Corporate values – why bother?

The Zentricity Blog has been in retirement, along with its author who only comes out for cameo appearances as a blogger and consultant these days.  But the blog is making its own cameo on this occasion, in a post for a special client –  it might also be of interest to anyone who is wondering about the worth of corporate culture, or “values”.

What are corporate values?

Values have been described as “the collective behaviour of a company’s employees”.  They are the “how” in your organisational design – how you behave towards your colleagues, your clients and your broader stakeholders.

 Why are values important in an organisation like yours?

  • You are working in a knowledge based economy, in which  your people are your primary asset
  • Your corporate reputation is vital to your business
  • They are another way to differentiate your brand, especially when competing with the big players in your segment
  • You are a comparatively small team working at close quarters with a serious workload
  • Acquisition and retention of good people in a talent-constrained market is challenging
  • The employee value proposition (especially, they say, for Gen Y) is more than just $$ – a values based culture can help drive employee engagement
  • Your clients operate in a highly regulated, highly visible environment where their, and your, probity is crucial.

How do can you see values working in an organisation?

  • They are used as an integral part of the process for:
    • Recruitment
    • Induction
    • Giving and receiving feedback
    • Performance discussions
    • Calling bad or non-aligned behaviour
  • You hear people referring to them in the office, and in conversations between colleagues and with clients
  • You see them referenced in your new business pitches
  • They are embraced and role-modelled from the top down – it is clear that the senior executive team is on board with the promotion of a positive, values-based culture.

What do values look like?

  • They have been discussed, agreed, clarified and articulated – your people and stakeholders can see exactly what your culture is
  • They must be engaging – they need to make a connection with your people and your clients,  and really push their buttons
  • They must be reflective – of the essence of the business you are in, and they way you do things around your place – though they may evolve and change over time as your organisation develops
  • They are referential – you need to be able to test something proposed against them – strategies, new hires, new clients, interactions with colleagues
  • They are aspirational – they represent what you know you ought to be doing but sometimes fall short of occasionally.

Some examples of corporate values:

 The Vodafone Australia values, circa 2001, articulated as part of the recovery process when the company was in a dire situation both market-wise and culturally:

  • Supportive
  • Excellence
  • Fair dinkum
  • Fun

 The evolution of the Vodafone values, circa 2006, when the company had its mojo back and wanted to align is values with its brand essence:

  • Red
  • Rock solid
  • Restless

 The values for a small arts organisation focussed on the development of great Australian literature:

Our Values – The Varuna Way

  • Valuing heritage and place
  • Making writing and creativity matter
  • Bringing rigour and commitment to the writing craft
  • Building a respectful and inclusive community

The Zentricity values – a pro bono consultancy focussed on the not-for-profit sector:

  • Inclusion
  • Integrity
  • Compassion
  • Chemistry
  • No judgements

And I just saw the Atlasssian “core values” in a report about their highly successful float on the Nasdaq:

  • Open company
  • No bullshit
  • Build with heart and confidence
  • Don’t #@!% the customer

Brilliant!

Why you should follow the No Surprises Rule

surprise

When we were kids and you could still buy fireworks, one of our favourite games was putting a tuppeny bunger under a kerosene tin and seeing how high into the air it would blow.  Something like that can happen in a board meeting if you forget the No Surprises Rule.  I saw that rule broken recently, through inexperience more than intent, and I witnessed the mild meltdown that occurred afterwards.

The rule goes like this:

“Never rise anything in a board meeting which is new, significant, controversial or potentially adverse, unless it’s been flagged in some way first.”

And here’s what happened last week.  The board was having a strategy-focused discussion.  The new member of the management team offered to share some insights and suggestions he had about how we could address one of the identified strategic challenges.  His ideas were useful ones, and there were noises of enthusiastic support from around the board table.

The new boy had, however, neglected to share his proposals with the CEO before sharing them with the board.  While they were good ideas, they weren’t ready for implementation in the priority queue, and presented some resourcing, logistical and timing issues.

When one director said, “So can we agree to move ahead with Kevin’s idea?”, the CEO was forced into an uncomfortable yank on the handbrake – which was unpleasant for her, tough on Kevin, and slightly cringe-worthy for the board.  Conclusion: never get between your boss and the board because you haven’t the boss on your side first.

The No Surprises Rule operates in a number of scenarios:

  • If you are the CEO, don’t give the board bad news without having signalled it first.  If it is late-breaking news, at least pull the chair aside before the meeting and give them a heads-up, so the chair can help manage the delivery of the bad news in the least provocative way possible.
  • If you are a director who has a serious beef about something significant, don’t just lob it into the meeting like a hand grenade.  Try getting the chair on side, or at least apprised of your issue, first.  If the chair is not onside with you, try lobbying someone else on the board so you’ve got some support.  If you really are on your own, make your play as dispassionately as possible, and consider requesting that your matter be specifically minuted.
  • If you are senior management, never float something with the board that the CEO hasn’t seen and given support to.  (This doesn’t apply to whistle-blowing which should not be done in a board meeting anyway.)
  • And while we are on bad news of which you are the bearer, don’t try and blame one of your colleagues for it in front of the board – you’ll just look lame.

