Corporate Governance – The Role Of The Board In Setting Strategy – Keith Suter

INTRODUCTION

The board has the overall responsibility for the strategic direction and operational efficiency of the organization, as well as safeguarding the organization’s assets and ensuring the quality of its products and services. In short: where the organization is going, how it is getting there and the quality of the output. It should be conveyed throughout the organization to achieve strategic alignment. Ideally it should generate some excitement about the organization’s future direction.

In this new era of corporate governance, NFP boards need to focus on the “big picture”. There is a temptation to spend time as a “management committee”, focussing on the operations of the organization (especially if management is left to devise the agenda). One problem with this role is that the board is doing the work of the CEO and their team. The staff should be left to do their own work.

The larger problem is that this means that no one else is asking the big questions affecting the organization’s overall direction. Management is expected to be focussed on immediate issues; the board has to have a future orientation. An organization may be efficient and doing all the right things – but heading in the wrong direction. The Titanic, after all, was operating very efficiently and all the passengers were having a good time – but the ship was heading in the wrong direction (towards rhe iceberg).

STRATEGY

“Strategy” (which comes from ancient Greek and refers to the function of a military leader) means having a plan to ensure the deployment of an organization’s scare resources to achieve one or more goals.

An NFP organization has to explain where the organization is going and how it will achieve it. The plan will also need to set out explicit assumptions about the future. No plan is ever (or at least should never) be devised in a vacuum; there is a need to look at the wider social, technological, economic, environmental and political context in which it operates.

The organization’s strategy is a way of distinguishing this organization from others operating in the same field.

All organizations have a plan of some sort. Tragically many of them are simply implicitly “more of the same” muddling through. These organizations lack a formal process for devising a plan and reviewing it on a regular basis. At the very least, the organization may become vulnerable to changes in its operating environment because it is not scanning the horizon listening for the faint signals of change.

Some organizations may think that have a “strategy” when in fact it is an aspiration. Therefore a vision statement such as “our strategy is to be the best employer in the aged care sector” is not a strategy. It is a noble statement of intent but not a plan.

THE PLAN

There is no one set format for a plan but the strategy needs to address such questions as:

what are the basic assumptions?
what is the wider context in which the project will be conducted? (The basic drivers of change have the acronym STEEP: social, technological, economic, environmental, political)
who is the target? (for example, older Australians)
what is to be offered? (for example, a new type of aged care)
how (a type of high-end aged care facility)
what resources will be involved? How will the resources be acquired (reserves, borrowings etc)
how this project fit within the context of the organization’s other work?
what is the time frame?
how will the organization know it has been a successful project?
has a risk assessment been done?
what about competitors?

Underpinning that plan are the following considerations:

(i) the organization’s own internal make-up: values, resources, structures and systems

(ii) the organization’s external operating environment (or the new environment it intends to target): such as existing clients, potential new clients, current and potential members (if a voluntary association), competitors, government regulation, business offerings in the same space, media and the wider public, and changes in technology.

An organization should enter every project with an exit strategy. Under what conditions would the project be deemed a failure? How could the organization exit with the lowest social, political and financial costs? If it is a government-funded contract, consideration should be given to the potential; public reaction when the contract is not renewed but the local community has become accustomed to it. The NFP organization usually gets the criticism and not the government.

The rapid rate of change has triggered a discussion between management writers on the need to change the emphasis from strategic planning to strategic thinking. Strategic planning was more appropriate for the earlier part of the industrial era when change was slower and organizations were large, hierarchical and slow-moving. The management of some large corporations in that era prided themselves on thick books of strategic plans. The giant computer company IBM, for example, was a model of formal corporate strategic planning in the post-war era but it was taken by surprise by rise of the Microsoft and Apple competition in personal computers in the 1980s.

Strategic thinking by contrast places the focus on being agile, responding to changes in the market, rise of competitors and (for voluntary associations) rise of competing attractions for one’s existing members (who may not necessarily want to renew their membership). Why does this organization exist? What are the strengths and weaknesses? What challenges is it confronting? Where does it want to go?

