Governance Bites #101: recruiting directors for not-for-profits, with Stephen Upton

In this episode, Mark Banicevich talks to Stephen Upton about how not-for-profit organisations can recruit directors. Stephen outlines the key skills and competencies required for a not-for-profit board. They discuss the process of identifying skills on the board, and skill gaps, and the role of diversity in board composition. They discuss the challenges attracting and recruiting both appointed and elected directors to not-for-profit directors. They also discuss overcoming skill gaps in boards that are entirely elected. Stephen outlines useful sources for recruiting directors, and one way to induct new directors effectively. He also shares the best governance advice he's received. 
Stephen mentions research by Tracy Molloy about appointment panels. You can find the research here: https://academics.aut.ac.nz/tracy.molloy/publications
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, #recruitment, #incorporatedsociety, #recruiting

Transcript

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Hi, my name is Stephen Upton. I'm the chair of Touch New Zealand, and during the day, I'm co-founder, director and Chief Operating Officer of Kernel Wealth an investment platform and KiwiSaver manager. Today we're going to talk about recruiting skilled directors in not-for-profits. Hi, I'm Mark Banicevich. Welcome to Governance Bites. As you just heard, I have the pleasure again to spend time with Stephen Upton. Stephen, thank you very much again for your time. Welcome, Mark. This is a really interesting topic, having, you know, my introduction to governance was through a not-for-profit and the challenge of not just identifying the gaps in your skillset in the board but, in particular, recruiting them. In my case, you know, a bit of a minority sport or minority-type organisation as opposed to something that's as well-known as Touch New Zealand, which can have a little bit more drawing power. So, really interesting discussion about how we can find and recruit the right people. But I am going to open with the same question I opened last time we caught up, because, you know, may have been a while since people have seen that, or some people may not have seen that video, and it's relevant to this conversation. What are the key skills and competencies that you think a not-for-profit board needs to have around the table? Yeah, I think it's that the members, you know, they need to be good at listening, they need to be good at constructively debating topics. You know, they need to have integrity and be willing to do the right thing and to share. You know, it is the collective voice that is that benefit of the diversity that you're looking for. Maybe the one thing we missed last time was time, because it's time for the meetings, it's time for the preparation, and often, especially not-for-profits, those board members can be on plenty of other, maybe at different levels of the sport or the arts organisation that they're involved in, and that board together time is so precious. Yes. That if people are underprepared, then, you know, well, everything must be taken as read. That's the point, because often you're not doing whole day meetings - You can't waste time in the meeting going through the background material. You've got to take that as, yeah, you got to devote your time to the discussions. Yeah, so, you know, if it's more than a recap or, you know, the exec [executive] summary, here's a paper, it's talking about, you know, a recommendation for this, you know, what does everybody think, and the chair can then facilitate discussion around that topic, then it's useful because, you know, even you're usually talking an evening, sometimes a whole day, but you're not talking, you know, weekends or week-long chances to talk about things. So you've got to be effective with the use of time. So it's making sure you don't waste time because you've got the time to prepare and the time to contribute to that organisation. That's, I think, one of the key skills. The hard skills, they'll vary by the organisation, what the organisation needs, the size of the organisation, the diversity of skills required. Any hard skills you would expect to see on every board, particularly when you get to a kind of a regional or national level? Yeah, definitely somebody good with numbers. You know, ultimately holding to account is a big part of it, overseeing the activities, and so, you know, where does the money go? Having somebody that can really, every director should be able to read a balance sheet, should be able to read a P&L [profit and loss] statement, should be able to understand cash flow, but that would be the number one skill. Then some understanding of the legal environment. So it doesn't mean they're a lawyer, that might mean they've had some exposure to the law. Particularly around things like health and safety, as well. In the sports context. Yeah, exactly. I mean, again, depends on the level, depends on the level of responsibility. You know, health and safety and employment. Do you have employees? Code reviews, you know, concerns about safety, well-being, integrity codes, you know, that child protection issues, member