Today we find ourselves with political systems based on 18th century philosophy, run with 19th century administrations, built on 20th century technologies, attempting to confront 21st century challenges [1]
In a smaller, simpler world, the incorporated society model was perfect for voluntary organisations. Membership gives ownership rights and obligations and, depending on the constitution, some form of control over the organisation. In many cases, this will remain the perfect solution.
But as entities grow, adding staff and assets, matters become more complex, compounded by the development of federal structures, groupings of societies across multiple layers, (local, district, region, national etc). Where this occurs, a disconnect is possible between the grassroots membership (the ultimate owners) and the peak body at national or even international level. Generally, this results in some form of diversionary and energy-sapping political distraction. Often, however, not without some justification.
For us, this is being brought into sharp focus through our work on the governance review of the New Zealand Rugby Union, arguably one of Aotearoa’s largest and most commercial incorporated societies. This is a $300m global business operating in a very challenging environment. Its owners, down through the layers, are ultimately individual members of local rugby clubs. The question is whether this structure is the best one to both honour that ownership and to give rugby at all layers the best chance of success. It’s a tough question and you will be able to read the Independent Review panel’s conclusions in September.
It is a rapidly changing world. We have found cause to use Lenin’s wonderful quote twice in this edition of Good Governance:
There are decades where nothing happens; and there are weeks where decades happen.
Covid, the war in Ukraine and the brutal reality of climate change impact here in Aotearoa have in short succession significantly affected our world.
Add ongoing generational change to this and we are now in world that bears no relation to that from which the 1908 incorporated society emerged:
The rapid evolution of our society over the past 50 years has created a situation where our eldest members were born into a world that our youngest members do not relate to in any way [2]
Baby boomers built much of our non-profit structures, but it cannot be assumed that the next generations are necessarily interested in maintaining them in their present state. There is some evidence [3] that these generations are just as likely to volunteer—or even more so—but how they intend to do that is very different. They are more purpose- and cause-driven. They will give time where they believe they can make a difference, which does not mean propping up failing organisations or attending seemingly pointless meetings. And if that experience can’t be delivered in a seamless digital medium, then forget about it!
In committee and board rooms, if the current faces around the table do not include a good number of those who will determine the future (the next generation) then there is a problem.
There is nothing inherently wrong with federal structures. They have been with us for a very long time. The almighty Persian empire was a form of federation. The contract was: pay the taxes, don’t create trouble and you can pretty much carry on life as usual. The upside was defence, access to knowledge and a vast span of trade.
The European Union is perhaps today’s largest federal experiment; a community of nearly 450 million people. Such structures are never easy and are riddled with paradox. They are led from the centre but owned by component entities or individuals. The voice of the individual must not be lost, but the common good must be kept front of mind. They require compromise and pragmatism.
As organisational theorist Charles Handy notes:
[Federalism] is never easy, because it means allowing the small to be independent while still being part of the larger whole, to be different but part of the same. Federalism is therefore fraught with difficulty because it is trying to combine those two opposites, to manage the paradox. [4]
Some British citizens never really grasped the idea, maintaining that Europe is somewhere one goes to rather than something one belongs to. The consequences of that insularity are becoming apparent.
Federal structures can be cumbersome, costly and time consuming. They require an understanding of subsidiarity [5] to work at all. The idea is that—as far as possible—social and political issues should be addressed at the local level or at a level consistent with their efficient resolution. The centre should not be perceived as becoming too powerful.
Even the Pope has seen fit to weigh in on this matter. The papal encyclical, Quadragesimo Anno of 1931, was a response to industrialism and the Great Depression. It stated:
It is an injustice, a grave evil and a disturbance of right order for a larger and higher organisation to arrogate to itself functions which can be performed efficiently by smaller and lower bodies.
The idea that decision making should be as close to the action as possible is consistent with much contemporary thinking on management structures.
Rosabeth Moss Kanter characterises the benefits [6] of discretion sitting within smaller units as being faster, focused, flexible, friendly and more fun.
We suspect that for small, simple organisations the incorporated society model remains the solution, but for complex entities—especially now with substantial businesses to run—other approaches may be needed.
Oddly, many of the contemporary approaches to structures have the hallmarks of good governance. The centre sets outcomes to be achieved (generally commercially expressed targets) and lays down only as many guidelines (policies) as necessary. The operating units have a significant level of freedom in choosing their own path to success.
We reviewed Gary Hamel and Michele Zanini’s excellent book Humanocracy [7] in Good Governance 81. The authors work through some great examples of modern dispersed organisations. No direct correlation exists between a commercial entity allocating capital from the centre and the bottom-up ownership model of a federation of incorporated societies. Strictly speaking the lower-level entities in a federation are not subsidiaries. But there are many learnings from some of the approaches outlined in the book. Consistent with the Pope’s view of nearly a hundred years ago, as far as is reasonable, discretion to act sits with the operating entities.
There is no one perfect answer here and organisations are testing a range of solutions. These include shared service environments, unitary models, virtual groups with no formal membership, common facilities across organisations with shared management, and links with private providers.
The ultimate issue for an incorporated society is deciding if this is the best structure to achieve its stated purpose. Currently members have certain rights and obligations associated with membership. These fundamental principles may need to be re-examined in a changed world.
Historically these structures had an assumption of volunteer labour built into them. Consistent with the comment above, research [8] indicates an ongoing willingness to volunteer. However, this is more likely to be at the coalface doing demonstrable good rather than back room administrative tasks propping up a struggling organisation. The capability and perspective needed to lead complex businesses may not come from a base of passionate volunteers. But creating too much distance from that base may be equally counterproductive.
Plenty of challenges and no easy answers.
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We acknowledge and thank Sport New Zealand for their permission to create this version of a longer commissioned opinion piece co-written with sports lawyer Maria Clarke.
The full article can be found here
Notes
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- Richard AK Lum. Futurist and Chief Executive of Vision Foresight Strategy
- Moore, B. Association Apocalypse. Strategic Membership Solutions. 2019
- Ibid
- Handy, C. The Empty Raincoat. Arrow Books 2002 edition.
- Subsidiarity
- Kanter, R.M. 5 Fs for Success. The Independent July 1993.
- Hamel, G. Zanini, M. Humanocracy. Harvard Business Review Press. 2020.
- Sport New Zealand. 2007 Volunteers - the heart of sport
