Measuring financial performance –

							Measuring financial performance – What corporates look for
Anthony Lupi Westpac To begin with let me say on behalf of Westpac how pleased we are to be the major corporate sponsor of this workshop. As a lead in to my presentation, I want to tell you why Westpac wished to be involved in today's proceedings and why we think this workshop program is important enough to outlay funds as a sponsor. Clearly, there is some synergy between a financial services provider and the notion of counting and costing. This is familiar territory in which we feel very comfortable. However, our reasons for being involved are much more than a sense of comfort with the topic. Our major reason for supporting the conference is that we believe the topic is very important It is important to Westpac as a responsible corporate citizen, which provides significant funds to a wide range of community organisations, that we are clear on the types of accountability and measurement that we as a corporate would expect, and that we communicate this to your sector as clearly as we can. We think this has benefits for both of us if you know what our expectations are before you approach us for support. But it is a bigger topic and issue than simply discussing what we as a corporate supporter expect. We think it is important that you engage in dialogue around measurement and accountability with:  other sectors from whom you draw support – eg Government and your donors  your own internal constituencies such as your staff and your customers  the wider society from where you draw your legitimacy  other organisations within your sector Engaging in such debate ensures that the community sector is more robust. Greater accountability leads to greater transparency, and this only benefits the community sector, and the community as a whole. To be able to encourage and facilitate this debate, and to be a part of it is a great opportunity for Westpac. It helps us to better understand the community sector, and better understanding we believe leads to more effective collaboration and partnership.

Finally for us, our involvement in this workshop is an important part of our "intelligent giving" program, For those of you who are not aware, Westpac, for the past few years, has developed an "intelligent giving" program where we have been putting resources into the community sector in a way that strengthens your capacity for effective financial management and independence. We think this approach has much greater long term benefit that to be merely a provider of philanthropy or sponsorship funds. Some examples of our intelligent giving have included:  Providing sophisticated and state of the art training for senior managers of non profits in financial management.  Funding consultants to work with community organisations to refine and reposition their income generating programs  Providing Westpac expertise for specific projects community organisations have wanted to implement. However, that's enough of a lead in, its time now to go to the heart of my topic. In speaking of the accountability that corporates expect of the community sector I thought it might be useful to share with you how the different stakeholders within the corporate sector view corporate community involvement and their expectations of such involvement. For it is these expectations which, by and large, drive the issues of accountability. Firstly, let me identify the four key constituencies within my organisation, as these are the key drivers of decision making around corporate giving/corporate support:     Directors - who represent our shareholders Senior executives – who are the key decision makers Staff – who are key influencers. Customers – who are the lifeblood of our organisation, and whose opinions and views are vital in determining our marketing and product delivery strategies.

Each of these groups has their own distinctive perspective, and if you are serious about developing a relationship with a corporate - that will end up with you receiving financial support, - then I would strongly recommend to you that you consider how you can satisfy the accountability requirements of all four of these stakeholder groups. In my dealings with these key stakeholder groups I am often asked to explain why Westpac should support a particular non profit or a specific program. From their various perspectives they want me to give them the rationale that satisfies their concerns and in essence it is out of these perspectives and the levels of

concern that they have that we can draw out the many layers and levels of accountability that a corporate looks for from a community organisation. When I was considering these various layers and levels of accountability a number of themes began to emerge which I would like to discuss in some detail and give some examples. Essentially, the themes that emerge from my analysis of levels of accountability are:  That there needs to be a good fit between the two organisations – a fit between values, culture and expectations  That relationships are a long term investment  Reciprocity, and the notion that relationships are a 'two way street'  Capacity and willingness to work the relationship for the benefit of both parties You will see as I delve into some of the specific issues around accountability that they inevitably lead back to these relationship related themes. Essentially, when a corporate is looking at the issue of accountability, they tend to consider it under 4 headings: 1. Financial Accountability 2. Corporate Governance Accountability 3. Program Accountability 4. Relationship accountability

Financial Accountability
Lets begin then with Financial Accountability: There are some broad issues here that span across all four of the major constituent groups, and in some ways these are fairly generic aspects of financial accountability:  That you keep sufficient and accurate financial records that give a clear picture of your income and expenditure, assets and liabilities.  That you have in place appropriate financial control and management mechanisms to prevent fraud and malpractice, including annual external audits of your accounts. But in the main, these are the "motherhood" aspects of financial accountability. And it would go without saying that any funding source would expect this level of accountability from you.

