Oct 28, 2017 - to encourage mountaineering, rock climbing and allied activities and the .... while still effectively rep
New Zealand Alpine Club Report to Club Committee from Governance Reference Group October 2017 1. Introduction The New Zealand Alpine Club (NZAC or Club) exists to foster climbing. Its objects are: “… to encourage mountaineering, rock climbing and allied activities and the enjoyment and conservation of mountain and rock climbing regions; and to bring together those interested in climbing. …to provide services for climbers, protect the interests and safety of climbers, and promote climbing activities.” As an incorporated society, NZAC enjoys a legal and social status that allows it to pursue those objects in a manner that is more efficient and effective than what could be achieved by climbers acting individually. The Club is a means by which resources can be pooled, risks and costs spread and benefits shared, all for climbers and climbing. And the Club has been very successful! But with that success comes responsibility. NZAC is a significant enterprise, conducting a wide range of activities for and on behalf of its some 4000 members. It has many unique and valuable fixed assets, has cash turnover of more than $1 million each year and has a number of full and part-time employees. It operates in a challenging regulatory environment, alongside many commercial operators, and has many of the same risks, costs and obligations faced by much larger organisations. It does this under a volunteer governance and mixed volunteer-professional management model. Meeting the Club’s responsibilities requires stable and effective governance. Against that background, this report examines the current state of the Club’s governance structures and systems and makes recommendations as to how those structures and systems might be improved to enable the Club to continue to grow and thrive. 2. Reference group At its November 2016 meeting, the Club Committee approved establishment of a reference group to: (i) examine the Club’s governance structure; (ii) propose changes to that structure and any consequential changes to the Club’s rules.
That reference group was formed as follows: John Palmer NZAC President Elect, Convenor Penny Brothers NZAC President John Cocks NZAC Past President John Nankervis NZAC Past President Robin McNeill NZAC Southland Section member, FMC Past President Tania Seward NZAC member, FMC Past Executive Broadly, the process adopted by the reference group was to: • Review relevant guidance and commentary on governance for similar organisations (e.g. Sport New Zealand governance material) • Prepare an issues/discussion document • Conduct workshops • Engage with governance experts, other Clubs in New Zealand and overseas • Request and review feedback from Members • Prepare this report. 3. Terms of reference By comparison to effective governance models and practices (especially in the sport and recreation space), but also having regard to the unique purpose and activities of the Club, the reference group was asked to consider the following: • Governance requirements and drivers for the Club • Composition and role of the Club Committee • Composition and role of Executive Subcommittee • Composition and role of other subcommittees of the Club Committee • Role of Club Sections in governance • Interface between the Club governance function and management • Governance tools - What tools does the Club have? What other tools should it have? Each of these matters is expanded on in the attached issues table (see Appendix One). 4. Current NZAC governance structure NZAC is an incorporated society with a set of rules that prescribe how the Club is governed. The rules can be viewed here. Club Committee The rules establish a Club Committee, chaired by the President, as the primary governance body for the Club:
“10a The power of overall management, direction and policy making for the Club shall be vested in the Club Committee” The Club Committee composition is: • President (two year term) • Immediate Past President (for the year immediately following his/her last year of office as President) • President Elect (once appointed) • Honorary Secretary • Honorary Treasurer • Conveners of standing subcommittees (maximum five year term) • Section representatives (typically a two-five year term). Each President is elected by the Club Committee. The Honorary Secretary, Treasurer and Convenor roles are voted on at the AGM, but Club Committee may fill any vacancies in the interim. Section representatives are elected by their sections. The current Club Committee comprises some 22 members. It meets twice yearly. Executive Subcommittee Executive Subcommittee provides a link between Club Committee and Club management: “The Executive Subcommittee shall oversee the work of Club’s [General Manager]; ensure that the National Office as a whole acts within these rules and the directives, policies, strategies, plans and budgets adopted by the Club Committee, and ensure the Club’s compliance with all legal requirements relating to employment and workplace safety.” Executive Subcommittee composition is: • Convener • President • Immediate Past President or the President-Elect (as applicable) • Honorary Treasurer • Honorary Secretary • Two other Club Members appointed by the Club Committee. The current committee actually comprises eight members but the General Manager also attends all meetings. It meets monthly with the General Manager. Other governance structures Other Club structures relevant to Club governance include: - Sections (and Section committees) - Other Club Committee subcommittees (e.g. Accommodation, Publications)