protection issues more broadly. These all do come in, - Yes. - but often these are skills that don't necessarily need to sit around the board table. It's just the concept, of what those things mean- Yes. - would be important. And, you know, obviously if you're talking about something that's in the community dealing with the disadvantaged, Touch runs a number of activities, we need to have people who are well skilled in that, you know, as against something which, you know, it's the club running the junior programme, you know, in some town, doesn't have those sort of same challenges. Or it's the, you know, the woodwork club or, you know, the bowls club. You know, you don't have those sort of requirements as much. It's more network that actually becomes more important there. And then, as you say, there'll be other skills that'll be tied to the strategy. So if there's a need to redevelop information technology or, you know, membership databases, you might need somebody with that skill set. If there's a desire to grow membership, it might be around marketing, social media, those kinds of things. So those needs may change over time. And it depends on your strategy. It changes over time, and we're not confusing the roles and experiences and understandings of board members with the skill sets required to execute those things, which really should be within the officers or the employees. Yes. So. Yeah, right. How do you identify the skills that you've got on the board and your skill gaps? Yeah, so a skills and diversity matrix, you know, they're often talked about. You know, they can be done really well, they can be done really badly. I think that it's the chair, the CEO, chief executive, head of an appointments committee if you've got one, maybe a, you know, longstanding board member, you know, come together and fill it in because you need a variety of people. But what variety of what people, you know. How much do different skill sets, business skill sets that you're talking about matter? How much is it understanding of funding environments? How much is it understanding of the constituency? You know, how much is it funding? How much is it high performance? You know, how much is it tikanga [traditional customs and values]? Is one that's sort of coming in more and more to make sure that Te Ao Māori [the Māori world] is, you know, properly recognised through the board and through the organisation generally. That's right, yes. That's become... governance, you know. Again, if you get to a certain level, you need people who truly understand good governance, because often at the higher levels you have an implied responsibility to also encourage good governance through the entire - Network of organisations. Yeah, absolutely. You know, that's what I actually spend quite a bit of time doing anyway. Can you describe a good process for using a skills and diversity matrix? How is that used effectively? I mean, it's gap analysis really. So it's, I mean, the way I do it, rightly or wrongly, is basically colour code or, you know, short rating 1 to 5, you know. And directors rate themselves. No, generally I'd have those people you'd make it aware, you know, you'd let people know, "Hey Mark, we think you're a 3 out of 5 on this" or "you're an amber, not a green on this". Yeah. But, you know, it should be pretty obvious. You're not trying to assess people, you're trying to agree where people's strengths are and where the weaknesses, the collective weaknesses are of the organisation. So then you can recruit for those collective weaknesses. That's right. That's what it's about. So I would generally think it's the chair, but with support from a few others, is doing that, and doing that annually, either, you know, before or after an AGM [annual general meeting]. Yes, to know what you've got and to see how it all fits together. Yeah, absolutely, and then being prepared for who is about to roll off the board and what skill do you need to replace them? Yeah. What skills you're going to lose at that point, as well. Exactly. Yes. What role does diversity play in identifying your board composition? Yeah, it's huge, but you got to be careful with what you mean by diversity because it's not demographic diversity. Well, it's sometimes demographic diversity, I guess, you know. It's hopefully not just pale, stale, male men. You know, you and I, well done. You know, but that's okay, you know. If we were setting up a, you know, men's only woodworking club, then we are the constituency, we are the right people to be on the board. So I guess that's the, it's always the thing I come back to is that you must represent your membership. So Touch is, you know, across all socioeconomic groups with a skew actually to the lower. It's very ethnically diverse, very geographically diverse, it's truly 50/50 male and female. So I do consider all of those factors, and, you know, sometimes that means the ideal board member I'm looking for is somebody Pacific Island, woman in their 30s who is in a wheelchair. You know, it's like, and I know I'm not going to tick all those boxes and that's silly, but it gives me an idea of what I'm actually wanting to discriminate for. And discrimination in this, and this is interesting. You