Periodically it is important for the organization’s board to ask what business is it in? What higher purpose is being served by its existence? Can you see a larger picture of what this organization could do? A standard business example is the extensive 19th century US railway company network. It saw its business as maintaining the tracks, stations, engines and carriages. It remained rooted to that perception while Americans in the 20th century were making greater use of roads and then airlines. If the 19th century company had decided that its business was “transport” and “moving Americans and their goods”, then perhaps the company could have reinvented itself for the new era.

Asking the Deeper Questions

Formal plans are still necessary but there needs to be flexibility in how they are devised and followed. The planning should not be done once a year and written up in a large book that is stored away until next year’s meeting. How the organization is proceeding should be a continual topic of review: not just the immediate financial report but the long-term issues of viability and emerging competition.

Here are some examples of those basic questions (which vary of course from one organization to another):

Is this organization too focussed on managing the present to think about the challenges of the future? What do we want to keep? What do we want to change? What do we want to try?
How can the organization communicate with a younger generation? As Sarah Sladek CEO of XYZ University has pointed out: Younger generations are your toughest consumers, and they want to associate themselves with a cause. They want to be inspired to make a difference. So does your association represent independent gas companies (yawn) or is it helping bring cheaper gas to the United States quicker (wow!) Does your chamber of commerce connect businesses (yawn) or does it bring in an average of $25,000 in new business to members each year (wow!)?
Many NFP organizations have an increasing number of older people; they will be around for a long time yet but they may not be able to give much money in their donations and concessional membership fees – how will the organization afford to operate with declining revenue?
Are we just recycling the past: doing next year what we did last year?
Should the organization amalgamate with a similar organization or one working with similar goals?
If this organization did not exist, would we now bother to create it?
Is the organization now just too tired to carry on? The older members mean well but they are now too frail to have the same level of activity they enjoyed years ago?
Is the organization now just too tired to carry on? The older members mean well but they are now too frail to have the same level of activity they enjoyed years ago? viii. If this organization closed down today, would the local community notice its disappearance? Would the community care?
How good is the board at spotting new trends? Is there a systematic routine for scanning the changing external environment? When we embark on new projects do we keep asking whether the initial assumptions are still valid? Where do directors get their information about those changes? Do they feel confident in challenging management assertions?

SETTING STRATEGY

x. Is the board haunted by a project’s “sunk costs”? In other words, there is an emotional attachment to a failing project because so many resources have already been devoted to it. The board is reluctant to admit its error and hopes that somehow the corner can be turned. (One way of defining “stupidity” is to keep repeating the same action hoping for a different result).

x. What could kill this organization?
These questions need not be formal agenda items for each meeting but each board member should be aware of them and have them in the back of their mind as they think about the organization’s future.

SCENARIO PLANNING

Looking at the World
Scenario planning is a technique for thinking about what could happen. The signs of possible change may be there – but there are not necessarily being “seen”. Unfortunately in all walks of life, there is a tendency for people to get into a “comfort zone” and to mix with a narrow range of people. Scenario planning is not so much about getting the future right – as to avoid getting it wrong. Done properly it reduces the risk of being taken by surprise.

As Clem Sunter has pointed out:
A critical thing to remember is that a scenario is a story of what can happen. It is not a forecast of what is going to happen. The problem with forecasting is that we so often are deceived into forecasting our wishes and desires. I have seldom come across a strategic plan which goes against the ambitions of the CEO. A popular word in scenario planning methodology is “paradigm”. The Classical Greek word paradeigma meant model, framework, pattern or example. The word entered the common parlance in 1962 with Thomas Kuhn’s classic book Structure of Scientific Revolutions. He challenged the then common viewpoint that scientific progress “advanced” via one neat step at a time, with scientists, so to speak, standing on the shoulders of their predecessors. Kuhn argued that there is in fact no steady accumulation of scientific knowledge. Instead, each theory is a revolutionary break from the previous theory, resulting eventually in the arbitrary replacement of one way of viewing knowledge with another view. Kuhn was attempting to explain change specifically in the natural sciences. The word has since been used (or misused) extensively in virtually all the other disciplines.

