well.”
Behind all the data is the reality for community workers on the ground, Dr Oliva-Altamirano says.
“It is a privilege to be able to see the data from the inside. What shines through is that notfor-profit leaders want their voices heard. Sifting through the responses gave me a new perspective on the sector and what people live through, their everyday struggles, and the immense effort they put in.
“I hope the analysis helps organisations and people who work with not-for-profit organisations to understand more about what leaders of those organisations go through, and what we can do to make their job easier.”
Read more about the Our Community Innovation Lab at www.ourcommunity.com.au/innovationlab
Respondents came from all states and territories of Australia, with Victoria, New South Wales, Queensland and Western Australia dominating the sample.
The distribution of our sample was roughly in line with the distribution of ACNC-registered charities1, though with some under-representation of NSW organisations in our sample (22% versus 28%), and some over-representation of Victorian groups (38% versus 21%).
1 Australian Charities Report 2017, Australian Charities and Not-for-profits Commission
Note: Total does not sum to 100% as an additional 19% of charities operate across more than one jurisdiction.
Most respondents were involved in organisations in the community development; human services; education; health; arts and culture; and sports and recreation segments of the community sector.
The majority of respondents identified as women (71%), with 28% identifying as men and 0.48% as non-binary.
The respondents were roughly evenly spread between the roles of senior managers/CEO (44%) and board members (47%).
Our sample included people from organisations of all sizes, with annual revenues ranging from less than $50,000 to $100 million.
Just over a quarter of respondents (26%) were from organisations with annual revenue of less than $50,000, 22% were from organisations with annual revenue of $50,000–$250,000, 23% were from organisations with revenue of $250,000–$1 million, and 28% were from organisations with revenue greater than $1 million.
Organisation Size (by annual revenue)
Extra small (less than $50,000)
Small ($50,000-$250,000)
Medium ($250,000-$1million)
Large ($1m-$10million)
Very Large ($10m-$100million)
Extra Large (over $100million)
The chart below shows the distribution of our sample (pink bar), in comparison to data from the AICD’s 2019 not-for-profit survey sample (purple bar) and the Australian Charities and Not-for-Profits Commission (green bar; note that the ACNC data accounts only for charities, which constitute around 10% of all not-for-profits, but the coverage is extensive because of reporting rules).
If ACNC data is taken as the benchmark, we can see that AICD data is skewed to the higher-income end of the not-for-profit sector, which accounts for some interesting differences in results in some areas.
We asked the board members and senior staff who completed our survey to identify up to five trends or challenges faced by their organisation in the previous year. They responded in their own words, allowing us to create a leader-driven picture of key sector stressors in the not-for-profit sector via a custom-built data visualisation.
A snapshot of the data visualisation is shown below. You can find the interactive version here. In the interactive version you can filter the data by state, sector and organisation size, which will allow you to benchmark your own organisation.
Challenges facing the not-for-profit sector, according to sector leaders
Competition
Challenges faced by clients
Governance
Workforce
Public Opinion
Members
Costs
Volunteers
The themes that emerged most strongly are shown in the bubble diagram above. The relative size of the bubble indicates the relative strength of the sentiment (the bigger the bubble, the more often we found that response in the data).
Each theme includes a range of sub-themes. Viewed together, the data represents a range of trends and challenges currently affecting the not-for-profit sector. These are easier to digest in our interactive tool, but we have provided a snapshot below.
While some major themes are easy to predict, it’s very interesting to note that concerns about government feature more prominently than any other (even funding). Exploration of this theme reveals that not-for-profit organisations’ concerns about government centre on:
• Policy volatility
Lack of government support, or too much red tape
NDIS reforms
• Changes in sector funding
Lack of engagement
• Policy and regulation not matching needs.
The rise of media-informed and driven policy in the community services and health sector enabled by the failure of our governments to provide leadership. Rather, they are allowing policy to be driven by the loudest and often leastinformed sections of the population without regard to evidence or practice wisdom.”
Survey respondent
Michael White, SANDASOther key concerns uncovered through our data analysis are shown below. Note that themes and sub-themes are both shown in relative order of prominence, as shown in the data.
Funding
• Funding cuts
• Unreliable or short-term funding
• Lack of donations
• Increased competition
Challenges related to fundraising
Demographics
Increasing demand for sector services or workers
• Ageing population affecting workforce or number of volunteers
• Declining and transient population
Growing population >> few volunteers >> no diversity
Workforce
• Increasing need for highly skilled workforce
• Difficulty maintaining salaries
• Need for better training and education of sector professionals
Declining voluntary workforce
• Maintaining workforce
Challenges faced by clients
• Challenges related to people with disability
• Challenges faced by single-parent families
Challenges related to victims of abuse and violence
• Challenges faced by disadvantaged individuals and families
Child safety
Volunteers
• Decrease in volunteerism
Time-poor volunteers
• Difficulties managing volunteer workload
Difficulties retaining volunteers
• Shortage of board volunteers
This is the picture painted of the not-for-profit sector as a whole; however, the relative position of challenges changes from sector to sector, from location to location, and in relation to organisations’ size. Visit our website to explore those segments further.
Note also that the themes and sub-themes were identified using keyword matching techniques that identify similarities; therefore, fuzzy logic may result in repetition of similar elements or omission of some elements. Labels were created by the Innovation Lab team to represent themes identified in the data.
I lie awake at night trying to structure impactful responses to the old chestnut that charities should have extremely low or zero administration/ operation costs. Charities are charged with solving some of the greatest social problems, yet social ignorance demands they do it for free”.
Survey respondent Andrea Nave, Forget Me Not Australia Ltd
Diversity, we now know2, is one of the keys to success for business, and we must assume that this applies equally (if not more so) to not-forprofit boards.
It’s a topic gaining widespread attention in equivalent sectors in America, the UK and Canada. At the time of writing, for example, the steering group reviewing the UK’s Charity Governance Code was seeking views from the sector about whether the code should be “more explicit about expectations around diversity and inclusion”. The UK has also recently seen the launch of the Young Trustees Movement, which aims to double the number of directors on charity boards aged 30 and under by 2024. Yet our survey results paint a mixed picture when it comes to diversity on the boards of Australia’s not-for-profit organisations. The sector, when taken as a whole, is doing well in some areas, less well in others. Some sub-sectors have achieved more diversity in particular areas than others. Attitudes to diversity also differ from sub-sector to sub-sector.
It’s a complex picture, made even more complex when you consider that diversity itself (as a concept) is not all that easy to define. What, precisely, does a “diverse board” look like?
In our analysis, we applied a somewhat arbitrary set of parameters; we asked respondents which of the following criteria their board met:
• At least 40% women
• At least one person younger than 25
At least one person with a disability
• At least one senior citizen/retiree
At least one Aboriginal and Torres Strait Islander
At least one person from a culturally and linguistically diverse (CALD) background
• At least one person from the LGBTQI community
• At least one person from the community served by your organisation (beneficiary group)
It is pleasing to see that most NFP boards have achieved gender balance and that most include an older Australian and someone from the community they serve. However, more needs to be done to achieve multicultural diversity and involvement of people with Indigenous and LGBTQ identity, as well as younger people and those with disabilities. This is important for reasons of equity, and to attain their own commitment to diversity.”
Pascoe AM, Inaugural ACNC commissioner, Chair of the Australian Council for International Development (ACFID) and the Principals Australia Institute Certification Advisory Board; Adjunct Professor at the University of Western Australia; Chair of the ICDA Community Directors Council
2 https://www.business.gov.au/people/hiring/equal-opportunity-and-diversity
Yet as some members of our Brains Trust pointed out, it is probably unreasonable to apply this methodology to every board. Firstly, people from diverse backgrounds are not evenly distributed throughout Australia. A board can only, surely, pull from the community of people available to it. Secondly, it can be argued that a board need only seek to represent its constituent community – if that community itself is not all that diverse, what’s a board to do? Furthermore, it may in fact be appropriate for some boards to be “stacked” in a particular direction – a kindergarten community probably should have more young adults on its board than retirees, should it not?
It’s also worth noting that not all diversity characteristics are immediately obvious – not all gay people are “out”; not all disabilities are visible. People don’t wear a badge signalling their diversity credentials.
Still, there are clearly some areas in which boards could do better, both by seeking out board members beyond ‘the usual suspects,’ and in ensuring those people are properly welcomed and supported when they do join the board.
ICDA proposes to appoint a Diversity Champion to explore this nuanced picture in greater detail over the next 12 months and beyond, and try to come up with a sensible plan to help the sector move forward in a way that makes sense and produces real, sustainable results. This proposal and related measures are discussed in more detail on page 26.
“It’s great to see that NFPs are ‘walking the talk’ with respect to gender balance, although the responses show that consciousness of gender balance in the large and very large organisations should still be a focus. There is an opportunity for NFPs to lead the way in ensuring boards embrace diversity, encouraging more participation from Aboriginal and Torres Strait Islanders, people from CALD communities, LGBTIQ and people with disabilities. Diversity is so much more than gender, as important as that is.”
Anne Cross, Non-executive Director and former CEO, Uniting Care Queensland; Adjunct Professor, School of Nursing, Midwifery and Social Work, University of Queensland; member of the ICDA Community Directors Council
Female, pale and stale(ish): In contrast to the corporate sector, where boards are often said to be “male, pale, and stale”, NFP boards could be described as “female, pale and stale(ish)”:
Female: 66% of board members in our sample were women.
Pale: only 43% of respondents say their board includes at least one member who is from a culturally and linguistically diverse (CALD) community.
