Not-for-Profit Directorships – It’s not a charity!

Roger Phare

Today, non-profit organisations in the United States control upward of $1.5 trillion in assets and are increasingly relied upon to help address society’s ills.

Corporations are not alone in focusing on governance; rigorous oversight of management and performance is increasingly important for non-profits too.

The corporate-governance debate globally is spreading from the for-profit to the non-profit world.

To improve the governance of non-profits, boards must venture beyond the traditional focus on raising funds, selecting CEOs, and setting high-level policy.

The litmus test of the chief executive’s leadership is not the ability to solve problems alone but the capacity to articulate key questions and guide a collaborative effort to formulate answers.

Theory and law dictate that the board of directors is responsible to govern your organization. Typically, new boards of directors in a new organization work hands-on, almost as partners — or as a “working board” — with the chief executive. A wise CEO will see Board members almost as strategic partners, rather than as a necessary evil that corporations must have.

It is important if you are building a board with the right set of tasks in mind. Boards have multiple roles, from fundraising to caretaking, governance, and oversight. Just like any company or corporation, it is important to do an assessment. Understand the skills that your particular non-profit needs to fulfil your mission.

Putting together an outstanding non-profit board is easier said than done, and it takes a lot of precision. Not everyone makes a great board member, so it’s acceptable to be picky when it comes to putting together a non-profit board.

Board challenges are something that many non-profits struggle with, and there’s no easy solution. We often hear horror stories of board takeovers—when the non-profit leadership is “overthrown” by its board of directors.

We welcome back Roger Phare as our guest blogger who is an accomplished Global Executive Director, equipped with a commanding track record over the past 38 years of bringing sound judgement and a strong commercial perspective to IT businesses, from ‘Mainframe to Mobile’.

Roger has been fortunate to have been part of the commercial computing lifespan. With a market driven approach, which he has strategically supported, a number of organisations, both at significant Board, Executive and Regional Directorship and responsibilities. An expert in corporate governance and compliance and risk management; enjoying challenging the status quo and providing independent advice to Boards whilst maintaining sound judgment, impartiality and with integrity.

Roger is going to talk to us about ‘Not-for-Profit Directorships – It’s not a charity!’

Thank you Geoff, the blog heading might seem like an oxymoron (or perhaps even a paradox for those of the literary-minded fraternity). After all, surely Not-for- Profit (NFP) organisations are charities; a fact that very few would dispute. At board level, however, the leadership, governance and compliance responsibilities are on at least an equal footing with commercial businesses of equivalent size and complexity.

I mentioned in a previous blog that that the term “Not-for-Profit” is a misnomer; in reality the correct term would be more likely “Not-for-Dividend”. In other words there is nothing at all wrong with, in fact commendable that, a charitable organisation makes an operational monetary surplus. The major difference is that the surplus is not distributed to external shareholders but channelled back into the organisation for ongoing initiatives. The governance and risk at board level is substantial and yet directors are often voluntary – pro-bono if you like.

The issue is not just one of payment but the value and importance placed upon such roles. At a recent business event I overheard a young professional discussing board opportunities. The individual was alluding to a recent application they had made to become a voluntary director on a NFP board. They went on to say that they hoped it would give them experience to apply for “proper” board positions in the future and – wait for it – if they made mistakes along it didn’t really matter because it was only voluntary! The concept of “free” having little or no “value” is the problem.

Now I am not proposing that Not-for-Profit Directors are necessarily paid at the highest commercial rates; there does need to be a good amount of desire and passion to be involved with the sector which means there is in-effect, a subsidised participation. I have long held the view that the NFP sector should consider the concept of “paid volunteers” (there’s that oxymoron thing again) for all roles within the organisation. What does this mean? Well – currently NFP’s have two types of staffing – paid and voluntary. Voluntary means no payment (other than direct expenses) and this leads to issues such as talent pool availability plus difficulties in selection of one candidate over another.

If, union rules permitting, all staff were paid volunteers i.e all paid but at say, 50% of market rates then this overcome a good number of the issues currently faced. At board level an experienced director could value the 50% subsidy as their pro-bono contribution, yet still be able to justify the time, effort and corporate responsibility required within their portfolio.

With this approach, charity could well begin at home….

We hope you enjoyed this blog!

