Viewing governance as a work in progress

Enterprise Care continually emphasises to Boards and Directors that Governance is a work in progress. Any Director who is not in “ongoing governance training” is not a practicing professional Director.

The professional Director is rightly neither complacent nor totally satisfied with their governance performance. This approach means the Director is always striving to properly contribute to the governance needs of the organisation.

Whether the Director is asking the right questions or addressing the critical issues, must be foremost in their mind.

At least from the outside, it is possible to ask whether the right questions were raised or the critical issues addressed concerning the Haiti Earthquake appeal.

Why were there so many Australian charities all attempting to get their voice out there? Why were there so many messages – in some cases the same message coming from different charities? Was this a competition or a concerted effort to facilitate a benefit for those in need?

How many of the Directors asked and maybe “demanded” their organisation join with others and present a shared message and presence in Australia?

In a totally different example, The Wilderness Society has attracted much publicity lately but for all the wrong reasons.

Again, from afar, one can ask whether there has been complacency in their governance practices? How can an organisation’s Governance reach a point where the organisation itself creates internal friction and disagreements on a substantive scale?

Surely this is not simply a matter of bad luck!

As a Director, let’s not get caught up in specific examples, rather reflect on whether we view our governance role as a work in progress!

In Enterprise Care’s view, this is a critical priority for Directors as well as Boards in 2010. It is worthy to be placed on the Board agenda and discussed, albeit briefly, at each meeting throughout 2010.

Damien Smith
Managing Director

Managing your organisation’s SCORE effectively

Risk management is rightly seen as an important governance issue by Not for Profit Boards and Committees of Management. The challenge is how to develop and implement the appropriate framework to identify and manage the risks effectively. 

 First and foremost is the issue of identification. Undertaking any activity, no matter the size or scope, has inherent challenges and risks. If we accept this basic precept we need to identify what is to be achieved through the development and implementation of a risk management framework. 

 The primary focus of most Not for Profit Boards / Committees of Management is in achieving the organisation’s Mission, and therefore risk management is generally viewed in the context of “what can go wrong” as we embark on this journey.

 One approach to risk management is to list all the things that can go wrong and to develop strategies to eliminate the likelihood of their occurrence and / or to alleviate the real or potential damage to the organisation in the event that they do occur. 

 The risk to the organisation in this approach is that the focus may be on what can go wrong rather than on what we are doing right and how we can continue to develop and build on our success.

 One option is to move this mindset to a change in focus from risk management to a strategy encompassing the organisation’s strengths, challenges, opportunities, risks and ethical dimensions (SCORE). This allows the acceptance of the multiplicity of each of these measures. That is, an organisation’s strengths can also have relevance in determining and assessing the challenges, risks, opportunities and ethical considerations faced by the organisation.

 An example of this might be if we consider our staff as one of our greatest strengths; a challenge might be in the retention of the staff; an opportunity is utilising the diversity of skills to broaden the services offered; a risk the lack of awareness of the staff’s activities/ skills outside of the organisation; and the ethical dimension is how we treat our staff.

 Risk management therefore transforms from an identification and ranking exercise to a strategy to effectively manage the organisation’s strengths, challenges, opportunities and risks within an ethical framework (SCORE).

Regardless of whether our focus is on risk management or the broader SCORE, the second step in this journey is the need to establish a framework to ensure effective management of the process.

 The approach that Enterprise Care recommends incorporates: 

1. Assessment at project level – encourage staff and project managers to develop and document project scopes prior to commencement. Amongst other things the project scope should include identification and analysis of the project’s SCORE;
2. Appropriate monitoring – establish a process to monitor the status of the project’s SCORE by the project manager;
3. Reporting framework – develop a reporting mechanism which enables the SCORE and their status to be discussed, as appropriate, at project, staff, management team or Board/ Committee meetings. This will enable a broader organisation approach to the classification and management of common issues across projects to be identified and implemented;
4. Strategic focus – where changes in the status of any of the SCOREs is likely to have either a significant positive or negative impact on the organisation’s operational targets or future strategic direction these changes should be actioned in terms of priority according to the established reporting framework;
5. Governance role – the Board / Committee of Management or the delegated committee should, on at least an annual basis, assess the overall framework to ensure its suitability and functionality.

 For further information on developing a suitable framework to manage your organisation’s SCORE please contact Mark Rudd on ruddm@enterprisecare.com.au

Ten things companies can do to increase gender diversity in the workplace – Part 2

Part two of our gender diversity tips

Step 6 Make Mentoring a Priority

“Research shows that mentoring programs can be powerful tools for advancing the careers of professional women. Every young professional can benefit from having a mentor. But for women in male-dominated corporate environments, the need is even greater. Women with mentors, research finds, are more likely to apply for promotions. That changes when managers are given the task of encouraging talented women to move up.”

Do you have a mentoring program in place? Do you know of any women (in your own organisation or others) who could be a mentor for your developing talent?

