Purposeful governance: Getting the basics right for post-COVID sustainability

Ranjit Gajendra Nadarajah and Vivienne Cunningham-Smith consider the role of purposeful governance as an impetus for sector transformation and sustainability. 

The predicament

Let’s just cut to the chase. 

Australia is in recession for the first time in almost 30 years, national debt is in unprecedented territory, and unemployment is expected to explode when the government suspends the JobKeeper and JobSeeker allowances. 

Small and medium not for profits – a vehicle for delivery of services and building community capacity, an essential component of the social fabric and applauded for serving those that invariably get left behind in our society – continue to assist in solving some of the nation’s biggest social problems. Many of the small to medium not for profits serve communities through access to recurrent government funding that encourages active collaboration within the sector around the needs of client groups and communities. 

In recent years the sector has been experiencing major disruptions. Attempts at transformation do not seem to get off the ground. In many cases this is because restructuring is only driven through cost-elimination, outsourcing, divestments and redundancies of staff that invariably eliminate capabilities, sap morale, remove the essential slack that could fuel new endeavours, and undermine the subsequent pursuit of value creation. 

Governance is becoming a bigger issue in the sector. The board – often consisting of friends, family and members assembled mainly because of their community standing, rather than for possessing the required knowledge, skills and experience for the role – is tasked with facilitating and enabling transformation required for sustainability. 

Many struggle with sector-transformation, now a necessity to survive changes introduced by neo-liberal influenced marketisation and new public-sector management policies. There has been a conscious policy objective of governments to minimise micro not for profits in a belief that it is administratively more efficient to deal with fewer providers. Marketisation brought a new ideology of government-defined need and solution, which was then commissioned-out for funding to an open market. The sector has not had sufficient funding for professional development of staff or for funding recruitment of social managers with experience, and their governance has remained within a 1970’s model of community sector management that does not support the notion of social enterprise. 

Even though the small and medium not-for-profit organisations are some of the most agile social businesses and have been acknowledged and credited for establishing relationships with their community clients, their predicaments are complex enough to consider exiting the sector altogether. 

Though structural and fundamental changes are required there has been very little government support to this sector for people-development, to build capacity and capability of management, leadership and governance. Increased focus on both client-centred care and billable hours makes it less likely that there is time-investment in leadership and management capability.

How did we get here?

Although governance of not for profits is undertaken by the board (or committee of management) not all boards possess the required and right combination of skills and knowledge to serve in rapidly shifting, disruptive environments. Not for profits tend to suffer when their board becomes too involved in operations. Whilst serving on a board could be immensely rewarding and requires a great deal of commitment, expertise is needed in maintaining the right balance between governance, management and passion. Recent research indicates that almost one in three not-for-profit boards has no system in-place for reviewing their own performance, increasingly impacting their credibility; more than a third of board members say they did not receive a good induction; and one in two board members believe they would benefit from more governance training. 

Meanwhile, the disadvantaged and vulnerable living across the country, be it in the central business district, inner city, rural or regional Australia, who could normally benefit from the small and medium not for profits are all doing it tough. Post-COVID-19 it is unlikely that their predicament will go away.

These organisations delivering welfare and services in Australia have evolved into a third sector of communities organised to serve communities, and face major disruptions including outsourcing by governments of human services, competition for contracts from commercial companies, the development of outcomes-measurement of services, introduction of consumer directed care services, new forms of online fundraising and use of new technologies. The sector almost never has capacity to access marketing, philanthropy and fundraising-specialists required to benefit from these new developments. 

There are attempts now to retrofit collaborative-practice that was once a core characteristic within the sector, and government funding of programs has been seriously reduced leading to many handing funding back simply because it is inadequate to cover costs. If they already haven’t, post-COVID-19 the sector will find the imbalance of community expectations of services vis-à-vis access to funds, a mighty challenge to navigate. Invariably, the boards must be proactive, complete a stock-take of skill-gaps, and not only enhance board skills but also recruit new members to the board.

It is ironic that the luxury of continued economic growth through the last three decades, driven by the resources boom, may have made Australia’s enterprise leaders under-prepared for a future of continuous scarcity, increasing competition, and growing client demand for both diverse and better services.

Many members of small and medium not-for-profit boards were selected during times when priorities were different. Equally concerning is that one in four board members is over the age of 65 and there continues to be a lack of younger board members in the sector.

About the authors: Ranjit Gajendra Nadarajah FCMA, FCPA has 30 years of experience in management, leadership and governance with not for profits and higher education. A senior fellow at the University of Melbourne, he manages the centre for global health and equity at Swinburne University of Technology and is deputy chair of Eastern Volunteers.

Vivienne Cunningham-Smith has more than 30 years of experience in the primary health, early years, child and family and community sectors in NSW and Victoria. Twenty-five of these have been spent in executive management and in addition to numerous board roles, she is CEO of Eastern Volunteers.