Women need no convincing: Across the sample, women are more likely to think that diversity is important than men.
Stale(ish): 68% of not-for-profit board members are aged over 50, and 27% are aged over 65. While being older than 50 (or 65) does not in and of itself suggest a board is “stale”, it does indicate that many not-for-profit boards could do with more youth.
Thumbs down on young, ATSI, LGBTQI and CALD people, and people with disability: There’s work to be done in getting more young people, Aboriginal and Torres Strait Islander people, people who identify as LGBTQI, people with a disability, and people from CALD backgrounds on not-forprofit boards (and the sector could do with more men on the boards of organisations with low income).
Thumbs up on women, seniors and consumers: The not-for-profit sector appears to be doing OK on the diversity front when it comes to inclusion of women, seniors and consumers (representatives of constituent groups).
Many boards boast both fresh eyes and experience: 64% of those who took part in our survey had been in their role for less than five years, while 15% had been in the role for more than 10 years.
The arts and culture sector is doing better than others in relation to inclusion of women, and people who identify as LGBTQI, but worse when it comes to representation of people from CALD communities.
The education sector is doing better than others in relation to inclusion of women, but worse in relation to representation of older Australians.
The sport and recreation sector is doing better in relation to representation of young people, but worse in relation to inclusion of women and people from CALD backgrounds. More than two-thirds of respondents across the sample think that board diversity is important, but this percentage drops to just 56% in the sport and recreation sector.
The majority of the people who completed our survey (71%) identified as female, in line with the dominance of women in the not-for-profit sector generally, and this trend played out across all role types, though the trend was less prominent for chairs, where 60% of the sample were women (this is discussed in more detail in chapter 6, ”The view from the chair”).
CEOs and senior staff are more likely to be female than board members (74% versus 66%), our results show.
Other surveys of the Australian not-for-profit sector have found an inversed gender split (e.g. 59:40 in favour of men, in the case of the AICD’s 2019 Not-for-Profit Governance and Performance Study); this can most likely be explained by the skew in the AICD’s sample towards higher-income organisations, as explained earlier.
Almost all ICDA survey respondents were adults older than 26 years (and the majority were aged over 50) – 35% were aged between 26 and 49 years, 45% were aged between 50 and 64 years, and 19% were 65 or older.
Board members tend to be older than CEOs and senior staff – 68% are older than 50 (compared with 60% for CEOs and senior staff) and 27% are older than 65 (compared with 10% for CEOs and senior staff).
This age distribution is in line with that of other not-for-profit studies. For example, the AICD’s study found a similar age distribution, with 95% of its respondents aged 40+ years, and the median age being 54.
In general, we found that women in our sample were on the younger side of the spectrum, with 86% in the middle two age groups, while men were on the older side, with 73% in the older two age groups.
The sum of all ages represents 100% of women/men Women Men
years
years
Women Men Board secretaries
General Board Members
CEO/Executive Director Senior Staff Members
Public officers and treasurers were excluded from this chart because they represented only 1% and 6% of the sample respectively. Board chairs are discussed in the section ”The view from the chair” (page 45).
Our survey revealed that there is a moderate degree of turnover in senior leadership positions (directorships and senior roles) in not-for-profit organisations in Australia. Most respondents (64%) had been in their role for less than five years, a figure consistent across role types.
Still, 15% of the sample, equivalent to around 250 not-for-profit sector leaders, have been in their role for more than 10 years.
Senior staff tend to stay on for longer than board members – 42% of senior staff say they have been in their role longer than five years (compared with 29% for board members), and 18% have been in their role for longer than 10 years (compared with 12% for board members).
Most not-for-profit boards have achieved a gender balance, our survey reveals: 78% of respondents said that their board comprised at least 40% women.
The majority of boards also have at least one senior citizen, and at least one representative of the community they serve (consumers/beneficiaries).
However, many boards are lacking representation from other groups. Only 17% of respondents said their board included at least one person younger than 25 years old; only 15% said their boards included at least one Aboriginal or Torres Strait Islander person; only 17% said their board included at least one person who identified as LGBTQI; and only 28% said their board had at least one member with a disability.
Boards also seem to be lacking ethnic diversity, with fewer than half of the respondents (43%) saying their board had at least one member from a culturally and linguistically diverse community. That’s despite the fact that the Australian Bureau of Statistics has found that 45% of Australians were born overseas, or have a parent who was born overseas3. Thus we would expect that a board with moderate representation of CALD people might comprise around 40% CALD directors (though noting that some communities are more diverse than others), and almost all boards should include at least one CALD director.
These trends hold true across all organisation sizes and all geographical locations.
78% of respondents say their board includes at least 40% women
Most boards (74%) have at least one senior member
(68%) have at least one consumer represented on the board (at least one member from the organisation’s community of interest).
Most boards are lacking young people, people with disabilities, Aboriginal & Torres Strait Islander peoples, and people from the LGBTQ community.
Only half of all not-for-profit boards include at least one person from a CALD background.
Many Australian not-for-profit boards clearly have some way to go when it comes to achieving diversity. This has implications not just for equity (in a sector that should be more concerned than any other with equity), but for results.
3 https://www.aihw.gov.au/getmedia/f3ba8e92-afb3-46d6-b64c-ebfc9c1f945d/aihw-aus-221-chapter-5-3.pdf.aspx
Less likely to believe that diversity on boards is important
Some sectors show marked trends of their own. As shown above, the arts and culture sector is doing better than others in relation to representation of women (92% of respondents in this sector said their board included at least 40% women), as well as LGBTQI representation (34% included at least one person from this community), but worse when it comes to representation of people from culturally and linguistically diversity communities (only 36% had at least one CALD member).
The education sector is doing better in relation to gender balance (87% of respondents said their board included at least 40% women), but worse in relation to representation of older Australians (only 55% had at least one board member older than 65).
The sport and recreation sector is doing better in relation to representation of young people (29% have at least one member younger than 25, compared with 17% for the entire not-for-profit sector) but worse in relation to gender balance (only 62% have at least 40% women, compared with 78% for the sector as a whole) and CALD representation (33% for sports groups, compared with 43% across the sector).
Although the not-for-profit sector has a way to go in relation to diversity, more than two-thirds of respondents (71%) think that board diversity is important.
This general feeling persists across all sectors, except in the sport and recreation sector, where the percentage of board members who think that diversity is important on boards is significantly lower (56%).
Across the sample, women are more likely to think that diversity is important than men (74% of women, compared with 63% of men).
This chapter showcases a revised version of the results presented in the Spotlight Report Assessing Board and CEO Performance. A total of 1534 board directors and CEOs responded to the survey questions discussed in this section.
This section of the report caused much disquiet among our Brains Trust, with Community Directors Council chair Susan Pascoe describing the results as “pretty disturbing” and fellow CDC member Sheena Boughen describing them as “curious”.
The headline finding is that almost one in three not-for-profit boards has no system in place for reviewing its own performance.
“That such a large proportion of boards are not reviewing their performance is curious,” Ms Boughen said. “I wonder if it’s worth asking some questions: Is this because you don’t know how or don’t think it matters? Is there a lack of demand from staff to ask their boards to review their own roles and impact? Is there a call to action message to target chairs and ask them to commit to a new process? Could there be a new question in grants process that asks the applicant to link to a onepage doc that shows they have a board review process?”
Fellow Community Directors Council member Anne Cross commented, “In this time of extraordinary change, disruption and diminishing trust by the public, it is very concerning that many boards are not understanding the importance of reviewing board performance. How can you truly know you are doing a good job if you don’t evaluate performance? This stands out as an important area for improvement!”
Some members of the Brains Trust counselled caution in interpreting the results without reference to additional context. Community Directors Council member Sonja Hood, an experienced board member and the CEO of Community Hubs Australia, suggested that board review must be seen in the context of what else is going on for that particular board. A new board is perhaps not yet at the point where it is ready for introspection, or it may of necessity need to concentrate on more immediate concerns (a sudden shift in the funding or regulatory environment, for example). Dr Hood notes:
“If I think about sport and recreation boards – many of these have progressed from being essentially parent or participant led committees responsible for competitions, facilities hire, collection of fees and awarding prizes, to now being responsible for employment, child safe and work safe policies, and much, much more.
“Having joined a ‘rescue’ board for a sport and rec organisation a year ago, and spending 12 months embedding policies and procedures that simply didn’t exist before, I am really clear that board review is way down our list of priorities in terms of stuff that needs to happen.
“So while in some contexts I think lack of board review might reflect complacency, in others, it just reflects the massive amount of other stuff that is going on.”
Several members of our Brains Trust highlighted the finding that more than one in 10 not-for-profit organisations do not review the performance of their CEO.
“It is gratifying to read that most boards review CEO performance, but disturbing that around 16% do not,” Ms Pascoe said. “This is a basic task for a board. Directors needs to provide appraisal both to ensure the enterprise is run effectively, but also to give feedback to the CEO to enable continuous improvement.”
Long-time governance trainer and ICDA director Patrick Moriarty also expressed alarm at this result. “How well your top manager is performing is vital to the overall success of your organisation. Groups can’t afford not to monitor their own performance as a board, and the performance of their CEO.
Senior staff should be similarly appraised and comprise part of a CEO succession strategy,” Mr Moriarty said.
“It’s never too late to conduct a review, but the need is probably immediate if you’ve already got disgruntled staff, or you’re unhappy about the way things are going yourself.
“It’s just another reason that our motto at ICDA remains ‘trust and validate’. We need to trust people are doing the right thing, but ensure we’re also validating those things through regular performance reviews.”
