Money and management have never been more important for Australia’s 40,000-odd not-for-profit organisations.Cameron Cooper reports.
As competition intensifies for a limited pot of gold in an era of corporate governance-driven checks and balances, the onus is on not-for-profit organisations (NFPs) – once regarded as slow-moving, poor cousins to mainstream corporations – to demonstrate their management nous.
One convert to the NFP sector is Andrea Pink, who moved to the international charity giant World Vision as Group Executive of Human Resources last year after a career including more than 15 years in the pharmaceutical industry.
Pink made the move after starting to see a divide between profits and values. “For me it’s knowing that at the end of the day there is somebody somewhere who is benefiting in their life wellbeing from what we are doing,” she says.
Chief Executive Officer of The Smith Family, Elaine Henry, is adamant that charitable and community groups can match it with the big end of town on the management front. The Smith Family has been helping disadvantaged Australians since 1922.
Henry says a paucity of resources means managers at NFPs often have to do it smarter than their corporate counterparts.
“You might have had a terrific year, but from July 1 you’ve got to start all over again. There’s nothing in the bank,” she says. “It means you’re only as good as today. That takes a tenacity and a complexity that you might not get in the corporate world.”
Led by superbrands such as World Vision, The Salvation Army, Christian Children’s Fund, Red Cross and The Smith Family, modern non-profit organisations are challenging the perception that they rely on passion rather than brains. Following in their slipstream are a host of impressive boutique operations, including beyondblue (the national depression initiative), CanTeen (fighting teenage cancer) and the Starlight Foundation (helping disadvantaged children), plus myriad smaller charities and non-government organisations.
Long seen as a little naive and removed, the mantra at NFPs today is about relationships and integrated innovations.
Michael Traill, Chief Executive of Social Ventures Australia (SVA), is another who is reflective of the new breed of business-savvy executives in the sector. Two years ago, Traill’s day consisted of striking venture capital deals for Macquarie Direct Investments, a division of one of the nation’s most successful finance houses. Today he is using his skills to help NFPs forge corporate links through business mentoring and a funding model he calls “venture philanthropy”. SVA has key partners in the Benevolent Society, The Smith Family, WorkVentures, and the AMP Foundation, and hopes to integrate the public, corporate and social sectors to create entrepreneurial solutions to social problems. For his part, Traill is enjoying a break from the corporate world, where he says many of his contemporaries are wrestling with a “question of purpose”. He is also relishing the chance to work with a new breed of young workers who are putting people ahead of pay packets.
“I’m 44 and I find it quite inspiring and motivating to see young, outstanding, quality people making decisions around putting things into the community really quite early in their careers,” he says.
Traill says profit and non-profit organisations share many characteristics. A difference, however, is the overriding commitment to the cause at NFPs. Most corporations, he argues, have mission statements about customer service and looking after people and suppliers, “whereas in the non-profit world the mission and purpose is really lived and breathed”.
Through SVA, Traill hopes to help strengthen some of the financial and management structures of NFPs, in which fragmentation can be a problem.
“There’s not as much sharing of ideas and not as much consolidation as should happen,” he says. “In the commercial world, where organisations grow, there tends to be a more structured approach, particularly to scaling and growing good quality organisations.”
By streamlining NFPs and linking them with corporate partners, Traill is confident of “getting people to connect their heads to their hearts”.
He adds: “What happens can be quite transforming on both sides.”
Leaving the corporate world to join the non-profit sector is an increasingly common story. People now want to work for NFPs.
The CEO of The Alannah and Madeline Foundation, Andrew Chappell, transformed his life two years ago when he left Telstra after decades in senior executive roles. The Foundation (www.amf.org.au) supports children who are victims of violent crime or sudden family loss. For Tim Costello, the shift has been less radical; he recently quit as a minister at the Baptist Church to become chief executive of World Vision Australia.
Leonie Young, CEO of beyondblue, says making the management transition to NFP is not easy, chiefly because of a lack of funding that continues to hamper non-profit groups.
