Author: Amy Wise
Contributor: Sean Chirio

Here, we look at structures of governance, and individual and group roles within organisations that help them run smoothly and efficiently, in line with agreed goals. For example, what makes good governance? What are the different styles of governance? And what is a board's role in directing the organisation successfully?

Main topics covered in this article include:

What is governance?

According to the Our Community website, governance is how organisations, including community groups, are directed and managed. As a community group grows, its governance and management functions can become more complex.

Good governance is essential needed to ensure a community group:

  • has a clear mission
  • operates ethically and in line with its mission
  • meets its legal and financial obligations
  • monitors and reviews itself regularly.

Governance is not the same as management. Generally speaking, the board deals with governance, while the chief executive officer (CEO) deals with management — although the two can overlap. So governance is mainly about how an organisation is run — the structures and systems that to ensure the board make the right decisions and develop as intended.

A not-for-profit organisation can thrive under different structures of governance, but to be successful, all structures should be:

  • responsive - everybody with an interest in a decision, or with information or opinions that can influence a decision, should have their say
  • decisive - once everyone has had their say, the right decisions have to be made and implemented across the organisation
  • easy to use - the structure should be open, flexible and straightforward. Stakeholders should know who is responsible for which aspects of governance, and how that responsibility relates to the organisation's mission and operation.

Approaches to governance

There are two main approaches to governance.

Not-for-profit organisations pride themselves on the 'inspirational' style which, compared to most large commercial enterprises, is informal, consultative, and relationship-oriented. In this case, a leader's role is to develop a vision of what's possible, and then inspire people to get involved in making it happen.

The 'administrative' style is traditionally bureaucratic, with fairly rigid procedures that document every passage of paper through a hierarchy of decision-makers — until a decision is finally made. Here, a leader's role is to make sure everyone follows these procedures and that all safeguards are strictly enforced.

While the administrative approach is more accountable, the inspirational approach is more entrepreneurial — but both have their virtues. Most successful modern governance techniques use a mix of both, projecting a vision while ensuring accountability.

What is a board?

A board is the group of people with the power to supervise, manage or govern a company, organisation or group. Like the community groups they govern, not-for-profit boards come in all shapes and sizes.

The board has overall authority by law until some of its authority is delegated to others. Final decisions on important issues must always go through the board. It is also the board's role to create the structures that help the organisation achieve its mission.

By law, all incorporated Australian organisations have to appoint a governing body, which serves as the organisation's highest authority. Even in cases where a governing body isn't mandatory, most community groups have an overseeing body to guide its vision and direction.

In Australia, governing bodies can include:

  • boards of management
  • committees of management
  • governing councils
  • trusts.

Legally speaking, these are simply different names for governing bodies, and they all have pretty much the same role in the organisation.

A board's responsibilities

When it comes to the expectations and responsibilities of a board, there's no legal distinction between not-for-profit organisations and for-profit organisations. For this reason, it's important board members know their responsibilities. For boards to meet their legal and financial responsibilities, they must:

  • establish a clear mission and vision: be clear about the direction of the organisation.
  • identify the organisation's core values: what are the key principles that guide an organisation's response to specific events?
  • define the organisation's programs and services: for example, assessing the community's needs and opportunities, and developing a strategic plan based on available resources
  • secure the necessary resources and community support: board members need to be comfortable selling the organisation's mission and raising funds to support it. Often, members should also be prepared to donate their own money
  • provide financial oversight and ensure the organisation meets its legal and financial requirements: this includes developing budgets, monitoring program activities by tracking key performance indicators, managing investments and reviewing financial statements
  • develop appropriate risk management practices: identify the risks and obtain insurances for them
  • select leaders for management positions: most importantly, choosing the CEO and monitoring their performance.

Governance isn't necessarily about doing — it's about ensuring things are done. The board must be clear about what it expects in terms of performance, assign these expectations clearly, and check they're met.