I’ve found one other instance of the value of the No Surprises Rule.  Don’t buy your wife expensive jewellery as a surprise – it’s a high risk manoeuvre, you can blow a lot of money on something she won’t like, and you can get just as good a result by saying “Come into Tiffany with me and choose yourself something.”  If you’re game.

[Partner’s note: That was actually an exaggeration – what he really said was “Come into Swarovoski with me”.  It’s nice enough, but it ain’t Tiffany. ]

(image courtesy of eofdreams.com)

Great teams and their brief shining moments

aussie ashes

I caught up with a friend a month ago, whom I hadn’t seen for a while.  She’s the CEO of a successful not-for-profit, and I’ve been with her on and off, directly and vicariously, on her leadership journey over the last 5 years or so.  She’s endured toxic team members. She’s persevered in the face of  intolerable behaviour from misguided or self-interested board members.  She’s dealt with the challenges of inheriting, then rebuilding and inspiring, an executive team in the underpaid NFP world.

And now, she says, I have an awesome team, and we are kicking goals all over the place.  And I say, that’s great, enjoy it while it lasts, because it won’t go on forever.

Then I think, that was a bit negative, and not what a good coach or friend would say.  But maybe that’s exactly what should be said, because those perfect, Teflon-coated times don’t last indefinitely.  Sooner or later, one or more people will leave the team, or there will be some major strategic shift forced by the board or the owners, or there will be a takeover or merger.

It’s really difficult to win back-to-back premierships in football – it just doesn’t happen that often.  Last time in the NRL was the Brisbane Broncos in 97-98.  In the AFL it was the Brisbane Lions 02-03-04.  (Damn, both Brisbane.)  You hear the guys being interviewed, just before the grand final, when they things like: “We are going to make the most of it, win or lose, because getting here is really hard and we mightn’t be here again for a while.”

That’s how it goes with teams.  They can have their golden seasons, and then their falls from grace. That English cricket team that has beaten Australia regularly over the past few years is now at the end of a 5-0 whacking.

Some might never gain that final prize.  The Cronulla Sharks are still waiting, and probably will be for a while yet.

But that doesn’t mean you shouldn’t savour and treasure those brief shining moments of a great team while they last.  They are worth celebrating, and they might not come again for a while.

And while they are happening, it’s not a bad idea to reflect on why it’s all going so well.  What is the essence of this team’s brilliance?

There are many factors that can make a team great.  Sometimes it’s serendipity – all the right people coincidentally in the same place at the same time.  Sometimes it’s good management rather than good luck.  Different teams respond to different drivers, and build their own individual cultures to support their performance.

Here are three of those drivers I have experienced in some of the great teams I’ve either been a part of or had the privilege to lead.

Values

The team knows what its values are – what it stands for and what it will not stand for. Even though we were only a humble sleeve sponsor, we once got into the home dressing room of the West Coast Eagles at Subiaco Oval, and I was pleasantly surprised to see their team values explicitly and proudly emblazoned across one wall. It wasn’t something I had thought a bunch of macho footie players would respond to.

Language

The team members have a common language that allows them both to positively reinforce each other and deliver constructive feedback.  When I was part of a team led by the inimitable Grahame Maher, we did a rigorous process that might in the absence of a shared vocabulary have been very confronting.  It was called “self and peer review”, where each team member would in turn say what they thought they were doing well, and what they could do better.  Then each other team member would then say what they thought that person was doing well and could be doing better.  All the comments were meanwhile being recorded on a big whiteboard.  Try doing that if you don’t all speak the same language.

Altruism

Someone is always prepared to take one for the team.  One of the most inspiring qualities I saw in my old boss Russ Hewitt do was his ability to go into bat for his team, when there was undoubtedly going to be a hostile reception from global head office, of which he would bear most of the repercussions.  That willingness to take the hit for your mates, especially in a leader, is a builder of team loyalty like no other I have experienced.

There are plenty of other drivers of team success, some of which inevitably involve alcohol and late nights.  Of course I couldn’t officially endorse such methods, but I guess as long as you can all show up in the morning, and no-one is injured in the process, even those antics may have their place.  Been in one too many such capers myself ( I particularly regret the one in the karaoke bar in Tokyo, principally because I am such an out-of-tune singer and I don’t think there has ever been a worse rendition of Maggie May – sorry Rod; or maybe it was the two hours sleep).

Anyway Jayne, enjoy your awesome team, you’ve earned it.

(Image courtesy of uk.eurosport.yahoo.com)

The 5 steps to chairing an effective board meeting (or any meeting really)

chairman-of-the-board

Meetings hate vacuums.  When there is a vacuum in a meeting something will rush in to fill it, and that something probably won’t be the most helpful or effective thing to promote the meeting’s success.