again, not a lawyer, please don't, somebody don't hold me to this, but you can actually discriminate, as far as I'm aware, in terms of board composition because this is not employment and this is not membership. You're not telling somebody they can't play the sport or participate, and you're not telling them they can't be an employee, but you are saying, "Look, I'm looking for a particular skill set." Yes. So I need this, and if what I'm lacking right now is we have too many men, I have to get some more women, then make sure you're making that call. And so yes, diversity, but it's diversity of thought, you know. It's that you want the range of perspectives coming to the table, the range of perspectives of your constituency. And if anything else, well, sorry, if nothing else, to remove tensions and perceptions of inaccessibility. It's like, you know,"Oh, there's all those old boys up"there wearing the blazers, they just make all the decisions for us, but"they don't know who we are." That creates an immediate sense of disconnect as to what's happening. Right. Between the board and membership. Between the board and the membership. So, you know, you kind of want to... that's not to say that those boys in the blazers have nothing good to say, but it's saying if it's only them, then you're going to not have accessibility. Yeah, right. Okay. Now many modern organisations will have a blend of elected directors and appointed directors. So you'll, you know, you'll have your AGM, you'll vote for a particular director to come on to the board, and then once all your elected and remaining directors are there, then you'll have a committee that will go out and try and hunt for another appointed director for a skill set. How do you find and attract potential directors that will help you meet those skill and diversity goals? When you're, because, you know, in many cases, when the appointed director, you're trying to go outside your membership, right. You're trying to go outside. How do you attract people? Yeah, well, it's tough. I mean, I'm not going to say it's easy. The money's not good, right. The money's not good. Again, was covered in the previous episode. Personally, I think there should be some money involved, at an honorarium or some. Yeah. Some not a- It's a token gesture. - we want your time. But it's at least, you know, we don't expect your time for free to give, give, give, you know. There's also some transactional element to this, even if it's mostly an intrinsic "I'm interested in what"you guys are doing." Yes. And that's why I'm going to do it at, you know, a discount rate. Look, we've got Appoint Better Boards [appointbetterboards.co.nz] I don't know if you've heard of that website. That's really good for just accessing a network, but often, and it's not necessarily a bad thing, it's through personal networks. Yes. So, you know, the broader personal networks. So it's not your old boys' network of "you're another guy to"come on for the junket". It's very much finding people that add those missing flavours to the mix. Yes. Through your LinkedIn networks and your business networks. Exactly, exactly. So that I've always found as the best way, especially when you're looking at from outside the sport. But even within the elected sometimes, you know, it's important to do that. I often think as well, one of the things that is one of the most valuable skills to try and, or things to try and develop within an organisation is internal communication. Yeah. Because you'll often have, you know, a few thousand people that you have access to, and if you can ask those people whether they know anybody with this particular skill set or, - Correct. - you know, this particular background, you have way more chance than the seven people sitting around the board table."Do you know anybody?" Yeah, well exactly. And but, you know, also packaging it well, like, you know, what is this? What do you have to do? What's the commitment here? You know, how does this work? Where are you expected to attend? Like, you know, often within regional or national sporting events, like, oh, it's just an expectation they will turn up to every single event and hand out the medals or just be there to be, you know, standing on the sidelines so somebody can have a moan at them. Like, you know, not necessarily, and often that's a deterrent. You know, sort of Kiwi, sort of tall poppy, don't poke your head up, and somebody would just want to say, "Oh, you're the guy I've been looking for." It's like, "No, it's more what's the commitment here? What's the"expectation?" And, like you say, clarity about what we're looking for, why we're looking for that. Yes, yeah. And while a job description will go some way to achieve that, maybe having a video on your website that you can direct people to is way more accessible than a - Than an email. - job description. Or an email, for sure, yeah, yeah. Now, some organisations, of course, are purely elected directors. Hopefully, they'll have a mechanism where there's a couple of directors rolling off and getting replaced each year. But in those cases, you're often restricted, well, you are restricted to who is elected. Is there a way of trying to ensure that, or manage the skill set of