As to Sections, the reference group notes that Section governance (ie. committees) is a key element in the overall makeup of the Club. This report does not examine, or make any direct recommendations on, Section governance. That will be the subject of a separate review. However, Section structures, activities and characteristics are relevant to central governance issues and, where relevant, these are discussed in this paper. 5. Relevant governance principles/factors Sport New Zealand’s ‘Nine Steps to Effective Governance – Building High Performing Organisations’ describes governance as: Governance is the process by which the board... - ensures the organisation complies with all legal and constitutional requirements; - sets strategic direction and priorities; - sets high-level policies and management performance expectations; - characterises and oversees the management of risk; and - monitors and evaluates organisational performance; ...in order to exercise its accountability to the organisation and its owners. There is no ‘right’ governance model. Every model will have strengths and weakness, placing different weightings on delivering in key areas such as competence, representation, control, efficiency, diligence and agility. That said, good governance principles should always be central to governance design. There are many theories on the principles of good governance design. One formulation that seems apt for non-profit organisations is as follows: Fairness Representative and consensus-oriented decision making Transparency Openness and transparency so that members can have confidence in decision making Accountability Members of governance body are, and are seen to be, responsible and accountable to members for decisions and actions. Performance against a strategic plan must be measured and reported. Integrity Constitutional and legal compliance. Organisation operates in an honest and objective manner Credibility Organisation maintains credibility with all stakeholders Clarity of purpose Effectiveness
Clear strategic planning and implementation Governance tools must be available to enable effectiveness.
It must also be recognised that the shape and role of a governance body will change over time. As the scale and complexity of an organisation, and its resources, change, so too must the governance body. Indeed, there will be factors that are unique to each organisation, at any particular time, that inform governance design. Factors identified by the reference group that may specifically influence any change to the NZAC’s governance structure include: • NZAC’s purpose • Limited financial resources, limited paid human resource • Specific risks • Specific funding sources • Dependency on volunteer governance • Specific regulatory environment • Sections Some comments on each factor identified: NZAC’s purpose The Club’s objects encompass a wide range of matters: encouraging “mountaineering, rock climbing and allied activities”, conservation and provision of products and services (e.g. huts, instruction, publications etc.,). To deliver on such a wide range of objects for members, the Club’s governance body needs to be structured so that it can readily attract and retain people with a commensurate range of skills and experience, while still effectively representing Section and climbing-specific interests. Clear role definition is also essential to promoting responsibility and accountability. Limited financial resources, limited paid human resource The Club has limited resources with which to achieve its purposes. That requires effective resource allocation by the governance body to ensure resources are prioritised efficiently, to maximise progress towards achieving those purposes. Allocation tools such as strategic plans, budgets and other goal-setting and performance measures are only useful if the governance body is structured and empowered to create and implement such tools. Specific risks Many of the Club’s activities present specific climbing-related and asset-related risks, which in turn expose the organisation to risk. Effective understanding, oversight, and management of risks by the governance body is essential to long term sustainable operation of the Club. Funding sources Sound governance structures and practices are essential to qualifying for and maintaining many sources of funding essential to Club operations (e.g. grants and loans). It is also essential to ensure sustainable provision of other fund-generating services. Funders demand and expect the NZAC to be well-governed.
Dependency on limited volunteer resource for governance Volunteer-led governance poses significant challenges, especially given that the Club undertakes a wide range of activities (some involving specific inherent risks, others in sectors and markets where the Club operates alongside or in competition with professional organisations). Availability of relevant skills, experience and capacity to governance roles is constrained by a fragmented volunteer pool. There is also a risk that volunteers may not hold themselves and others to appropriate performance standards – as Sport New Zealand states: professionalism is an attitude, not a question of payment. That said, it is possible also that the Club’s current governance model does not best utilise/access the significant capability within the Club’s existing and potential volunteer base. Effective recruitment and succession planning is also difficult in a volunteer environment. There is also potential for tension between volunteer-led governance and employee-led management, especially where roles are not well defined. As noted above, clear role definition is essential to promoting responsibility and accountability. Specific regulatory environment Proposed changes to the laws relating to incorporated societies will impact NZAC’s governance body. It is likely that such changes will impose duties on governance body members similar to some of the duties that company directors now have. If and when this occurs, it may impact recruitment and retention of volunteers for governance roles unless the Club’s governance structures and practices are designed in a manner that allows those volunteers to effectively discharge such duties, with appropriate tools and protections. Sections Some Club members see the Club through their membership of Club Sections. The Sections have provided a nucleus for volunteers and engendered a sense of camaraderie. Sections are seen as the ‘face’ of the Club by some members, especially those Sections who actively organise skills training and outings for their Section’s (and sometimes other Section’s) members. Sections are both a strength and weakness for the Club. They are the heart of the Club but their geographical dispersion and disparate nature pose some significant challenges for central Club governance. 6. Issues with current NZAC governance structure Against that background, the reference group has identified a number of significant issues with the current NZAC governance structure.