Beyond the motherhood issues, the types of questions my four major constituent groups tend to ask me about financial accountability can be grouped under a number of major headings: Income sources:  Where does their funding come from?  What percentage of their income do they derive from: - Government - Sponsorship - Fees and charges - Fundraising - Interest on assets  Who are their major individual and corporate supporters?  Do they have a database of these? How accurate is this database?  What are the demographics of their supporter base? Organisational and management efficiencies:  What is the structure of the organisation?  Who is on the Board?  How many staff do they have?  Percentage of salaries spent on program vs administrative vs fundraising staff?  How much does their administration cost? Banking matters:  Who do they bank with? And how long have they banked with them?  How many staff do they have?  Who is on their board?  Where do they invest their cash and superannuation assets?  Do they spread their investments across several institutions?  Are they using electronic banking channels?  Are they a high volume transaction organisation?  Do they have high credit requirements?  How do they manage cash flow?  How do they manage their debtors? Fundraising:  How much does it cost these organisations to raise a dollar?  How efficient is their fundraising?  How many fundraising staff do they employ?  Who are their major individual and corporate supporters?  Do they have a database of these? How accurate is this database?  What are the demographics of their supporter base?  How do they acknowledge their supporters?  How do they communicate with their supporters?  How regular is this communication?  What is their profile in the community?  How do they measure this?

So where is all this taking us in terms of the key issues around what accountabilities are corporates looking for? What is it that they measure? If you look behind these questions, the strong theme that emerges is that of reciprocity, or put another way, the notion that relationships are a two way street! In other words, in terms of their finances – what do they have to offer? – what can they bring to the relationship that will be of value to us. Are they looking to us to be simply another revenue stream or is there the potential for a mutually beneficial relationship? By all means, a corporate expects you (as do all your other stakeholders) to manage your finances wisely. But when we talk finances we move very quickly into the areas of relationship and the value in such a relationship for our major stakeholder groups.

Corporate Governance Accountability
In terms of corporate governance, the types of questions I am asked are:  What is the legal entity?  To whom is it accountable?  What formal affiliations does it have?  To whom does the organisation have to give an account of activities and outcomes?  Who is responsible overall for the performance and behaviour of the organisation?  What is its relationship to the three levels of Government?  What is its image and reputation with Government? Very quickly, these types of questions lead to more detailed questions about:  Who is on the Board?  Who are the key staff?  What are their core values and do they align with ours?  Can they be trusted to behave ethically and responsibly from a governance perspective? Again, if we go behind these questions what we find is the corporate wanting to explore the relationship issues and potential yet again:  Is this the type of organisation that we want to be involved with?  Will it reflect positively on our brand?  Who are the key players?  Do they have a good track record?  What are their reputations and track record with key constituencies?  Will they understand our needs and perspective? Put in fairly simple terms what they are asking is:

    

Is there a good fit between our organisations? What are the core values of this organisation? Are they compatible with ours? What is their vision for the future? Are they dynamic, moving with the times, at the cutting edge of their field?

How these questions are answered will determine whether or not a relationship has potential.

Program Accountability
From a program perspective, the types of questions I am asked are:  What does this organisation really do in terms of outcomes?  What needs is it trying to address?  How focussed is it?  Who are its clients?  How many people does it service and over what time period?  How does it distinguish or differentiate itself from its competitors?  How long has it been in existence?  What is its image and reputation in the community?  What brand equity does it have?  What are the values of the brand?  What plans does it have to grow its brand equity?  Are these synergistic with Westpac's plans for growing our brand equity?  Is it national?  What are its points of representation?  What type of staff does it employ to deliver its programs?  In what ways does it rely on volunteers? Once we get beyond these fairly basic questions about programs, the exploration again quickly turns to relationship factors:  What do they want from us in terms of program support?  Is it just money, or are they wanting to really explore the possibility of how we might add value to each other's operations?  In what ways can we involve our staff in the relationship and in the programs of the non profit?  In what ways can we involve our customers? Again, behind these questions are the themes of reciprocity and value for our stakeholders. Like all of us, we want consistent and sustained value and return from our investments. Relationship accountability

From a relationship point of view, the specifics I am asked about are:  What has our history been with this organisation?  To what extent and in what ways do our staff support this organisation?  What resources have they devoted to building and nurturing a relationship with us?  In what ways do we believe they are prepared to invest significantly in a more vigorous relationship?  Will we have to do all the work to leverage the relationship?  Who else are they involved with?  To what extent do we get to have the prime relationship?  In what ways can we involve our staff, customers, suppliers, and shareholders in extracting value from this relationship?  In what ways will this relationship complement our brand building strategy?  How effective are their PR / Marketing staff?  What communication vehicles do they have?  What is their look and feel?  How do they use these? Again, behind these questions are the themes of reciprocity, capacity and willingness to both work the relationship So from all of this, it should not be too hard to conclude what it is that corporates are looking for in terms of accountability and measurement. For a corporate, what is underlying these accountability questions, are the more fundamental questions of:  What's in it for us?  In what ways can we use this relationship to grow our business?  In what ways can we use this relationship to grow our image and reputation?  What is the shareholder value / shareholder return for investing in this organisation?  Do they have any resources that they will invest into a relationship?  How likely are they to be active partners and make this relationship work for us?

So, in conclusion, I would suggest that before you approach a corporate, consider all of these things and ask yourself if you have the capacity and willingness to:  be accountable along these dimensions  invest in tools to measure these aspects of the relationship. And perhaps the most important investment you have to make is the investment of time and energy. Because relationships that work take time, are built up gradually, and require investment from both parties.