Almost one in three not-for-profit boards does not have any system in place for reviewing its own performance
The larger the organisation the more likely it is to have undertaken a formal board review
More than a third of board members say they did not receive a good induction
Half of board members believe they would benefit from more governance training
Health sector boards appear to be more formalised and organised than others
More than one in ten boards has never reviewed the performance of the CEO, and more than four in ten haven’t conducted a CEO review in the past 12 months
Most board members are happy with the amount of time they dedicate to their board role, though more than a quarter think it takes up too much of their time
Board members from the sport & recreation sector are far more likely than average to think their board role commands too much of their time, and far less likely to think they received a good induction
We asked survey respondents to indicate which (if any) method their board used to review their own performance:
41% indicated that their board had an informal review process
• 30% said their board had a formal review process
• 29% said their board did not review its performance in any way
We have an informal review process
We have a formal board review process (eg. annual review)
Typical responses varied slightly from sector to sector, with the community development, human services, and health sectors more likely than others to conduct a board review. The majority of boards in these sectors have a formal or informal review process in place, while organisations in the arts and culture, education and sports and recreation sectors are less likely than others to have a review process in place.
My organisation’s board does not review its performance
We have an informal review process
We have a formal review process
We also detected a variation in board review activities depending on an organisation’s size. We found that board review is a common practice in larger organisations4. The percentage of boards that formally review their performance increases in line with an organisation’s annual revenue.
We also asked survey respondents to tell us about the frequency of CEO review. Although most boards (77%) said they had reviewed their CEO in the previous two years, more than one in 10 (16%) had never reviewed their CEO, as shown in the graph on the following page.
4 We use annual turnover as a proxy for an organisation’s size, in line with the Australian Charities and Not-for-Profits Commission formula
We sought to find out how CEO review practices compare to board review practices:
• 92% of those who said that their board had a formal review in place said that they had reviewed their CEO in the previous two years.
82% of those who said that their board had undertaken an informal review said that they had reviewed their CEO in the previous two years.
• 49% of the respondents who said that “My organisation’s board does not review its own performance” said that the organisation had reviewed its CEO in the previous two years.
We conclude from this that:
• The more reflective a board is about itself, the more reflective it is about the CEO. If a board has a self-review process in place, it’s more likely to have reviewed its CEO in the previous two years (especially if it has a formal board review process in place).
Many boards that do not review their own performance think it’s important to keep on top of the CEO performance, with half of those who don’t review themselves having reviewed the CEO over the previous two years.
Our survey asked respondents to rate their levels of satisfaction and experiences in their board role. We isolated the responses of board members and found both some causes for celebration, and some things that may prompt remedial action:
GOOD
Most respondents (93%) enjoy their role as a board member (only 5% do not).
Most respondents (90%) understand their responsibilities as a board member (only 9% do not).
A relatively small number of board members (17%) are planning to leave their role soon (the majority [71%] are not).
The majority of board members (67%) are happy with the amount of time they devote to their board role (though 28% say it takes up too much of their time).
Around half of all board members who responded to the survey said they did not receive a good induction when they joined the board.
Half of respondent (52%) say they would benefit from more governance training.
A quarter of respondents (24%) have never participated in governance training (though 55% have).
Note: “not applicable” responses are not shown
These trends are generally consistent across organisations regardless of size and sector, with the exception of board members in the sport and recreation sector (who fell below the trend) and the health sector (who rose above it).
In sport and recreation:
• 46% of board members agreed with the statement “My board role takes too much of my time” –which is 18% more than the average response (28%) across all sectors
• 22% agreed with the statement “I received a good induction” – 23% less than the average (45%)
In the health sector:
• 57% of board members agreed with the statement “I received a good induction” – 12% higher than the average (45%)
• 35% of board members agreed with the statement “I have participated in a review of my performance as a director” – 11% higher than the average (24%)
75% of board members agreed with the statement “I have participated in governance training” –13% higher than the average (62%)
It seems logical to conclude that the health sector has more procedures in place (formal reviews, inductions for board members, governance training), while the sport and recreation sector is less formal than other sectors.
• Investigate tactics for encouraging greater introspection among boards (including examining some of the suggestions by Sheena Boughen outlined in the introduction to this chapter).
• Seek opportunities (e.g. through training and publications) to publicise ICDA’s Board Effectiveness Quiz and Board Member Effectiveness Quiz (as well as opportunities to transform them into electronic tools).
Seek opportunities (e.g. through training and publications) to emphasise the key responsibility that boards have to supervise the CEO, including repeating the CEO review webinar held in partnership with Moores as part of the 2019 Festival of Community Directors.
Seek input from the Community Directors Council on what are the essential attributes of a successful not-for-profit board in the modern era – from selection to exit.
READING: Effective CEO performance appraisal, featured in Community Directors Intelligence (May 2019): communitydirectors.com.au/cdi
TOOLS: Take our self-assessment quizzes:
• Board effectiveness quiz: https://bit.ly/2KoQsws
• Board member effectiveness quiz: https://bit.ly/33PqgTy
HELP SHEETS: from ICDA’s tools and resources pages
• The CEO and the board – the roles and relationships: https://bit.ly/33Plplg
• Becoming a more accountable, transparent and consultative board: https://bit.ly/33KbnBT
• Keeping your board fresh: Spotting the need for change and making the change: https://bit.ly/2KlGj3S
• Achieving the right mix – towards a more diverse board: https://bit.ly/2pjGwNv
POLICIES: Performance review policy template: https://bit.ly/375YjsD
This chapter revisits results presented in the Spotlight Report Board Induction
In this section we isolated the responses of board members (excluding CEOs and staff), resulting in a sample size of 628 community directors.
Our survey found that almost half of board members did not receive a good induction. This has significant flow-on effects, with those who received a poor induction more likely to report that they’re struggling with their role.
“This needs to be improved, especially as those board members who received a good induction tend to report better understanding of their role, suggesting enhanced capability,” comments Community Directors Council chair Susan Pascoe. “It is pleasing that ICDA intends to develop a Board Induction Template to help boards improve their induction practice.”
CDC member Anne Cross pointed out that poor inductions can also affect understanding of organisational culture.
“It’s important to set expectations about culture and conduct early, and induction is an ideal time to do this, as well as ensuring that new directors have the information about strategy, operational and financial performance they need to do a good job,” she said.
Some members of our Brains Trust highlighted the finding that sports organisations are performing particularly poorly when it comes to providing inductions, though they were not surprised at the result.
“I’d be amazed if any of the boards I’ve have anything to do with in sport do an induction,” commented Sonja Hood. “I think they’ve got a long way to go in appreciating that they have a governance role (as opposed to a high-level administrative role). As for the education boards – my experience of state schools is that induction is offered by a third party and is optional (and is poor).”
ICDA trainers Lisa Jennings and Patrick Moriarty both drew a parallel to the finding in the previous chapter that many board members in the sport and recreation sub-sector feel over-stretched.
“There is probably a connection between poor induction and the amount of time members spend on their board role,” Ms Jennings said. “An additional action plan for ICDA could be to seek opportunities (e.g. through training and publications) to emphasise that good inductions (and handovers) will usually result in board members being more time efficient (in addition to understanding their roles better).”
Patrick Moriarty said, “I often reflect that when I played footy we had [only] one coach, but in the modern era that’s not sustainable because there’s too much to do.
“Despite this, we often have the same sort of structural issues, with sporting club board members both governing and delivering services. There needs to be more working groups and subcommittees to support the board (just like backs, mids and forward coaches).
“This study highlights the fact that it’s time for many community organisations – and not just those in the sport and recreation field – to rethink that model.”
Around half of all board members who responded to our survey said they did not receive a good induction when they joined the board.
Larger organisations provide better inductions than smaller ones.
Organisations in the community development, health and human services sectors provide better board inductions than those in other sectors. Only 28% of board members in the sport and recreation sector said they had a good induction.
One in five of those who said they did not receive a good induction also said they did not clearly understand their role on the board, indicating that poor induction practices could have significant downstream negative effects on good governance.
Good-quality board inductions are acknowledged as a key action required to get new board members up to speed and contributing quickly. But our survey shows that around half of all board members did not receive a good induction when they joined the board.
Larger organisations and organisations in the community development, health and human services sectors provided better board inductions than others. However, even in the best performing sectors and segments, our survey found 30-40% of respondents did not receive a good induction.
These results suggest that poor induction could have significant downstream negative effects on good governance, with one in five of those who said they did not receive a good induction indicating they did not clearly understand their role, a figure six times as high as for those who did experience a good induction.
Note: this sample only includes board members (excludes CEOs and senior staff), and excludes the 136 board members who answered “not applicable” to this question.
Breaking down this information by the respondent’s role on the board, we found that treasurers were more likely to receive a good induction than others.
Yes No
Chart excludes responses from those who replied, “not applicable”.
If we split the data by sector5, we can see that the community development, health, and human services sectors are better at board inductions than the sports and recreation sector, as shown on the chart below.
%
Chart excludes responses from those who replied, “not applicable” and sectors that lacked statistical significance.
Organisations with an annual revenue of more than $1 million appear to do better at providing a good board induction for new members. This could be because larger organisations are more likely to have paid staff devoted to supporting good board processes.
%
Yes No
Chart excludes responses from those who replied “not applicable” and those with annual income of $10 million+, whose sample size was too small to be statistically significant.
5 We have drilled down on sector-based findings only in sectors where we had enough data to represent a legitimate sample.
