Governance Bites #95: developing not-for-profit directors, with Stephen Upton

In this episode, Mark Banicevich talks to Stephen Upton about developing directors in not-for-profit organisations (who are usually on tight budgets). Stephen outlines the key skills and competencies required for a not-for-profit board. They discuss how elected, passionate organisation advocates can be trained in governance, and continually developed, including outlining low cost or free sources of governance training. They discuss the importance of devoting time, particularly when directors are often volunteers or paid less than market rates, mentoring, and how a not-for-profit board can overcome gaps in its combined skills.  Stephen also shares advice for not-for-profit chairs seeking to establish director development programmes.
Sport NZ, Nine Steps to Effective Governance, https://sportnz.org.nz/resources/nine-steps-to-effective-governance-building-high-performing-organisations/
Institute of Directors, The Four Pillars of Effective Governance, https://www.iod.org.nz/resources-and-insights/4-pillars-landing-page#
Stephen Upton is Chair of Touch NZ, and led the organization through revising its constitution when the Incorporated Societies Act 2022 came into force. He is also a past President of the Swiss Touch Association. Stephen’s primary career is in funds management. He is Chief Operating Officer at fund manager and KiwiSaver provider Kernel, and was Chief Operating Officer at NZX-owned Smartshares (now Smart) before that. 
#governance, #leadership, #corporategovernance, #boardcraft, #decisionmaking, #makingadifference, #governancebites, #boardroom , #cgi, #charteredgovernanceinstitute, #director, #notforprofit, #cpd, #professionaldevelopment, #incorporatedsociety

Transcript

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Hi, I'm Steven Upton. I'm the chairperson of Touch New Zealand. I also am, by day, the Chief Operating Officer, co-founder, and director of Kernell Wealth, an investment platform and KiwiSaver manager. Today, we're going to talk about developing directors for not-for-profits. Hi, welcome to Governance Bites. My name is Mark Banicevich, and as you just heard, I'm lucky again to spend some more time with Stephen Upton. Stephen, thank you very much for your time. Thanks, Mark. I really appreciate it. You've had six years now on the board of Touch New Zealand. How many of those as chair? Six as chair, eight on the board actually. Oh, wow. Yeah. Okay, right. So a great deal of experience. And then Switzerland prior to that. That's right, I saw that. So, yeah, but, anyway. Yeah. We can talk about that offline. But get into the topic du jour, about developing directors in not-for-profits. You know, in the company world, it's very easy to expect directors to build and develop their competence, knowledge, and skill as directors. In a not-for-profit setting, it's often a lot harder. To start with, what are the key skills and competencies you believe are essential for directors in not-for-profit organisations? Yeah, listening, constructively debating, integrity, and sharing. So, soft, all soft skills. You know, the hard skills, they obviously need to vary, in terms of the board composition, and in terms of what's required for that particular organisation. But the skills and competencies are those, you know, emotional intelligences and, you know, the ability to interact with others and to understand the organisation, what the organisation is trying to achieve. What about hard skills? What would you say in a list of hard skills that you would need across the board? Yeah, again, that's a hard question to answer because it depends on the level of the organisation. So, you know, if you're talking a local club, it might just be that you represent some particular constituency. You know, you represent some sector, whether that's the officials or the coaches or the players. It might just be that you're someone who's good with money or, you know, can look after the finances. It might be that, you know, you have some business background or you can understand funding, you know. Whereas at a national level or a larger organisation, you start to get into more business skills. So you would want some strategy skills. You'd probably want some legal skills. You'd want chartered accountants or people with strong accounting knowledge on the board. And then, you know, maybe your other constituent requirements, tikanga [Maori customs and values]. That's actually becoming increasingly important. Back to funders, as well. You know, somebody who understands funding structures and funding applications and has good networks. I think all directors must bring networks with them and ideally be able to access those networks. How would you see across that skill set? You know, one you mentioned in particular was around funding, that a not-for-profit organisation generally, maybe at the national level, where skills required would differ from a company board. You know, one example may be, for example, managing a large network of volunteers is not necessarily something you need to have skill in when you're operating or working in a company. But at a governance level in a large sports organisation, volunteers are such an important stakeholder set that having some skill and experience around attracting, retaining those sorts of people. It's quite different. Yeah, I think it's good to understand motivation, and good to understand that motivation is not just financial. Yes. You know, there's a lot of intrinsic motivation for people involved with community, arts, sports organisations. It's usually the main motivation, right, it's not usually financial. Right. So it's appreciating that. I think it is back to, I guess, the Anglo-Saxon view of governance versus maybe more a Civil Law or, you know, or a more Eastern way of