The iceberg of governance

Richard Hamilton

If there is one topic guaranteed to distract volunteers, staff and donors from focusing on achieving the mission and objectives of a non-profit organization, it is governance and control. Particularly for organizations which work in many different countries, the effects can be disabling, with great efforts being expended on trying to circumvent or change inappropriate legal provisions. This article focuses on the implications of decisions about governance for multinational non-profit organizations[1] and looks at the process Resource Alliance went through to reach its current name and organizational structure.

When thinking about governance, the temptation is to start by looking at the governing document (ie the constitution, statutes or by-laws). This is what determines the formal governance of the organization. It can be changed if and when necessary, but only in accordance with the terms set out in the current document. But what really matter are the relationships between people and/or parts of the organization that are reflected in the legal structure.

So where do we start?

People generally start looking at the governance of an organization in one of three situations: where there are plans to establish a new organization; where an organization is working effectively but needs to change to ‘keep ahead of the game’; and where the organization is not working properly or is suffering a ‘crisis of confidence’.

Whichever of these three situations applies, the same basic questions should be the cornerstones for discussions and planning:

  • What is the central purpose, vision and mission of the organization?
  • Why is it necessary to have a multinational organization?
  • How are the objectives best achieved in practical terms?
  • Where will the funds come from and go to?

Only when full understanding and agreement has been achieved in answering these four questions should one be tempted to move on to the question of legal arrangements.

What’s in a name?

Like the tip of an iceberg, the name is what the public sees. But what really matters is what it may conceal! Most importantly, does it help the organization do its job? Just one example – admittedly from the fringe of the non-profit world – the International Federation of Football Associations, FIFA. It sounds harmless enough, even appropriate for 204 national members. With a headquarters in Switzerland and a president elected by secret ballot, giving one vote to each national member regardless of size, it could be said to be a model. If you are seriously interested in either the future of football or good governance, recent events indicate otherwise! Behind the formal governance structure lie personal battles for power and serious financial questions.

Before the Resource Alliance (previously known as the International Fund Raising Group) adopted its new name, a wide consultation was carried out over nearly three years. The early focus concerned the real needs and how to change our programme activities to meet them. So how did we arrive at the choice of name?

Keep it short, everyone agreed, just two words! For this article let us concentrate on the second word only, which indicates to the public the culture, style, structure and governance of the organization. What were the options? In addition to the four already indicated in italics, other better-known multinational organizations give us Committee, Council, Foundation, Fund, Network, United and Union – and we may think we understand what these names mean. By far the most common is the all embracing International, so let us look more closely at what different forms of governance and structure may be hidden under this umbrella name.

Control or confusion?

There are numerous American and British organizations which have added the word ‘international’ to their name, either because it sounds impressive or simply because they send, or ‘export’, money from one country to another. Other examples are truly multinational and much more complex in their governance and structure. The World-Wild Fund for Nature-International (WWF-I), Marie Stopes International (MSI) and Alzheimers Disease International (ADI) may give the impression they are all ‘the same’.

In practice, ADI is much closer to another major multinational healthcare organization than it is to either WWF-I or MSI. Both ADI and the Multiple Sclerosis International Federation (MSIF) have autonomous national member societies in over 50 countries and are organized, structured and governed by and for these societies (model 1). WWF-I, on the other hand, owns the name and panda logo, and this forms the basis of its contract with the WWF national organizations – some would say closer to a Body Shop type of franchise (model 2). Whereas MSI, which also owns the name and logo worldwide, has locally named partner organizations in 29 countries and provides coordination and technical assistance in what they describe as a ‘social franchise’ (model 4).

The crucial point in the discussion about names is not right or wrong, or even good, better or best. It is understanding the underlying implications of the worldwide relationships and finding the most appropriate structure to achieve the organization’s agreed purposes. The board members (or equivalent) will be in control of a non-profit organization, but this begs the question of how the members of an international board are actually selected.

Organization and structure options

All organizations must have a governing document. This will set out, in legal terms, the relationships and procedures which have been agreed. As long as the accepted everyday practice works, people take the legal part for granted, but if things are not accepted or relationships go seriously wrong, this document is what counts. We therefore need to have a clear understanding of the options available so we can provide the lawyers who draw up the document with as good a brief as possible.

The Resource Alliance wanted to evolve from its historical way of working, with a strong emphasis on the office in London, to a decentralized organization for the ten regional workshops and new activities, using established partner organizations throughout the world. There was total agreement on the way we wanted to work, but when we turned to the more formal relationship structure, it was assumed that this would follow model 4 and we would create a new partnership. Only then did it emerge that a misunderstanding caused by confusion not disagreement was likely to result in a centralized organization (model 2) – not what we intended at all! A revised brief for the lawyers has ensured that we now have a true partnership structure which reflects and supports our expanded programme.

The key thing is to be clear about what model will work for your organization long before you are looking at legal drafts. The examples below, taken from existing and well-known organizations, can inform the discussion on which will meet your needs.[2] [3]

Getting it right first time is not easy. There is no ‘one choice fits all’ model – and just adding the word ‘international’ to your name will help nothing. Even after three years the Resource Alliance is still developing the details of its new system of regionally based governance, and this will continue to evolve over the years to come.[4]

Models

  1. A federation This is composed of autonomous national societies which can claim membership in a voluntary worldwide organization which will also support an international secretariat.
  2. Centrally established with national members These are usually founded with an international headquarters and a number of national organizations at the same time using a legal structure similar to a franchise agreement.
  3. Parent organization with subsidiaries This closely resembles a corporate model and usually has its origin where a dominant funding country ‘exports’ money to others. This may devolve into a different model over a period of time.
  4. Partnership This is a legal relationship between autonomous organizations, sometimes called a social franchise, with a formal secretariat or dominant partner.
  5. Alliance or network of like-minded autonomous organizations These come together either with or without a secretariat or support office.
  6. Centrally controlled with decentralized operations At first sight a classic multinational company, but this model can be used very effectively by non-profits as well.

1 In this article the word ‘organization’ means one which works multinationally –sometimes mistakenly called ‘internationally’.
2 If anyone knows of other models or combinations, I would be most interested to receive a copy of the governing document.
3 A square denotes an organization that is fully autonomous while a circle denotes one that is not. A continuous line denotes a line of control while a dotted line denotes an informal relationship.
4 The Resource Alliance now has staff members co-located with our three regional partners, all existing autonomous organizations. These are Venture for Fund Raising, Philippines (for South-East Asia); Centre for Resource Mobilization, Kenya (for East Africa) and Civil Society Development Foundation, Hungary (for Central and Eastern Europe).

Richard Hamilton served as Secretary General of the Multiple Sclerosis International Federation from 1995 to 2000. He then founded Future Indicative, which advises multinational NGOs on issues of governance, relationships and resource development. He has been a board member of the Resource Alliance for six years. He can be contacted at richardfutureindicativeg@yahoo.co.uk.

For more information about the Resource Alliance, visit http://www.resource-alliance
For more information about MSIF, visit http://www.msif.org


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