We also sought to tease out the quality of board inductions over time. While we must perhaps account for faded memories among those whose induction happened many years ago, the chart below indicates that the quality of board inductions may be deteriorating over time. That is to say, it appears that board inductions carried out 10+ years ago were better than those carried out in the past two years. Are not-for-profits becoming too time-poor to conduct adequate inductions; are inductions becoming less important in the minds of board convenors; are people remembering their inductions with rose-coloured glasses; or is some other factor at play?
Step In, Step Up
Everything a New Community Board Member Needs to Know.
Notwithstanding variations in the quality of inductions highlighted above, our study found that even in the best performing sectors or segments, there is always a minimum percentage of 30% of respondents who say they did not receive a good induction.
We explored these results further to ascertain whether a poor induction experience has downstream ramifications for board member capacities. We found that almost everyone who received a good induction is likely to say that they understand their role as a board member. Many of those who say they received a poor induction get there in the end, but one in five say that they do not clearly understand their role as a board member. This finding indicates that board member capacity could be significantly improved if inductions were improved.
In 2019, ICDA released an online compact course (“Step In, Step Up”) specifically designed to fill gaps in poor board induction processes, and also presented a webinar on board recruitment, induction and succession planning as part of the Festival of Community Directors.
ICDA has published a book on board inductions (‘Step up: Everything a new community board director needs to know’) and our website includes a range of free help sheets on how to develop
an effective board induction process.
In response to these survey results, in 2020 we will redouble efforts to publicise the existence of these resources and seek opportunities to accelerate their dissemination. We’ll also emphasise the connection between good induction and good outcomes for boards (and board members).
We will also develop a Board Induction Template to help promote better (and more widespread) induction practices.
HELP SHEETS & TOOLS: All about inductions: Checklists, induction processes, manuals, help sheets: https://bit.ly/2XlLDJF
BOOKS: ‘Step In, Step Up: Everything a new community board director needs to know: communitydirectors.com.au/books/stepinstepup
TRAINING: Step In, Step Up: An online compact course for new board members: training.communitydirectors.com.au/
In this chapter we discuss the types of training and professional services that not-for-profit boards want and use.
Between 1421 and 1534 board directors and CEOs responded to the questions discussed in this section, with some questions receiving a higher response rate than others.
Fundraising and governance were identified as the top two training needs.
“The research shows that most boards see a need for training. This suggests a reflective and analytic approach by boards to ensure they are equipped for their roles,” said CDC chair Susan Pascoe.
“While it is not surprising that governance was accorded a high priority, I was interested that fundraising was also highly rated as a need.”
Ms Pascoe was not the only member of our Brains Trust to express mild surprise that so many respondents believed their boards needed further fundraising training.
“Is this board members wanting to be involved in fundraising (operationally) or is it the board being better able to understand how they can make their own organisations more sustainable?” said ICDA director Patrick Moriarty.
Our report comes in the wake of the release of a white paper published by Perpetual and Noble Ambition that advocates for a change in fundraising culture on Australian not-for-profit boards. The paper suggests that board members who have the capacity to do so should be encouraged to give more to the organisations they support, and that organisations should invest in fundraising capacity building for CEOs.
While ICDA does not necessarily support a shift in board culture to one more closely aligned to the American model (“give, get or get off”), it does support the notion that board members and CEOs need to be equipped with more fundraising knowledge.
“ICDA has developed two short courses to better support board members and volunteers to get a better grasp of the fundraising and grants landscape. More boards and CEOs should be accessing these as a start of the conversation and strategy development,” Patrick Moriarty said.
Our Community Group Managing Director Denis Moriarty signalled concern that training about data and cyber security was not considered a priority among respondents, given the increasing opportunities and threats in these emerging areas of practice.
“It’s worrying that data collection and cyber security are considered low priority when we know data and cyber security are two of the biggest emerging issues for not-for-profit boards,” Mr Moriarty said. The finding that governance training is in great demand was seen as positive but predictable.
“It is not surprising that given the heightened emphasis in the public domain on governance and the role of boards that ongoing training in governance is valued highly,” said Anne Cross. “It’s hard for boards to keep up with strategic challenges, funding and regulatory changes.”
Almost all respondents believe their board needs training, with fundraising and governance identified as the top two training needs.
Financial management, impact evaluation, information technology, compliance, and communications training are also in demand.
Larger organisations are more interested in cybersecurity training than smaller organisations.
A majority of senior leaders (including board members and senior staff) have participated in governance training, though 42% say their board needs more of it.
Not-for-profit organisations commonly call on professional consultants, particularly in relation to legal services, finance, and strategic planning. Governance, fundraising, technology, communications and human services professionals are also called upon for help.
Nearly all respondents highlighted a training need of some type. Only 3% said their board did not need any additional training.
The top two training needs identified by respondents were fundraising and governance, with financial management, impact evaluation, information technology, compliance, and communications also featuring prominently.
Human resources, data collection and cyber security were the least chosen options (the last two topics are discussed in more detail in other parts of this report).
This trend persists across organisations regardless of size, sector and location, with a few interesting exceptions.
We found that very large organisations (those with annual revenue of more than $10 million) had less need for fundraising training (a response selected by only 12% of respondents), but more need for cybersecurity training (18% of respondents from this cohort).
A total of 69% of the board members and senior staff who completed our survey said they had participated in governance training, a finding consistent with the 2019 AICD survey, which found 71% had received governance training in the 12 months before the survey.
Participating in governance training apparently does not extinguish the thirst for it, with 42% of our sample indicating it remained a top training need for their board.
When boards do not have the expertise they need on their board, many seek to access it via pro bono or paid professional services. Our survey sought to discover which types of professional services were in most demand.
We found that around 80% of respondents had used professional consulting services (whether paid or pro bono) in the year before the survey. Almost half of those had accessed legal services. Other commonly called upon services include finance and strategic planning.
Legal services are in demand for most not-for-profit organisations, regardless of size or sector, with the exception of the smallest organisations (those with annual revenue of less than $50,000), where the top service accessed was fundraising (34%).
• In line with our strategic objective to “deliver training that is practical, accessible and affordable,” during 2020 ICDA will, through the Festival of Community Directors, provide high-quality, accessible training in fundraising and governance (as top priorities), as well as training in financial management, impact evaluation, information technology, compliance, and communications.
Training in cybersecurity will also be provided, particularly for larger organisations.
ICDA will seek opportunities to be a conduit for not-for-profit organisations to get access to highquality, low-cost legal, finance, strategic planning and other professional services, either through “establishing a strategic and governance consultancy business arm within ICDA” (strategic objective 9.2), or through partnerships with professional services firms specialising in the not-for-profit sector (such as JusticeConnect and Moores).
• ICDA will promote the need for board members to be trained in cybersecurity and data collection.
• ICDA will increase its range of capacity building resources in relation to cybersecurity and data collection.
INFORMATION:
Giving insights from GiveNow.com.au: givenow.com.au/stats
Funding Centre: Where not-for-profits go for money: fundingcentre.com.au
TRAINING: Diploma, short courses, Festival of Community Directors and specialist training: communitydirectors.com.au/courses
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There is no role of greater importance to the health and success of a not-for-profit organisation than that of the chair. Our survey sought to isolate responses by chairs to paint a picture of their unique view of the world.
This chapter shows the revised version of the results presented in the Spotlight Report The View from the Chair. All responses in this section come from people who identified themselves as board chairs, 231 in total.
A headline finding, according the members of our Brain Trust, was that a quarter of chairs have not done any governance training at all.
“Surely it’s a fundamental requirement of the role?” said CDC member Sonja Hood. Most survey respondents agreed that more needed to be done to “equip and support chairs for their important role”.
Our survey found that the majority of chairs (60%) were women, and Brains Trust members were happy with that result.
“Given the feminised nature of the not-for-profit workforce it is good to see that the majority of board chairs are women,” said CDC chair Susan Pascoe. “This is a critical leadership role. I was pleased to see that the majority of these female board chairs are happy and stable in the role.”
The majority of chairs in our survey were women, consistent with the dominance of women in the sector generally – but men are over-represented when compared with their numbers in the sample overall.
Female chairs, as a population, are significantly younger than their male counterparts –but most chairs, male and female, are still older than 50.
Male chairs tend to stay longer in the role than women. Around 25% of men have been chairs for more than 10 years, while only 8% of women have remained in the chair that long.
Board chairs are generally happy and stable in their role, and say they understand their role well.
Chairs in the sport and recreation sector represent the only significant outlier to our community of not-for-profit chairs.
Chairs in this sector are less likely than others to have received a good induction, less likely to have participated in governance training, and less likely to have participated in a board review. They are more likely than their peers to think their role takes up too much of their time.
Most people who completed our survey (71%) identified as female, in line with the dominance of women in the not-for-profit sector generally, and this trend continued in the board chair cohort (though in different proportions).
A total of 60% of the chairs in our sample identified as female, compared with 40% who identified as male (with just one chair saying they identified as non-binary/diverse gender). While females dominated the sample of chairs, they were under-represented when compared with the sample generally, which recorded a gender split of 71% to 28%.
Chairs: Total Sample:
60% Women 40% Men 0.44% Non-binary
71% Women 28% Men 0.48% Non-binary
Almost all chairs in our sample were adults older than 26 years old, and were most likely to be aged between 50 and 64.
The percentage of people older than 65 is higher for chairs than for the whole population of community directors (31% vs 19%) and this difference is most likely directly linked to gender.
Male chairs tend to be aged at the older end of the spectrum when compared with female chairs or other community directors.
