Governing 170,000 Members Successfully

[00:00:00] In today's episode, Richard Conway interviews Anthony Wright, Chair of Hanlon Industries and director of CPA Australia on the governance challenges that arise in organisations focused on serving members rather than shareholders.

[00:00:16] Richard Conway: Welcome to Minutes by boardcycle. I'm your host, Richard Conway and today my guest on the podcast is Anthony Wright. Anthony is the Chair of Hanlon Industries and Five at Heart and relevant to today’s podcast is a director of CPA Australia. Australia's leading member organisation for the accounting and finance profession.

[00:00:36] Today, Anthony will be sharing some of his insights with me on the governance challenges that arise in member focused organisations specifically.

[00:00:44] So, welcome Anthony.

[00:00:46] Anthony Wright: Hi, Richard. Great to be here.

[00:00:47] Richard Conway: So, Anthony, CPA Australia serves more than 170,000 members, so it's one of the largest kind of member driven organisations in the country. And I wanted to ask you, just to open up, what you see as the kind of fundamental differences when you are on a board or around the governance of a member driven organisation versus I guess, a traditional company?

[00:01:11] Anthony Wright: For the most part, the concepts and the responsibilities of the board, whether it's for a not-for-profit or a membership organisation versus a for-profit listed or unlisted, are largely the same.

[00:01:26] So, what do we as an organisation, as a board need to do to ensure that that organisation succeeds and is governed well and the strategy's right? And we've got the right people to execute that strategy? Where it differs in a not-for-profit or a member-based organisation - that organisation probably has objectives other than making money or doing things profitably.

[00:01:51] So, in the case of CPA Australia, an accounting organisation that's been around for well over a hundred years with 170,000 members in 50 countries around the world, the objectives are not necessarily monetary related - but how do we add more value to what those members do in their jobs? And one of the core purposes of CPA also is about education. So, educating members and future accountants and future finance professionals to be better at what they do.

[00:02:24] So, we then have different goals and objectives in relation to: are we achieving member value, and member satisfaction? And then there's also some objectives around education and the quality of the education that we can deliver as well.

[00:02:39] Richard Conway: Now, how do you know that you're on the right track with that, Anthony.

[00:02:43] So, I guess in a company that's for profit there's some clear metrics in the end that give them an indication of whether they're on the right track on that. How do you do that in a member organisation where those metrics aren't your driving purpose?

[00:02:57] Anthony Wright: Yeah, sure. So, we at CPA Australia have a very clearly defined purpose and then the key strategies or the core strategies that we need to do to achieve and be successful with our purpose.

[00:03:10] From that, we then have KPIs for each of those key strategies to ensure that we're on the right track. So, some of the KPIs relate to financial sustainability. We still need to deliver a profit so we can reinvest those monies for the benefit of members.

[00:03:28] But then we have other goals or KPIs related, so for example, membership growth. Membership satisfaction. We're a big organisation with thousands of staff. So, the goals that you would see in other for-profit or listed organisations about staff engagement. And we measure those things, whether it be quarterly, annually, and, and so we know whether we're on track with those financial and non-financial KPIs.

[00:03:57] Richard Conway: Anthony, CPA Australia, as I said, is one of the largest member organisations in Australia. And so, I wanted to ask you how you actually make sure that such a diverse membership, and you said also before that there's members in 50 countries I think as well, how do you ensure that those people are all represented in decision making and what consequences does that lead to from a governance perspective?

[00:04:22] Anthony Wright: So, we as an organisation are constantly engaging with our members, both formally and informally to get their input into our strategy and whether we're executing that strategy satisfactorily.

[00:04:37] Also, whether the strategy needs to change. A lot has happened within technology in the last few years which probably will have a significant impact on the finance and accounting profession.

[00:04:48] So, our strategy needs to be adaptable and flexible and agile. So we, to do that, we're always engaging with the members. Then there's the real formal governance and member engagement examples. And a couple of examples, with this, and this is where CPA Australia I would class as having, in all the organisations I've been involved with as an executive, as a business owner, as an investor or on the board, CPA Australia is what I would class as having gold five star governance. However, there's a fine line between being over-governed and then being flexible and agile to get things done. Particularly when the external environment changes so quickly.

[00:05:34] So, we have, where I talk about this gold star governance structure, we have divisional councils within CPA Australia. So, there are about 15 different regions within CPA Australia, the states within Australia and then various regions throughout the world.

