The philosophy of not-for-profit organisations seems to resonate with younger workers and managers. It may be about doing good work or it may be the growing 'not for the profit of shareholders' approach.

Lesley Parker reports.

Many not-for-profit managers will quietly admit to having a self-esteem problem. They are the 'poor cousins' - sometimes figuratively, but often literally - of their corporate sector peers.

But, in the post-HIH era, and at a time when it sometimes seems like chief executives are measured more by their pay packets than their achievements, the question is being asked: do leaders of the not-for-profit (NFP) sector have something to teach their corporate peers?

Hay Group consultant Henriette Rothschild says that when a Hay Group team began a pro bono study into NFP leadership it was with the aim of being able to help NFPs tackle management issues. But by the end of the study, the team was talking about how their findings could be applied to help the Hay Group's corporate clients.

"It started out as being about selection, development and succession planning - what makes the best not-for-profit leaders," Rothschild says.

"But by looking at what not-for-profits have been doing we found we could actually feed that in through our work with corporate leaders, to provide them with some additional insights.

"There's something around the personal characteristics you find in the really outstanding not-for-profit leaders - around achieving through others, not putting yourself above the organisation, not putting yourself above the cause - that actually parallels what we are seeing with the emerging requirements of leaders in the corporate sector," Rothschild says.

"In the corporate world, we've moved on from that sort of ego-driven leader. The leaders that are succeeding are the ones who are really able to engage others and achieve effectively through others, who can influence using emotion, who are genuine, and who use humility rather than the grandstanding that may have been a characteristic of leaders in the past.

"And that's where the not-for-profits have always had to be; because they couldn't rely on hierarchy to dominate and they couldn't rely on throwing money at a problem, they've always had to have those characteristics."

The Hay Group study was based on in-depth conversations with chief executives of NFP organisations, plus a survey of not-for-profit managers, which asked them who they thought stood out as impressive leaders in the field and why. Corporate clients were also asked about NFP partners. Official statistics put the number of NFP organisations in Australia at about 700,000, although only about 35,000 of them are large enough to employ staff. The combined annual turnover of the sector is estimated at about $30 billion and NFPs are said to account for about 4.5 per cent of economic activity, putting the sector on a par with the agricultural industry in Australia .

Philanthropy Australia says that, these days, about 60 per cent of the NFP sector's income comes from sales of goods and services, 30 per cent from the government and only the remainder from donations. That makes NFP management less about running chook raffles and more about running a business. Rothschild says the Hay Group study found that the most effective leaders in the NFP sector are those that are able to step up from simply managing to taking a leadership position. Specifically, this includes shaping a high-performing management team for support and managing the board relationship effectively, so the board and the CEO don't end up 'micro-managing'.

Part of building a strong team is being able to make some tough decisions based on people's performance, not just their passion, she says. Jill Weekes, Chief Executive of the Starlight Children's Foundation - which aims to brighten the lives of seriously ill children and their families by providing much-needed entertainment and positive distraction in and out of hospital � says performance management can be one of the toughest jobs at an NFP.

"You become very close to people when you are living through some of these children's lives," Weekes says.

"You become so close to your team that you don't have the separation; being able to step back and be a manager and do the tough stuff, the feedback, that's not easy sometimes.

"There's the whole issue of passion and commitment to the cause being confused with performance and accountability," she says.

"But you've got to do it, you've got to make the tough things happen - but with a kid glove."

Estelle Fyffe, Chief Executive of disability and community aged-care services provider annecto, the people network, says people "shouldn't hang their brains up at the door because of their passion."

"The management qualifications, the proper accounting, the judicious financial management, the meeting of targets are all important; they're not an either/or," she says. 

After all, the aim is to provide the best possible service for the end user, using the donors' dollar in the best possible way. And part of that is recruiting, developing, and retaining the best people for the job. The trouble is, NFPs can't hope to compete on the basis of remuneration alone.