You can contact Roger Phare via LinkedIn: Roger Phare on LinkedIn
or by email: roger phare @ gmail .com (remove all spaces)

Guest-blog: Roger Phare – A Nod to the NED – the key dynamic of the modern board

We welcome back Roger Phare as our guest blogger, who is an accomplished Global Executive Director, equipped with a commanding track record over the past 37 years of bringing sound judgement and a strong commercial perspective to IT businesses, from ‘Mainframe to Mobile’.

Roger has been fortunate to have been part of the commercial computing lifespan. With a market driven approach, which he has strategically supported, a number of organisations, both at significant Board, Executive and Regional Directorship and responsibilities. An expert in corporate governance and compliance and risk management; enjoying challenging the status quo and providing independent advice to Boards whilst maintaining sound judgment, impartiality and with integrity.

In the third of this series (view Part I and Part II ), we are going to look at the role of the Non-Executive Director (“NED”), which is a highly debated subject in today’s modern board.

To provide some background, before I hand you over to Roger, as an Independent Non-Executive Director and Executive Adviser on several companies, I talk with experience across the list of attributes required of a non-executive director, which is so long, precise and contradictory that there cannot be a single board member in the world who fully fits the criteria.

They need to be: supportive, intelligent, interesting, well-rounded and mature, funny, entrepreneurial, steady, objective yet passionate, independent, curious, challenging, and more. They also need to have a financial background and real-life business experience, a strong moral compass, and be first class all-rounders with specific industry skills.

Chairmen and chief executives should use their NEDs to provide general counsel – and a different perspective – on matters of concern. They should also seek their guidance on particular issues before they are raised at board meetings.
Indeed, some of the main specialist roles of a non-executive director will be carried out in a board sub-committee (particularly the remuneration and audit committees), especially in listed companies.

The key responsibilities of NEDs can be said to include the following:
Strategic direction
As ‘an outsider’, the non-executive director may have a clearer or wider view of external factors affecting the company and its business environment than the executive directors.
The normal role of the NED in strategy formation is therefore to provide a creative and informed contribution and to act as a constructive critic in looking at the objectives and plans devised by the chief executive and the executive team.

Monitoring performance
Non-executive directors should take responsibility for monitoring the performance of executive management, especially with regard to the progress made towards achieving the determined company strategy and objectives. They have a prime role in appointing, and where necessary removing, executive directors and in succession planning.

Remuneration
Non-executive directors are also responsible for determining appropriate levels of remuneration of executive directors. In large companies this is carried out by a remuneration committee, the objective of which is to ensure there is an independent process for setting the remuneration of executive directors.

Communication
The company and its board can benefit from outside contacts and opinions. An important function for NEDs, therefore, can be to help connect the business and board with networks of potentially useful people and organisations. In some cases, an NED will be called upon to represent the company externally.

Risk
NEDs should satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible.

Audit
It is the duty of the whole board to ensure that the company accounts properly to its shareholders by presenting a true and fair reflection of its actions and financial performance and that the necessary internal control systems are put into place and monitored regularly and rigorously.
An NED has an important part to play in fulfilling this responsibility, whether or not a formal audit committee (composed of NEDs) of the board has been constituted.

Now I would like to hand over to Roger!

Thank you Geoff, today I would like to discuss the role and ‘A Nod to the NED – the key dynamic of the modern board’.

Of all the Board positions the Non-Executive Director (NED) role is undoubtedly the most confusing. Not so much as to the expected outcomes of growth, compliance, shareholder returns and social responsibility but more as to the background and dynamics of the modern NED.

Why confusing?

Surely the NED role is the most historically formulated, culturally cultivated and legislatively defined of all board member roles.

Yet instead of being well defined and well-structured the NED requirement seems to be all over the place.

Part of the issue is that demand has rapidly increased due to factors such as legislation, compliance and business growth. This has spread the net further afield and created a demand over and above the previous norm.

The result of this demand there has seen “NED Membership” organisations springing up. I recently read as part of a membership promotion the following excerpt:

“If you have the right amount of experience to offer, you could become a Non-Executive Director. This could be an especially good option if you are approaching retirement because it can be a useful way to earn money without the pressures of being involved in the day-to-day decision making of a business.”

Whoa! This conjures up images of geriatric un-prepared old-boys rolling up for a four-hour board meeting; pontificating and story-telling before retiring to their local club for a large brandy and an afternoon nap in a dark leather padded armchair!

Nothing could be further from the truth for the modern NED. Guidance around “day to day” decision making is a critical part of the NED role. Four hours in the Boardroom can equate to four days spread pre and post meeting guiding and assisting the CEO & executive team. It is serious business.