I sat in a board meeting a few days ago.  It is very early in this board’s existence and there are no settled or agreed procedures yet.  The meeting started out with a vacuum because the board’s intended chair didn’t turn up, and there was no prior agreement on what would happen in such a case.  The filling of the chair role was batted back and forth for a couple of minutes.  (I couldn’t stick my nose in, because I wasn’t formally on the board.)

The job eventually fell by default to someone with no experience in a situation like this.  The meeting then morphed into the equivalent of a rambling management discussion (despite the prior circulation of a detailed agenda), with the substantial degree of formal business needing to be transacted squashed into a few moments at the end.

If you find yourself in a meeting suffering from such a vacuum, here’s what I suggest:  put up your hand, take the chair, and follow these 5 simple “C’s” to run an effective meeting.

  1. Claim the space.  If everyone has agreed on you taking the chair role, then you have referred power.  Take control immediately and demonstrably, with some appropriate statement like “Right, we’ve got a fair bit of business to get through today, and limited time to do it, so let’s get on with it.”  It doesn’t matter much what you say, as long as it shows you are driving this vehicle.
  2. Champion the agenda.  Presumably an agenda has been circulated before the meeting.  Review it briefly with the meeting participants. Get agreement on whether any changes need to be made to the order of agenda items, and whether there is any other “business”.  Agree where on the agenda any such other business should be dealt with.  Then use the agenda to run the meeting, to keep it on track and to prevent it from being hijacked or diverted.  By getting everyone to sign up to the agenda at the outset, you can legitimately whack them with it if they try and take the meeting off-track.  And if there isn’t an agenda already in existence, don’t even start the meeting until you and the other participants have created one – even if it’s on a whiteboard.
  3. Control the discussion.  Get a proper consideration of each agenda item going.  If necessary have it introduced by someone who knows the background and the reason the matter is up for discussion and/or decision.   Use your claimed chair space to let everyone who wants to make a contribution to have their opportunity.  Feel entitled to require that only one person speaks at a time, and that they get to finish what they are saying before anyone responds.  Intervene if they go on too long or wander off topic.  Remember, you have referred power from the meeting to keep the discussion effective.  If you have to revert to something more formalised to keep the discussion in order, then do so.
  4. Clarify the outcome.  When the discussion on the agenda item has finished and there appears to be agreement on what needs to be done, don’t move on to the next item until you summarise what has been agreed, what actions need to be taken, by whom and by when.  Playing this back to the meeting helps avoid uncertainty about what really happened in the meeting, and minimises the chances of the decision or agreement being white-anted later on.
  5. Close it cleanly.  If you have worked through the whole agenda within the allotted time, check with the participants whether there is anything else which needs to be done, then close the meeting with a note of consensus. If you haven’t finished by the specified time, then get the meeting’s agreement on how much longer can be spent, and what the new agreed closing time is – and then close it at that time.  If the business has been completed, close as before.  If not, get agreement on when and where the next meeting will be, and what items need to be covered.

That’s it, really, the 5 “C’s”.  Well, there are plenty of other nuances in chairing a board meeting, or any meeting.  It’s best done by deploying some EQ along with the rules.

But even a mediocre job is better than the potential chaos that can reign if a meeting vacuum is filled by default.  It’s not just nature that abhors a vacuum.

(image courtesy of aquariumdrunkards.com)

Governance with heart – the shadow side

darth vader

Everything, everyone, has their shadow side, I reckon.  Like the Dark Side of The Force, for instance.  Or me when it’s past my bedtime.

I’m just following on from the TEDx talk I did recently:

http://tedxtalks.ted.com/video/Governance-with-Heart-David-Whi

discussing the concept of “governance with heart” – tapping into the passion inherent in working for a not-for-profit organisation, to make us more effective custodians of the NFP’s essence, and to serve better all those who have a stake in that organisation.

I said in the talk that the not-for-profit sector is fuelled by passion.  Passion is essential, when you aren’t getting paid for what you do; or if you are getting paid, when it’s substantially less than what you would be getting in the big bad corporate world.

Passion, though, has its shadow side.  Here are three areas where I have seen good governance stumble in NFPs, where the heart in governance with heart might have been slightly misplaced.

1.  Over-identification with the cause.  I mentioned in the talk one of the potential consequences of fuelling an organisation with passion – the danger of people’s identity being determined by their work for a particular cause.  Over-identification with the cause can result in not knowing when, or how, to let go – like the example I quoted of someone having been on a board for 38 years, and being clearly well past their use-by date.  It can also result in loss of perspective,  or of the ability to give a reality check when needed.

Another example of over-identification is what we sometimes call in the trade “founder syndrome”, where an inspirational and dedicated person has established a charity, taken it through the start-up phase, and got it firing and poised for real growth.

That growth usually can’t happen without the founder letting go of some control, or allowing other people with the right skills to become involved in the growth phase.  I have seen founder syndrome scupper some major funding arrangements on at least two occasions – one recently where the two primary investors walked away from supporting a board of founders which would not accept that changes in their governance style and substance were needed.