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Representation
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Role definition
The level of democracy in appointment of members to Club governance roles is assessed to be moderate, in terms of the current Club rules. However, primarily due to a perceived, or actual low level of volunteer resource for governance roles, the custom is generally that key roles (such as President and convenors of standing Club Committee subcommittees) are ‘shoulder tapped’. This factor was commented on by several members who submitted feedback to the reference group. The level of democracy can impact the range of perspectives and interests represented at the Club’s governance level. A narrow range of perspectives and interests will likely hinder the governance body’s ability to deliver on the Club’s objects. The level of democracy can also impact member engagement in the Club. The reference group considers that clear and open processes for appointment of key Club governance roles is important. There are three aspects to this issue: a. Governance body role definition: The Club rules define roles for Club Committee and the Executive Subcommittee in general terms. However, in practice, the separation of roles is not clear. Partly out of necessity (because of the infrequency of Club Committee meetings), the Executive Subcommittee often performs governance tasks. The governance ‘triangle’ resulting from this structure is not in line with good governance design principles and has led to some ambiguity in how the Club governance operates in practice. The primary governance-management interface is the Executive Subcommittee, which: - dilutes the engagement and effectiveness of Club Committee - creates uncertainty and confusion for management in terms of reporting and accountability Membership of Executive Subcommittee is not the same as Club Committee. That is a further governance risk factor inasmuch that there is ‘board within a board’, which does not have a common membership.
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Engagement
4
Competence
The reference group considers that consideration needs to be given to collapsing the CCM-Executive Subcommittee structure. b. Governance member role definition: Individual Club Committee roles are not well defined in the Club rules. The reference group considers that ‘job descriptions’ for governance body members would assist in (i) framing the key competencies required for effective Club governance and (ii) assist members in those roles to perform well. c. Management The Club employs a General Manager whose role is critical to the operation of the Club, yet the Club rules do not describe or define that role. Clear role definition and delegations are vital to a successful interface between management and the Club’s governance body. Given that Club Committee meets only twice yearly, inevitably it has a low level of engagement with Club operations (at least at a national level). It is not a ‘working board’. In addition, the selection and induction processes for Club Committee members do not always ensure that they have sufficient familiarity with all Club operations to achieve an effective level of engagement. To some extent, that low level of engagement is offset by the Executive Subcommittee’s delegations and interface with management. However, for the reasons set out above, the appropriateness of that structure is questionable from a good governance perspective. The reference group also notes that the annual convenors’ meeting in contrast is typically a highly-engaged forum, evidencing the benefit of a smaller, skills/function-based decision making group. The reference group considers that, given its constrained financial resources and small number of paid staff, a good level of engagement from the Club’s governance body is desirable. The Club’s governance body structure, recruitment and induction processes and governance tools have not been
5
Transparency
6
Sections
designed to ensure that the Club governance body has people with the competencies required by the Club to deliver on its objects. Although, in practice this has not generally created significant issues for the Club (perhaps because the general calibre of Club volunteers has been very high), given its (i) increasingly complex operations and (ii) reliance on volunteer resource, the reference group considers that a greater focus on ensuring that key competencies are defined and supported (through recruitment and governance tools) is desirable. Recruitment for and decision making by Club Committee do not seem to be well understood by members. There can be a tendency amongst members to ‘lump’ together Club Committee, Executive Committee and management as ‘the National Office’, a mostly-fictional entity perceived by some to be largely autonomous, opaque and out of touch with member needs and interests. The reference group considers that lack of transparency is a significant cause behind this perception, which in turn negatively impacts member and Section engagement on and/or ‘buy in’ into significant governance body decisions. Enhanced transparency is considered to be essential to improved Club governance. Given the disparate nature of New Zealand, where everything from geography, climbing opportunities, access and populations vary immensely, Sections have proven to be effective in pooling voluntary resources to develop and maintain regional Club assets (eg. huts, crags) that would otherwise be beyond the resources of the Club. Each Section operates largely as if it were a separate entity, to a large degree autonomously, each with its own internal governance structure (Section committees) and undertaking its own activities. However, this separation is not legally effective – in law the Sections are not standalone from NZAC Inc (there is one exception, the Australian section is a separate legal entity, created to ring-fence liability associated with activities in Australia).