Our survey asked respondents to indicate how long they had been in their current role. We found that the majority (65%) of chairs had been in the role for less than five years, though 14% had been in the role for more than a decade.
Although these percentages were similar for women and men, men did tend to stay in the role longer than women. The difference is significant when we compare women and men who have been chairs for more than 10 years. Only 8% of women have been in the role more than 10 years while 25% of men have been in the role more than 10 years.
We asked chairs about their levels of satisfaction and experiences in their board role. On the whole, chairs are a happy bunch, recording high levels of satisfaction, as shown below:
Nearly all chairs (97%) enjoy their role as a board member (only 3% do not).
Nearly all chairs (94%) understand their responsibilities as board members (only 6% do not).
Few (12%) are planning to leave their role soon (59% are not planning a move any time soon)
41% of chairs say they received a good induction when they joined the board (though an almost equal number – 40% – did not)
60% of chairs are happy with the time they are required to invest in their board role (40% are not)
60% of chairs say they would benefit from more governance training
23% of chairs have never participated in governance training (72% had)
52% had never participated in a board review (34% had)
There were some areas in which chairs recorded a different experience to other board members:
• Chairs were more likely than other board members to believe their board role was valued by society (83% compared with 70%)
Chairs were more likely than other board members to feel their board role took up too much of their time (38% compared with 24%)
Chairs were far more likely to have participated in a board review (34% compared with 21%).
We also checked for differences between sectors. The outlier was the sports and recreation sector, where:
Only 5% of chairs said they received a good induction (compared to 40% of all chairs);
• 57% thought their role took up too much of their time (compared to 40% of all chairs);
• 38% had never participated in governance training (compared to 23% of all chairs); and
• Only 14% had participated in a board review (compared to 34% of all chairs).
We also looked at differences in the experiences of those chairing organisations of different sizes. We found that chairs in larger organisations (annual revenue of more than $1 million) were more likely than others to have participated in a board review (51% vs 33% of all chairs) and to have participated in governance training (87% vs 72% of all chairs).
While the level of satisfaction of board chairs was high and fairly constant regardless of organisation size or type, their experiences differed wildly from that of CEOs and other senior staffers. In general, senior staffers were less likely to believe their contribution to the community was valued (55% of senior staff compared to 83% of chairs), though they were also much less likely to be contemplating a shift (7% compared to 17%).
The top two training needs identified by board chairs were fundraising and governance. Only 1% (three respondents) said that their board did not need any training.
• During 2020 ICDA will hold training for chairs (as part of the Festival of Community Directors), and continue to create and host publications, tools and resources designed specifically for this cohort of board members, including a new publication titled Damn Good Advice for Not-forProfit Chairs
• ICDA will target organisations from the sport and recreation sector, in particular, for training for the chair.
ICDA will ensure that future surveys ask other senior leaders about their experiences with their chairs, in order to create a more balanced picture of how this cohort is performing, and how ICDA can better support its needs.
HELP SHEETS: Office holders’ responsibilities: Help sheets, duty lists, meeting tips: https://bit.ly/2XeTg4y
BOOKS: Get on a Board (Even Better – Become the Chair): Advancing Diversity and Women in Australia: ourcommunity.com.au/books/getonaboard
READING:
• The role of the chair: July 2017 edition of Community Directors Intelligence ICDA members download: https://bit.ly/32TyGIp | free extract: communitydirectors.com.au/files/ bbjuly17extract.pdf
• The wisdom of the chairs: July 2015 ICDA newsletter: https://bit.ly/352Epgf
• Article: Becoming a better chair: https://bit.ly/2XhE9HE
The findings in this chapter attracted the most commentary from our Brains Trust, with the majority of feedback centring on the alarming finding that one in 10 not-for-profits doesn’t track its success in any way.
“The major red flag for me is the measurement of performance,” said Community Council for Australia CEO David Crosbie. “The same number of people say they use organisational performance measures grounded in financial returns as say they use measures relating to the organisation’s purpose or mission.
“The majority also say they are working to achieve the milestones set in their strategic plan, but strategic plans will also be informed in part by income levels.
“The community sector will not flourish if it insists on being a pale imitation of the business sector – seeking to boost its income and profitability. Organisational measurement must move beyond finances to purpose – otherwise, what is a charities sector for?”
Mr Crosbie suggested there was a clear need for a deeper discussion within not-for-profit organisations, and the sector as a whole, about purpose.
“The discussion about the performance of the board needs to be informed by a fundamental question: who does the board serve and what would a successful board look like?” he said.
“In business, the board represents the owners of the company who get to directly or indirectly share in the profits of the company.
“In the charities sector, does the board represent the communities being served, and do they get to share in the success of the organisation? In what way? For me, boards need to constantly be reviewing whether their current approach is delivering on the purpose of the organisation and contributing to building flourishing communities.”
Mr Crosbie put forward a challenge to not-for-profit boards: “How do you lift your head and your discussions away from focused self-interest (building the income of your organisation to run your programs) towards doing the best things possible to deliver on your mission – even if that means closing down, merging or dropping long-running programs and services?
“These are the tough questions that boards avoid by focusing on inputs and outputs measures.” Some members of the Community Directors Council advised boards to ensure their strategic plan was a living document, if they were going to use it to gauge their success.
“One of the challenges is to embed a culture of continuous improvement in both performance and innovation,” said Susan Pascoe.
“Is your strategic plan an active document or is it a passive reference document?” said Sheena Boughen. “I strongly suggest a cultural shift to ensure any plan is a business and visionary plan – not a statement of intent only.”
Anne Cross also encouraged a shift away from output-based assessments of progress: “Given the importance of the strategic plan as a tool for measuring performance, focusing on the development of measurable outcomes in the plan makes good sense.”
ICDA trainer Lisa Jennings, who has a background in the arts, offered some context for the finding that the arts and culture sub-sector appeared particularly reluctant to formally measure its success. She said the measurement of success was one of the most fraught areas in the arts sector, pointing to a 2018 ArtsHub publication, What Matters? Talking Value in Australian Culture by Julian Meyrick, Robert Phiddian and Tully Barnett, to provide context.
“Why have we turned culture’s value into something to be scaled, measured and benchmarked? When did culture become a number? When did the books, paintings, poems, plays, songs, films, games, art installations, clothes, and all the myriad objects that fill our lives and which we consider cultural, become a matter of statistical measurement?” the authors write.
“When did the value of culture become solely a matter of the quantifiable benefits it provides, and the latter become subject to input–output analysis in what government budgets refer to as ‘the cultural function’? When did experience become data?
“Perhaps a more important question is why did it happen, and why does it keep happening? Also, how does it happen?”
On the other hand, Ms Jennings also pointed to the Australia Council for the Arts’ Artistic Vibrancy Framework tool, saying it was a good source of guidance on how to frame success in an artistic context.
Meanwhile, trainer Patrick Moriarty highlighted the finding that nearly all boards now rely on email communication, but relatively few are using new digital tools such as board portals and online chat.
“While there is nothing wrong with email, it doesn’t support better utilisation of papers/minutes/ records/data,” he said. “Email is also an area (like Facebook) where there is opportunity to transmit things that should not be transmitted (e.g. send to the ‘wrong’ person). More boards should be investigating lower-cost board portals. They provide a better and more secure platform to communicate among the board, and also provide a valuable history for others who come on to be able to get up to speed.”
One in 10 of the not-for-profit organisations that responded to our survey does not measure success in any way, and up to one in four does not collect any sort of data
Arts & Culture and Sport & Recreation organisations are less likely than organisations from other sectors to measure their success
Using a strategic plan as a yardstick for measuring success is more common among large organisations than small/medium ones
Around three in five organisations collect data on outputs, memberships or donors (or a combination), and 45% collect outcomes data
Most respondents consider their organisations no better than average when it comes to data collection, analysis and use
Few respondents see either impact evaluation or data collection/use as a top training need.
Nearly all NFP boards now rely on email communication, and many are now using other electronic tools such as file management software, and online meeting and learning tools. Use of board portals, online chat tools, project management tools and online board advertisements is less common.
In this chapter we showcase results originally presented in the Spotlight Report NFP Impact & Data, and add some findings in relation to the use of digital tools. A total of 1535 board directors and CEOs responded to the questions discussed in this section.
Most not-for-profit organisations are measuring success in one way or another, though it’s worth noting that a not insignificant figure of 13% of respondents say they do not measure success in any way.
Our survey results indicate that organisations working in the arts and culture and sport and recreation sectors are the least likely to be formally tracking their success.
Strategic plans are the most common benchmarks not-for-profit organisations use to track their progress towards success; these are used by 57% of respondents, with 44% saying they measure progress towards their mission/impact, and an identical number saying they use financial indicators to measure their progress.
Other common measures of success include bespoke targets/KPIs (set internally or by funders), membership/participant numbers, and client satisfaction metrics.
These percentages are significantly higher in boards that formally review their own performance:
• 82% measure success against the strategic plan
• 56% use financial indicators
54% measure progress towards their mission
Only 3% do not measure success
These percentages are significantly lower in boards that do not review their own performance:
• 32% measure success against the strategic plan
• 34% use financial indicators
• 26% measure progress towards their mission
• A third of the respondents (33%) do not measure success
While there was little variation from sector to sector, we did detect some differences in the way organisations of different sizes measure their success. Our results indicate that measuring progress towards mission/impact is a practice undertaken by organisations of all sizes, but measuring performance against a strategic plan seems to be a practice linked to large organisations. When split by annual revenue, the percentages of organisations that track to a strategic plan are as follows:
Between $10 million and $100 million: 83%
• Between $1 and $10 million: 79%
• Less than $250,000: 40%
A similar trend was detected in relation to the practice of using financial indicators to measure success, with larger organisations more likely than smaller ones to use these as a benchmark.