Young says this reality means beyondblue has to be “lean and keen”. As a former manager of the Northern Territory office of the Commonwealth Department of Health and Ageing in Darwin, Young comes from a relatively resource-rich background where specialists handled areas such as finance, marketing and legals.
“In a non-government organisation you mightn’t have anyone who is particularly responsible for those areas, but, of course, you still have the same legal and financial requirements,” she says. That has forced some adjustments. “It’s not about doing things at either a reduced level or taking your eyes off the need to be accountable, but the keenness is about the type of people you attract and that’s where you can make some major gains on a large and sometimes unwieldy organisation.”
While the NFP sector is reinventing itself, there is still some work to do; with some corporate executives still regarding the not-for-profit sector as largely unsophisticated and reliant on a give-us-money approach.
Anthony Lupi, Director of corporate social responsibility company, Positive Outcomes says that many NFPs have failed to heed the warning that many corporations have abandoned traditional sponsorships and cash-based philanthropy in favour of business partnerships and corporate social responsibility programs.
The shift to corporate-community partnerships does not faze Elaine Henry, who is five years into implementing a seven-year restructuring plan at The Smith Family.
When the change process was first mooted, Henry says the board asked her if it would be a revolution or evolution.
“And I said it has to be about evolution because you’ve got to take people with you, although it might seem like revolution to some people.”
A central plank of the overhaul has been to develop strong ties with the likes of Westpac, BHP Billiton, Colgate-Palmolive, Cisco Systems, Mallesons Stephen Jaques, and Microsoft.
Innovation is another word getting play at NFPs. At beyondblue, Young believes being independent and escaping the strictures of government agencies has allowed the organisation to pursue international best practice and find unique solutions for depression-related illnesses.
“We’ve been able to trial and put in place some innovative programs around tackling depression that aren’t tied to particular health service models or politics, or indeed state and territory environments,” she says, citing initiatives around postnatal and workplace depression.
At World Vision, Pink says staff have learnt to be inventive.
“There is a high degree of innovation in the regard that we can get things done on a shoestring,” she says, noting that World Vision’s international network offsets some resource issues which means staff “don’t constantly reinvent the wheel”.
Money remains a contentious management issue for NFPs. Charities, for example, tend to produce financial reports with statements of income and expenditure, balance sheets and cash flows. But they do not have to adhere to the same open-book requirements on executive payments as ASX-listed companies.
Mission Australia, for example, has about 4000 staff and volunteers, operating revenues of more than $150 million last year and partnerships with corporate giants such as Qantas and Westpac. But it does not disclose the remuneration of its senior executives in its annual report.
However, The Smith Family’s Henry says accountability of NFPs is as stringent, or more so, than mainstream companies because it is all about the use of donors’ money.
“So performance management, particularly when it comes to fundraising, and how the funds are utilised and reporting back, is vitally important … You’re accountable for every dollar; and we should be, too. I mean, this is donors’ money.”
Henry rejects criticism of NFPs for spending money on administration, infrastructure and salaries as “really quite silly”. And Traill, at SVA, claims NFPs must resist the call to stop spending any money on management and business systems. He says in his Macquarie days the key requirement the investment house wanted in a business was depth and substance in the support structures around the chief executive. To that end, he scoffs at media giant Ted Turner’s celebrated decision a few years ago to give $1 billion to charity while promising not to spend a cent on administration.
“That’s just a nonsense,” Traill says. “When he set up CNN did he say ‘I’m not going to spend any money on marketing or strategy’?”
In any case, wages for NFP staff tend to still be low. The national Anglicare network had revenues in 2002 of more than $400 million. It had been paying senior staff at the 25th percentile of the market but switched to the 37.5 percentile of the market a few years ago. World Vision says it is in the 25th percentile. However, the cultural merger of profit and non-profit organisations could put pressure on pay scales, according to Pink.
“The marketplace for not-for-profits is getting more observant,” she says. “Compliance issues are increasingly being raised and we need to conduct ourselves with as much rigour as any business, which means you need people with good business skills – and that can be more expensive.”