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The Club rules provide that Club Committee has ultimate oversight of all Club activities, including Sections, and yet there have been tensions from time to time between Club Committee (or management acting under delegation from Club Committee) and Sections, particularly in relation to Sections’ accounts and funds. This is despite the fact that Sections control all Club Committee decisions by virtue of greater representation and greater voting rights. By way of example, separate fund raising activities by Sections (e.g. Banff Mountain Film Festival) have created significant cash surpluses for some Sections. An issue has arisen as to whether those surpluses are Section funds or Club funds, and who has the power to determine how those funds are applied. Similarly, Sections are (from time to time) asked to adopt common practises and procedures (e.g. for instruction activities or GST reporting), but adoption is not always uniform. This creates risks for the Club, which has the potential to negatively impact all members. The reference group considers that enhanced two-way communication between the Club governance body and Sections, and greater integration of operations, will improve member engagement and reduce risk for the Club. Strategic leadership A key plank of any governance structure is a well-defined strategy that is developed and overseen by the governance body, but developed with the support of the membership. Club Committee has struggled to discharge this responsibility in recent times – there is no current or ‘live’ sanctioned strategic plan for the Club. Reasons for that possibly include: - lack of time due to infrequent Club Committee meetings - lack of developed or coordinated strategic planning capability at Club Committee - low prioritisation of the Club’s strategy - lack of enthusiasm by some members. The reference group considers that high prioritisation of strategic planning by the Club’s governance body is critical to the long term sustainability of the Club.
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Agility
10 Membership tensions
The Club’s ability quickly to make significant decisions (e.g. respond to/address material risks or opportunities) is assessed to be moderately low. Lack of agility in decision-making can be attributed to a number of factors: - Size and voting procedure of Club Committee - Infrequency of Club Committee meetings - Lack of strategic plan to guide rapid decision making - Absence of other governance tools that can aid efficient decision making (e.g. interest register, risks register, standard tollgate processes, insurance to protect the volunteers and staff from litigation. etc.,) The reference group considers that any changes to Club governance to address the other issues described above should also enhance the Club’s agility in making important decisions. There are many factions and interest-groups within the Club membership, which sometimes creates tension as there can be competing needs for Club resources. The reference group considers that the Club needs a representative governance model that can (as best as possible) balance those competing needs, within the context of the Club’s values, objects and strategic vision.
7. Reference group recommendations To address the issues identified in this report, and by applying good governance design principles having regard to the specific characteristics and needs of NZAC, the reference group proposes that the Club considers adopting the following revised governance structure. Necessarily, the recommendations below are high-level, in-principle recommendations. If supported by Club Committee, the next stage would be preparation of detailed rules on the basis of these recommendations:
ACCOUNTABILITY
MEMBERSHIP VOTING SECTIONS BOARD GENERAL MANAGER The principal elements of this structure are: Membership The Review Panel identified two possible election arrangements for the membership to choose from to elect Board members. The alternatives are: - Direct Membership voting: Any financial member of the Club is entitled to nominate a candidate for the Board, and each Club member is allocated a number of votes equal to the number of positions open for contest. Pros o Simple system o Highly democratic o Provides forum for direct engagement between candidates (ie. future Board members) and all members on key Club issues. Cons o Higher cost than alternative
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o Voting outcomes can be distorted by a number of factors including: low voter turnout, asymmetry of information amongst candidates and/or voters, regional bias. Section voting: Any financial member of the Club is entitled to nominate a candidate for the Board, but only Sections are entitled to vote. The number of votes allocated to each Section would be a broad reflection of the size of the Section membership. Section voting decisions would be made by Section committees, so member representation would occur through Section Committee elections. Pros o Simple system o Lower cost o Lower risk of distorted voting outcomes due to low voter turnout or asymmetry of information amongst candidates and/or voters o Reduced risk of regional bias, subject to fact that larger Sections will have greater voting power Cons o Less democratic than Direct Membership voting o Less engaging with wider membership Votes: Under Direct Membership voting, each member would be allocated one vote per position to be voted on. Under Section voting, each Section would receive the same size-weighted allocation of votes for each position. The vote count would be a ‘first past the post’ count – the candidate with the most votes wins. Candidates: Only financial Club members would be eligible for candidacy.