elected directors and find and attract potential directors that still meet those skill and diversity goals, even though they're all elected? Yeah, it's interesting. And, you know, maximum board tenure is an interesting one. And how many, again, you know, like we were discussing previously, like, yes, there's certain organisations with certain prestige where you might get a large number of nominations and you can have that sort of, you know, rotation. But often, actually, that rotation counts against you, and that you lose good people because,"Sorry, you've served your maximum term." It's like, "Well, is there anybody else"actually wanting to do this?" Like, there's a little bit of that. And then there's also making room for others. So, balance. It might be misunderstood, but you've got to shoulder tap them, you know. And it's generally people don't self-nominate for this type of thing, as I just mentioned, because they don't know what it is, for a start. So, I think it's the chair's job to call for nominations. And by that, I actually do mean call, like pick up the phone, have a chat to members, have a chat to, you know, regional or whatever their network, or across board members, "Hey, we need somebody. What networks can we access here? You know,"how do we find the right people?" Because the biggest challenge is often capacity, of, "I just don't have time for that." That's all the biggest excuse, "I don't have time for that." So, "Well, what do you think you need"time for? Like, you know, how much time are you thinking this is?" Because a lot of organisations that only, you know, the board only meets four times a year, and it's for a two-hour meeting in the evening. So, it's like, most people have time for that. So, time's not the impediment, but the perception of time involvement, risk associated, that deters them. So, I think it's also that people have the sufficient time and the energy for it as well. So, if they hold too many hats, maybe they don't. And you risk just getting the interest waning because the real interest is at the club level, but they've been pushed forward to the provincial, regional level, and then they've been pushed forward to the national level, but their passion lies at the club level. Yeah. And so, how valuable are their insights and their support and, you know, their participation at that national level going to be, even if they're pushed forward there because they're an amazing person and they have a great CV [curriculum vitae] and they've achieved a lot in business or in that particular sport? Doesn't necessarily mean that's where their passion lies or where they can see themselves making some difference or, you know, supporting the purpose of the organisation. Yeah. The other risk that can happen in a purely elected board is you could find yourself on a board of directors for a not-for-profit with a whole bunch of passionate people that are drawn from the membership and don't necessarily have the skills to be there, the governance skills that the organisation needs, or, in particular, the spread across them doesn't fill all those gaps. How does a board then try and fill those gaps when a group of people have been elected that don't meet all the needs? Yeah, I mean, look, ideally, the constitution, you know, if you change your constitution, consider this, you know, as part of the Incorporated Societies Act [2022] changes, consider co-opted where the board co-opts on what the board thinks it needs. I always like that as a short-term mechanism until the next meeting, you know, that allows you to fill the seat while you have a vacancy or while you have a lack of a critical skill set. And, you know, a couple of seats. And then more long term, I'm also in favour of appointed directors. And there's a whole appointments panel thing. There's actually, there's some really good research done by AUT [Auckland University of Technology] around appointments panels and how appointments panels can add value to a board. So encourage people to look for that if they're interested. But it's then the board can adjust. Yes. You know, to what it's getting from its election. And yes, you do, everybody will have, you know, stories, or those involved will have stories about the enthusiastic person, but they're very narrow in their enthusiasm. They're enthusiastic for their particular, you know,- Sub-passion. - sector, sub-passion, topic, whatever, and they kind of ignore the broader, you know, purpose-driven, strategy-driven, holding-to-account, - Yeah. - you know, aspect. Governance role. Governance role. Yeah. You mentioned, and the first time I caught up, actually, that under the Incorporated Societies Act 2022, the majority of board members must be members of the organisation. When you're co-opting directors in, are they included in that count? Yeah, they would be. They would be. Top of my head. Sorry, throwing you a detailed question. Yeah, ask a lawyer. But, yeah, I mean, like, it's the majority. And you can, again, it's the idea that you're benefiting the members. So, often, you know, your membership should not be exclusionary and your membership does not necessarily entail participation. A lot of, you know, golf clubs and various rugby clubs will have the "non-playing member membership", you know, the "social member", a class of membership where you can vote, but you can't, you know. You don't tend to participate in the sport itself. Not participating in the sport. So, you're still a member, it's the idea of serving the needs of its members, no matter whether they're actually doing what the intended, you know, sport, you know, is. In sports organisations, it's quite a common way to co-opt parents, isn't it? Yeah, totally. As members. Yeah. When you were, you've mentioned a couple of these already, but you may have some others. What sources do you use when you're recruiting new directors, particularly when you want people external to the organisation? You mentioned Appoint Better Boards. Yeah, yeah. LinkedIn, you know, very good for understanding what people's skill sets are, you know, how many degrees of separation you are away from them. That’s often helpful. Personal network, as I think we covered before. And it's just the same thing. It's being clear as the commitment required, the purpose, the benefit, any remuneration, no matter how small. You know, you see a lot of ads on Appoint Better Boards, you know, "Free and must do 10 hours a week." You know, don't know how many applicants you're going to get. You know, the balance isn't quite there. You know, you got to be super passionate, and if you're super passionate, maybe you're not necessarily bringing the open-mindedness that you would need or that is required of the organisation. So, so yeah, those would be the sources. I can take from that as well. Start by being very clear on what it is you need. Write up an advertisement for what, for want of a better word, that describes what you need. And also, as you say, what the time commitment is, what's involved in the role. Perhaps even make a video or something out there that says the same thing. But define very clearly what it is you need before you go out there and say, "Hey, we need somebody," so that those questions, when they arise, you've got answers for them. And so you're not wasting people's time, as well. Like, you know, if you're clearly looking for, I mean, I think that the obscene example I gave before, you know, a Pacific Islands woman in her 30s who's in a wheelchair, you know, well, if it, maybe they need to meet two of those four criteria because you really need to get those diversity factors in play for whatever reason, you know, I mean, particular funding requirements or maybe awareness. You know, each of those roles may make up a decent proportion of your membership. So, you're kind of telling people if they don't tick two of those four boxes,"Please don't take your time to"apply. Please don't get your hopes up and put effort into putting forward"your application." Just the same with recruitment for jobs. I wish actually a lot of ads were clearer as to what we're looking for. Non-discriminatory, of course, with an employment that, you know, if you don't have these skill sets, you are going to be automatically screened out. I mean, algorithms do that anywhere these days. But, and so, please don't write us a long cover letter if you really don't have a single skill set that we are looking for here. You know, if it's three years' experience you really need because we're not looking for somebody who doesn't understand this industry at all. Yeah. Please don't take your time to apply. So, is it, there's that balance of getting, you know, helping the right applicant apply and also helping reduce the number of applicants to only those that are actually manageable in terms of that process. You know, quite often the challenge a small not-for-profit organisation is getting any applicants. Yeah, totally. Yeah, yeah. And that's a challenge. When you found somebody and you bring them onto the board, what do you do to go about inducting them? Yeah, I think a board charter is a really, I mean, first, the constitution. Yes. Hopefully they've seen it or they're aware of it. Board charter, I find very helpful. And, you know, setting out kind of at a regulation level how this board operates, what our commitment to each other are, you know, what the expected standards of integrity and, you know, practices are, how the board will interact with the chair, how the board will interact with any staff. That's actually a big one. You know, board members can't just go, "I'm a board member, do what I say." It's like, no, not even the chair should ever do that. Use the organisation. You know, the CEO is the kind of the hourglass analogy, I think that somebody previously used that as well. You know, that you do have this one or two directors, either, you know, executive directors or chief executive, who are the connection between the board. And that doesn't mean there's no connection. I'm also quite a fan of boards knowing management or boards knowing multiple levels in the organisation, speaking to the front line. That's more in a corporate sense than necessarily a sporting sense. But it's also not, you know, using that power to, inappropriately. Yes. That's something I've sadly seen, and it's not ideal. What else? Access to archives, access to policies. What I would generally do at the, D&O [directors and officers] insurance, hopefully, you