A key element of tracking a path to success centres on data collection. However, almost one in 10 respondents indicate that their organisation does do not collect any type of data. Still, the majority of organisations are collecting data:
66% collect outputs data
• 63% collect membership/donor data
• 46% collect outcomes data
• 24% collect other data – including feedback from clients or consultation data; financial data; benchmarking data; government-supplied data; and research data relating to specific projects.
When it comes to data collection, organisations that do not review their board’s performance could be seen to be a little less sophisticated than those that do. While the non-reviewers show a similar pattern to the general sample in relation to collection of membership or donor data, the percentage of respondents in this group that collect outputs and outcomes data is much lower, as shown below:
63% collect membership or donor data (compared with 63% of the general sample)
• 58% collect output data (compared with 66% of the general sample)
27% collect outcomes data (compared with 46% of the general sample)
• 19% collect other types of data (compared with 24% of the general sample)
Organisations that have a formal board review process in place show a stronger tendency towards data collection overall, as shown below:
• 82% collect outputs data
• 65% collect membership data
65% collect outcomes data
• 35% collect other types of data
These percentages did not differ markedly when split by organisation sector or size. Most respondents (80%) consider their organisations no better than average when it comes to data competence. When asked to score their organisation’s capacity to collect, analyse and use data to guide activities and pursue their mission, most (60%) entered a score of between 40 and 70 out of 100 (see graph below). Only 9% rated their organisation as excellent (giving a score of more than 80 out of 100), suggesting that community sector leaders believe that there is some room for improvement in this arena.
Despite the challenges, few survey respondents see either impact evaluation or data collection/use as a top training need. Only 14% of respondents chose data collection/use as one of their top three training needs, and just 26% selected impact evaluation among their top three.
Nearly all boards (96%) now rely on email communication. Smaller fractions (28–53%) use other electronic tools as well:
53% of respondents said their board was using file management tools (Dropbox, OneDrive, Google Drive etc.)
• 34% of respondents said their board was using online meeting tools (Skype, Zoom, GoToMeeting etc)
• 28% of respondents said their board was making use of online learning tools (webinars or online courses).
Use of board portals, online chat tools, project management tools and online board advertisements was less common, regardless of the organisation’s sector or size.
ICDA will leverage its “sister enterprise” status with Our Community’s Innovation Lab to deliver training, publications and partnership opportunities that help not-for-profit organisations shift towards evidence-based practice. In particular, ICDA will look for ways to capitalise on the impending release of an Outcomes Engine for grantmakers.
• In line with ICDA’s strategic objective to “increase the availability and affordability of technological and other tools and resources that promote improved governance”, we will provide assistance (e.g. through tailored help sheets and partnerships) to not-forprofit organisations that wish to introduce or make better use of systems for tracking and measuring success and other digital tools.
READING:
• Special technology report: Power up your digital strategy: https://bit.ly/2qpL1GK
• Jobs analysis: Why your board lacks ICT nous: https://bit.ly/32UNE0v and How to recruit for the skills you need (ICDA member article): https://bit.ly/33WNd7o
• How NFPs can get started with data: https://bit.ly/2Kq2ztl
• TOOLS: The Innovation Lab: Where we are seeding new ideas for not-for-profits: ourcommunity.com.au/innovationlab
This chapter showcases results originally presented in the Spotlight report Fraud & Cybercrime A total of 1442 board directors and CEOs responded to the questions discussed in this section. Our survey revealed that thefts and cyberattacks were the biggest crime threats for Australian notfor-profits.
Our Brains Trust was alarmed at the finding that 19% of respondents said their organisation had experienced some type of crime in the 12 months before the survey, and that around two-thirds of those crimes had not been reported to the police.
“That’s a real worry,” said Our Community’s Denis Moriarty. “While organisations might want to avoid a public scandal, not reporting may result in you just moving the problem on.”
Mr Moriarty also expressed concern that so few not-for-profit organisations say they’re interested in training on cyber-safety, given 7% of organisations reported they’d fallen victim to a cyber-crime recently.
Community Directors Council chair Susan Pascoe said she was surprised the crime rate was so high, and that so few crimes were being reported to police.
“With the crimes mainly being cyber or financial, these are serious matters, and the NFPs should think seriously about reporting both for a deterrent effect within the organisation and to hopefully quell the behaviours in the offender,” she said.
CDC member Sheena Boughen was similarly puzzled by the lack of reporting.
“This is distressing and shocking,” she said. “What’s the resistance to reporting it? What does that reveal about boards and their interpretation of responsibility?” she said.
As well as emphasising the need to report crimes once they’d occurred, several members of our Brains Trust felt that not-for-profits needed to do some work to get their houses in order to stop crimes from occurring in the first place.
“I think we need to highlight the importance of strong systems and controls,” said Sonja Hood. “What do the risk management processes look like in those organisations that are falling victim to crimes? There are some simple fixes – e.g. does your organisation actually need a credit card? In my view – no. Does the board have a line of sight over the bank accounts and the accounting system? It needs to.”
Anne Cross said not-for-profits can be seen as a “soft target” for fraudsters.
“Asking the question of ‘are we vulnerable to fraud?’ should be on the board’s agenda,” she said. “Boards should do everything they can to protect against fraud and should be clear that stealing will be reported to the police.”
A recent UK study found that “mandate fraud” – which occurs when an employee is deceived into changing a regular payment mandate (e.g. direct debit) to a fraudster – was an emerging area of concern for not-for-profits. The study reportedly found that such frauds had cost affected charities more than $13,000 each on average. This should be an area for future study for ICDA and others with an interest in this area.
ICDA trainers Lisa Jennings and Patrick Moriarty drew attention to some of the simple tools that could help organisations to avoid falling victim to crime.
“The findings from the report that I will probably quote most often in training are those around fraud and crime in the sector, and the low level of reporting on it. Shouldn’t be surprised – but I am!” Ms Jennings said.
“More organisations should be putting their policies into practice – and those organisations who don’t have financial management and whistleblower policies in place should be utilising the ICDA Policy Bank to investigate and develop their own frameworks,” Mr Moriarty said.
“They should also immediately download the free guide Damn Good Advice on Cyber-safety and Fraud Prevention (written and distributed in partnership with Commonwealth Bank) – it contains practical advice in plain English on what any not-for-profit organisation can do to increase their chances of staying safe.”
Your Call is an Australian organisation that provides whistleblowing services integrated with a traditional telephone hotline. Your Call has partnered with ICDA to produce a free guide, Whistleblowing at Your Not-for-Profit: A Leader’s Guide (available at https://bit.ly/3437gkF).
Your Call CEO Nathan Luker said the findings of the ICDA study carried significant short- and long-term implications for not-for-profit organisations.
“Numerous risks face any not-for-profit that does not tackle crime and fraud properly. These risks include – and are not limited to –reputational, commercial, funding, cultural, leadership, legal, regulatory, safety and performance.”
“Not reporting crime corrodes an organisation’s culture and sets its ethical standards amongst its employees and volunteers. It is how leaders act ‘in the shadows’ which truly matters,” Mr Luker said.
He said with up to one in five not-for-profits experiencing crime, a good whistleblower plan was essential.
“Whistleblowing plays a crucial role to both deter and detect crimes and misconduct. Providing an avenue to report misconduct or illegal activity via a range of reporting pathways –including anonymously and externally – can cultivate a ‘speak up’ culture.”
He said not-for-profit organisations should strive for a culture in which members of an organisation know that the organisation will not tolerate misconduct.
Around two-thirds of the crimes experienced by not-for-profit organisations are not being reported to the police.
Theft of cash and theft of assets are more likely to be reported to the police than other types of crime.
Theft of assets, cyber-hacking, credit card fraud and theft of cash are the most commonly reported crimes.
Up to one in five not-for-profit organisations has experienced some sort of crime relatively recently (and some organisations experienced multiple crimes).Nathan Luker, CEO, Your Call
A total of 19% of respondents said their organisation had experienced some type of crime in the 12 months prior to the survey.
Fewer than 3% of respondents said they’d experienced cheque fraud, payroll fraud, bribery and kickbacks, theft of data, data ransom and/or expense-account fraud.
The areas of most concern, with the results reflecting some organisations reported more than one crime, were:
• Theft of assets (reported by 7% of survey respondents);
• Cyber-hacking (7%);
Credit card fraud (4%); and Theft of cash (3%).
Our survey did not identify individuals nor individual organisations. As such, it is not possible to say how many cases of crime may have been reported by multiple people from the same organisation and thus effectively double-counted in our survey analysis. It is expected, however, that any rate of overcounting would be equalled by under-reporting.
Note too that due to the relatively small number of organisations that indicated they had experienced a crime, we were unable to explore sector or organisation size-based differences (with just 277 organisations reporting some sort of crime, the sample was too small to allow us to split the data further).
Many crimes are going unreported. Just one in three of the respondents who said their organisation had experienced crime in the previous 12 months said that the case was reported to the police. Even fewer (just one in five) were reported to insurers.
Out of those who said their organisation had experienced some kind of crime (277, or 19% of all survey responses):
• 35% said the incident was reported to the police 22% said the incident was reported to their insurer.
We found some evidence to suggest that some organisations had experienced more than one type of crime in the year leading up to the survey.
