Issues facing NFPs in 2019

The increasing governance burden requires greater sophistication…

Particularly in smaller organisations, directors and committee members (referred to as ‘directors’ from here on) are often volunteers chosen primarily for their connection to the organisation’s mission rather than their governance experience.

Unfortunately, good governance requires an increasingly sophisticated skill set and understanding. In 2019, directors may need to consider the impact of matters on their organisation as diverse as: recommendations from the banking royal commission; the new ACNC External Conduct standards; changes for deductible gift recipients that are not registered charities; and a potential change in government.

Each organisation should consider whether the level of experience of its committee or board is appropriate for the complexity of the organisation and the regulatory environment in which it operates. It may be appropriate to provide professional development to current directors or recruit additional directors with specialist governance qualifications.

Managing culture is a governance responsibility

The recent royal commissions have caused significant reputational damage to organisations and the individuals responsible for their governance. Almost invariably, those investigations found cultural failures had allowed misconduct to thrive.

The lesson for directors is not only that culture is important, but that the public considers that setting and overseeing the culture of an organisation is a key part of good governance. Culture is no longer a solely operational issue – if it ever was.

Directors need to ensure that their organisation’s values meet changing community expectations and meaningfully translate into day to day operations.

The cresting Baby Boomer wave

Baby Boomers make a disproportionately large contribution to the bottom line of many not-for-profit organisations. But the boomer wave is cresting. – By the end of 2019, almost half of the Baby Boomers will have retired, and will no longer be earning a regular income.

The window of time within which not-for-profit organisations can engage with their most rusted-on and generous donors is starting to close. Directors need a strategic,  segmented fundraising strategy to engage with retiring boomers, Generations X and Y and the emerging Gen Z workforce.

Options for organisations wanting to get onto the front foot

  • Tell your story
    Many organisations are so focused on what they do, that they fail to step back and consider why they are doing it. Worse, they fail to articulate the ‘“why” to their internal and external stakeholders. Today’s culture is far more energised by authentic purpose than annual reports. Great directors will ensure not only that their organisation’s story is told well and often, but that it informs and guides the organisation’s values, mission and operations.
  • Collaboration: Work with others for more impact
    Collaboration with other organisations can create benefits including economies of scale, increased opportunity to attract government funding and shared know-how. Mergers continue apace in the sector, but are not always necessary,  or appropriate. Strategic alignment through activities such as joint ventures, co-branding or colocation can offer many of the same benefits. This can also provide a good opportunity to investigate cultural “‘fit” for a potential future merger.
  • Protect the vulnerable
    This may not be an opportunity in the traditional sense, but it is fast becoming an imperative. Vulnerability can affect any stakeholder in an organisation, – from the single mother receiving services, to the employee with a physical disability or the community director with depression. Both not-for-profit and for-profit organisations risk a severe backlash if they fail to engage compassionately with vulnerable individuals.

    For registered charities, the protection of vulnerable beneficiaries is an ACNC compliance focus for 2017 – 2019. It is also an express requirement of the new External Conduct Standards.

    Not-for-profit organisations that get this right have an opportunity to differentiate their organisation in a crowded marketplace. But the real reason to protect vulnerable individuals is not about risk management or branding,  – it is simply the right thing to do.

For more information on the issues facing NFPs in 2019, please do not hesitate to contact us.

This article was first featured in the Community Directors Intelligence newsletter in February 2019.