Step 7 Retain Your Best Women

“What does it take to keep talented women in your organization? Asking them directly is a good place to start in getting an answer. However, research finds that flexible work hours, generous maternity leave benefits and coaching for women returning to the workforce can make a difference.”

Have you recently asked your staff what keeps them attached to your organisation? Research shows that in Not for Profit organisations money is not always a deciding factor in taking or keeping a job. Are you offering the right benefits to keep your best staff?

Step 8 Measure Your Result

“When companies put goals in writing and track their results, things gets done. Companies need to know where they stand and make managers accountable for the level of gender diversity in their organizations. Benchmarks to track include the proportion of women in a company's business units at each level, pay levels of women vs. men at comparable levels, attrition rates by gender and the ratio of women actually promoted to women eligible for promotion.”

Our recent Not for Profit Remuneration Report shows a disparity between male and female remuneration, with nearly all positions reporting higher wages for males over females. Have you benchmarked your pay levels by gender?

Step 9 Plan for Diversity

“Succession planning is the best way to assure the optimal mix of backgrounds, experience, skills and perspectives on boards and among top executives. Companies can use opportunities created by turnover to generate the kind of collective strategic thinking needed to compete successfully in a constantly changing economy.”

Does your strategic plan include a section on succession planning and skills diversity? If not, ensure it is included at the next planning meeting.

Step 10 Move Beyond Tokenism

“According to McKinsey, companies with three or more women in senior management scored higher on measures of organizational excellence than companies with no women at the top. It is not enough to add a woman here or there. The best performers build a critical mass that gives women the power to have their views heard.”

How many females sit on your Board? How many senior management are females? What strategies do you have in place to balance any gender inequity?

Read the full article on Reuters here.

Ten things companies can do to increase gender diversity in the workplace – Part 1

An article appeared recently on www.reuters.com that listed ten useful tips for companies to assist them in working towards a more diverse gender balance.

Step 1 Work towards “functional diversity”

“Professor Scott Page of the University of Michigan uses this term to capture the idea that we need people with diverse ways of perceiving problems, rather than groupthink, in order to devise better solutions. As a recent Ernst & Young report points out, a group of intelligent problem solvers chosen at random will outperform a homogenous group of even the best problem solvers, under the right conditions.”

Does your organisation have different thinking styles on your Board? Do you nurture ‘outside the box’ ideas or stick with the ‘tried and true’ methods?

Step 2 Send a message from the top

“A report from McKinsey & Co. found that almost all companies that achieved significant change in gender diversity ‘benefited from the personal commitment of the CEO’.”

Does your CEO recognise the importance of gender diversity? What policies has the CEO set in place for nurturing female talent in your organisation?

Step 3 Put more women on your Board

“According to a recent report from InterOrganization Network (ION), an alliance of women's business organizations, board-ready women are not difficult to find. A significant number of qualified women serve in executive capacities in Fortune 1000 companies. Others run large hospitals and non-profit organizations, are active members of industry associations and professional organizations and regularly attend educational and corporate governance programs offered by business.”

A recent article on the Women on Boards website noted that a diverse Board can often times lead to more profitable organisations. The article quotes: “These companies will be able to draw from a broader pool of talent in an era of talent shortages. What’s more, research shows a correlation between high numbers of female senior executives and stronger financial performance.” Furthermore, the article also notes that having more than one female on the Board makes a defining difference on Board performance.

How many women are on your organisation’s Board? How are Board members recruited? Is there a diversity policy?

Step 4 Rethink Human Resources

“As research shows and Inforum's members can attest, corporate HR policies often, inadvertently, hold back professional women at the very stage - in their late 20s and early 30s - when their careers should be taking off. Simple changes could address that. For example, evaluation processes that penalize women for taking maternity leave could be changed so that a woman's tenure with the company includes that time.”

What HR policies are in place to ensure women are not penalised for taking maternity leave? Is there any noticeable bias on the promoting of women of child bearing age?

Step 5 Recruit smarter

“Some simple changes in the way companies recruit new employees could make a big difference. According to McKinsey, companies that simply train recruiters and operational managers on the importance of diversity can make meaningful progress in recruiting women. One European company raised the application rate of women for technical, sales-oriented jobs by 40 percent simply by changing the text on the ad and replacing a stock photo of a man with a photo of that company's senior women.”

Look at your recruitment adverts - do they appeal equally to both sexes? Look at your website and publications – are they oriented towards a particular sex?

Part 2 next fortnight will look at the next five steps to creating a greater gender diversity in your organisation. Or you can read the full article on Reuters here.

Not too much of the inverse proportion rule – please!

Suppose that ten people can build a house in 20 days.

Does it stand to reason that if we have 20 people then it will only take ten days; and further, if we have 40 people it will be five days; and further still, if increased to 80 people, then it is two and a half days; and finally with 200 people will it only take one day?

Well, we can now observe (from experience) the almost “frantic” activity of governments, committees, observers, media, regulators, activists, ‘experts’, and many others, who having discovered the Not for Profit sector (that mind you has been in existence for many centuries!), want to contribute and be a part of it.