looking at governance, in that, you know, the stakeholders are the most important. So, you know, who are we here to benefit? You know, is it what do our members want, but also, what do our employees want, our volunteer base want? You know, there's a wider range, as much as, you know, maybe there are funding partners, do you have to consider their needs as well? You know, and be careful about that, because sometimes the organisation ends up doing the work of the funder, rather than doing the work of the organisation, but there's a conversation there. But yeah, it does, it's a broader set of stakeholders that need to be understood. Yes. So a board member needs to appreciate that in terms of what they're bringing in and maybe their network, or maybe their understanding of the organisation and how it gets the mahi [work] done. Right, right. What challenges do directors face in the not-for- profit sector, particularly if where they're different from the corporate sector, and how can they be addressed? Yeah, I think it's that the governance skills are often quite underdeveloped. You know, these are not people often from professional occupations who are used to, you know, governance structures, board meetings, you know, maybe even hierarchies. You know, and they also often come in with committee, working group mindsets, and that's actually what's required in that organisation. So, that understanding that. That it's often poorly recompensed. So, what we're talking about, you know, people are doing it, and who wants to sit around a board table and, you know, go over the books and go over the risks for intrinsic benefit? Not really. It's more for the greater good, then. That kind of,"Well, someone's got to do it", and, you know, "This is my part." Yes. It's, yeah, it's just more complex, as I was getting into before about, you know, the wider range of stakeholders involved, and the complexities and challenges that that can bring. Right. And as you just alluded to, it's very common for not-for-profit boards to be populated by very passionate people who are heavily behind the purpose of the organisation, but they don't necessarily have governance skills, or experience in governance or, in many cases, even business experience, as you suggested. So, how can a not-for-profit provide effective initial governance training to people coming onto the board if they haven't got any sort of background, and how do you do it cost effectively? Yeah, well, absolutely true. I mean, it's often because the only people involved with that organisation or the governance of that organisation are those who are deeply committed to it. So, you know, otherwise, why would anybody else do it? I mean, you know, maybe for their children, that's often what you see. Yes. But look, a lot of the resources are available for free. You can get a lot of the Institute of Directors [IoD] resources for free, or they're freely accessible. Sport New Zealand's got a huge governance section. Yes, it's got a really excellent site. That is, you know, really, and they've had to, because of actually some mismanagement of sports governance. Yes. So that's created the need and the investment in the area. The, look, the line between governance and operations, you know, and those critical hygiene factors. I mean, the Institute of Directors talks about, you know, their four pillars. That's often a good place to start. You know, determining the purpose, an effective governance culture, - Yes. - holding to account, you know, effective compliance. You know, getting those right, that's it. But I think that the biggest thing is that governance versus operations -Yeah. - divide, and people coming - Understanding what is what. - understanding what is what, understanding, you know, where the line is. You know, and that's often a problem of definition that the boards fail to clearly define the results they expect the organisation to achieve. Yes. And then they also allow themselves to be drawn into those operational matters. You know, they allow themselves to focus on, you know, the busyness of what they're doing, rather than actually setting the organisation up, and then having the working groups, which may be the same people. Yes. Again, it's not about, - But it's a different hat. - It's a different hat. Yeah, or ideally, you know, be able to give that to, you know, people who are paid, whether they're employees or whether they're just paid for the task. Administration. That is that is quite important. So, I think it's that the board needs to ask itself, you know, are we moving the dial? And which dial do we want to move? How do we know we're moving the dial? That that's the important thing. So, I've just, you want to have, you need have somebody on the board that's willing to drive this move towards good governance. Because if you've got a whole lot of people that aren't, don't know what they're doing, then there's no one steering the ship in that way. But once you've made that decision, as you say, there are a lot of resources available. I think Sport New Zealand's actually done a really good job over the last, what, 20-odd years of helping sports organisations move from the traditional committee structure of president, secretary, treasurer, and some regional representatives, to more of a board of director structure. And a good sports organisation will have their own, particularly at a national level, maybe even at a regional level, will have their own contact within Sport New Zealand that they're working with, or within the regional sports organisations, as well, like Active in Auckland. And the material is available. It would be great to see a little bit more in the way of training being offered, but the online courses for Sport New Zealand are really good. Yeah, see, I mean, it's horse to water stuff. I mean, if you're a director, you've got