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Opinion: The Not For Profit Sector - The Politicians Dilemma

9 March 2010 at 2:09 pm
Les Hems, Director of Research at the Centre for Social Impact, looks at the Productivity Commission's report on the Not for Profit sector, and the challenges it poses for the Government.

Listings | 9 March 2010 at 2:09 pm


Opinion: The Not For Profit Sector - The Politicians Dilemma
9 March 2010 at 2:09 pm
Les Hems, Director of Research at the Centre for Social Impact
The Productivity Commission’s report on the Not for Profit sector has provided much food for thought for politicians, while they contemplate how they can best utilise a sector that has vast economic and social significance.
Not for Profit organisations (NFPOs) employ 8% of the paid workforce, and contribute $43 billion to Australia’s GDP. NFPOs make a significant contribution to Australian society in the fields of social services, health, education, arts/culture, sport/recreation, housing, and environment. The interest to politicians is obvious as these activities are closely aligned with the main calls on the tax purse.
Given this close alignment of activities it is unsurprising that a third of the Not for Profit sector’s revenue comes from Government ($26 billion). An astute politician might interpret this as a great deal  someone else is doing the work and for every dollar spent you get three dollars of value. In fact, the deal looks even better if add in the $15 billion wage equivalent of the 4.6 million un-paid volunteers.
So why are politicians not beating a path to the Not for Profit sector’s door?
This situation is comparable to the situation in the United Kingdom in 1996, New Labour – whilst in opposition – utilised a similar report as the basis for its successful election manifesto which included the strapline of Building the Future Together”. In stark contrast the incumbent Conservative Government used Rules of engagement as their strapline.
The instrumental use of the Not for Profit sector was very much in tune with Tony Blair’s “Third Way” – the New Labour Government pursued partnership solutions in preference to traditional state and market approaches. During ten years of New Labour Government the Not for Profit sector doubled in size and benefitting greatly from a similar multiplier effect.
The New Labour command structure and the army of fresh foot soldiers included people who had worked and volunteered for charities and community organisations. Such grounded knowledge and confidence in their Not for Profit sector partners resulted in the New Labour Government recruiting sector leaders to drive new spending programmes.
In contrast the Productivity Commission (PC) report focuses on significant “known unknowns” when considering NFPOs. Governments are notoriously reluctant to spend tax payers’ money on things they know little about – they need evidence to justify public expenditure. The PC recommendation to develop a framework to systematically measure the contribution and impact of NFPOs therefore seems eminently sensible.
The PC also concluded that the existing regulatory framework for the Not for Profit sector is ineffective and recommends the establishment of a national Registrar, an Office for Not for Profit Sector Engagement, and a Centre for Community Service Effectiveness. It is difficult to argue against the purpose and desired outcomes from these recommendations however twenty years experience as a researcher of NFPOs and public policy tells me that poorly designed top down approaches will not be successful and will create new barriers to partnership and that ultimately the Not for Profit sector will not achieve its full potential.
The learning from the UK – both the successes and the mistakes – needs to be carefully considered and understood in the Australian context. Firstly, NFPOs cherish their independence both from the state and the marketplace.  They are the voice for many communities, and put the needs of the people they serve high above the demands of Government. They should therefore be treated as equal partners when Government is exploring solutions to social problems. They should also be treated like a good and trusted friend – the type of friend that you listen to when they are criticising you.
If consulted, NFPOs can help shape public services to deliver higher quality and more efficient services. Therefore Government has to develop effective ways of engaging and consulting with NFPOs. This dialogue has the added benefit of contributing significantly to the development of the knowledge base.
Secondly, NFPOs make unique and distinctive contributions because they can harness and combine resources which are not available to government agencies and business. This means that the standard metrics used by Government and businesses are inadequate. For example, many NFPOs benefit greatly from the guidance freely provided by professional people and “experts” that sit on management committees and often invest some of their own wealth, how do you measure the value of these volunteers?  The measurement framework for NFPOs will have to be much more sophisticated than that currently used for Government and business.
The overarching learning therefore is about partnership and not using master and servant approaches. This suggests that the PC recommendations should be pursued using a process of “co-production” – where the knowledge base is built on research with and not on NFPOs – and where regulatory mechanisms proactively involve NFPOs and all their stakeholders.
Whilst it is important to learn from other jurisdictions it is also important to acknowledge that every country is different and perhaps most importantly that technology and human behaviour change very rapidly. Both the knowledge base and a new regulatory framework could be built using the latest web and information and communication technologies that encourage engagement, interaction and co-production.
The challenge for politicians to chew over at Sunday brunch is therefore how to rapidly gain the knowledge they will need to partner with the Not for Profit sector and exploit the multiplier effect that the Not for Profit sector offers Government. The task is made a little easier when you see the number and quality of the people and organisations that contributed to the PC report – including many researchers and universities. An astute politician may therefore look to these as a trusted go-between to develop knowledge and a mutually beneficial partnership with the Not for Profit sector.


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