2.  What I call “shiny syndrome” – grabbing on to new stuff, when it’s hard enough just to keep on doing the core business.  The issue here is that there is just so much need out there, begging to be addressed.  For compassionate and caring people it’s hard not to take on more projects, especially when funding might be dangled before you.

Shiny syndrome can detract from the delivery of your agreed current strategic goals, and will probably ensure that you don’t have the resources to do the shiny new stuff properly either.  Testing it against your “where”, your destination, is usually an effective way to guard against counter-productive new stuff.

3.  Not keeping your distance.  Under-resourced NFPs will grab any help they can get, but if you are involved in governing, you need to be clear about staying out of management’s hair, and carrying out the governing, not doing the doing.

It’s fine to go and get your hands dirty helping out with delivery, but when you’re doing it remember what hat you have on, and it’s not your director hat.  It’s your volunteer hat or your staff hat, and when you are wearing it you are reporting to the CEO, or someone else in management, not to the board.

Don’t come in with a confusing view of having some special status because in another capacity you may be a director – in that circumstance you are just another volunteer.

So beware of the shadow side – like Obi-Wan says: “Bring balance to the Force, not leave it in darkness.”

For better or worse, I’m back …

Yeah, I know it’s been a while since I posted anything on this blog until a couple of days ago.  A friend of mine sent me a comment on that post saying “Good to see you blogging again,” and that highlighted it for me (thanks JMT).

I have in fact been off on another couple of blogging projects:
Life in 500 Words  (a collaboration with my beautiful daughter)
Being60.com (a journal to help deal with an impending birthday)

But sometimes you lose your way. The steady thread of my life was being tangled by outside events, and I learnt that I am not the strongly resilient person I thought I was, and often claimed to be.

Following a short period of decline, my mum died, and my sister and I sat vigil with her for two days until the end.

Shortly after, one of my great mates died, in those inexplicable circumstances when one of the truly good people in the world is taken too early.

My dogs died, one after the other, within a space of months.

Assorted family difficulties stacked up one on top of the other.

So I’ve been sloshing around a bit for 10 or 12 months, but I’m back. I can’t pinpoint exactly what’s helped me to get it all together again, but looking back a few things stand out:

• A genius of a personal trainer showed me that my body wasn’t in an inexorable slide downwards, and even got me racing, well, competing, again (which makes turning 60 a bonus rather than a sorrow, because you go up an age category and you don’t have to race people 9 years younger than you)
• Sadly or fortuitously, my constitution stopped tolerating the amounts of alcohol it used to be able to and I don’t drink as much as I did
• I changed what went into the shopping trolley, and therefore what went into me
• I’ve been working with some dedicated and committed people in various not-for-profit enterprises who have reinforced the value of service
• I never stopped writing, and even if it was of no great quality and only for me, it gave an opportunity for self-reflection without too much self-flagellation.

Ah, the bleedin’ obvious, but it’s hard to see it at the times when you most need it: exercise, diet, less booze, helping other people.

These things weren’t consciously undertaken, or part of any plan. I can’t guess at the source of their interventions. Maybe this stuff is cyclical. Maybe I’m just a lucky bloke. Whatever it is, I’m grateful for it.

Governance with Heart

[This is the script of a TEDx talk delivered by David White at the Blue Mountains International Hotel Management School on 7 September 2013.  You can find the talk here ]

In 1989 Mick Dark gave the Blue Mountains community, and the writers and readers of Australia, a wonderful gift.  He gave Varuna, formerly his parents’ house, to a newly established charitable foundation, to be a writers’ centre.  His mother Eleanor Dark was one of Australia’s finest writers of the 20th century, and his father Eric Dark was a local Katoomba GP, and what we might these days call an environmental and social activist and an author in his own right.

Mick Dark’s generous gift is now Varuna, the National Writers’ House.  Since 1989 Varuna has inspired the creation of new Australia literature and provided support for a thriving writing community and a growing body of alumni.

Varuna runs a number of residential writing programs, but most of all it provides a quiet and collegiate space, where writers don’t have to worry about cooking, cleaning or kids – they can just write.

Gifts like Mick’s, though, come with responsibilities – Varuna needs to be maintained, nurtured, its heritage protected, its programs funded. Varuna has a board of directors that is charged with doing just that.

The Varuna board is just one of 600,000 or more boards and committees in Australia with the responsibility for governing a not-for-profit organisation.  That word – “governance” – is anyone else sick of hearing about it?  “Corporate governance”, “lack of governance”, “failure of governance” – it’s getting to be as overused as “mandatory detention” or “interest rates”.

But governance has a particularly important role in the not-for-profit sector, for a reason that it exemplified by Mick Dark’s gift – in the NFP world we are so frequently dealing with OTHER PEOPLE’S MONEY.  People, and governments, donate their hard-earned money, or give their assets, to enable organisations and charities to help those who are in all sorts of need, or to support all sorts of worthwhile causes.  The stewardship of that money, those assets, is the especially vital role of NFP governance.