[00:05:53] Each one of those regions or divisions has a member elected group of people, ranges between 10 and 15 people in every region, who gather information and feedback from the members in that location and then feed that information through the divisional councils to the board and to the executive management team and all of the staff at CPA. So that's our conduit to get to the members.

[00:06:18] The other thing that we have is what we call centres of excellence, which are based on topics that might be tax or superannuation or artificial intelligence or ESG. So, we'll have different centres of excellence which is also then gathering feedback from the members that are interested in that particular topic. And then that information gets fed to the board as well.

[00:06:40] Another quick example is we have, with so many members, we have an online, 24/7 chat forum called Member Connect. It's amazing the feedback and the frank feedback that we get through Member Connect about what's working, what are we missing, what have we gotta do differently, what's going really well.

[00:06:59] So, that there's a lot of different feedback loops that we get from the membership to see if we're on the right path or not.

[00:07:06] Richard Conway: So, I think that ultimately what you're saying is that you need to have both formal structures that represent your members, but also less formal ways that they can communicate to the organisation without the formality of those structures. Would that be fair?

[00:07:21] Anthony Wright: Absolutely, and I think we all know that when we get sent an email with a survey request or a feedback form with everyone's busy and got better things to do. So, that formal channel, you might get an open rate and a response rate of 10% at best.

[00:07:42] But it's the informal avenues, whether it's through events and functions and just talking to people at different things, where you get that real, genuine, constructive feedback and you're more likely to get it from a diverse group of people, not just that 10% that are really minded to fill out a survey and give an annual piece of formal feedback.

[00:08:07] Richard Conway: Anthony, going on to the sort of formal representation side, it's pretty common in membership driven organisations and I think it's the case with CPA as well that certain numbers of seats at the board are representing particular constituencies in the membership.

[00:08:23] And I wanted to ask you how you see that as interacting with the requirement for the board to also have the right skills at the board table for its current environment.

[00:08:33] And I guess what I'm getting at there is that if certain seats are reserved for certain constituencies, it limits, I imagine, your ability to get the skills that you need. And how does an organisation like that cope with that? Does it limit their ability to get those skills?

[00:08:51] Anthony Wright: Yeah, it also is a good example of why I think CPA Australia does a fantastic job in terms of governance and getting the right people into the right roles to ensure that the organisation and its members are successful.

[00:09:06] I'll talk you through a few of the ways that CPA Australia approaches it.

[00:09:10] So, the first thing is that we have what's called we separate out an appointments council and a nominations committee. The appointments council, has around 15 people in it, and each of those people represent the 15 different divisions, which I mentioned around the world that make up where the CPA members are.

[00:09:29] The appointments council, select the board. But the appointments council get a lot of advice and opinions from different experts to really ensure that we've got the right board at the right time with the right skills and the right diversity.

[00:09:46] So on the nominations committee, which is a subcommittee of the board, it contains a couple of people from the board, it also contains two independent experts on corporate governance and also, business excellence.

[00:10:05] And then, there's another independent expert, an executive search expert, on that committee who advises that committee as well. And then twice a year, the board goes through a skills and experience gap analysis to work out, okay, what have we got, what do we need, and where are there gaps? And then it's trying to balance that talent versus tenure dilemma at any board.

[00:10:30] And then ultimately the appointments council will make a decision on the composition of the board. And we've got a really great mix of a really great diverse board in terms of skills, location, gender, age, and it just works well with those different mechanisms in place.

[00:10:49] Richard Conway: Yeah, that sound like an extremely thorough approach to that. And Anthony you're an independent director on that board. In that scenario where there are certain directors who are representing member constituencies, etc., do you see the role of an independent director to have sort of particular importance and what do you see as your mission as an independent director, I guess?

[00:11:12] Anthony Wright: I see myself as part of the team, I'm a board member. And I happen to have the title as being an independent, non-executive director. But the whole purpose of that independence is bringing diversity of experience and thought. I haven't worked in an accounting firm and I haven't been a member of CPA for many decades.

[00:11:32] So, hopefully I'm bringing fresh perspectives like any independent director would to any board. And often it all goes back to diversity of thinking. Like, it's great to hear different viewpoints and different opinions on whether it's a governance matter or particularly strategy, are we doing the right things and are we doing the right things to achieve the purpose of that organisation?

[00:11:57] It also helps, in some ways try and limit and avoid conflicts that might exist. Speaking as an independent director, I can often be in conversations with members where I can say to them, look, I'm not quite sure what you mean by, but that, but what do you think about these? We are doing it this way.

[00:12:15] So, I think the whole concept of having independent directors or people that aren't members of the organisation, adds a lot of value to what we're trying to do.