The unique governance context of the not for profit (NFP) boardroom: construction and execution of board member roles and processes
Creators: name: Fuller, Jennifer
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350199
subject: Accounting, auditing and accountability not elsewhere classified

description: Presently, only a small body of literature investigates the internal processes of boards of directors using a qualitative approach, and the number of Not-For-Profit (NFP) sector board studies is even smaller. However, there is a strong argument for understanding how governance works in the NFP sector, which is increasing in both size and significance. NFP organisations also have unique characteristics that generate governance questions. Some of these characteristics include fulfilling altruistic missions and values while also remaining financially and operationally sustainable and satisfying numerous stakeholder groups. Other challenges confronting many NFP entities include legislative and funding change, technological developments and different expectations from clients with the advent of user-pays systems in more areas of service delivery. Collectively, these changes generate new challenges and responsibilities for boards.

By examining the three board roles of strategy, control and resource dependence, the aim of this longitudinal case study is to understand board roles and how board members discharge their roles in the NFP environment. This case study is significant in that it investigates board roles at both the individual and collective board levels and contributes to the board studies that have either applied or called for analysis at multiple levels. The multi-level approach recognises that board work is both an individual and a collective effort. It could be argued that this study undertakes analysis at a third level, the organisational level, as the researcher often considered the effect of factors such as the organisation's characteristics, sector and environment in which it was operating.

A framework of broad accountability was applied to the data collected through observation, interviews and document analysis. The researcher spent a year and a half observing board meetings, committee meetings and strategic planning days. In addition to the considerable participant observation data collected, the researcher interviewed all board members including the Chair and all senior managers including the Chief Executive Officer (CEO). The researcher also obtained data from secondary sources such as board and committee papers, agendas and financial reports.

An investigation of the theoretical approaches in NFP governance and similar fields reveals that a framework of broad accountability is most suitable. This is not a critical approach, but applies many of the positive aspects from critical accountability perspectives. The broad accountability approach widens the perspective of accountability beyond narrow conceptions of responsibility and transparency. It considers concepts such as formal and informal accountability, narrative and calculative aspects, and negotiable and rule-based accountability.

A key finding from this study is that the board members in the case study organisation focused largely on strategy in response to external and internal factors that conditioned the strategic focus. One of the significant themes in the board's strategic focus was the desire to balance achieving the philanthropic mission and values of the organisation while also remaining financially and operationally sustainable. The board was also sensitive to the need to navigate its professional and political relationships with internal and external stakeholders. Much of this centred around the board's ambition to communicate to internal and external stakeholders that the organisation's mission and values were fulfilled as well as the entity's goal of remaining a viable organisation. This demonstrated negotiable accountability in action. Narrative and calculative accountability as well as formal accountability featured in the exercise of the strategic board role and worked to prevent "mission drift".

Another principal finding from the present study is the contribution it makes with regard to an enhanced understanding of "operational drift" and how board members prevent the practice from occurring. It is one of very few studies that investigates and identifies the techniques board members use to discharge their three roles without encroaching on senior manager roles. Broad accountability concepts of trust (negotiable accountability), upwards and downwards accountability, formal and informal accountability, and individualizing and socializing accountability were employed by board members in their efforts to avoid operational drift.

The finding of "blended control" as a practice enacted by board members is a key contribution of this study. This concept builds on prior research with respect to blended strategising practices enacted by NFP leaders. The present study discovered formal and negotiable accountability practices often helped board members ensure board and organisational legitimacy existed when their control role was exercised. The motivation for achieving legitimacy was not only for the board's benefit, but also to reassure internal and external stakeholders that the organisation was achieving its values as well as being financially and operationally sustainable.