To Be or Not To Be - A Not For Profit Director

startup meeting 641There has been a lot of bad press about directors over the years, but that hasn't stopped around 1 in 10 Australians becoming a board member of about 600,000 not for profits (NFP) in Australia.

So if you are really passionate about being involved, don't let the responsibilities put you off – just take the time to make sure you are prepared and then go out and do it.

I have been a NFP director on and off for around 10 years and I often get asked, why I do it and is it worth it. NFP's are now more commonly referred to as 'For Purpose' organisations, but in this article I will refer to them all as NFP's.

Firstly, it's not about the money because there usually isn't any. Unless you are on the board of one of the large, well known corporate style NFPS, you will be a volunteer. And it's not for the glory either - most small NFP's work tirelessly behind the scenes to service the needs of their niche market.

So why do I do it – because if you find the right match for your skill sets and your passion, it can be one of the most personally and professionally rewarding things you will do.

 

But there are there are some things you need to consider. Here are a few:

  1. Be honest about the commitment you can make. Many NFPs are small and resources are stretched. In these cases the board often takes on more than just the traditional 'governance' role and it can quickly become another full time job. Having said this, you still need to understand and observe the separation of duties between board and staff members.
  2. Understand your responsibilities as a director. When you are a director on a NFP or a for profit board regardless of whether or not you are paid, your responsibilities and liabilities are the same. Your role is to look after the organisation and you have accepted a 'fiduciary' responsibility to act in good faith, and with due care and diligence. You are expected to do the work, know the rules, not take things for granted and ask questions if you don't understand anything. But don't let this put you off. If you are conscientious and apply the required time and effort to the role you are unlikely to end up on the wrong side of Corporations law..

 

What should you do or know to prepare yourself for a NFP board role?

  1. Have a strong belief in the cause. You are on the board to pursue the organisation's mission. So understand what it is, make sure you believe in it, because your role includes representing the organisation to the public in relation to that mission.
  2. Understand the core operations of the NFP and who does what. You should be aware of the core deliverables of the organisation and the skills available to deliver them. Strictly speaking, the board is only responsible for the behaviour and outcomes delivered by the CEO. But there is an old saying in the board world 'a fish rots from the head'. So you need to understand the culture and how the organisation is actually working to deliver on its mission.
  3. Understanding financials. You don't have to be able to prepare the financials, but you need to understand what the financials mean. Financial reports tell you a lot about what is going on in an organisation. Ignorance of the accounts is no excuse in the event something goes wrong. A director's duty is to manage the finances of the organisation, responsibly and with appropriate care. NFP's are not about making money, but they do still have to be financially viable and solvent (be able to pay their bills when due) in order to operate.
  4. If you are not sure or need clarification – ask. Many of us are new directors and still learning the ropes. But not knowing something doesn't protect you. If you are unsure about how numbers are generated or about any information you are given by the CEO - then ask for clarification. As a board member, it is your responsibility to make sure you have the information you need in order to make a well informed decision.
  5. Understand strategies for making the organisation more efficient. This doesn't always mean reducing staff numbers and/or services, but it does mean suggesting strategies for doing things smarter and more effectively. NFPs are competing for an ever shrinking bucket of sponsorship and support dollars, so we all need to think outside the box while keeping a focus on our mission.
  6. Understand the difference between a strategic plan and a business plan. I think of these as the strategic plan being the 'what we want to do' and the business plan being the 'how we are going to do it'. As a board member your responsibility is to the high level strategic planning. We don't get involved with delivery and you need to be comfortable with that.
  7. Be comfortable with the concept or risk and understand strategies for managing it. This is risk relating to the organisation – not you. All organisations work in an environment that attracts risk, whether it is financial, environmental or social. Your job as part of a board is to understand the risks facing the organisation and help develop a strategy to mitigate or manage this risk.
  8. What options do you have if you don't agree with a board decision? You will be working with a range of personalities; experience levels and let's face it, egos. You have a responsibility inform yourself and if you think the board is not making the best decision, you should know how to bring this to the Chair's attention and have your views recorded. There are a number of steps you can take if you think the decisions being made are actually putting the organisation at risk.

 

This is a short summary of the type of thing a director in a NFP should think about, many are based on situations I have experienced. There are a number of resources that will help you understand your obligations and rights as a director, here are a few:

 

About Lighthouse Business Innovation Centre
Anna Pino is the CEO of Lighthouse Business Innovation Centre Limited (Lighthouse) and sits on a number of Allied Health related NFP boards. Lighthouse has a strong track record of supporting entrepreneurs, researchers and inventers on the path from concept to commercialisation. Since July 2008, Lighthouse has worked with over 990 distinct enterprises and provided group and peer based services to over 3400 enterprises and individuals. For over five years Lighthouse has successfully delivered business advice, education, mentorship and networking opportunities to help these businesses commercialise their ideas and grow their companies. Lighthouse also delivers programs such as the ACT Microcredit Program for the ACT Government. Visit www.lighthouseinnovation.com.au for more information.