A related problem is that somehow a “one size fits all” approach to NED requirements has become the prevailing attitude. Other than “Chair” type roles it seems that there is little demarcation in the nature of the role nor organisation in which the NED is required.

Contributing to this is the definition of organisation types. Most understand the concept of listed or private organisations and the duties, responsibilities and remuneration levels required by and from the NED’s. When community organisations are brought into the mix then things really go off the rails.

It starts with the concept of “Not for Profit”, equating with the concept that NED roles being “Volunteer”. To start with, Not for Profit organisations should be re-branded “Not for Dividend”. In other words, they need to be governed and run the same way commercial organisations operate with a view to making a surplus; the only difference is that those surpluses are distributed to beneficiaries rather than shareholders.

This topic is probably the subject of a whole new thread but the point is that community organisations need directors with the same level of skill and due diligence as those in the commercial world.
The question is when an ad appears that asks for applications for a NED “Volunteer, expenses only”, who is going to apply?
Yes, there is a small percentage of experienced and talented individuals who are prepared to provide their time on a “pro bono” basis and these people are to be commended. Simply having time on one’s hands and looking for an activity is not necessarily a qualification for a board position.
Even worse, to a degree, is the concept of applying for volunteer positions to “gain experience” as a Board member. This can lead to frustration and disappointment for all parties.

Yet it is not all doom and gloom. Demand for high quality Non-Executive Directors is increasing and it is generally acknowledged that the keys to success are the right recruitment, support, training and ongoing engagement. With these factors in place, NED’s can add significant value to all types and size of business.

So, here’s a nod to the new breed NED – exciting times ahead!

Roger Phare

You can contact Roger Phare via LinkedIn: Roger Phare on LinkedIn
or by email:
roger phare @ gmail .com
(remove all spaces)

Guest-blog: Roger Phare – The Jekyll, Hyde and The Executive Director

Roger Phare

As an executive director, how do you powerfully lead your organisation through complex challenges? How do you align your organisation, staff, and board around impact and achieve financial sustainability? As daunting as these questions can seem, they are fundamental executive leadership responsibilities.

In spite of its institutional power, the position of an Executive Director remains an immensely demanding one, and not one that any qualified and capable man or woman will agree to lightly.

We welcome back Roger Phare as our guest blogger who is an accomplished Global Executive Director, equipped with a commanding track record over the past 37 years of bringing sound judgement and a strong commercial perspective to IT businesses, from ‘Mainframe to Mobile’. Roger have been fortunate to have been part of the commercial computing lifespan. With a market driven approach, which he has strategically supported, a number of organisations, both at significant Board, Executive and Regional Directorship and responsibilities. An expert in corporate governance and compliance and risk management; enjoying challenging the status quo and providing independent advice to Boards whilst maintaining sound judgment, impartiality and with integrity.

Roger is going to talk to us about ‘Jekyll, Hyde Associates and the Executive Director’

Thank you Geoff, today I would like to discuss the role of the Executive Director, which can arguably be the most individually challenging and changeable of all Board roles. Not that the responsibilities are any greater or less than Non- Executive counterparts, yet the concept of disassociating the “day job” with the Board role can be tricky and take some fortitude. The Executive director must possess or develop the ability to perform separate roles with separate mindsets; a veritable Dr Jeckyll and Mr Hyde (and maybe other) set of personas.

The majority of companies start from small beginnings. Friends, family or work colleagues decide to set up in business and likely form a limited liability company. Almost invariably they become shareholders, directors and employees overnight. Generally there will be a leader; a chief executive who, more often than not, will also be elected chairman of the board. The other board members are often generalists, providing input based upon their work role experience.

Confusion can set in as the company grows and more employees are taken on board. This is where the understanding of role demarcation is vital. I recall being an executive director on the board of a growing company some years ago when one of my colleagues, who was head of the technical department as well as an executive director/shareholder, threatened to fire the receptionist for an indiscretion.
The receptionist did not report to this individual but his view was that as a major shareholder and director he had the over-riding power and right to make such decisions. He clearly had confused the roles, effectively merging all three responsibilities into one.

In the board room the need to disassociate the individual roles becomes even more apparent. Recalling that a director’s duty is to represent the medium and long-term interests of the shareholders, the double or triple role can be a major challenge. Let’s say that within a growing goods and services company the head of development, one of the founders and a minority shareholder, also sits on the board as an executive director. As a manager doing his day-to-day job, he has put up a business case to employ a number of new staff members within the development team.