My experience of working at close quarters with NFP boards over the last 10-11 years is that the best kind of governance for organisations like these is GOVERNANCE WITH HEART. Why HEART?  Because:

  • It’s about people – the ones who are doing it, giving or volunteering or supporting, and the ones we are doing it for, the beneficiaries of the activities.
  • It’s about the cause – in the NFP world you don’t get paid for what you do, or if you do then it’s not what you’d get paid in the big bad corporate world – so the whole show runs on passion, and there’s no passion without heart.

We’ve been on our own journey at Varuna, with the board taking steps to put itself in the best position to exercise the trust which has been placed in it.  To deliver our own governance with heart

And we are doing it based on 5 key elements which I have found, after hanging around in board rooms for more than 20 years, are amongst the most important things for a board to be really clear about.

The first element is WHO – who are the people on the board, getting the right people on the board and sometimes, getting the wrong people off.

Getting the right people on the board – you know how this works so often – “I now someone who would be really great to bring on the board, a mate of my brother’s …”.  Whether the brother’s mate is actually the right person won’t be clear at all, unless you’ve first discussed and decided what skills, knowledge, experience and personal qualities you really need on the board, if it is going to guide the organisation to achieve its strategic aims over the next 3-5 years.

At Varuna we have been really clear about what skills we need on the board, to what extent they are already covered, what the gaps are – and then we only recruit new directors to fill those gaps.  I can’t be more emphatic about that – only recruit into the gaps.

Then there’s that delicate issue of getting the wrong people off the board.  I was involved in a series of workshops once for NFP boards and CEOs, and we ran a straw poll of who had the longest serving director on their board.  The record was 38 years.  Are you really going to be making the best contribution possible after that long?  The necessary skills for a board have changed to a considerable degree even over the last 10 years, let alone 38.

So what’s the deal here?  I mentioned that the NFP sector is fuelled by passion.  Sometimes that passion means the person involved comes to strongly define their own identity by their involvement in the particular charity, and to leave would be to lose part of that identity.  So respectful disengagement of the wrong people can be challenging.

I did a job a couple of years back for a board that had been displaying some dysfunction.  After a confidential discussion with each of the directors, it emerged that the CEO’s ex-husband was the brother of the current chairman, and the other directors were lined up on either side of the relationship.  Just by bringing the issue out into the open (and probably hearing it from a third party) seemed to be a sufficient catalyst for the chair and two other directors to choose to get out of the way, so some fresh blood could be brought in.

The issue here is that you have to conscious, and intentional, about who is on the board.  You have to discuss it openly and transparently – and the more open and transparent the discussion, the easier the job of getting the right people becomes.  I’ve often seen it, after I have taken a board through the skills audit process, that people have self-selected off the board, with no other intervention, when it becomes clear that the contributions which they might be able to make are not the ones which the board actually needs in the next phase of the organisation’s development.

There’s the who.  The next crucial element is the HOW.  In organisations fuelled by passion, it’s critical to be clear about what our values are, what we stand for, how we will BE with each other and those for whom we are doing it all.  It’s hard to see how a NFP can’t be a values based organisation.

At Varuna last year, we assembled 60 people – writers, staff, directors, alumni, volunteers – and dug into what Varuna’s values were.  Our conclusions became what we have called “The Varuna Way” –

  • Valuing heritage and place
  • Making writing and creativity matter
  • Bringing rigour and commitment to the writing craft
  • Building a respectful and inclusive community

We can now test the things we do, and the way we do them, to ensure that they are aligned with these values.  People who want to become involved with the organisation can see what we stand for, and then come to their own conclusion about whether our values are compatible with theirs.

The board took another step – discussing frankly and openly how we want to work together as directors.  We now have clarity about things like expressly embracing The Varuna Way, valuing trust and respect, contributing effectively before, during and after meetings.

One of the upsides I have seen in other values-based organisations, about having a clearly expressed set of values, is that when you think there is some behaviour going on that is not aligned with those values, you have a concrete basis on which to call the behaviour.  Like “chairman, we have agreed that we value openness and transparency, but what’s going on here doesn’t feel like it’s open or transparent.”  Values can become a shared language.  We haven’t had to go there on the Varuna board yet, but it’s comforting to know that there is an agreed framework on which to hang difficult conversations.

After “how”, I have found it is important for NFP boards to be clear about “WHO FOR?”  For whom are we governing this organisation?  Who are its stakeholders?

NFPs generally have to operate within certain legal structures, for tax and other regulatory reasons.  Those structures, however, were designed for commercial operations, where there is usually some clearly identifiable shareholders, the value of whose investment is to be maximised.  That’s not so clearly the case in a NFP.  Sure, there are the beneficiaries of the organisation’s activities:  the disadvantaged children, the homeless cats and dogs, the aspiring writers and poets – whomever or whatever cause you are working to support.  But there may be a host of other important stakeholders whose interests the board should be guarding.