“Paradigm” is the central term in scenario planning. The term means both (a) a set of beliefs and assumptions about how each person/ organization “sees” the world and (b) a filtering device which is the window through which each person/ organizations sees the world. Once a paradigm is commonly accepted it lingers and becomes the new “reality”.

Once a person is familiar with the term, it is possible to notice examples of paradigms in a variety of places and contexts. For example, it was long assumed that no runner could break the four minute barrier. Then in 1954 UK medical student Roger Bannister ran a mile in 3:59.4. Within the next few years, 50 more runners did the same thing. The fact of Roger Bannister’s showing the world that breaking the four-minute mile was humanly possible spurred many more runners to push themselves harder, stronger, faster, in the belief – or now more accurately, the knowledge – that the four-minute mile was no longer an impossible dream but something that they could attain if only they worked at it.

The Technique

1. Work out the basic issue.
Scenario planning is done in response to the perception that there is a “problem” to be solved. It is important that the right initial “question” be identified, for example, “Will this organization be able to recruit the same level of members in the future?”

2. Understand the organization that has commissioned the scenario planning.
What is the “official vision” of the organization? How does the organization perceive its business? What is the “official perception” of the future (namely the line laid down by the board or CEO)? How do they see that future changing? What are their hopes and fears? What is its future strategy? What are its stated values?

3. Work out the driving forces of change.

The forces can be broadly grouped into five areas: STEEP:

Social — for example: what are the demographic changes?
Technological — for example: how will the genome project (mapping the body’s DNA structure) impact on life expectancy: could people could live far longer than at present (say to 150 years)?
Economic — for example: how will the economy go?
Environmental — for example: how will “climate change” affect Australia?
Political — for example: Will there be an increase in ethnic tensions? What about the risks of terrorism?

4. Rank the key factors in order of importance to determine the most important two drivers.
In interviewing experts, it will become clear that one or two drivers are the most important in answering the project’s question. If necessary, ask each expert what they think is the main driver.
Create two or four scenarios. Avoid creating three because the client is tempted to go for the “middle” one as the most moderate. The purpose of the exercise is to encourage the organization to re-perceive their future: they need to be challenged.
If four scenarios are selected, the scenarios will be shown in the form a cross: “+” (a Cartesian coordinate system, with the two most salient driving forces as the X- and Y-axes). The two axes cross each other at their mid-points, thereby creating four quadrants. These will be the basis of the four scenarios, with the end of each axis having a “high” and a ‘”low”.

5. Work out the Scenario Logic
The drivers are then used as the axes along which the eventual scenarios will differ. These are two or four different worlds. Create two or four plausible scenarios.

6. Make the Scenarios Come Alive
Each scenario needs to be compelling. There has to be sufficient detail in each story to make it easy to follow. A scenario may be uncomfortable but it needs to be believable. Each scenario should have a memorable name. Conversations with outside experts will be useful here. These people should be outside the scenario planning project who may have different perceptions. They should experts in a particular field – but not the one under examination for the scenario planning project. They help guard against “group think” and narrow perceptions. They can also suggest new matters to examine. Two questions are put to them: (a) is each draft scenario plausible? (b) is there something that has been overlooked?

7. Identify the Leading Indicators
The future will determine which scenario was “right” in the sense that it was closest to what actually happens. It is important to have warning indications as quickly as possible which scenario is coming into play.

8. Work out the Implications of the Scenarios
What do the scenarios mean for the organization? What are the implications for the organization’s current strategy? What contingency plans need to be in place? What is the Plan B?

9. Do Not Argue Over the Value of Each Scenario: Don’t Try to Pick Winners.
There should not be arguments over which scenario is more likely than the others. Each scenario has to be equally plausible. Future events will tell which scenario was “right”.

