The Director: Goodwill hunting: Not-for-profit governance

Alan Beal is chair of the board of trustees of Hospice South Auckland. The story of how he got there is not, thankfully, for many New Zealand not-for-profit (NFP) organisations, an uncommon one.
A successful career in commerce, in his case the insurance industry, with stints offshore, bestowed both depth of knowledge and leadership experiences that make individuals like him an asset in any boardroom. Now he is using his change in management experience to guide Hospice South Auckland through the next critical stages of its evolution.
But how does the NFP sector, which demands governance standards that are as high as any required by commercial enterprise, manage without paying directors fees? How does it attract high-performing and time-pressured individuals without the monetary or ego-centric incentives that go with private and public sector board membership? And, finally, can this increasingly important sector of the economy continue to pull the best individuals possible as it expands and the consequential pressures to raise funds and grow operating revenues increase?
Beal’s story is in large measure representative of what is happening to NFP governance throughout New Zealand. He was captured by Hospice South Auckland little over two years ago. The enterprise is moving from what might have been kindly termed “a cottage industry” to become more significant small business.
The Hospice is becoming more professional in what it does and its vision, according to Beal, is to more than double the number of beds it has on its splendidly manicured site. It is simultaneously expanding its community nursing and other support services and growing its small chain of retail outlets to boost revenue.
This expansion will bring the Hospice up to the point where it must be “to hold its place” in the community it serves. The international standard for hospice care is five palliative care beds for every 100,000 of population. “With the nine beds we have now we are well short of the mark,” says Beal. “With 21 beds by this time next year, we will just reach the point at which we should be.” The board’s vision for the next five years is to have the Hospice provide model of care that is suitable for the area’s rapidly changing population.
Beal’s career in commercial insurance has focused largely on change management roles, both at home and abroad. He returned from his last stint in the United Kingdom and was invited to join the Hospice South Auckland board. He was, he concedes, motivated by “sense of wanting to give something back”.
The board members, diverse but strongly represented by sector specialists, are all volunteers. And while Beal has long standing interest in hospice activities, he had not had any previous governance experience in the healthcare sector. “But,” he says, “the governance of non-profit organisation is little different to governance of, say, public company.
“The same principles apply. We are accountable for the decisions we take. Our role is to ensure the financial stability of the organisation is maintained, to ensure the assets are protected and to require that the service we provide is of the highest quality. We work closely with the chief executive and senior management team to ensure that our jointly owned strategy is implemented and that we have both the funds and the resources to deliver our programmes now and in to the future.
“It is important for the composition of non-profit boards, and particularly for board like ours, to have balance of members who represent the medical, clinical, nursing and commercial expertise we need. We also need gender balance,” says Beal.
Funding Hospice South Auckland is, as it is for all NFPs, the board and management’s major challenge. Government provides little under 65 percent of its budget. The Hospice raises the other 35 percent: around $3 million.
And fund raising is becoming even harder. There are, says Beal, increasingly heavy demands on individuals’ goodwill. “Given the current economic climate, we may receive the same amount in dollars from our government funding, but that will become smaller percentage of our total operating costs,” he predicts. That in turn puts more pressure on the need to raise more money and find ever more creative ways of going about it.
Hospice South Auckland runs seven shops in its south and east Auckland catchment. It plans to increase that by one shop year for the next five years. “But we must compete with other charitable organisations which use similar shops to generate funds,” says Beal. “There is lot of competition for the goodwill dollar out there.”
Despite time and other personal pressures on qualified individuals, the hospice has not, so far, had any difficulty attracting good board members. That, in part at least, results from the positive experiences many people have of the nursing and care support the hospice gives to their families and friends. “There is general and deep-seated desire by many people to give something back to the Hospice,” says Beal.
On the other hand, not-for-profits may, in the not-too-distant future, have to face up to providing some kind of payment or honorarium to keep attracting good board members. “It is something that we are now starting to talk about,” he concedes. “I’m sitting on the fence on this for the moment but, I accept that it may become more of an issue. We want to drive an organisation that is professional and efficient and maintains the ethos of the Hospice. That ethos is about hospice services and support being accessible to anyone suffering from life-limiting illness, and providing support to their families, at no cost to them.
“But to drive development and strategic focus for the future, we may have to look at some form of fee or honorarium. The discussion will, however, take some time to resolve.”
NFPs may continue to attract good people simply because they are just that, good people. On the other hand, directors must be fit for purpose. As Beal points out, being director of an NFP is no less onerous than being director of any other enterprise – only the numbers change. And as the pressures and demands of best practice governance and highly competitive economy increase, so NFP directors must be as “able” as they are “willing”.
So is there place for more formal up-skilling of NFP directors? As Beal says, directors and chairs within the hospice sector meet regularly and share their experiences but, there is no pan-NFP governance organisation. The Institute of Directors is hardly constituted or designed to meet the particular needs of NFP governance.
Beal thinks there may be need for such an organisation. “We certainly need to be looking at what we provide for our own trustees in terms of both their personal development and our trading needs. It is certainly on our mind. We have not done anything formal about director training and development but, increasingly we need to keep abreast of all the issues facing us.”
Training and development is, he adds, probably one of the weaknesses of the NFP sector. Because those who populate the boards are volunteers and their actions are charitable, organisations don’t provide any formal training. “Perhaps they should,” he adds.
But there is, according to Beal, growing interest in the idea of professional body to provide for the learning, development and common interests of NFP directors. NFPs are large and steadily growing segment of the economy. That in itself suggests the need for greater recognition of its role and place in the nation’s political and economic landscape.
NFPs will increasingly need more qualified people on their boards. “The sector is starting to understand that,” says Beal. But he believes there will always be board membership balance between those willing to give their time but who are perhaps not so qualified and, those with the skills necessary to ensure that boards perform to the best standards. How do you put price on the kind of goodwill