At Varuna we have taken a deep dive into finding just who our stakeholders are, what their actual stake is, and how that stake is being managed.  Amongst them are of course our writers and alumni, but there are also our funders, our staff, our volunteers, our local Blue Mountains community, publishers, other organisations operating in our sector, the ATO without whose grant of charitable status we couldn’t operate.

There were a couple of penny-drop moments during the process, and now we have identified our stakeholders there is some work to do to ensure they are all being appropriately managed.  But once again, there is a framework to base future actions on.

The next big one for me is WHY?  Why does the organisation exist?  What is its purpose?  Why do we get out of bed in the morning to go and give our time and energy to it?  The benefit of a NFP being clear about its purpose is that it can test what it is doing, its strategies and potential new areas of operation or involvement to see if they fit.

We are clear at Varuna in our belief that there is a value to our society in the continuing development of quality Australian literature.  Our purpose is clearly set out in the objects in our constitution.  These include to support and develop Australian writers, and promote Australian literature, and to maintain the legacy of the Dark family heritage.  On reflection, we thought that there was one part of our purpose which we not carrying out, the dissemination and discussion of ideas (a concept especially dear to the heart of Eric Dark) and we have over the last 18 months been developing the annual Eric Dark Lecture to address this.

And the last big question is WHERE?  Where is the organisation going in the next agreed period?  What is its destination, at the end of 3 or 5 or even 10 years?  This agreement on destination is critical for NFPs in determining their strategic plans.  A strategic plan is after all simply a map to get to the agreed destination.  It can be really hard for organisations to set strategies, and then budgets and operational plans, without that clear idea of where you are going.

So those are the 5 big questions for me about governing a NFP with heart.  And there is a collateral benefit in having agreed answers to these questions.  They make it much easier to tell your story to funders.  It’s a competitive environment out there for funding, not as much money on offer for all the good causes to be supported.  For your NFP to prosper you have to be able to stand out.

At Varuna we recently had to submit an application for three year funding to one of our most important donors.  A substantial part of the application turned out already to be written, as we dropped in our who, how, who for, why and where material into the required format.  We were fortunate enough to secure that core funding for the next three years.

Governing in a not-for-profit has some particular wrinkles to it, but if you are open to governance with heart, it is one of the most rewarding, and useful, things you can do, for yourself and your community.

So I’d like to invite you to go out into your community and find yourself a job on a board or committee, and govern with heart.

David Rowan White

Business and family – can you have it all?

George McGovern died this week. He is probably most remembered, if at all these days , as “the liberal presidential nominee routed by Nixon”  in 1972 (a result which America may well have later regretted).

His obit in the SMH noted that:

In 1994, his daughter Teresa, who had suffered from alcoholism and mental illness, froze to death, acutely intoxicated, in a car park snowdrift in Madison, Wisconsin at the age of 45.

“That just about killed me,” he said years later.  “I always had a very demanding schedule.  I didn’t do everything I could as a father.”

Hang on George, you were busy fighting a good fight: against the war in Vietnam, the draft, and incomes below the poverty line, and for civil rights.  You were doing really important things.

His regret jumped out at me, I suppose, because I had been having a few reflections myself about fatherhood.

Can great things, even just good things, get done without a price, without somebody suffering for their achievement?

I’ve been chatting with a CEO recently, who has been involved in an enormous reconstruction effort in an organisation which was standing on the edge of a self-dug precipice.  He has paid a price and so has his family. I thought about the other CEOs with whom I have worked closely in my career, 6 of them, and another half dozen whom I have coached or advised.

In nearly every case, the demands of their job meant sacrifices for their families.  You can’t lead any organisation, in my experience, without having to put in at least one and a half times the effort set out in your position description.  Without some sacrifice, realistically the job just won’t get done.

You’re usually not just doing it for your own glorification, or the allegedly inflated salary.  You are responsible for the security and income of the shareholders, the jobs of the staff, and the interests of all the other stakeholders.  If you are a non-profit CEO, you have the added responsibility of “the cause”.  You are doing important, meaningful, even essential work.

But at home your partner, your kids, your dog, often pick up the crumbs of your time.

The CEOs whom I have seen resolve the business/family divide most successfully are the ones who had a clear acknowledgement of the time they would need to devote, the willingness (though often grudging) to devote it, and the recognition that it would come at some family cost.  Also, an explicit belief that it was the right thing to be doing at that time, rather than letting it happen by default.  Oh, and did I mention an incredibly understanding and supportive partner?

The ones who didn’t had troubled, or crumbled, relationships and families.

So here is my two bob’s worth – no, you can’t have it all.  But what you might be achieving on one side can validly go towards balancing what you might be missing on the other.

Just do it with your eyes (and your family’s) open.

david white

The mug’s guide to running the AGM

It’s that season again, when your organisation needs to hold its annual general meeting.  I have seen AGMs conducted badly, and possibly invalidly, for want of a little bit of procedural knowledge.