Henry talks about an era of “convergence rather than divergence” in which enlightened CEOs manage a community of people.
Henry expects the flood of people wanting to work for NFPs to continue as Generation Y looks at work options in a philanthropic light.
And with good management and staff development, she is confident they will stay. “Once you get it in your blood,” she says, “you’re here.”
An entrepreneur from the NFPs
When David Bussau AM, Australian Entrepreneur Of The Year, arrived in Monte Carlo, Monaco at the end of May to vie for the title of World Entrepreneur Of The Year, he was making history.
Never in the 18 years since these awards began have any of the 35 participating countries ever awarded their national title to an entrepreneur from the not-for-profit sector.
Yet no previous World Entrepreneur Of The Year winner – never mind National winner – can lay claim to creating 2.4 million jobs worldwide and taking as many as 20 million people out of poverty.
This is exactly what Opportunity International, the organisation that Bussau founded, has achieved.
“A groundbreaker in applying a capitalist solution to solving world poverty, Bussau has developed an extraordinary, truly entrepreneurial model for creating wealth rather than simply redistributing it.” (Excerpt from the Australian Entrepreneur Of The Year Judging Panel comments.)
Bussau has been recognised for his role in the formulation of the methodology of Micro-Enterprise Development (MED), for co-founding Opportunity International, and for the enormous impact OI has had in empowering millions of budding entrepreneurs in the developing world to break out of the poverty cycle forever.
Through MED, Opportunity International offers a practical and sustainable way to break the poverty cycle by providing small business loans, training and mentoring, empowering poor families to start or expand their own small businesses in 27 countries around the world.
“David Bussau is the ultimate entrepreneur. By providing the resources for others to become entrepreneurs he has positively impacted millions of people and served as an inspiration to us all,” said Brian Schwartz, Ernst & Young Australia CEO.
Asian businessman Tony Tan Caktiong, head of Jollibee Foods Corporation was the ultimate winner of Ernst & Young’s 2004 World Entrepreneur Of The Year.
From modest beginnings as the owner of two ice-cream parlors in Manila in the 1970s, Jollibee has grown to become one of the most admired and respected companies in Asia. Jollibee Foods Corporation now employs 26,000 people in almost 1000 outlets in seven countries, including the United States and China.
Some Non-profit Leaders
- Anglicare: the welfare arm of the Anglican church
- beyondblue: the national depression initiative
- CanTeen: support network for young people living with cancer
- Headway Illawarra Inc: helps people with Acquired Brain Injury (ABI)
- Mission Australia: aids disadvantaged families and children, young people, and the homeless
- Red Cross: international emergency aid network
- Social Ventures Australia: providing venture philanthropy to Australian organisations
- Starlight Children’s Foundation: dedicated to helping seriously ill and hospitalised children
- World Vision: international humanitarian aid and development agency
Empowering Young Australians
Dynamic, not-for-profit organisation The Foundation for Young Australians is committed to developing innovative initiatives that support and empower the lives of young Australians aged 12 to 25.
Each year The Foundation manages a portfolio of grants, totalling more than $6 million, for initiatives that help provide young people with opportunities to reach their full potential and be catalysts for change within their community.
Mary Wooldridge was appointed CEO of The Foundation in July 2001 and she led a review of the organisation’s strategy and operations.
The Foundation now operates as a “venture philanthropist” and ensures the meaningful participation of young people in all activities funded or undertaken by The Foundation.
“Through our Youth Grant Makers, and the other young people who are members of our Board and committees, we are ensuring that young people are key decision makers in our most important activities,” Wooldridge says.
Prior to joining The Foundation, Wooldridge was Senior Adviser to the Federal Minister for Industry, Science and Resources and worked with McKinsey & Company.
She has an MBA from Harvard Business School and a B.Comm (Honours) from the University of Melbourne.
In 2002, Wooldridge was awarded the New CEO Award in the Equity Trustees’ CEO Awards for Not-For-Profit Organisations.
For more information visit: www.youngaustralians.org.