10. Strategic Conversation
This, in effect, represents “part two” of the process. This means getting the word out to staff (and/ or volunteers). An organization learns through its network of interconnecting conversations and exchange of ideas between individuals. The implication here is that the organization has to “own” the document. The staff/ volunteers have to be fully conversant with it and looking for the warning signs. People need to “live” within each scenario and become fully familiar with it. They will then be well positioned to gauge which of the scenarios is coming into play and have the contingency plans ready.
Change often begins at the margins and so junior staff (or volunteers in NFP organizations) may be best placed to detect it first. By contrast, the heads of organizations may have a psychological bias in maintaining the status quo which they know and feel comfortable with, for example they may be close to retirement and so they do not want to be challenged by potential events over the horizon.

A Case Study: South Africa: The “High Road” and the “Low Road”

Here is an example of the value of scenario planning. In the early 1980s, Clem Sunter, then of the country’s largest corporation Anglo-American, devised scenarios of South Africa’s future. South Africa was under the apartheid regime, which seemed destined to stay in place indefinitely.

Sunter toured the country speaking of two scenarios: the “high road” and the “low road”. The “high road” was a story of the release of Nelson Mandela (then the world’s longer-serving political prisoner), the creation of multi-racial electorate and Mandela’s election as the first black President. His white audiences were outraged.

Sunter would then explain the “low road” scenario as a story of the country falling into increasing sporadic violence, continued international isolation, a white exodus to safer countries and a generally grim future. This encouraged his white audiences to ask for more information on the “high road” scenario.

In March 1989 Frederik de Klerk was elected President. Max Hastings was the Editor of The Daily Telegraph (London) and he recalled the mood of those years in his memoirs. Few observers, including his own journalist in South Africa, anticipated just what would follow because no one expected de Klerk to be any different from his predecessors. But on February 2 1990 de Klerk suddenly lifted the 33-year ban on the African National Congress and invited Mandela to join him in negotiations towards a constitution which would grant the vote to the country’s African majority. This drama was occurring around the time of the ending of the Cold War. Hastings concluded his survey of that 1990-1 period:

Which of our generation would have dared to predict, even twenty years ago, that we should see within own lifetimes, an end to the Cold War, the collapse of the Soviet Empire, and a relatively peaceful transition to black majority in South Africa? Much of the business of newspapers is to purvey tales of disappointment, failure, tragedy. How intoxicating it was, that for a season, we found ourselves bearers of historic and happy tidings on two of the greatest issues that faced the world in the second half of the twentieth century.

I have my own footnote to this story. In 2001 I was a guest of Annette Liu, then the Vice President of Taiwan (the most senior woman elected in 5,000 years of Chinese history) at her seminar of Nobel Peace Prize Winners in Taipei. Frederik de Klerk was one of the Nobel participants. He knew nothing of my professional interest in scenario planning. But quite spontaneously, while explaining how he was able to manage the transfer of power to black majority rule, he paid tribute specifically to Clem Sunter who had given the scenario talks in the 1980s and had created the political opportunity for de Klerk to make his historic reforms. Sunter had helped white South Africans think about the unthinkable.

THINKING ABOUT THE FUTURE OF VOLUNTARY ORGANIZATIONS

A basic question for NFP boards is the organization’s future in light of the changing availability of volunteers. Many NFP organizations are reporting a decline in membership and have financial problems.

Here are two scenarios on the future of NGOs. Scenarios should have memorable titles: these are called “Recessional” and “Tango”.