For example:
• 20% of those who said they had experienced theft of assets (20 respondents) also said they’d experienced theft of cash, and 15% (14 respondents) also experienced expense-account fraud
• 12% of those who said they had experienced cyber-hacking (11 respondents) also mentioned credit card fraud.
It is not known if any of the multiple crimes reported by any one respondent resulted from a single incident.
THEFT OF ASSETS:
A total of 96 respondents (7% of the sample) said their organisation had experienced theft of assets in the previous 12 months. Of those:
38% did not know who the perpetrator was
16% said the perpetrator was a staff member
10% said the perpetrator was a volunteer
5% said the perpetrator was an online fraudster
“Other” perpetrators (identified by 18% of respondents) included non-associated members of the public/community, strangers who broke into a facility, or users of the service.
A total of 49% of those who had experienced theft of assets said the case was reported to the police and 28% said the case was reported to their insurer.
CYBER-HACKING:
A total of 94 respondents (7% of the sample) said their organisation had been cyber-hacked. Of those:
53% said the perpetrator was an online fraudster
31% said they did not know who the perpetrator was
5% said the perpetrator was a staff member
A total 27% of those who had experienced cyber-hacking said the case was reported to the police and 23% said that the case was reported to their insurer.
A total of 56 respondents (4% of the sample) said their organisation had experienced credit card fraud. Of those:
59% said the perpetrator was an online fraudster
16% said they did not know who the perpetrator was
7% said the perpetrator was a staff member
“Other” perpetrators (identified by 13% of respondents) included: non-associated members of the public/community; strangers who broke into a facility; and unknown (notified by the bank).
A total of 29% of those who had experienced credit card fraud said the case was reported to the police and 16% said the case was reported to their insurer.
A total of 49 respondents (3% of the sample) said their organisation had experienced theft of cash. Of those:
100
22% said the perpetrator was an online fraudster
20% said they did not know who the perpetrator was
12% said the perpetrator was a staff member
Other respondents (identified by 16% of respondents) included: non-associated members of the public/community; a stranger who broke into a facility; a visitor.
A total of 41% of those who had experienced theft of cash said the case was reported to the police and 24% said the case was reported to their insurer.
Detailed analysis of the survey results indicate that:
• Most cases of credit card fraud (at least 59%) and cyber-hacking (at least 53%) are perpetrated by online fraudsters.
• The crimes of ‘theft of cash’ and ‘theft of assets’ are more likely to be reported to the police than other types of crime – around half of these incidents were reported to the police.
Credit card fraud is less likely than other types of crime to be reported to insurers. Only 16% of cases were reported to insurers, compared with more than 24% in the other types of frauds/ crimes. This is most likely because credit card frauds are often identified and protected by the bank who issued the card (as pointed out by several respondents).
It is difficult to identify the perpetrator of theft of assets. For around 40% of the cases the respondent did not know who the perpetrator was.
• ICDA will, through the Festival of Community Directors, provide training in cyber-safety and crime prevention for not-for-profit boards and senior staff.
• ICDA will also seek opportunities to publicise and further disseminate crime prevention help sheets and other publications (e.g. Damn Good Advice on Cyber-safety and Fraud Prevention, which is produced and disseminated in partnership with Commonwealth Bank).
FREE GUIDES:
• Damn Good Advice for Treasurers: https://bit.ly/2CU5c2u
• Damn Good Advice on Cyber-safety and Fraud Prevention: https://bit.ly/2CTXvt3
• Whistleblowing at Your Not-for-Profit: A Leader’s Guide: https://bit.ly/3437gkF
POLICIES:
• Financial control and financial management policies: communitydirectors.com.au/policybank
HELP SHEETS:
• Financial help sheets and resources: https://bit.ly/2Olpffn
READING:
• Community Directors Intelligence newsletter special edition: Power up your digital strategy: https://bit.ly/2XlkEhg
• Article: Cyber attacks highlight threats to NFPs: https://bit.ly/2Xuzgew
This chapter showcases a revised version of the results presented in the Spotlight report Not-forProfit Finances. A total of 1525 board directors and CEOs responded to the questions discussed in this section.
Our study revealed a tale of two sectors: there are groups that are thriving, and groups that are battling, with the dividing line drawn right down the centre.
“It’s interesting to draw a connection between this finding and the earlier finding that fundraising training is in great demand among the not-for-profit organisations who participated in our survey,” said ICDA director Patrick Moriarty.
“Are we seeing organisations responding to financial pressure by looking for new sources of funds? Are we starting to see a more proactive approach to sustainability, whereby boards are realising that they need to get ahead of the game by diversifying and exploring other options?”
Community Directors Council chair Susan Pascoe pointed out that it was not surprising to hear that many not-for-profit organisations are struggling financially.
“Most surveys find that financial viability is a constant concern for the smaller not-for-profits – and many of the medium and larger ones as well,” she said. “Given that we live in a disruptive era, notfor-profits need to be agile, innovative and adept at managing their resources.
“In this regard, the significant minority of boards who report lower levels of financial acumen on their boards should think of training and board member selection to address the deficit.”
The not-for-profit sector can be split more or less equally into two groups: financial battlers and thrivers.
The sport and recreation and human services sectors are in slightly better condition financially, while organisations in the arts and culture sector are more likely to be just breaking even or struggling.
Smaller organisations – those with an annual revenue of less than $50,000 – are more likely than others to say they are struggling financially.
Organisations where most board members have a solid understanding of the finances are more likely to be in good shape financially, but having a board where all members are fully across the finances is not a guarantee of financial success.
Collaboration as a strategy for reducing administrative expenses is a relatively common practice, having been pursued by around one in three organisations in the year prior to the survey. It’s most common in the community development sector.
40% of respondents believe only some, few or none of their board members has a sufficient understanding of the organisation’s finances.
Major IT projects are relatively common, having been experienced by one in five respondents in the leadup to the survey. IT projects were most common in the human services and health sectors, and in larger organisations. Organisations that are struggling financially are less likely than others to have undertaken a major IT project.
Mergers are relatively rare, having been experienced by 6% of organisations in the leadup to the survey. They were most commonly experienced by larger organisations, but the decision to proceed does not appear to be correlated with an organisation’s financial health.
Replacing a CEO is more common among large organisations, and more common among organisations that are struggling financially.
The not-for-profit sector can be split more or less equally into two groups: financial battlers and thrivers. Our survey found that 54% are doing well financially (thrivers), while 31% are breaking even and 15% really struggling (the sum of these two groups we see as battlers).
% of ICDA 2019 survey respondents that said…
We are struggling financially We are just breaking even We are in good financial shape
There are few variations in the findings when split by sector6, though as the chart below indicates, the sports and recreation and human services sectors are in slightly better condition financially, while organisations in the arts and culture sector are more likely to be just breaking even or struggling.
We are struggling financially We are just breaking even We are in good financial shape Note that data may sum to more than or less than 100% due to rounding.
6 We have drilled down on sector-based findings only in sectors where we had enough data to represent a legitimate sample.
Perhaps unsurprisingly, smaller organisations – those with an annual revenue of less than $50,000 – are more likely than others to say they are struggling financially. Around a quarter of respondents (24%) from small organisations indicated they were struggling financially, a figure four times larger than the 6% from large organisations (those with annual revenue of $10 million to $100 million) who indicated the same.
Chart excludes responses from those who replied “don’t know/would rather not say” and those with annual income of $100 million+, whose sample size was too small to be statistically significant.
We are struggling financially We are just breaking even We are in good financial shape
In the 2019 AICD survey (in which a majority of respondents were from charities with annual revenue of $1 million to $20 million) a total of 54% of respondents said their organisations were making a profit (at least 11 percentage points fewer than the large organisations in our sample who said they were in good financial shape), 27% were breaking even, and 18% suffered some loss (at least 11% more than the large organisations in our sample who said they were in good financial shape).
The AICD survey highlighted that while 80% of the directors in their sample expected their organisations to be profitable, only 54% reported an actual profit, making the point that their expectations of financial sustainability might have been set too high, or community directors may not have been fully aware of the financial situation of their organisations.
Sixty per cent of respondents to our survey said “most” or “all” of their board had a sufficient understanding of the board’s finances, though a worrying minority (40%) indicated that only “some”, “few” or “none” of their board directors were across the finances. These results were consistent regardless of sector and organisation size.
Our survey suggests that organisations where most board members have a good grip on the finances are more likely to be in good shape financially. But that’s only part of the story.
Exploring this relationship further, we can tease out a few more insights. For example, it’s rare in organisations that report good financial health for people to report that only a few people know about the finances (11%). However, blanket strong financial knowledge across the board is not enough to guarantee an organisation’s financial success. Only 22% of those who reported strong financial results said that all members of the board clearly understood the organisation’s finances. Having a large proportion of board members across the finances appears to be sufficient, and indeed it appears that “most” may be preferable to “all” (see the table on the next page). Pondering these results, it’s tempting to posit that diversity on the board may be more important than allround financial acumen – that is, it may be preferable to have a board with a variety of skills than a board full of accountants.
It’s worth noting also that financial troubles do not appear to be correlated with financial acumen on the board. Fifteen per cent of our sample reported that they were struggling financially but these organisations were just as likely to say they have board members with strong financial skills as weak ones.
We are struggling financially (15% of the sample in this report)
We are just breaking even (31% of the sample in this report)
We are in good financial shape (54% of the sample in this report)
The darker the shade, the higher the percentages. A change in the shade represents a change in statistical significance. Note we have excluded from the results (as per the left-hand column above) those who answered “none” because this response constituted less than 1% of the responses.