It may not be practical to put both options forward in the context of a formal rule change by membership vote, not least because of the rule drafting implications and possibility of confusion. The reference group therefore proposes that
Governance body
the preferred voting method be resolved before a formal rule change is sought. It is proposed to establish the Board with the following attributes: Composition: - up to eight board members - Two board members will always be Section representatives (see below) - All other board members elected through Direct Membership or Section voting, as to be decided. There would therefore be no other ‘standing’ board roles, such as honorary treasurer or secretary, although the functions of such roles will be filled by Board members as required/determined by the Board - Staggered tenure so that not all board seats vacated at once. A two or three year term is suggested - Interim vacancies are to be filled by appointment by the board, rather than through by-elections. - No limit on the number of terms someone may hold a Board seat Control: - Elected President chairs the Board meetings - Each member of the Board is entitled to one vote at Board meetings, with the Chair holding a casting vote - Voting thresholds are to be set in the Club rules (e.g. the rules will specify what types of decisions require a bare majority, a super majority or a 90% or consensus of Board votes. It is expected that higher thresholds will apply to significant decisions (such as major investments, divestments etc) ) - Standard quorum, proxy, etc., controls - Provision for Board members to attend at least some Board meetings through telecommunications rather than in person Competencies: - The Board would post recommended attributes for board members from time to time - When advertising elections, the Board would identify skills sought from the cohort joining the Board
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The Board is expected to be a working Board. While governance is part of the role, the Board members would be expected to take an interested role—to some extent operational, as required—in the Club’s activities and operations (see below for how this is to be achieved).
Powers: - Power of overall management of Club, within Club rules - Can establish and disestablish sub-committees to deal with specific Club activities and requirements (e.g. Audit/Risk, Finance, Executive and functional committees such as Accommodation and Access). The Board would appoint subcommittee chair, members, set delegated authorities, etc., - Greater integration between the Board and Sections, within terms of Club rules - Board members, with explicit agreement from the Board and in conjunction with the General Manager may work voluntarily with paid staff in developing policies, plans and suchlike, within explicitly stated delegated authority Meetings: - The Board is expected to meet five times a year, with the General Manager and other relevant staff in attendance Accountability - Board to publish strategic plan, and an annual operational plan - Board report 6 monthly to members on Club performance against plans Sections
It is proposed through these arrangements that the Sections’ automatic right to representation on the Club governance body will be altered. Instead of each Section having a representative on the governance body, there will be two Section seats. A Section Council will be established comprising representatives from each Section. The Council will be responsible for appointing Section representatives to the
President General Manager
Section board seats. It is anticipated that that will be done on a rotation basis (eg. one year term). The Council will meet once a year (likely around the time of the Club AGM) to discuss Section issues and make any board seat appointments required. Council members may otherwise conference or communicate at other times, as required. This structure is intended to satisfy the need for Sections to have a strong voice at the Club governance level while reducing the size of the governance body and enabling other members (through voting) to participate in Club governance. The Section Council meeting will also serve as a forum for networking and information exchange directly between Section representatives on matters of interest to Sections. - Elected as per other board members - Two year role - President-Elect voting occurs one year out -
Formal accountability to the Board, through the President Day-to-day management interface as per Board direction
It should be noted that an increased (but not significant) incremental cost may be associated with implementing the recommended governance changes – primarily arising from increased meeting frequency for the board and Section Council. 8. Proposed change process The reference group considers that any significant change in Club rules, to support revisions to the Club’s governance structure, should only occur via a membership-wide postal or electronic voting process (as opposed to a General Meeting). Rules changes require a 2/3rds majority. Therefore, if Club Committee adopts the reference group’s in-principle recommendations on governance and agrees that a membership-wide vote should occur, the recommended change process is as follows: Step Description Date 1 Reference Group report presented to Club Committee 28-29 October 2017
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3 4 5 6 7
Reference Group to prepare: (i) draft rules to support revisions to the Club’s governance structure; (ii) governance transition plan Reference group to ‘roadshow’ new rules to membership (Club Committee, Sections etc) Club Committee to approve (with or without amendment) proposed rule changes If approved, Club Committee to mandate membership vote on changes under Club rules Membership vote If carried, implement transition plan
NZAC Governance Reference Group October 2017
By February 2018
March-April 2018 At May 2018 Club Committee meeting At May 2018 Club Committee meeting June 2018 July 2018
Appendix One – Governance Issues Table