know, at a certain level of organisation, you have that, so that you give the directors some comfort as to what their risk is and how the risks are mitigated. That's not to say that you can be completely negligent and not care because our insurance policy will cover you. But it's giving them some insight that you've thought about these sort of things and you do or don't have one. And then what a big thing I would do is a call from the chair before and after both each of the first three meetings. Okay. Just to, you know, because it's an intimidating environment often, especially if they're younger or they've got less governance experience, to walk into this room of strangers because you don't usually have a lot of socialisation time. Yes. And to sit down and be expected to contribute and expected to put forward your view. Yet, that voice is important, even if that voice is short or small or naive, it is important to - Very important. - and to make them feel comfortable and part of the team. You know, governance is a team sport. So, yeah, before and after I've found is a way to just encourage people, allow people to, you know, - Express concerns and ask questions. - Yeah. Ask questions. Ask the dumb question. There are no dumb questions. There are just things you don't know or things you haven't quite collected yet on. That's fine, you know. Yeah, I think that that induction and spending that time on boarding. Good quote I heard the other day, more about business onboarding, I guess, and governance onboarding, is,"Make sure it's onboarding, not waterboarding." Make sure that actually it's a positive experience for the organisation that you're joining and not going, "What have I just got myself into here?" And there's always a bit of a risk when you're saying, "Here's your background reading," right, which is a big part of it. You know, as you say, you got your constitution, you got your board charter, you have your last few minutes of meetings, you've got your policies. You've got to be across this stuff. So, a big chunk of is, "Read this stuff". And context is missing in a lot of it, like you say, actually, there's a 100-page document, but really don't need to read that. Just, you know, flick over that one. You know, it's like, it's that context. This is a thing that's been a motion, this is a key risk area, this is a key strategic focus right now. You know, that sort of context I think the chair can provide. Of course, all the board papers are there. You know, you're not just taking the chair's word for it, but it is that induction, bringing on board kind of experience. Yeah, fantastic. Thank you. I've got one final question for you, a little bit general. What's the best governance advice you've ever received? Yeah, I took some time to think about this when you sent it through. I was like, there's actually two that, and it's kind of my two mottos of governance I keep going back to. And it's that board members should be learning, board members should be thinking, board members should be discussing. They should be asking, they should be directing, they should be reviewing. They shouldn't be doing. Yeah. Yeah. It's just getting, it's everything else. You know, it's asking the right questions, maybe having some of the answers, but it's definitely if you're getting your hands dirty, then you're not doing a governance role. That doesn't mean that you can't also get your hands dirty as part of a working group or as part of a committee, but it's not a governance role. And then sort of in the similar sort of vein, the board's job is to ask what and why, not how, not when, not where, and not who. You know, you got to stick to the right questions because otherwise you get into detail that's actually operational detail about who's going to do this, when going to do it by, where are they going to do it, you know, how exactly they going to do it. So, that all should be determined at most levels of the organisation. Management level. Management level. And then report it up. And then obviously report it up. You know, maybe run it past, you know, that who develops strategy? Like, well, management should develop strategy. They're developing the strategy. Board are endorsing the strategy, board are debating the strategy, board are asking good questions about the strategy, but board are not designing the strategy, certainly not from a blank piece of paper because otherwise, again, depends on the level of organisation, but you're asking people who are spending minutes on something to supplement and to be more insightful than people who are spending days on something. It's like, it's disproportionate. It's a little bit obnoxious in some ways. Yes. So, yeah, I think that those are the two key principles that I always come back to in boards and that that helps especially as a chief operating officer. You know, know where that line is and also allowing the board to go into operational matters. I think there's also a lot of chairs that I've observed, "Oh, that's operational. Let's get this governance." Like, you've got to actually allow people to follow it for a little while and then bring them back. Yes. And so, because otherwise you're kind of shutting people down because