At a board meeting, the annual item regarding profit distribution by way of dividends is discussed. The head of development sees this as an ideal forum to lobby for the approval of the business case. This is not say the overall decision will necessarily be wrong; it is that he has unwittingly brought his managerial role into the boardroom.

Once a company goes public, then the appetite for executive director’s wanes considerably. Most Commonwealth countries operate a unitary system, indicating a balanced mix of executive and non-executive directors. Yet over the past twenty years there has been a push for greater board member independence, with a move towards more non-executive directors. The executive directors are often consigned to the roles of chief executive and possibly head of finance.

Yet are we about to see the return of the executive director on public boards? There is no doubt that the need for up to date subject matter knowledge of industry trends is as much a requirement as expertise around governance and compliance. The need for this has started show itself in the rise of the advisory board; yet this can never replace true in-house expertise.

Perhaps we are about to witness the return of our Henry’s and Edward’s; but this time around improved peer mentoring and coaching maybe the answer.

You can contact Roger Phare via LinkedIn. Roger Phare on LinkedIn or by email: roger phare @ gmail .com (remove all spaces)

Guest-blog: Roger Phare – The qualities and experience needed to getting the right advise on the Board

Roger Phare

In the small business world, there is a lot of talk about whether a company should have a Board of Advisors (Advisory Board), and if yes, what the composition of such a group should be. In my time in the small and medium enterprise (SME) world, I have been exposed to and worked with hundreds of companies, a small percentage of which have had a Board of Advisors. Whether having such an advisory group makes sense depends a lot on the business and more importantly, the CEO and senior management team of the business.

In my opinion and I state this with wisdom, one of the smartest growth initiatives a business owner can implement is an advisory board: a hand-selected group of advisors that believe in your leadership, are aligned with your culture and mission, and are committed to your success.

The vast majority of business owners who implement an advisory board fail to see a strong return on investment because they have not followed guidelines to recruiting the right advisors, and have not set them up for success.

Today I have the pleasure of introducing another Guest Blogger, Roger Phare, who is an accomplished Global Executive Director, equipped with a commanding track record over the past 37 years of bringing sound judgement and a strong commercial perspective to IT businesses, from ‘Mainframe to Mobile’. Roger have been fortunate to have been part of the commercial computing lifespan. With a market driven approach, which he has strategically supported, a number of organisations, both at significant Board, Executive and Regional Directorship and responsibilities. An expert in corporate governance and compliance and risk management; enjoying challenging the status quo and providing independent advice to Boards whilst maintaining sound judgment, impartiality and with integrity.

Roger is going to talk to us about the qualities and experience needed to getting the right advise on the Board.

Over recent years we have seen the rise of the Advisory Board concept, a trend that reflects the changing nature of modern organisational leadership and governance. Thinking further on this, the obvious question is why? What has changed in public and private Boardrooms to see such a demand for specialist knowledge and expertise?

The answer perhaps dates back some twenty or even thirty plus years. Up until the late eighties board members generally came with experience related to the company’s market or industry, together with all round leadership and business skills. This had largely been the post war formula, in other words Executive or Non-Executive Directors in 1958 had much the same attributes of those in 1988 – then everything changed.

We had Wall Street, Enron and the Sub-Prime less than twenty years apart. Not co-incidentally, this timeframe was paralleled with the rapid rise of business computing and the internet. Ironically, while technology was an enabler for business growth it became an inhibitor for effective all-round board performance. Directors became much more focussed on financial and legal due diligence as the regulators took control. Boards became largely the keepers of compliance and governance, with their members skilled and qualified in these disciplines. So what happened to the much needed advice in areas such organisational structure and market direction?

Enter the Advisory Board, bringing relevant expertise and experience in key strategic areas.

There is perhaps another reason for the rise of the advisor(s) in the boardroom. Casting the mind back to our pre-1988 Director, past industry experience was a key attribute for the senior board member. Being five to ten years away from a hands-on roles was not a major issue – as business and market fundamentals remained consistent. Today key industries are in rapid growth mode that did not even exist five to ten years ago, with “here and now” expertise required.

So Advisory Boards are most likely here to stay and ideally should complement our incumbent NEDs or Exec Directors; the key is find the right balance and consistency.

You can contact Roger Phare via LinkedIn. Roger Phare on LinkedIn or by email: roger phare @ gmail .com (remove all spaces)