A collective commitment is needed to secure the future of the not-for-profit sector

Opinion-Editorial
Louisa Graham, CEO, Australian Leadership Hub
December 2023

As pressure mounts on for-purpose organisations, effective leadership is more critical than ever, and the Australian Leadership Hub whose purpose is to develop leaders, is stepping up to deliver what the sector needs most. After 14 years as the Australian Scholarships Foundation, during which we provided 5,000 individuals with scholarships and professional development opportunities worth a staggering $17.2 million, has now expanded our activities to offer leadership awards, education programs and events. We also build connections among educators, executives, funders and alumni, who partner with us to foster skills that are crucial for organisations dedicated to creating a better society.

Charities, social enterprises and other not-for-profit (NFP) organisations work at the front lines of social need, providing services to families and communities under increasing strain from climate emergencies, economic stress, homelessness and mental health crises. NFPs are also a vital component of Australia’s social fabric, contributing nearly a tenth of overall economic activity, more than a tenth of employees, and millions of volunteers. They fill the gap when government and the private sector are unable or unwilling to deliver.

Yet there is a widespread belief that they should do all this without incurring indirect operating costs, such as administration, fundraising and professional development. And a growing body of research shows this expectation undermines the success and sustainability of the very organisations that Australians turn to when the need is greatest.

Not-for-profits are a vital component of Australia’s social fabric, contributing nearly a tenth of overall economic activity, more than a tenth of employees, and millions of volunteers. They fill the gap when government and the private sector are unable or unwilling to deliver.
LOUISA GRAHAM, CEO, AUSTRALIAN LEADERSHIP HUB

Paying What It Takes: Funding Indirect Costs to Create Long-Term Impact, a 2022 report by the Centre for Social Impact and Social Ventures Australia, stresses that the prevailing funding model for NFPs fails to cover indirect costs, and this threatens capability and effectiveness across the sector. Insufficient funding means more administrative work falls on front-line staff, greater time is spent on fundraising, and there is long-term under-investment in crucial areas such as professional development. This increases risk, rendering NFPs more vulnerable to external shocks.

Paying What It Takes also highlights challenges that NFPs face in accurately reporting indirect costs. These include power imbalances, competitive funding environments, and reputational concerns. The report examines the relationship between government funding and philanthropic practices, and advocates for a paradigm shift in perceptions and funding of indirect costs. It calls for increased trust, improved data, and a change in public attitudes to ensure sustainability and effectiveness.

A further report, Building from Purpose: Unlocking the Power of Australia’s Not-for-profit Sector, backs up the need for professional development opportunities for not-for-profit leaders. The research, by McKinsey & Company and the Australian Scholarships Foundation, found the Australian sector excels globally in commitment and mission but talent growth has stalled, due partly to ongoing challenges arising from the COVID-19 pandemic.

Building from Purpose reveals that the healthiest organisations focus on growing talent, executing with excellence, and system shaping. While some excel at system shaping, there are opportunities for improvement in operational excellence and practices for talent growth and performance management. In fact, only 35 per cent of Australian organisations surpass the global median in these domains.

A third report, Learning for Purpose: Researching the Social Return on Education and Training in the Australian Not-for-Profit Sector, substantiates the value of continuous learning and skill-building in maximising the impact of NFPs. Initiated and funded by the Origin Foundation in collaboration with the Australian Scholarships Foundation and led by the University of Western Australia Business School, the research found that professional development is linked to organisational viability and positive social change.

The theory of change guiding the research suggests that limited workforce competence hampers the sustainability and success of Australian NFPs. Investments in training and professional development lead to positive downstream effects on social impact. All these findings amplify the message that emerged as early as 2010, when the Productivity Commission report on the for-purpose sector highlighted the crucial role of professional development in fostering organisational growth and effectiveness.

The contemporary landscape demands more from not-for-profit leaders than ever before. Navigating complexity and uncertainty, addressing workforce and resourcing challenges, and managing the surge in service demand are just a few of the responsibilities they face. In this context, the Australian Leadership Hub is a beacon of opportunity — a hub where for-purpose leaders can hone their skills, exchange best practices, and collaboratively explore innovative solutions to the unique challenges they encounter.

The Australian Leadership Hub is not just a matter of responding to a growing need; it is a strategic investment in the not-for-profit sector. By providing a centralised platform for professional development, the Hub becomes a catalyst for positive change, empowering leaders to adapt, innovate, and lead their organisations with resilience and foresight.

As we champion the expansion of the Australian Leadership Hub, we advocate for a collective commitment to the future of the not-for-profit sector. By equipping leaders with the tools and knowledge they need to excel, we pave the way for a stronger, more resilient, and more impactful sector — one that is better positioned to meet the evolving needs of our communities and create lasting positive change.