“Recessional”
The “recessional” is a hymn sung as the clergy and choir withdraw at the end of the church service and people can look forward to some refreshments in the church hall. Many NGOS are in a “recessional” trajectory.
Membership is literally dying off. These organizations often draw their membership pool from the people born before World War II. These people (the “Depression Generation”) know the value of contributing to the community because they saw how well it worked in the Depression in the 1930s and wartime (1939-45). They value loyalty and tradition and have a high regard for institutions of all sorts. But they are not being replaced. They often cannot get their children (the “Baby Boomers”, born 1946-66) to join organizations to the same extent as they did. However, because this is such a large population cohort, a small slice of the Boomer generation helps maintain numbers.
The Boomers did not have the struggle of their parents; they grew up in the post-war economic boom and so often have a different mindset (“paradigm”) towards contributing back to the community. The Depression Generation vowed that their children would not have to endure what they had to, and so they created a society in which their children were well catered for.
The Depression Generation’s grandchildren do not join organizations. They may turn up for a specific event on a particular day (if they feel like it) but they will not commit themselves to being involved on a regular basis (such as by serving on committees). They have learned to live with fluidity and transitory relationships. After all, their Boomer parents are the most divorced generation in history and so they became accustomed to their mothers having a variety of boyfriends or to living in blended families.
Meanwhile NFP organizations are running out of women. Women have been the backbone of these organizations for decades, if not centuries. The men may have done the talking and held the official positions but the women did the work. Women were often involved as a way of contributing to a better society, and as a way of escaping the drudgery of homework, and the work facilitated their personal growth and development. But now many women have their own careers to look after. They may also be raising families single-handedly. They may also be looking after aging parents.
Alongside these demographic factors, there are also economic reasons for the Recessional scenario. Before the current era of economic problems and business restructuring, down-sizing etc, people had more time for community activities. Indeed, there may have been a company expectation for such activities. For example, some banks expected their managers in country towns to become treasurers of local NFP organizations as a way of showing that the bank was anxious to put something back into the local community and so they were a “pillar of the local community”. Now banks are more concerned about their shareholders (who could be anywhere in the world).
Meanwhile, people are now working longer hours to retain their employment. They have to spend more time on their business than on community activities.
It is also becoming more difficult to run NGOs. Volunteers have to be insured, trained and supervised; appointing employees entails extensive government red tape; treasurers do not like all the financial reporting requirements; staff working with children have to be subjected to police checks; and boards are now expected to meet the new corporate governance requirements. No doubt many of the government regulations were well intended but cumulatively they have made the actual running of an organization much more onerous.
No NFP organization has a guaranteed future. There is already a sense of crisis in some. Once an organization hits a downward spiral, it continues. For example, declining members mean declining income, so staff (if any) are laid off, so members get fewer services for their fees, and so they are reluctant to renew their subscriptions.
NFP boards need to recognize that at some point their organization’s time is up. The organization has provided distinguished and valuable service but the wider context in which it was created has now changed. Society has moved on. The organization (no matter how efficient or well meaning) is just no longer needed
“Tango”
“Tango” is alternative scenario. The acronym means Third Age Non-Governmental Organization. The tango dance is agile, swift, and colourful.
The starting point is again demographic. There has been a silent revolution. People in western countries have gained as much life expectancy in the last century as they did in the previous 5,000 years (about 25 years). 5100 years ago, average life expectancy was about 25 years; by 1900 it had crept up to 50; now it is around 75 or 80.
There is therefore a new “age”. Previously people were young, middle aged and getting ready to die. Now there is a “new age” after the formal middle age paid working stage in a person’s life, and before people are ready for their fourth age: to go into residential aged care and palliative care.
In this “third age” (for people aged around 60 to perhaps 80), they are still in good health, may have access to superannuation funds, and have high expectations about a long and active life. Retirement is a health hazard. Being involved in NFP organizations is good for a person’s health because it gives them a sense of purpose and a way of being useful to the community. It gets them out of the house and away from watching television and other sedentary activities.
Alternatively, they may have been down-sized out of full-time employment and so like voluntary work as a change from the fast pace of their consulting work. It may also appeal to unemployed people as a way of networking in the search for further employment. The Baby Boomers are now entering their 60s. Will they rediscover their sense of social justice and rebellion which characterized the 1960s/1970s? NFP organizations could be good vehicles for them to relive their exciting days of youthful struggle. There is no shortage of potential good causes to attract them.
Meanwhile, the largest transfer of wealth in world history is underway, as the Depression Generation die off and leave their assets to their Baby Boomer children. Will the Boomers donate some of the money to good causes? There is already a new world of e-giving which has been made possible by the internet. As recently as the late 1990s, philanthropy and voluntarism sites were rare on the internet. Now there are thousands of companies setting up sites. The sites sell items and invite donations. There could be a new golden age of philanthropy coming.

Cannot Predict the Future

Scenario planning encourages people to think about what could happen and for them to then have contingency plans in place.