We asked the senior leaders of not-for-profit organisations who responded to our survey if they had experienced major financial and structural changes during the previous year, or if they planned to undertake such actions in the year ahead.
Chart shows the proportion of the active sample who selected each option. Respondents were asked to lodge no response if the action/s did not apply. Please note that while the figures discussed in the commentary are indicative, where percentage differences are small it’s prudent to treat findings with caution.
As the chart above shows, our survey revealed that around one in three organisations had collaborated with another organisation in the previous year to reduce expenses, while half of that number (one in six) planned to do so in the year ahead. It is unclear whether the difference in these numbers is due to the fact that collaborations of this sort are generally unplanned, or whether some other factor (e.g. a more stable funding environment; less appetite for collaborating) is at play. We also found differences in the number of organisations that had previously laid off staff (11%) or planned to in the next year (6%); and those that had replaced the CEO (11%) or planned to (7%). Again, these types of activities may be less likely to be planned well in advance, or other factors may be at play. Conversely, we found that fewer organisations had undergone a merger (6%) than planned to in the year ahead (9%).
Our survey found that one in five organisations had gone through a major IT project in the previous year, while a similar number planned to do so in the year ahead, indicating that this is a constant need currently within the sector. The proportion of organisations planning to sell assets was also stable (6% had done so in the previous year; 5% planned to in the year ahead).
Many organisations went through more than one major financial change last year. For example, of the 417 of respondents that collaborated with another organisation to reduce expenses (27% of the sample):
27% had also undertaken a major IT project
• 16% had also replaced their CEO
• 15% had laid off staff
• 14% had merged with another organisation
• 9% had sold assets.
As part of our analysis, we sought to tease out variations between sectors in relation to financial and strategic actions and trends. The results are shown below. Higher percentages are shown in the chart with darker shading.
Our results reveal that the health and human services sectors are more likely than others to have undergone a major IT project, and that the community development sector is more likely to have collaborated with other organisations to reduce administrative expenses.
Percentage of respondents who say their organisation went through a major financial/strategic change last year (by sector)
We also sought to uncover any correlations between organisation size (determined by the organisation’s annual turnover) and financial/strategic actions. The results are shown in the table below. Higher percentages are shown in the chart with darker shading.
We found that the larger the organisation, the more likely they were to have merged with another organisation, replaced the CEO, laid off staff or undergone a major IT project; that is to say, larger organisations appear to be in a greater state of flux than smaller organisations.
Of note, an organisation’s size appears irrelevant when it comes to collaboration and selling assets –small organisations are just as likely as larger organisations to have undertaken such actions.
Percentage
of respondents who say their organisation went through a major financial/strategic change last year (by annual revenue)The darker the shade on each row, the higher the percentages. A change in the shade represents a change in statistical significance.
The 2019 AICD survey found a similar percentage of mergers in its sample of large organisations. A total of 6% of respondents said their organisation had completed a merger in the previous 12 months, while 30% said their organisation had discussed a merger, showing that there is a big gap between thinking about a merger and actually going through with one.
The AICD identified the top three reasons for merging:
• “To better meet our mission” (35%)
• “To develop or maintain market share” (24%)
• “To broaden our range of services to existing users” (22%) Other popular reasons were “to improve efficiency” and “to increase the number of people we serve.”
It seems fair to assume that the worse shape your organisation is in financially, the more likely it is to take major actions and restructure. We set out to test our assumptions by comparing organisations’ financial health with actions they report having taken over the previous 12 months. The results are shown in the table below. Higher percentages appear in the chart with darker shading.
Of note, we found that:
• Organisations that are struggling financially are more likely to have replaced their CEO and to have laid off staff than organisations in good financial health.
• Organisations that are breaking even are less likely than either struggling or strongly performing organisations to have undergone a major IT project.
• An organisation’s financial health appears to have no bearing on its decision to sell assets or merge with another organisation.
• ICDA will continue to explore measures designed to democratise access to funding, and to educate lower-capacity organisations about how to become more sustainable (e.g. through Funding Centre membership and low-cost fundraising training held as part of the Festival of Community Directors).
• ICDA will redouble efforts to ensure that members of not-for-profit boards achieve competency in financial management, through Finance Week training (held in partnership with Commonwealth Bank as part of the Festival of Community Directors), continued dissemination of the free publications Damn Good Advice for Treasurers and Damn Good Advice for Board Members (also distributed in partnership with CommBank), and provision of free online help sheets.
• In partnership with Commonwealth Bank, ICDA will celebrate and elevate the role of treasurers through the annual Not-for-profit Treasurers’ Awards.
HELP SHEETS:
• Financial management help sheets: https://bit.ly/2OlnfDT
FREE GUIDES:
• Damn Good Advice for Treasurers: https://bit.ly/2CU5c2u
• Damn Good Advice for Board Members: https://bit.ly/2NZ25wx
TOOLS:
• Funding Centre grants database and newsletter: fundingcentre.com.au
TRAINING:
• Free training: Not-for-profit Finance Week: communitydirectors.com.au/nfpfinanceweek
• WTF – Where’s the Funding? Online compact course: training.communitydirectors.com.au
CELEBRATION:
• ourcommunity.com.au/treasurersawards
As we saw in our text analysis (see chapter one), maintaining good government relations is a challenge for many not-for-profit organisations, and our study found that this is particularly the case for smaller groups.
A total of 1392 community directors and CEOs responded to the survey questions relating to government and peak body relationships, but a variable number within that group ticked the “not applicable” box; therefore, the average sample size for this section is 1184.
Our Brains Trust were troubled by the finding that many groups feel they have a poor relationship with government (particularly the federal government), but CDC member Sonja Hood also wanted to know: what does a good relationship with government actually look like? It’s a good question.
As the head of the Community Council for Australia, David Crosbie, recently wrote in Pro Bono: “Governments generally dislike noisy charities, the kinds of charities that highlight injustice, inadequacy, environmental degradation, ethical inconsistencies, failures and unmet needs.
“But without noisy charities Australia would be a much less healthy, safe and prosperous country.”
Is it possible to have a “good” relationship with government while also advocating for change, as many not-for-profits do, and must do?
“Would any of the recent royal commissions have happened without some noisy Australians, without charities and other groups raising their concerns, without some form of activism?” Mr Crosbie wrote.
“It took people with courage and values to push for change.”
Many members of the Brains Trust highlighted the fact that 7% of organisations felt they had a poor relationship with their own peak body, with the smallest organisations faring worst on that front.
“In my view, the role of peak bodies is often conflicted. In many sectors, governments now pit organisations against each other in competitive funding rounds – and often, peak bodies themselves are also competing with members for funds, or for credibility or for oxygen,” said CDC member Sonja Hood. “There’s a question here for me about what the role of a peak body actually is.”
“Almost a third of not-for-profits characterising their relationship with the federal government as poor suggests that the constrained fiscal climate and the government’s aversion to advocacy are having an impact,” said Community Directors Council chair Susan Pascoe.
“This heightens the important role for peak bodies, some of whom could improve their relations with their members based on the findings of this survey.”
Or as CDC member Anne Cross put it simply: “Peak bodies need to step up!”
ICDA director Patrick Moriarty says the results suggest that some local government authorities also need to invest in cultivating better relationships with local community groups; and that those not-for-profit organisations themselves would do well to invest in building better relationships with their LGAs.
“This is an area that I think more organisations should focus some attention on in their planning phase so that there is less duplication, potentially more partnerships and sharing of resources, and better access to connection to local government who are often the closest to the coalface,” he said.
More than one in five not-for-profit organisations characterise their relationship with the federal government as poor, though large organisations are doing better on that front than small organisations.
There is room for improvement for peak bodies in relation to cultivating good relationships with the organisations they represent, particularly small organisations.
We wanted to understand more about how respondents characterise their organisation’s relationship with their peak body and the different tiers of government. Our results indicate that most not-for-profit organisations have good relations, though a sizable minority do not characterise their relationships as favourable, with the federal government coming off worse than its state or local government counterparts, as shown below.
These trends persist across sectors, except in the case of the federal government, which seems to enjoy a better relationship with the health and human services sector than with others.
When we split the sample according to annual revenue we see a radically different picture, with large organisations having a significantly better relationship with their peak bodies and all tiers of government than small groups.
It is interesting to note that peak bodies appear to have some way to go in cultivating a good relationship with their stakeholders and, again, the smallest organisations are the least positive on that front.
This study has been produced by the Institute of Community Directors Australia (ICDA), an Our Community enterprise.
ICDA is a best-practice governance network for the directors serving on Australia’s 600,000 not-for-profit boards, committees and councils, and the senior staff who support them.
ICDA members get access to a range of educational, capacity building and networking opportunities that build knowledge, connections and credentials.
Join up now to reap the benefits of membership:
1. Achieve “responsible person” status – ICDA members are recognised by the ATO under “responsible person” rules
2. Recognition – three membership post-nominal options, providing community and professional recognition for educated and engaged not-for-profit members
3. Capacity building publications – learn about current trends, issues and emerging areas of risk via member-only newsletters and governance help sheets
4. Policy alerts – receive notification when changes are made to governance, human resources, financial management, values and communications policies you’ve downloaded through the Policy Bank
5. Preferential member pricing – receive discounts on Festival of Community Directors events and online compact courses
6. Alumni events – gain access to deep connections and a vibrant network of believers and doers. There’s an online forum, as well as regular invitations to events such as the Communities in Control conference
7. Access to forums, networks, information and opportunities – boost your confidence (and competence) and open career doors
8. Affordable – for as little as $65 a year you get all the benefits outlined above and so much more.