The chair is probably stressing already about having to run the meeting, remembering how they had to fluff their way through it last year. So here is a mug’s guide that should allow your organisation to hold an effective AGM which meets the legal requirements.

I make a couple of assumptions:

  • The AGM notice has been properly drafted with the necessary items of business set out in it
  • It has been sent to the organisation’s members with the required amount of prior notice
  • You don’t have any of the variables referred to in the PS at the end of this blog.

So here is what the chair should do in running the AGM:

Declare the meeting open (and note the time for the minutes).

Welcome those present, and note there is a quorum (you will have checked this in the constitution before opening the meeting, because the meeting can’t formally start until a quorum is present). 

Note who is present – directors, members, auditor, observers or visitors – and any apologies received, so these details can be recorded for the minutes.

Note that the notice of meeting has been sent out.  Take the notice as read.  Remind the meeting that all the business at an AGM is special business (which is business of which prior notice has been given), so only the agenda items specified in the notice of meeting can be dealt with at the meeting.

Deal with the minutes of the previous AGM.  (As these minutes will hopefully have entered in the company’s minute book within a month of the previous meeting, you generally won’t be approving the minutes of that meeting at the next AGM.)  Just note that the minutes of the previous AGM have been entered in the minute book and members can inspect them or ask for a copy.

Deal with each agenda item in turn.

The first item is likely to be the receipt, adoption or acceptance (however it is phrased in your organisation) of the annual financial statements, the directors’ report and the auditor’s report.

Note the accounts and reports have been circulated to the members with the notice of meeting. (This is an important step that is often overlooked – if it hasn’t been done, make sure you do it next year! And for this meeting, just make the best of it and advise the meeting that the accounts and reports are available for inspection.)

Invite questions and comments from members.  (The law provides that the chair of the AGM must allow a reasonable opportunity for members at the meeting to ask questions about, or make comments on, the management of the company. 

If the auditor is present, invite any questions from members to the auditor.  (Again, the law provides that the chair must allow the members a reasonable opportunity to ask questions of the auditor about the conduct of the audit or the auditor’s report.)

When all questions have been satisfactorily dealt with, it is usual practice for the chairman then to advise the meeting that the annual financial statements and reports are received by the meeting.

Although it is not a legal requirement, some organisations like to pass a formal resolution receiving the accounts and reports.  If yours is one that likes to do this, clearly state the resolution to be passed in the form set out in the AGM notice.

Then ask all members in favour of the resolution to raise their hands.  Ask for all members against the resolution to raise their hands.  Declare the resolution passed (or not, in the unlikely event that the majority of members has voted against it).

Deal with each remaining resolution in the same way – state the nature of the resolution; invite questions or comments; formally state the resolution to be passed in the terms set out in the AGM notice; conduct the vote; announce the result.

Remember, if directors are being elected or re-elected at the meeting, each director must be elected by a separate resolution.

There may be items on the agenda that require special resolutions, such as amendments to the constitution.  If so, note when stating the resolution that it requires a special resolution, and if and when it has been passed with the required majority, advise the meeting that it has been passed as a special resolution.

When each resolution has been dealt with, note that there is no further business, and declare the meeting closed.  You do not have to accept any further business or motions from the floor of the meeting.  Note the closure time for the minutes.

It can be really helpful to write these steps down in a script for the chair to follow, so essential steps aren’t missed in the heat of the moment.

If you follow these simple steps, you can take the stress out of the AGM, and meet the legal requirements at the same time.  Happy AGM.

PS There are a number of other variables which aren’t covered in this short guide, such as:

  • when members who can’t attend the AGM have sent in proxies so that their votes can be counted at the meeting
  • when members may have an entitlement to more than on vote at the meeting (for instance because they have a number of shares in the company, and they call a “poll” so they can use these votes (since they are only entitled to one vote when a show of hands is used to vote)

I’ll provide some plug-in steps for these situations in the next blog.

 

 

 

10 questions you should ask when approving the annual financial report

Yep, it’s just about that time again.  The board has to approve the annual financial report in a post-Centro world.  Like the judge said:

“All directors must carefully read and understand financial statements before they form the opinions which are to be expressed in the declaration required by s 295(4).”

The approval of the annual financial report, which includes making the directors’ report, is arguably the single most important action the board will take on an annual basis.  So how can you best cover your ass?

After Centro (this is a great summary), here is the most important thing a reasonable and diligent director should do:

  • Actually read the documents – including the financial statements.  While non-accountants may not be able to follow all of the technical matters, every director should be reasonably familiar enough with the company’s financial position to make some contribution to the process – even if it is picking up typos, adds or formatting errors.

One of the Centro directors admitted that they didn’t actually read the annual financial report, but just looked at a summary.  You’ll never found a defence on actions like that.

Here are 10 questions which I reckon address matters that should always be considered before any resolution is passed to accept the financial report.  And please note, I am not an accountant, just a director who wants to hang on to his assets.