The immediate task for NFP organizations is to draw up indicators to see which of the two scenarios is coming into play. These could include: level of membership, membership revenue, donations, and bequests. For example, the nature of volunteering is changing: there are more people willing to volunteer but they will do so for less time on each occasion.

There is also a need for brain-storming to see what actions could be taken to avoid “Recessional” coming into play, such as: what new programmes could be introduced to attract new members, what new membership categories could be introduced, how could the organization function with different notions of membership? Could the organization amalgamate with a like-minded one? What would be gained – and what would be lost?

The next stage in the scenario planning process would be to have contingency plans to cope with either scenarios coming into play. For example, if Recessional comes into play for an organization, will there be a “gold rush” as unscrupulous people enter NGOs to get eventual access to their assets (such as buildings and capital reserves)? What mechanisms do these organizations have to protect themselves against “entryism”? Branch stacking already occurs in political party branches – will there be a form of organization stacking to get eventual access to the assets once the current office bearers retire or die?

What exit strategies do NGOs have if they need to wind themselves up? Are the members psychologically prepared for the role of executioner: the decision to terminate a dying organization which may have a history going back for as long as two centuries? We know the trauma associated with Australian farmers who have to leave the properties they inherited and their despair as they hold themselves responsible for poor stewardship of a proud tradition. Much the same applies to NGOs.

If “Tango” comes in to play, what plans do NGOs have to attract the Baby Boomers looking for good causes in which to “make a difference”? The Boomers will be entering the organizations after a hectic career in business or the professions. They will not be keen on “old-fashioned” rituals that their parents liked (partly because they were liked by their parents). They will be more results-oriented and less process-oriented. They will not be there out of any intrinsic sense of loyalty and so they will move on if they are dissatisfied.

Will existing members be ready to make the changes necessary to accommodate the new members? For example, in churches it is sometimes the case that the families that keep the church doors open, are also the families who keep the church pews empty. In other words, their dedication to the local church keeps the church ticking over. But they are reluctant to accept new members because they want to make changes to the liturgy, type of worship etc and so the newcomers go elsewhere. How will such families learn to “let go” and become reconciled to the fact that a new generation wants to do things differently?

To sum up, scenario planning helps us to rethink our perceptions. It encourages us to think about the future differently. It also helps us deal with denial. Denial is a defence mechanism to protect ourselves from bad news. “We’ll cross that bridge when we come to it”. But that desire for security may in the long run make us even more insecure as we are taken by surprise by events for which we have no preparations.

REINVENTING THE ORGANIZATION

Lessons from the Business World

If an organization is in decline it is the board’s primary responsibility to either create an exit strategy or reinvent the organization.

Organizational change has always been a problem. Machiavelli, over five centuries ago, warned that change was difficult to achieve:

It should be borne in mind that there is nothing more difficult to handle, more doubtful of success, and more dangerous to carry through than initiating changes in a state’s constitution. The innovator makes enemies of all those who prospered under the old order, and only lukewarm support is forthcoming from those who would prosper under the new. Their support is lukewarm partly from fear of their adversaries, who have existing laws on their side, and partly because men are generally incredulous, never really trusting new things unless they have tested them by experience. In consequence, whenever those who oppose the changes can do so, they attack vigorously, and the defence made by the others is only lukewarm. So both the innovator and his friends come to grief.

Updating for the inclusive language, Machiavelli would feel at home writing about many NFP organizations today.

But the world of business has shown it can be done. For example, IBM was a household name for decades. But it became lazy and complacent. It should have used scenario planning in the 1980s to think about the potential competition to its dominant position in the computer industry. By the end of the 1980s it was near bankruptcy. Lou Gerstner is credited with dramatically saving IBM from collapse in the early 1990s. In his memoir he noted: “I came to see, in my time at IBM, that culture isn’t just one aspect of the game – it is the game”. The new CEO stopped the intended break-up of the company into local profit centres and instead created a strong central culture, with one central brand “one voice, one agency” (then the largest advertising consolidation in history).