to be able to read and digest information. Yeah. So, expecting that you're going to be sent off on a training course is probably a little bit rich. The IoD [Institute of Directors] course is certainly a little bit too expensive for most. And for most, the nine steps to good governance that is available freely online. That's right. You know, that's, you know, 200, 300 pages, which covers all the range of topics. Not you have to read it like a novel, you know, just pick and choose from as as different topics come up, and then they have produced a number of videos. And I think that these are equally applicable to any community or arts organisation. Yes. They just happen to have the sporting lens over them. But it very much is the not-for-profit or, you know, for a community good rather than for a financial gain,- Yes. - concept. And one thing that you could do as a community sports board, or a community or sports board is simply take one of those topics at each board meeting and discuss it. Yeah, absolutely. Yes. Oh, on that note, I didn't mean to put words in your mouth there. How can organisations effectively support the ongoing training and development of their directors? Yeah, I think promoting the availability is key. You know, this is the economy, you know, championing that exists, championing that, you know, CPD [continuing professional development], like often it's just saying, "Look, we make these, we make this information available to you,"and we're going to," as you say, "make an agenda item." You know, not that this is a tutoring session, but, you know, that there's a - A bunch of adults having a valuable discussion. - having a discussion, sharing perspectives, you know, peer learning, that kind of, that kind of thing. That there is an importance of reflection within board meetings. You know, most board only times should consider some reflection, where that's just just the simplest of it. You know, what should we stop doing? What should we continue doing? What should we start doing? You know. Yes. Just even those simple three questions just allows icebreaker for conversation. You know, it's encouraging that contribution. Look, that very much is the role of the chair, you know, to make sure that every voice is heard and to encourage those voices who may be, you know, less comfortable to share their perspective. Doesn't need to be detailed perspective, - Yes. - but sometimes there's great value in the naive perspective. Yeah, that's very true. Now, in a not-for-profit board, often, in fact, probably more often than not, directors are volunteers, and there is often a need for those directors to do some form of ongoing learning, some form of training in governance, especially in cases where there isn't any. How then can an organisation ensure that its directors devote adequate time to their own governance development, rather than just tuning up to the board meeting once a month or once a quarter and saying, you know, "I've done that job now"? Yeah, well, I can't, it can't ensure, but it it can encourage, it should encourage. Yes. Through, you know, collectively, you know, collective commitment to these sort of things, you know, ideally led by by the chairperson. But it's those wider benefits. It's the, you know, it's the skills, the networks, the insights, the being part of something. That's often it. I mean, I'm generally an advocate for director's fees. Because I think that you're at a minimum recompensing people for the out of pockets. Yes. But, you know, some sort of per diem [daily amount] is, you know, valuable, you know, as a token of appreciation. It's honorarium type level stuff. Yes. It's not corporate director, you know, in the thousands. No. We're talking in the hundreds, but I think it's important, especially if you get that balance right of you're, again, depends on the level of organisation. If we're talking small club, no, just doing it to allow the club, but where you're further away from the coalface, as well, - Yes. - I think that there does need to be some financial renumeration, token as it may be. Yes. Yeah, absolutely. I mean, you're expecting board members often to at least set aside a few hours on a day for a board meeting, plus up to a day or more of preparation. And then in many cases, if you want face to face, there may be flights involved getting to the location. So these people are giving up, you know, at least a weekend. Yeah, and if all board members don't prepare equally, a lot of that time can be wasted, too. Yes. So there is that. And you know, holding those board members to account, you know, can be more challenging. You know, you can often have people who have been elected onto a board because they are, they have a strong support from the constituency, because of their mana [authority and prestiege], because of, you know, whatever, that they've been a former champion or whatever, - Yes. - and like, they don't prepare, and they just turn up, and literally they have to be brought up to speed on every discussion, or, you know, they they speak without having read any of the board papers and just actually, it makes the board quite ineffective and inefficient. So having an honorarium or a small compensation in place essentially gives them the, it reinforces the obligation that you have to do something for this,- Yeah. - not just here to turn up and keep your seat warm. Yeah. Not just here, or to give your opinion, top of your head, you know, and whatever your special interest is, because of course, that's another challenge you can get with not-for- profits - Yes. - is that people have their, you know, they're there because they've got their particular topic, or the particular axe to grind. So you've got to be careful about that. And that also you can get a wider pool of directors if there is some, again, I want to be clear, the main motivation