Lindsay McMillan, Chief Executive of the MS Society of Victoria, who has overseen two international summits on leadership in NFPs, says that these days, NFPs recognise that they do need to pay for the quality of people they wish to attract - particularly for high-level positions - while still respecting the fact that people are usually drawn to an NFP as a 'vocation' rather than as a step up the salary scale.

"We don't want to be abusing people's deep desire to make a difference and not pay them a level of remuneration that matches their skill and interest," he says.

Bernie Murphy, who leads the New South Wales arm of the RSPCA, having come from a position as general manager of a state government body, says that, in the absence of big dollars, the animal welfare group tries to offer attractive work experiences.

"We take young vets out of university and they come across at a very, very low rate. What we say to them, in essence, is: if you work for us for three years we will give you such an interesting range of work and life experiences it will make you very, very marketable when you go to the private sector."

Whether it's staff or volunteers, says Murphy, workers should get something in return. "You look for activities or outcomes that reinforce the value of their work, that make them feel they've made a difference, that give them a rich experience."

Weekes, who's been on the other side of the fence in advertising agencies and in marketing with Cadbury Schweppes, says it's "imperative" that NFPs attract highly skilled people.

"The need for less wastage in our environment is critical; probably more critical than the corporate sector, although I know some people won't agree with that," she says.

"When you're dealing with the donated dollar that's a huge responsibility, and we pride ourselves on being very good custodians of that dollar. Therefore, you've got to have really smart people on your team."

She agrees that providing a satisfying work experience is the key to recruitment and retention.

"For people who are really driven by values, Starlight's a very attractive place to work because every day there is constant reinforcement of why you're working here," Weekes says.

She pulls out a 2004 staff survey with results that Starlight's HR director, another recruit from the corporate sector, told her many companies would "kill for".

In the survey, 80 per cent 'strongly agreed' that they were proud to tell people they worked at Starlight; 86 per cent said they were listened to; 87 per cent said they were encouraged to share their experiences, and 92 per cent said they took pride in their achievements.

The Hay Group says the staff relationship is just one of a myriad of relationships that outstanding NFP leaders manage well. "The most effective CEOs have deep and insightful relationships [with], and understanding of, the broad and diverse stakeholders they interact with," says Rothschild.

And the really outstanding CEOs have "a unique ability to tell a story" that engages each of those stakeholders. While corporate leaders, too, face diverse stakeholder groups, Rothschild says balancing the various interests can be more of a juggling act in an NFP.

"There's more hierarchy in stakeholder groups in the corporate environment," she says.

Fyffe, of annecto, says different stakeholders have different interpretations of what the important issues are, and the CEO of an NFP needs to be able to explain what's happening in ways that connect with those different frames of reference.

"To illustrate, someone of social conscience who perhaps has a strong corporate background is going to relate to investments and outcomes, yet they are no less passionate than someone who would be offended if you started talking in those terms," she says.

"The commitment can be the same, but the way of expressing whether something's worthwhile can be very different. "In the end, the stories from the heart seem to touch everyone, and NFPs benefit from multiple frames of reference." But the bottom line is increasingly important these days.

Weekes says her management team regards Starlight as a business. "We're not 'not-for-profit' - we're just not for the profit of shareholders," she says.

"We really don't like the term (not-for-profit), because we have to make a surplus, we have to be raising more money, because the demand for our services is so huge." That said, no one would deny that keeping families together or improving quality of life have a value beyond measure. Finally, the Hay Group study identified a number of personal characteristics that were more common in the better-performing NFP leaders.

They included a deep, personal commitment to their cause; humbleness, or an ability to put the organisation and the cause above their own personal agenda; self-awareness; and effective self-management. Weekes says that the people attracted to work in organisations such as Starlight come with a strong set of values. Those values plus their skills in areas such as stakeholder/customer relationships and organisational culture mean NFPs do have something to offer their corporate peers.

"We've seen a strong backlash against the recent scandals in the corporate world and I think the way we work is a shining example," she says. "One of my hopes and desires, and one of the things Starlight can take back to the corporate world - who have been tremendous supporters - is to help them build that wonderful engagement and culture."