In a small community group with no staff or volunteers other than board members, the board will probably be responsible for everything from running social events to organising fundraising strategies and making sure the budget balances. In a larger organisation, the board will have a more hands-off role, with an emphasis on direction and monitoring. In these cases, the board is governing, not managing as such.

Community group board and committee members are subject to the same demands for accountability and efficiency as any board member — profit or non-profit. These responsibilities may have legal ramifications, so shouldn't be taken lightly.

Who can be a board member?

You don't usually need any specific qualifications to be a board member, although some skills, such as legal, financial, networking or management skills, are often in more demand than others. Some boards set aside one or more seats for people with particular qualifications, such as a doctor on a health-related board — or for those representing particular groups, like public housing tenants on a public housing management committee.

A board or committee member needn't be legally eligible for the position. However, an eligible person is usually:

  • over 18 years' old
  • not insolvent or under administration
  • not disqualified under the group’s constitution or due to a breach of their duties.

Some states and territories have different rules, so check out the help sheets from the Boards, Committees and Governance Centre of the Our Community website.

The best boards are inclusive, with representatives from all backgrounds and walks of life, with a wide range of views and skills. Good boards also strongly represent the people they serve. Indeed, while it's important for community groups to reach out to the business community to rejuvenate their boards, it's also important the community group stays firmly in control of its business and operations.

Office bearers

Most community group boards have key office bearers — typically a chair, vice chair, secretary and treasurer. They may also appoint a public officer. Boards with committees or sub-committees will also need committee chairs and vice chairs.

How you appoint office bearers should be outlined in the community group's constitution. Typically, they're nominated for the position and then the full board votes on the nominees. While they all work for the community group and its goals, office bearers' roles can be very different.

Board meetings

The structure and style of meetings differ from board to board. They may be formal or informal, open or closed, short or long. But whatever their structure, the best meetings flow logically, keep everyone engaged, elicit a range of useful ideas and information, and leave members feeling they've made a worthwhile contribution.

Board members will be involved in ordinary meetings, but other meetings may include:

  • annual general meetings (AGMs) that recap each year's progress, chart a direction for the future, and elect new members or office bearers
  • extraordinary meetings, held between ordinary meetings if urgent decisions need to be made
  • committee meetings
  • retreats, held away from the boardroom so members can discuss specific issues in more depth.

Board members shouldn't see their role solely within the confines of the board meeting. Before meetings, members should read the agenda carefully and ensure everything's clear about what's discussed. And after meetings, members should review the minutes while they're fresh in their minds and note any amendments. Members may also have actions assigned to them through the meeting, and should keep track of their progress, ready for reporting at the next meeting.

Terminology

The agenda

A list of things to be discussed at the meeting. It's usually sent to board members well before the meeting to make sure everyone has a chance to read it and think about their input. Some agendas give more information, such as who will address each item, recommendations for action and how long each item should take to discuss.

The minutes

The minutes are the official record of the actions and decisions of the board. They are taken every meeting and approved the next time the board meets. Meeting minutes include the date and time of the meeting, attendees (including absences and apologies), a summary of the main points discussed, and the outcomes.

Motions and resolutions

A motion is a proposal for action, which the board then votes on. Motions can be amended or reworded before going to vote. If a motion is approved by the board, it becomes a ‘resolution’, which can be legally binding.

Quorum

This refers to the minimum number of board members who have to be present for the board to legally conduct business transactions. An organisation’s constitution will define its quorum.

The role of the chair

Board meetings cannot take place without a board 'chair'. The chair's role is to ensure the meeting is conducted efficiently and according to the agreed rules. The chair should facilitate discussions, keep members on track and the meeting on time. When a topic has been discussed fully, the chair will often summarise the points and put the motion to the board for a decision or vote.

More information

Our Community
BREAZE
National Council for Voluntary Organisations (UK)
National Roundtable of Nonprofit Organisations
Australian Securities Exchange, Principles of Good Corporate Governance

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