Questions for management

1.         Who prepared the accounts and who checked them?

It is reasonable to want to know that the work in preparing the accounts has been carried out by someone whom the board can expect to have the necessary skills and experience, and trust to be doing things the best way possible.  This may be particularly important when the accounts are prepared by an external party.

2.         What process has been followed to ensure compliance with the accounting standards and corporations regulations?

The board is required to pass a resolution about compliance, so directors should be explicitly asking about the steps taken to give them the grounds to do so.

3.         How have the valuations of assets been conducted, and/or the carrying values been ascertained?

The value of the company’s assets is ultimately a question for the board, so the board will want to know how that value has been ascertained, and that it has been ascertained in a reasonable way on some reliable evidence or information.  Feel free to test the basis of the valuation until you are happy that it is appropriate in the circumstances.

4.         What are the areas where judgement has been exercised in coming to the result recorded in the accounts, and if there are any, how was the judgement call arrived at?

Part of the process of preparing the financial statements is to make assessments of particular aspects of the company’s financial performance and position.  One of the commonest, and potentially scariest areas where judgements are made  is the making of provisions.  The board must fully understand the reasons for provisions being made, and how the amount of the provision has been arrived at.

Other areas where judgement may be exercised in coming to the position recorded in the financial report are:

  • Valuation of assets, discussed in question 4.
  • Depreciation rates and life expectancy of assets.

5.         On what basis can we be sure that there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due?

In view of the gravity of the solvency declaration which has to be made when approving the annual financial report, directors need to be sure that there are proper grounds for making it.  Remember, directors are personally liable for debs incurred if the company is trading while insolvent.

Directors are generally not responsible for the actual preparation of the annual accounts, and they are allowed to rely on information they receive from “competent and reliable” people who advise them about the company’s state of solvency.  They need, however, to take sufficient steps to test what they are being told, for instance:

  • are they happy that the people advising the board about solvency are “competent and reliable”?
  • is there anything about the company’s current trading position which might suggest the need for further specific enquiries?

A company can still be able to pay its debts when they fall due, even if it is in a loss-making position at the time.  It may have the support of its lenders, and sufficient income to service all of its creditors.  In such a situation, though, directors would need to understand very clearly how they can safely make the solvency declaration.  Particularly in this area, there is no such thing as a dumb question.  After all, it’s the roof over your family’s head that may be on the line.

6.         Has anything significant happened in relation to the company or its activities and operations since the end of the financial year which might be important when looking at its overall position?

While the annual accounts report on the performance and position of the company for the last financial year, there may have been events that have occurred since that time which may put that performance and position in a different light going forward.  This can include things like:

  • The sale of important assets or business operations
  • The acquisition of new businesses
  • The instigation of major litigation against the company.

This is another area of judgement call by the board, as to whether anything that has occurred is significant enough to require disclosure in the directors’ report.  If there is some uncertainty about the level of significance, try running it past the auditor and see what they might think.

A question for yourselves as directors

7.         Do the accounts reflect what we as directors, individually and collectively, would have expected given what we have seen of the company’s activities and operations over the financial year?

The annual financial report must comply with specific regulatory requirements, which are not always intuitive in either their form or substance.  But if the financial report shows the company making a loss, and you think it has made a profit, or perhaps more importantly, it is the other way round, you need to have a decent understanding of why that is.

There may be clear reasons why the recorded result may be different to what you understand to be the real world result, like:

  • The creation, or writing back, of a provision
  • The sale of important assets.

The board can apply an important sanity check to the financial report, and while there may be technical requirements which mean things must be reported in certain ways, there should still be a reasonable correlation about how the company has actually performed, and what is being reported.  Make sure you understand what that correlation is.

Questions for the auditor

8.         How did you find the state of the company’s records?

The board is making some important statements about the company.  An external view of the state of the company’s records can be an important indication of whether it is safe and reasonable to be making those statements.  The auditor will have accessed many of those records during the course of the audit.

9.         What level of co-operation did you receive from management while conducting the audit?

If management or staff have been unco-operative, unhelpful, or even evasive, it may be an indication that they have something they either don’t want looked at too closely, or may actually want to hide.  Again, an external view on a factor like this can be re-assuring, or a warning bell suggesting some further enquiry before the board commits itself.

10.       Are there any other matters you consider you should bring to the board’s attention which have not already been discussed?

Despite having asked questions 1 to 9, there may still be some important issue which the questioning has not uncovered.  This is your final opportunity to maximize the benefit of the external overview which the auditor has applied.  Don’t feel backward about taking that opportunity.

And finally …

The thrust of all these questions is the same.  Don’t take anything on face value, or gloss over something you don’t understand because people are telling you it is technical accounting stuff.

You may not be an accountant, but you can still make reasonable enquiries and do your best to ensure that proper processes have been undertaken to truthfully show what the company’s financial performance has been, and what its financial position is.

After all, you don’t want to be bitten by the Centro bug.


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