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Tips for good governance
Following on from our review of the AICD NFP Governance and Performance Study, today, we give you some key tips to help you maintain a high standard of governance within your organisation.
What is good governance?
Before we start discussing how to achieve good governance, we should clarify what we believe it is… and to help, there is a straightforward definition laid out by the AICD,
“Corporate governance refers to the framework of rules, systems and processes put in place to control and monitor – or “govern” – an organisation. Good governance underpins good conduct and the good judgement of those who are charged with running an organisation.”
Kirsten Forrester, Accounting For Good’s CEO, expands on this by saying,
“It’s about making best use of the organisation’s resources… make decisions that serve your purpose, and act in the best interests of your community. Good governance means directors participate actively, are diligent and informed.
And in turn, good financial governance means the Board must understand the organisation’s financial position and performance. How can you make good decisions – and know you are solvent and able to meet your debts as they fall due – without that understanding?
The Board should demand meaningful financial reports. Ideally, these will distil the key financial information to help you quickly and effectively understand the current position and give you a view of future performance.”
Kirsten continues,
“Good financial governance is about quality, not quantity. The organisation is much better served if the Board spends 15 quality minutes discussing major variances and key business drivers, rather than 40 minutes ‘in the weeds’, asking why postage is so high.”
How to achieve good governance?
In principle, good governance should be actively driven by the Board and expected by your organisation’s members. Having a shared understanding of what good governance looks like in practice around your board table is important to ensure efficient meetings, good questions and productive discussions.
Vision, purpose and strategy
Where would your NFP be without its vision and purpose? Probably without much of a supporter base nor anything to guide you in your activities!
Vision statement, mission, purpose statement – it doesn’t matter what you call it, or if you have snappy words for one or all three, the key here is that your vision/mission/purpose must be clear and must work for you… guiding what you do and how you do it.
The strategic plan is the key tool you have to demonstrate your accountability to your community.
It should guide the day to day work of your staff and provide a framework for performance and activity reporting. Kirsten explains,
“A strategic plan should have measurable goals, timeframes, action plans and success measures. Reports to the Board should be against the strategic plan goals – not pages of waffle about who did what when, but clear points that demonstrate progress. I think dot points are great – and traffic lights are even better!”
Steven Bowman of Conscious Governance is a fan of a succinct strategic plan and process. You might like to check his seven strategic plan tips.
If your strategy is lacking any of these elements, go back to basics and build a new plan that includes common features such as a SWOT analysis, long and short term goals and key performance indicators (KPIs) so that you can accurately measure your progress as an organisation and the performance of your CEO.
Culture and ethics
Good governance also relies heavily on the culture and the ingrained ethics within the organisation. The not for profit sector is filled with people who want to do good in the world… but this doesn’t always mean every NFP has a cooperative and equitable culture.
Again, this is driven from the top down. The Board directly impacts the culture and influences the ethics of the organisation, so it’s imperative to set the appropriate tone. Selecting a CEO that has experience, passion and dedication to organisational development will help create a cohesive culture.
Accurate information
It’s impossible to make astute decisions about the direction of your organisation if you don’t have accurate information.
This is where clear, concise financial reporting is vital. Kirsten explains,
“We’ve seen many instances of quantity of information being mistaken for quality… and even a few cases where I’d suggest the volume of data was a deliberate attempt at obfuscation.”
If finance reports contain excessive information, the Board may have trouble extracting the key data that will help them make good decisions, or their interest may wane after 20, 30, 40 pages…
We find poor reporting is what brings many organisations to seek out Accounting For Good. They feel that they are ‘in the dark’ and know that their governance obligations compel them to be better informed. This drives some organisations to outsource the whole finance function, others are looking to bring in some expertise to develop reporting frameworks and provide support to their in-house team.
Member communication
Regular communication with your members can help support good business governance. Instilling trust is incredibly important to the success of your NFP, so the more you can connect with people, the better. Whether it’s regular social media posts, a monthly digital newsletter, or a printed and mailed brochure, keeping your community informed of your activities and highlighting opportunities for involvement is highly beneficial.
Again, this is where a clear vision/mission/purpose is key… both to engaging supporters and to provide a hook to hang the stories of your activities and achievements. Don’t forget that your membership might be a vital pool of talent for future Board positions. Aim to have your Board successors queueing up to join your highly regarded governance team!
Systematic assessment… measure twice, cut once
Finally, you need to make sure you are constantly evaluating your progress. And that includes progress against the strategic plan, evaluation of the Board, appraisal of the CEO and staff team. It would be the opposite of good governance to realise you have followed an unsuccessful path for twelve months because you didn’t check your performance along the way.
By monitoring organisational performance, you can implement appropriate changes when you recognise obstacles and can also uncover opportunities that otherwise might have missed out.
Kirsten concludes,
“The Board is responsible for appointing and managing the CEO, and their appraisal should be driven by KPIs… clear, measurable indicators that provide an objective view of performance.”
If you’d like to find out more, contact our team today or read more not for profit governance articles.