Tenneco, a Fortune 500 company, went through a dramatic restructure which saved its life.As Dana Mead, the CEO responsible for this transformation, recalled in his memoirs:

By the close of 1998, Tenneco was so different that 80 percent of the assets that were part of the corporation in 1992 had been sold or divested. Two-thirds of the employees on Tenneco’s 1992 payrolls were no longer part of the organization. In turn, through 29 acquisitions made since mid-1994 in automative parts and packaging, 20,000 of our 50,000 employees had been part of the new Tenneco for less than four years.

A reader might well ask that since Tenneco had been through such a drastic overhaul, to what extent was it still “Tenneco”? But it had saved Tenneco.

Mead recalled the lesson Andrew Grove of Intel who, with Intel co-founder Gordon Moore (of “Moore’s Law” fame) made the 1985 fundamental decision to move from memory chips (where it made its name back in 1968) to microprocessors (the electronic brains of personal computers). The drastic move saved Intel. Beyond “Recessional”Can an NFP organization on a “Recessional” trajectory manage to avoid death? It is pos

sible but (as with the above business models) it requires drastic change. Here are two examples (the first is identified with permission; the second must remain anonymous)

The Woman’s Christian Temperance Union (WCTU) has a branch in each Australian state.

It is almost impossible to write a social history of Australia in the 19th century/ early 20th century without referring to the WCTU (much the same could be said about its significant role in its country of origin: the US). Whatever the issue, WCTU were involved: opposition to the liquor barons, votes for women (with the expectation that female politicians would take a tougher line with the liquor barons), and opposing war and the white Australia policy.

Nowadays Australian branches have considerable property but few members. I knew of one branch which had a property worth almost a $1 million but an annual budget of $20,000 (and a “youth worker” aged in her 70s).

I worked with the WCTU in NSW in studying the “Recessional” and “Tango” scenarios. It was clear that “Recessional” was coming into play. The president sought her branch’s consent to winding up the WCTU as a membership organization, the sale of its valuable inner-Sydney city property and the creation of a trust fund to finance projects with an anti-alcohol focus. The eventual aim is the same; the methods have changed. There is now a WCTU Trust.

By the way, the use of the trust model would be of use to other NFP organizations who wish to continue albeit with a declining membership. They could separate out the day to day membership activities (which could be vulnerable to “entryism”), from the long-term membership of a trust fund to hold in stewardship the major assets of the NFP organization. Unscrupulous people could still try to gain control of an NFP organization via AGM elections – but they would not gain automatic access to the property in the trust fund (and so perhaps not bother to stack the AGM in the first place because they would not gain any advantage from it).

The second example (which has to remain anonymous) is of an NGO which has a heritage even more significant than that of WCTU. But it too had membership problems, with an aging and declining number of volunteers. It has also been troubled by being a federal organization, with powerful state and territory branches. It is a very old organization and the structure reflects the make up of Australia’s own federation.

Its challenge has therefore been both to cope with its declining volunteer base and the need for a new corporate government structure to come into line with the Australian Government’s corporate governance requirements for charities.

However it has been able to leverage off its good name and high public standing to attract extensive government funding to provide services. Volunteers, once the backbone of the NGO, have declined in significance; membership fees and donations had gone down. But government contracts and other financial arrangements have filled the gap. It is now bigger than ever.

It has been a difficult and protracted project, running on for about two decades. Because it was a federal organization, its basic governance task was to centralize power in one city (albeit with a continued state/ territory presence). It has also shifted the balance of power to the board and management (rather than volunteers) to steer the organization.

This NGO is now, after two decades of reorganizational turmoil, a very different one in terms of internal make-up from what it was in the early 1990s. Externally, little of the drastic internal reorganization attracted public controversy; its brand remained intact; its public standing remains good. Volunteers who have served on its various committees are gradually fading from the scene as a new breed of professional managers fulfil the government contracts. It is in many senses a different organization but with the same vision.

In short Recessional does not necessarily mean an inevitable death – but it does require drastic action and leadership to avoid a slow slide towards extinction. These two NGOs show its can be done. But it requires leadership from the board.