Researcher Dr Jo Cribb writes about the difficulties faced by not-for-profit boards in an economy of start-ups and listed companies. 

For the thousands of New Zealand directors serving on the more than 100,000 not-for-profit (NFP) boards in New Zealand – that is an estimated one in 40 of us  – being on the board is a labour of love.

While being appointed to the board of a listed company may be seen as the pinnacle of a governance career, research released this week challenges this. NFPs contribute more than $6 billion each year to New Zealand’s GDP, employ over 130 000 paid staff, engage more 1.2 million volunteers and deliver many social services to vulnerable New Zealanders.

NFP boards face a range of complex governance challenges including securing sustainable funding, complying with changes in the law and, for those that deliver social services, managing the increasing demand for their services and the increasingly complexity of their clients and the communities they serve. Being on an NFP board is not for the faint-hearted.

Up until now little has been know about how NFPs are governed in New Zealand. Research released this week investigated what happens around the NFP board table, with a focus on those who deliver social services. The research found some NFP board structures can hinder good governance. Some NFP boards are made up of appointed or elected members. This can make getting a good skill mix around the table difficult and if board members are elected to represent their constituencies, having good governance discussions can be hard.

Many small NFPs struggle to recruit skilled volunteers to be part of their governance board. These small NFP boards often have limited understanding of governance. Such boards often act more like committees – helping out the manager, fundraising and hands-on service delivery. They are made up of passionate and committed volunteers but may not have the access to the full range of skills needed to govern.

Given many of these small NFPs often serve specific populations (Pacific communities, for example) or are trusted providers who have strong ties to their communities, this finding is of concern. In contrast, small business start-ups usually have no trouble attracting skilled directors. The report questions why being on the board of a small community NFP is not seen as of the same value as a being on the board of a start-up – both have much potential to offer.

NFP board members generally had little training for their board role relying instead on the experience they bought to the table from other roles. Those interviewed would welcome opportunities for practical hand-on opportunities to learn, including mentoring from experienced directors.

Some boards were focused completely on the day-to-day operations of their organisation and had limited understanding of what was happening around them. They were not developing strategy to navigate their future. Some of this behaviour can be attributed to short-term government funding arrangements. When you don’t know if you are going to be funded in the coming months, it is harder to look forward. The NFPs interviewed also consistently expressed a level of mistrust in their relationship with their government funders which similarity diverted attention away from the longer-term.

A consistent strength of NFP governance was the board’s focus on achieving the NfP’s mission and vision.  All boards interviewed were focused on achieving the best for those they served.  We all should celebrate this dedication and determination.

For government funders of NFPs, the research identifies a number of implications including the need to re-building trust with the NFP sector, offer longer term and more stable funding agreements, invest in small NFPs that are often fragile and support NFPs to build their governance capability.

The research also questions the role of New Zealand’s governance community in valuing and supporting governance in this sector. A vast percentage of governance that happens in New Zealand, happens around a NFP board table. Investing in improving NFP governance will make an important contribution to strengthening our communities. NFP governance could be more widely discussed as part of governance conversations and a wider range of training, development and mentoring opportunities offered.

While many experienced directors volunteer for NFP boards and their contribution is immense, more could take up roles on the boards of small NFPs. For experienced directors, being on an NFP board is often considered part of ‘giving back’, however many directors report that it is their NFP roles where they challenged and learn the most.

Perhaps also the NFP sector could take its governance more seriously. The research questions whether the value of good governance is widely understood across the sector. Given the complexity and challenging environment NFPs operate within, the role of governance in developing strategy is especially critical to their on-going ability to deliver high quality services to those they serve.

But consistent across all those involved in the research was the determination to serve. The NFP board members interviewed have had their governance skills tested, they have laughed, they may have cried but they all knew they were making a difference by governing for good.

Access the full research report here.

The Spinoff’s business content is brought to you by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.

Check out how Kiwibank can help your business take the next step.