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Operating at the helm during a time that will undoubtedly make our history books, boards and their board of directors have faced significant challenges in the wake of a global pandemic.
While countless corporate entities have struggled under the impact of lockdowns, many not-for-profit (NFP) organisations have experienced significant growth.
With the public need for support services increasing, stimulus monies and COVID-specific grants have enabled rapid expansion to meet demand.
This has come off the back of years of increased government outsourcing to NFPs, to help close the gap in service delivery for education, crisis accommodation, health, family planning and support, aged care, and more.
In turn, this has forced many NFPs to adopt professional operating models to create structure, address risk, and ensure continuity.
One such model which is highly popular within the sector is the Carver Governance Model. Under the Carver Model, the board sets a direction and leaves the CEO to deliver on it.
The board doesn’t typically get involved in operations and, if things go south, the CEO is typically replaced and the cycle starts again.
But is this 50+ year old governance model really still relevant in a modern world?
THE FUTURE OF BOARDS
The latest Future of the Board Report from the Governance Institute of Australia found that future board members are set to face pressure on many fronts.
Key findings from their survey of 550 professionals include:
- 92% agree that board accountability and responsibility will increase.
- 73% agree that chairs and directors will take responsibility for corporate failures.
- 89% agree that boards will need to align organisational purpose with community purpose.
- 73% agree shareholders will have a greater influence on board agendas.
- Legal liability is likely to increase as regulators seek to accelerate change, particularly in ESG-related areas.
- A culture of transparency, trust, and respect between the board and management is a vital factor.
Overall, the report shows responsibility and accountability continuing to move away from management and towards the board – particularly as directors become more involved in management issues.
In itself, this demonstrates a definite need to examine novel approaches beyond the Carver Model.
PRESSURES FACING NFP BOARDS
There are plenty of examples over the past couple of decades that demonstrate how adherence to the Carver Model has failed NFPs.
In 2010, St Vincent de Paul became the subject of substantial bullying claims which led to resignations, reputational loss, and the suspension of its NSW board.
In another example, the Uniting Church was forced to sell a record number of assets when failed governance of its previously successful Mowbray Uniting College resulted in insurmountable debt.
The governance models previously trusted by these NFPs will become increasingly irrelevant in a world where board members will be held accountable for their actions, and stakeholders expect members to have the necessary experience to guide these now large, complex and multi-faceted organisations.
Board members and CEOs need to be on the same page – aligning decisions with the organisation’s core mission and values and providing the accountability and transparency expected by government, communities, and benefactors.
THE POTENTIAL FOR A HYBRID MODEL
Instead of operating strictly according to the Carver Governance Model, it’s time for NFPs to explore the benefits of taking a more hybrid approach.
In a hybrid approach, the board actively supports the CEO with mentoring.
When issues arise, the board oversees the formation of sub-committees (which generally include some board members).
Working with senior executives, sub-committees can:
- examine an issue in more depth
- mediate between stakeholders
- develop solutions to solve the problem
Once the problem is resolved, the sub-committee takes a step back and another committee can be formed to address new issues in the same way.
Many successful boards are already using this approach, as it ensures board members have oversight of systems and processes – while knowing when to step up or take a step back.
Rather than feeling disconnected from their board, CEOs feel supported and can benefit from the years of experience many board members have to offer.
In addition, it negates the potential for tension between executives and board members which often spills into operations.
STRUCTURE AND GOVERN YOUR NFP FOR SUCCESS
At RSM, our experienced restructuring and recovery team have worked closely with many NFP boards to provide guidance on best practice.
We offer a tailored service – supporting your board and CEO with strategic advice, including how to best structure the organisation to contain damage in the event of financial strain.
As your trusted advisor, we act as a sounding board to help you establish and maintain governance practices so you have peace of mind that your NFP is operating effectively.
With the holidays fast approaching, let the Christmas break provide some much-needed reflection time; so when your organisation regroups in 2022, you can step into it with a new vision to take your NFP and its corporate board into the future.
For a confidential discussion with an experienced adviser, contact your local RSM restructuring and recovery team today.
