Directors under pressure to deliver funds, good leadership
Why a net return at the end of the financial year will pay dividends
Things are getting more challenging for NFPs - particularly those in the services sector. Governments are expecting them to do more, and to take on more complex clients, with less funding. At the same time, private sector providers are picking the easier and more profitable work. This often leaves the NFPs with the more complex and less profitable clients, particularly in the disability service sector.
It is always tough to run an organisation in a financially sustainable way, while being ambitious for impact and outcomes. Staying true to the mission is vital. But there is no mission without a margin.
The old approach of staring government in the face and delivering the same services with the same expenditure, and smaller government grants, is no longer a smart fundraising strategy (if it ever was).
This approach of doing more with less is likely to erode any budget surplus, tip organisations into deficit, and force them into a desperate search for additional funding streams. Beware, because governments are no longer rewarding budget deficits with bigger or "top up" grants.
What's more, budget deficits are like a red rag to a bull for philanthropic and corporate funders reviewing financial reports. They are much more likely to fund organisations in good financial shape than those posting deficits. Governments are also increasingly rewarding organisations that make the effort to secure philanthropic and corporate funds and generate some "fee for service" income.
Refine your pitch to dip into diverse revenue streams
On a related topic, board directors must take a far more proactive part in generating revenue. I recommend that directors take as much interest in revenue raising as they would if they were on the board of a commercial company seeking to raise venture capital. Directors need to take a keen, active interest in the "pitch" to investors.
Make your meetings count for good leadership and strategic guidance
Understanding the key elements of the "pitch" and being "on message" when speaking about impact, ambition for growth, and the need for more income is essential. Directors should be "talking-up" the organisation and advocating for investment whenever possible. Directors should keep on top of the names of major supporters and be sure they pass on their personal thanks when the opportunity arises. Funders and investors expect that directors are aware of major investment pitches and successes. When funders investigate an organisation, usually the first thing they do is go to the website and have a look at who is on the board.
Too many NFP board directors think their role is purely a formality. The board papers are often too scant or lacking in analysis to provide any insight into the true situation of the business. Board meetings are often conducted in a perfunctory manner with a "tick and flick" approach to the agenda.
I urge board directors to use meetings as the main forum for checking the "pulse" and other "vital signs" of the organisation. The directors can truly engage with the CEO during the meetings and should provide strategic guidance and support. When the CEO presents the CEO report, the board directors should use this time as an opportunity to ask probing questions. What does the CEO see as the key challenges? Can the board directors assist in addressing some of the challenges? Do the directors have ideas for dealing with the issues? What does the CEO see as the key opportunities? How can the directors assist?
The chair plays a key role in regularly checking in with the CEO. The chair should be good at listening and analysing complex business situations and supporting the CEO to find solutions.
The chair and other directors must focus on supporting the CEO to be an exemplary, strategic leader. If the CEO is not meeting these expectations, then it is up to the board to review if the CEO has the appropriate supports or is the right person for the job.
Opportunities for NFP boards
Be part of the solution, not just a problem responder
You don't have to be the biggest in the sector, but you can be known for excellence in achieving impact. Organisations that are confident of their impact can take a leadership position within their sector. This gets them noticed by government and other funders.
Be sure that all directors are "on message" and amplify the position of the organisation as part of the solution through its impact.
Make sure your organisation appropriately measures and evaluates impact and then communicates this impact to supporters, including governments, along the way.
Build a dynamic leadership team, starting with an engaged and committed board, and back the CEO to deliver the strategy and run the business. Build a culture of ambition and aspiration that focuses on increasing impact.
Demonstrate how your organisation helps make the world a better place
Government and major funders are increasingly looking for organisations that are clear about how they are contributing to wider systemic change. There is significant funding available for organisations that understand systems change and can demonstrate how they contribute to the change.
It is no longer good enough to beaver away in your own corner. Regular consultation, communication and engagement with others in the sector, both nationally and internationally, is a great way to better understand how to best contribute to systemic change.
We recommend being clear about the "theory of change" for the organisation and then mapping this to a systemic "theory of change". Going through this process for the board and management is a great way to ensure everyone understands where the organisation fits into the sector and where it makes the most effective and efficient contribution.
Adapt your ability to react: prepare for the opportunities
The only certainty about the future is change. And change is coming faster than ever before.
Organisations that can understand and analyse their key strengths and then position themselves to seize new opportunities in the market are going to survive. Smaller organisations have the ability to be agile, but often lack the depth of experience and resourcing needed to take the risks required to change. Larger organisations are often stuck doing the same thing and find change slow and difficult. Sometimes it is best for larger organisations to break up into new units or departments to start new business ventures.
The organisations that are the best at adapting to change tend to have directors and CEOs who have strong business acumen and experience at an appropriate level and can make smart business decisions. Smaller organisations should make sure they have a number of directors who are experienced in running small businesses, while larger organisations, with bigger administration and budgets, need directors with matching business skills.
Wendy Brooks (BMus, LLB Hons) is managing director of Wendy Brooks & Partners, which provides strategic and fundraising advice to NFP organisations. Wendy is also chair of InLife Independent Living, co-chair of Human Rights Watch Australia, a board director with Kokoda Track Foundation, Summer Housing Ltd, and Flying Arts, and a MiVote council member.