Planning for the future

  • Date:01 Jul 2015
  • Type:Company Director Magazine
Succession planning within not-for-profit organisations requires discipline and energy. Domini Stuart explains what boards need to consider.

When Marg O’Donnell AO took her place as chairman of Breast Cancer Network Australia (BCNA) she had been preparing for the job for 18 months. 

“I had spent considerable time with my predecessor being briefed and discussing relevant issues,” she says. “Now I’m going through the same process with my own successor. It is almost a year since I identified a possible replacement and she expressed interest. She is now my deputy and will stay in that role until she takes over as chairman in 12 months’ time.”

A sound succession plan brings stability to an organisation and the promise of smooth boardroom transitions.  “You will always have the best possible replacement ready, even if something unforeseen or catastrophic occurs,” says O’Donnell.

It ensures that knowledge and skills are passed on and that relationships are maintained. “In not-for-profit (NFP) organisations, relationships are often critical,” says Liesel Wett FAICD, chairman of Goodwin Aged Care Services and a director of Osteoporosis Australia.

A plan creates the continuity that underpins long-term strategic thinking and can also help to “future-proof” the organisation. “A good succession plan will identify impending changes and the skills needed to manage them effectively,” says Professor Ian Williamson, leader of the Asia Pacific Social Impact Leadership Centre at the Melbourne Business School.

“At the moment, for example, there is a lot of turmoil in the disability space because NFPs that have traditionally relied heavily on government support will have to function in a much more competitive environment. Good boards will have anticipated this and planned to recruit a director with an understanding of competitive commercial marketplaces,” he says.
NFPs need the same basic boardroom skills as commercial organisations. They may also need insight into the communities they serve and any community organisations and government entities that have an impact on their work.

“My observation is that directors in NFPs come from a much wider range of sectors than in other organisations,” says Williamson. “This presents a challenge, not only in terms of recruiting so many people but also managing them. They speak very different languages, have very different norms and expectations and they are generally passionate about what they do. Relationships could be much more complex, yet they must all be able to engage in healthy debate without damaging the overall cohesion of the board. It is important to look for the personal and behavioural skills that will result in a good cultural fit.”

Sourcing funds
NFPs must also look for money. “I don’t think many could afford to appoint a director with a particular set of skills if they weren’t also prepared to bring funds, or access to funds through their network,” says Peter Yates AM MAICD, chairman of The Royal Children’s Hospital Foundation in Melbourne.

The fact that most directors are volunteers has no effect on their legal and fiduciary responsibilities.

“If you sit on a board that didn’t pay its superannuation requirements before you joined, you could still be financially liable and personally liable,” says Rachael McLennan, executive director of People for Purpose, a talent management organisation for social ventures, and a director of the National Centre for Childhood Grief.

However, what it does affect is motivation and purpose. “Succession is a challenge because you’re expecting people to give a lot of their time without traditional remuneration,” says McLennan “But, when directors are genuinely aligned to the purpose of the organisation, they feel they receive as much as they give. The trick is to find out what they really care about. A lot of skilled and experienced people tell us that they want to help a charity and they don’t mind which one.  But, as we talk, they invariably open up about a personal connection to a particular cause or mission and it is suddenly clear to them where they want to focus.”

Hard to find
Many NFPs struggle to find directors of the calibre they need. “It is very dispiriting when you have to settle for whoever has the time and inclination to take on the role, or when board members are elected over and over again because there is no other option,” says Wett.

Recruitment can be particularly challenging for organisations in regional and rural areas, though technology has the potential to broaden their scope.

“They should make sure that options like Skype are written into the constitution,” says McLennan. “This will enable them to look further afield without having to consider costs associated with travel and accommodation.”

Some boards build their expertise with associate directors. “Associate directors don’t have voting rights, so it is a way for people to contribute without committing themselves to the responsibility and accountability of a full directorship,” says Laurel Draffen MAICD, general manager of Matrix on Board Consulting Services.

NFPs can also be used as launching pads for a commercial boardroom career. “Many of our executive MBA students are very interested in joining a board and, because experienced directors are hard to find, NFPs are often willing to appoint them,” says Williamson. “This situation needs to be handled with care but, if you embrace it as a training opportunity and build a mentoring model into the boardroom, it can be an effective way of attracting good people and maintaining high quality decision-making as well as ensuring that corporate knowledge and experience is passed on.”

There is also the option of enlisting outside help. “Resource-strapped NFPs might find it hard to justify spending money on recruitment, but going it alone could be a false economy,” says McLennan. “Directors could well be their most valuable assets. All NFPs need two things in order to meet their purpose – money and profile. When things are going well, these build on each other to strengthen the organisation but, if you don’t have the right people keeping both of those balls in the air, one will fall and have a negative effect on your social impact.”

Setting a limit
Draffen is concerned that few NFPs have a maximum term for board members written into their constitution. “Putting a limit on the number of times directors can be re-elected gives board members an opportunity to take a break,” she says. “When they’re doing a good job it is easy for them to get caught up in an enormous sense of responsibility and obligation to continue. A time constraint also builds in a mechanism for regenerating and refreshing the board. I recently worked with a very large and successful NFP where the board had an average tenure of 16 years. The directors had enormous respect for each other and clearly worked very well together but there was no cohesive plan for passing on their corporate experience and knowledge.”

Maintaining an effective succession plan requires discipline and hard energy; it can easily slip off the radar. “I think it is important that the CEO is involved in developing the plan and also has the board’s permission to drive the process,” says Yates.