When something bad happens to someone we don’t know we often cringe and think "I’m glad that wasn’t me". If they have been doing something reckless or dangerous our reaction can also include "well that was probably self-inflicted" and "no wonder".
When the same thing happens to someone we do know our reaction is usually more sympathetic and concerned with a degree of "I hope you’re OK".
If you are a director currently serving on a committee or board the daily news of royal commissions and inquiries makes for some cringe-worthy viewing and reading. Whether you are looking on at a distance, deeply involved or know some of the participants, every director I have spoken to has expressed concern on what they might be missing from their own board processes and what might be coming in the form of new legislation.
Although Hayne's report (and other similar reports) has delivered recommendations for the financial sector, it has been widely touted as a warning for all boards. In principle all directors should sit up and take notice.
I think for the non-profit sector the royal commission into aged care and the disability sector will deliver some much more relevant insights into the state of governance in the sector.
In my opinion many of Hayne’s findings actually point to some elephants in the room i.e. we all know what’s going on but if we don’t say anything, we can plead ignorance. That said, now that behaviours have been made public, what can we glean from the Hayne report that might improve the way we see governance even for your non-profit board?
Obey the law. I am surprised that this had to be spelled out as a finding but apparently not following the law was not a deterrent for some businesses. Although not an excuse, compliance can be extremely complex especially if you are in a highly regulated sector. For the average non-profit director this can also become confusing if the board they sit on is outside their normal area of professional expertise or experience.
The Chair needs to ensure that compliance is put on the agenda for board meetings, included in board calendars and seen as a critical reporting element for the organisation. From a cultural point of view, the organisation needs to see compliance and compliance reporting as part of their normal job roles, and mechanisms need to be in place.
Oversight of culture. The catchphrase in forums and panel discussions I have been to post Royal Commission of late seem to be that it has suddenly dawned on boards that the culture of the organisation is important. The problem is that most of the discussions I have heard frame culture in the form of ping pong tables, hot desking and coffee machines, which is misleading.
The main cultural discussion for these organisations as I see it needs to be around compliance, closely followed by ethics and respect for consumers (dead and alive). Compliance can often be a nebulous topic if your culture is about operating on the edges of what is right and what is wrong.
If the feeling in the organisation is you only need to speak up if called out, or "I might get in trouble if I say anything", then there is definitely a cultural narrative that needs to be addressed. Even the non-profit organisation needs to be testing some of these assumptions to see how robust their systems are.
Provide services that are fit for purpose. Hayne felt that the desire for profit was greater than the needs of consumers and the community. The non-profit sector is not immune to this area of concern and I suspect we will hear more from the current royal commissions in play. Linking service provision to purpose should be a strength for non-profit organisations. Services based on well-developed theory of change and best practice is a key first step.
From a board perspective having measures of success other than just financial is another critical element. With progressively tighter budgets, expectations around overhead expenditure and increased competition for revenue, it is easy to slip into the habit of making board meetings all about the financial performance. Focus on measures of success around service delivery, relationships and client satisfaction should play an equal part in board discussion and CEO review.
In theory the non profit sector should be all over this, but alas it is not immune to the effects of poor governance, shortsightedness and ignorance. Take some time to look at your current processes and ask whether the board (and each director) knows key elements of the broader organisational requirements.
Ask yourself some key questions:
Are board review processes more than just tick box exercises?
Do we understand the current compliance landscape?
Are we tuned into what our employees and clients think about the organisation?
Is the customers voice present in the board room?
Is there a reluctance to report and discuss issues or concerns?
Is there clear communication of cultural expectations to the CEO and Senior Team?
Is the board consistent in messages and actions?
Although all the issues raised may not apply to your current boards or appointments directly, taking the time to discuss these and other concerns with the board is good practice and a great way of ensuring the board is staying current, dynamic and not being too insular.