Essay on AICD NFP Governance and Performance Study

Question: Write an essay onThe AICD NFP Governance and Performance Study. Answer: The AICD NFP Governance and Performance Study 2015 (AICD 2015b, p. 23) found, NFP boards rate their skills in strategy development and oversight of strategy implementation at 6.6 out of 10 - with room for improvement. From the outsets, the role of board highlights the amount of time that the board members expected to spend to develop a strategy that will help the company to run properly in future (Reynolds 2014). A boards effectiveness in setting strategic direction depends on five characteristics - size, independence, reputation, activity and diversity (Spearritt and Butcher 2010). According to the NFP Governance and Performance Study 2015 (AICD 2015b, pp.11, 16), Australian Charities Report 2014 (Leblanc 2015) and Guaging the State of Not-for-profit 2015 (Macdonald 2013), some of the prime facts that stood out regarding the role of the board in setting strategic direction are: The top priority of the board in developing strategies is to maintain financial sustainability. As the NFPs focus is on the richer mix of diversifying income streams, cost, management and increasing own source of income, simple cost management has diminished as an imperative (Anand and Jog 2014) 41% of directors believe they require to develop their present level of skills in strategic planning (AICD 2015b, p. 23) Almost half of the directors believe that the board of NFPs is very effective in order to measure the organizational performances against its mission (Pro Bono 2015, p. 8) Therefore, SEs has to develop corporate structure in such a way that could able to fulfil all its requirements. However, NFPs and SEs are completely two different factors. Therefore, strategy development also will have to be different as compared to NFPs. Otherwise, SEs might not able to fulfil its actual objective (Du Plessis, O'Sullivan and Rentschler 2014). Since, board members have major role in recruiting, supervising, and evaluating the organizational process. Boards have to create proper strategy that will help the SE to gain advantage in the market. Since, many SEs are also works as for-profit. Therefore, strategy of SEs will definitely have to be different from the NEPs. Board members also provide direction for the organizations. This crucial in strategy development, as without selecting a proper objective no strategy can be formulated. Board members are the higher authority of the company (Elms 2014). Therefore, they play a significant role in developing relationship with t he government organization. This is a key aspect for developing any strategy for social enterprises. A board of directors is a combination of individuals focusing on to operate an organization as a group. In social enterprises, strategy formulation not only focuses on the profit margin of the company but also help the society as a whole. However, not all the social enterprises are a not-for-profit firm (Strong 2014). Therefore, strategy formulation of the company will have to consider both the aspect such as increasing the profit of the company and also improving the amount of benefits that the company is currently providing to the society. Hence, the strategy formulation for the SEs is far more difficult and demands combinations of approach. As per the 2014 Chairman and Non-Executive Director Survey, the role of the higher authority such as EDs and NEDs become even more crucial in developing a particular strategy for the company. The strategy development in the social enterprise demands huge amount of skills, which companies failed to get sometime (Atkinson 2012). It leads to the o rganizational failure. Therefore, many boards and management have struggled to formulate appropriate division of strategy that will help the company to operate much more effectively. References: Anand, A.I. and Jog, V.M., 2014. Diversity on Boards.Available at SSRN 2469410. Atkinson, M., 2012. Developing and using a performance management framework: a case study.Measuring business excellence,16(3), pp.47-56. Du Plessis, J., O'Sullivan, J. and Rentschler, R., 2014. Multiple layers of gender diversity on corporate boards: To force or not to force.Deakin L. Rev.,19, p.1. Elms, N.E., 2014. An exploratory study into director selection: who do directors want on their boards and how do they select them?. Leblanc, R.W., 2015. FACC 6600Corporate Governance Course OutlineFall 2015.Available at SSRN 2656628. Macdonald, R.J., 2013. Determining best practices for board evaluation for a provincial commercial Crown corporation. Reynolds, S.T., 2014.Effective Corporate Governance in Not-for-profit Organisations(Doctoral dissertation, Victoria University). Spearritt, K. and Butcher, S., 2010. Company Secretary: Promoting Board Diversity to Enhance Performance.Keeping good companies,62(6), p.332. Strong, P., 2014. Integrated reporting-where are we now?.