here is the intrinsic. Yes, of course. You know, they're not doing it for the money. No. But they're doing it for the skills development, they're doing it for the network, they're doing it for moving the organisation forward, but they're also not being put out of pocket, especially when they're often having to take days off work,- Yeah. - travel, you know, et cetera. Time away from family, and so forth. Time away from family. Yeah, absolutely. Now, we covered this a little bit earlier, but I think it's worth reiterating. Not-for-profit organisations, of course, generally operate on a very tight budget, and you know, you want to make sure that your directors continue to develop, and The Institute of Directors' one-week long course is way out of range of most not-for-profits. And even even membership of those organisations for some budgets is very, very tight. So, how can organisations overcome those budget challenges, while also developing their directors? Yeah, again, it's the size of the budget that does count here, but often it's that mentoring, coaching, insights, networking, you know, that it's promoted within, you know, that it's a board meeting agenda item. You know, that it is, I guess, awareness is the first step to anything. Yes. I think, you know, we're aware that we have a governance gap, or we're aware that we've got some directors who have less experience in governance. How do we make sure that we make this, you know, this board as effective as possible? Yes, and you mentioned already the many free sources available of very good governance content from Sport New Zealand. The Nine Steps, as you said. The Institute of Directors, there's some material, it's possible to get a copy of Four Pillars, for example. Some really good content available. Yeah, absolutely. And then, yes, the devoting of some time to board, in board meetings, the encouragement to do extra training, and directing people of what sort of thing to look at, discussing the topics. You mentioned there mentoring. What role does mentoring play, and how have you seen that work? Yeah, I'd say it depends on the personalities involved. You know, it's like saying, "You go mentor this person." It's like, well, it's pretty fleeting contact a lot of the time, as well. This is not like somebody sits next to you under your wing and, you know, you're, they're the junior that needs training. You know, it's often more adult than that. But some boards people might just want to join, or are joining just for who else is on the board. Yes. You know, the benefit of being able to get insights. I guess there's also the, I guess, motto they got is that generally anybody will accept a coffee meeting. You know, especially if it's nearby to them. Yes. You know, say, "Hey, I'm going to be in your building, you know, would you mind sparing time"for a coffee with me? I'm interested in discussing, you know, governance or, you know, a business topic." Yes. Not, "Give me a job", or, "Hey, can I waste your time?" But, you know, being clear, most people accept that. And then, you know, back to what I said earlier, it's kind of the chair's role to upskill the directors, - Yes. - because if the chair has a well functioning, effective board, then the organisation will be able to achieve its ambitions, its strategy, its overall purpose, you know, better. One of the challenges you often find in a not-for-profit board is skill gaps. Particularly, and you know, there are still organisations out there where the board is entirely elected. How does a non-for-profit board effectively overcome those gaps? You've got to recruit for it. Right. That's, you know, so whether you're recruiting through consultants, you know, whether you're recruiting through employees, whether you're recruiting through a co-opted director or an appointed director, if you've got those mechanisms available, or if you're actually just going out and, you know, calling for, and truly calling, for the right type of directors to add to the board. You know, if you don't have those mechanisms. So those are ways you can overcome the gap. I think it's identifying those, you know, doing a skills and diversity matrix that is really key. Yes. To, yeah, get insight as to where and what these gaps are. Right, right. And then, as you say, go out and look for them. A final question for you, then. What advice would you give to a not-for-profit chair who's trying to establish a good development programme for its organisation, for its directors? Yeah, as I said before, make an agenda item. Right. You know, actually, if you don't put it on the agenda, if you don't give people time to think about it, even if there's no associated reading, you know, ideally get a speaker in, because then it creates a focal point for the conversation. You know, have somebody join for 10 or 15 minutes, or watch a video. Plenty of governance videos available online, just as a, "Oh hey, let's watch this for, you know, five minutes, 10 minutes, and then let's talk about it." You know, that's it. The board charter is actually really important here, I think. You know, having that collective commitment towards certain things, towards upskilling, towards, you know, working together, those are really important, because, yeah, you want a strong board, and you want a strong diverse board. Absolutely. Well, Stephen, again, thank you very much for your time. You're welcome, Mark. It's been very interesting talking about this topic. I'll look forward to chatting again soon, and we'll see you next episode. Thank you for watching this episode of Governance Bites. We have more episodes on YouTube and your favourite podcast channel where I interview directors and experts on various topics relating to boards of directors and governance. We'd love to see you back, and please like, subscribe, and share the videos and podcasts.