Financial Metrics: A Guide for NFP Boards

It’s easy to count how much money you’ve made. It’s not so easy to demonstrate that you really are helping children to reach their full potential, or how effectively you’ve raised awareness of a rare disease. Yet not-for-profit (NFP) organisations are increasingly expected to quantify their achievements – and the directors must ensure they’re measuring the right things. “The board sets the strategic direction and will want to track the organisation’s progress and achievement of these objectives,” says Andrea Petersen, Managing Director, Not for Profit Accounting Specialists.

Fulfilling Your Obligations as a Not-for-profit Director

When Mark Edmonds joined his first not-for-profit (NFP) board he was surprised by what he found. “I’d attended board meetings as a senior executive and, because the role interested me, I’d also completed a company directors course,” says Edmonds, who is currently chairman of Barwon Community Legal Centre, deputy chair of the Geelong Chamber of Commerce and a director of the Geelong Cemeteries Trust. “I was very happy to be offered a place on a local statutory committee but, from my first meeting, I could see that these people either had limited ideas about their duties and responsibilities or were paying them scant attention.

Diversity in the Boardroom

In the boardroom, diversity can enhance decision-making and drive more wide-ranging and probing discussions. It can also help remove the blind spots that can keep important matters out of sight. “Research shows time and time again that diversity improves outcomes in a number of ways, including financial performance, the quality of decision making, reputation and the ability to innovate,” says Alicia Curtis, co-author of Difference Makers: A Leader’s Guide to Championing Diversity on Boards.

Streamlining the Work of the Board

Most of the directors on not-for-profit (NFP) boards are unpaid. Many have full-time jobs, other directorships and family obligations. Putting the time they donate to good use is respectful as well as beneficial to the organisation. “Some boards waste a lot of time on management issues so directors must be very clear about their role and where their responsibilities end”, says Sallie Saunders, Principal Consultant with Building Better Boards and an experienced board member.

Dealing with Difficult Directors in your Boardroom

The most effective directors are prepared to challenge, probe and speak their minds but this can sometimes cross the line into bombastic, rude or disparaging behaviour. Difficult directors disrupt boards in every sector – but do not-for-profit (NFP) organisations have more than their fair share? “If we take ‘difficult’ to mean having an oversized ego and focusing more on themselves and their goals than the best interests of stakeholders then I’d be inclined to say that they do,” says Warwick Peel, Chief Executive Officer (CEO) of Startup Boardroom.

Difficult Conversations About Director Performance

Every board must discuss difficult issues from time to time – and the right approach can have a positive impact on the outcome. James Birch AM, chairman of the Australian Red Cross Blood Service, has found that poor, or less than optimal, performance from the chief executive officer (CEO) tends to top the list of sensitive issues. This is followed by poor performance from a director or the board as a whole.