Let’s hope, therefore, that like the 200 people and the house built in a day, that the enormous attention now directed at the sector will see its resources and sustainability enormously increased too!

Sadly I fear that the inverse proportion rule may apply and then ‘implode’; so that just as 500 people don’t build a house in less than half a day, this greater attention on the Not for Profit sector may not deliver the resources and support that will ensure its viability and sustainability.

We need to all work together to ensure that this attention benefits the many who work in, or closely with, this fantastic sector. And that we harness this new-found enthusiasm of the government and media to ensure the long-term viability of our Not for Profit organisations.

Damien Smith
Managing Director

Finance Committees – adding value to your organisation

The end of a financial year is always a stressful time for staff, especially those involved in completing a number of financial compliance activities, including:

• finalising year-end accounts;
• completing taxation returns – including GST and income tax;
• compiling budgets for the next financial year;
• preparing for and participating in the external audit;
• compiling statutory accounts; and
• completing regulatory and statutory returns - including WorkCover, payroll tax, group certificates etc.

All of these activities are time-consuming and unfortunately have similar deadlines for completion, thus adding to the hours worked and the related stress created for finance and management staff. So what, if anything, can the Board and individual Directors do to ease the burden on staff during this challenging time? One way is for the Finance, or equivalent, Committee to take an active role on a number of key governance matters including:

External audits – the Finance Committee can take the lead in relation to scoping and setting the terms of reference for the external audit. This can be done by direct communication with the auditors and also allows the auditors to be able to report back directly to the Finance Committee, by way of the management letters. This takes the pressure off both the external auditors and the staff in relation to any contentious issues that may be encountered during the course of the audit. It also enables the Board, by way of the Finance Committee, to take appropriate action on any control weakness that may be identified by the external auditors.

Budgets – whilst it is important for staff to have a detailed breakdown of costs for each project, it is more important for the Board to have an understanding of the key financial targets that are aligned to the strategic and operational plans of the organisation. The Finance Committee can play a role in tailoring the budget forecasts into a format that facilitates strategic decision-making by the Board. This may include:

• Revenue: identifying key revenue sources, including costs for generating each revenue stream;
• Costs: identifying key costs by type – for example, salaries, operating costs, depreciation etc. and division, - for example, core activities, business support, marketing etc.;
• Liquidity: calculating high-level cash flow forecasts to determine the amount of "free cash" at any point in time;
• Investment strategy: calculating surplus targets and recommending strategy for how the monies are to be utilised - including income generation, risk management, program development and capital expenditure.

Systems and processes – the Finance Committee has a role to play in ensuring the systems and processes in place are the most efficient and appropriate for the organisation. This will include reviewing where time taken to complete tasks may be reduced through automation, training or use of appropriate external experts;

Controls and risks – another important role of the Finance Committee is to review the policies and practices currently in place and to make recommendations to the Board and management where it is felt risks could be reduced or controls strengthened in order to safeguard the organisation’s assets. Such assets include the intellectual property of its core services and the knowledge and experience of key staff; and

Compliance – the Finance Committee can work with senior management and finance staff in ensuring that all statutory and regulatory compliance matters are dealt with appropriately and in a timely manner.

A proactive and responsive Finance Committee can play an important role by ensuring all of the above are in place in advance of the year-end deadlines. This helps to ease some of the pressure on finance staff, in particular, in what can otherwise be a stressful time for those involved.

Should you require further information on how to implement an effective Financial Management framework for your organisation please contact Mark Rudd on ruddm@enterprisecare.com.au

Occupational Health and Safety – Where are you Now?

Enterprise Care recently conducted a survey on Occupational Health and Safety (OH&S) in Australian Not for Profit organisations. The survey was revealing in that while 99% of all respondents knew they had an obligation to comply with OH&S laws, some organisations did not have appropriate processes in place to manage this.

Briefly, the survey found that:

• 65% had a living and dynamic OH&S process in place that included regular updates on OH&S changes, reminders and action items;
• 67 % had a formally appointed and trained OH&S representative;
• 76% kept up-to-date with OH&S legislation in all operational areas; and
• 40% had professional process in place to measure OH&S risk.

It is pleasing to see that so many organisations are committed to undertaking Occupational Health and Safety in their workplaces. However, it’s clear that for some organisations, there needs to be a greater emphasis on having formally documented policies and procedures in place in relation to OH&S risk.

Risk management is integral to the continued operation of all businesses, and OH&S should be a major consideration in your risk management plans.

Have you recently measured your organisation’s compliance with OH&S? Answer the following questions in relation to your organisation and then ask the same of all your staff.

1. Do you have a written OH&S policy?
2. If yes, is it up-to-date?
3. Have you identified hazards in your workplace?
4. Are annual health and safety goals set by management?
5. Are there any long-term health and safety goals?
6. Who is in charge of health and safety in your workplace?
7. Have health and safety responsibilities been assigned?

If you or your staff answered no to any of these questions, maybe it’s time for a OH&S check-up in your workplace…