Governance, Boards of Directors and the Impact of Contracting on Not‐for‐profit Organizations – An Australian Study

Abstract

AbstractThis article investigates strategic changes in the governance of not‐for‐profit (NFP) boards in response to Australia's fully contracted employment services system. Of interest are changes in board demography, behaviour, procedures and dynamics, with special attention to the impact of those changes on boards' identity as a representation of community interests. As Australia is in the vanguard of social service contracting, the Australian experience affords insight into the impact of contracting upon the identity of the NFP sector. We find that NFP directors operating in this quasi‐market have come to define board ‘professionalism’ as the main strategic move to accommodate the increasingly commercial and competitive nature of contracting. Boards have adopted a more business‐like view of how their agency should operate, changed their board's skill set and utilized strategic recruitment processes, including selecting new board members based on perceived skill deficiencies of the current board and paying board members for their service. NFP boards have also introduced more comprehensive induction, training and evaluation systems. These findings provide Australian policymakers with evidence of the cultural impact of service delivery reforms on NFP agencies. They also afford leaders of NFPs an opportunity to reflect on important changes in the governance of their organizations, including the potential for ‘mission drift’ and loss of local forms of legitimacy.