they just happen to ask the wrong question or they having to, you know, sort of say,"I'll do that. I can do that. I can call that person. I can do that." That's fine, just this not what we should be doing. And some of that can be as part of your preparation, right. You're reading your board pack and got those sorts of questions, Well, maybe find out the answers and in the board meeting you can stick to your, the high level stuff, the whats and the whys. Yeah, exactly. So, it's coming back to those, you know, coming back to the what and the why. You know, very Simon Sinek, I know, but, you know, come back to the, it starts with the why. Yeah, your purpose. And then the what. Yeah, the purpose, then why are we doing this? How does this move towards our purpose? Yes. And then what should we be doing? And then leave the rest kind of as like, "So, can management come back with a proposal on the, you"know, the what, the who, the where, and the when and then we can build"that into a plan?" And in a not-for-profit context, depending on the scale of the organisation, it comes down again, as you said, to the multiple hats. So, when you're spending time on governance, make sure you're focusing on those big questions. And if you're then in an operating committee or a working group that's doing the do, then that's when you target the different question. And they're separate meetings. I mean, those meetings may be back-to-back. Yes. You know, "Seven to eight, we're dealing with the governance, the strategy."Eight till ten, we're doing the working group, you know, answering"these questions." And it may not be everybody who's on the board that's in that particular working group. You can move to subcommittee, you can move to working group, you can move to committee, you know, level to be able to have those types of conversations. And I just think it's important to keep that separation, even if it's a large overlap of the people. And that's the key distinction. Of course, holding yourself to account is a little bit tougher than holding others to account. Yes, yeah. But it's sometimes by necessity in a not-for-profit. Yeah, it sometimes is. Again, you know, we're talking across a range, you know, not-for-profits. Like, where profit isn't the sole focus. Yeah. You know, the biggest mistake I've made in, I've seen in terms of a lot of social enterprises is that they say, "We don't want to"make a profit." It's like, well, hang on. No, no, no. You can't make losses. Yeah. Not-for-profit just means you're not going to distribute out to shareholders. There will be no dividend. It does not mean we will make no surplus. It does not mean we will make no sustainable activities. There was a change in terminology that happened, I think, maybe 20 or so years ago when you moved from non-profit to not-for-profit. As you say, that's not the main focus, but you want to make some money to be able to deliver your purpose. As you say, it's just not distributed to your stakeholders. Yeah, you have no sustainability if everything's done at break even. No. You know, you've got to build up some reserves for the rainy day, for the unexpected. You know, that does not mean massive reserves, but that just does mean that. So, not-for-profit doesn't mean no profit. Like you said. You've got investment, you know, you know, IT [information technology] systems, you might even be looking into some of the opportunities that are available. Stability, longer-term thinking, something with a slightly longer payback period than this particular cycle. You know, there are all those things that are important. So, yeah, not-for-profits do need to make surpluses. They do need to invest those surpluses often in themselves. Yes. Really the only distinction is nobody's going to get paid out on this. And of course, that's when people start to get worried about pecuniary gain and about, you know, what is the director fee here? You know, these are kind of problems for later. That's when the membership should then be calling to account and saying, "Well, hey, this money is for the purpose of the"organisation. Let's not divert from that by starting to pay our directors"or our officers huge salaries. You know, let's make sure that we are"earning surpluses. We're ensuring our sustainability. We're ensuring"that we're don't not overly dependent on a particular funding stream." That's a big one. You know, we talk about not-for-profits and Class 4 gaming. That's a tenuous thing sometimes about community redress and, you know, it's a competitive space, so... And it can change very quickly. People fear it can change very quickly. I mean, certainly, funders' appetites can change very quickly. Funders' own purposes can adjust, and then an organisation that's been dependent for a decade or more can suddenly find themselves out of vogue and then- The tap gets turned off. - Yeah. So, that's an interesting space. Is its, yeah. So, no. Well, Stephen, again, thank you very much for your time. It's been a great conversation. I've really enjoyed this. It's a fascinating area to get into a little bit more. So, thank you. Look forward to seeing you again soon and to seeing you next episode. Thanks, Mark. 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.