L2R: Professor David Gilchrist from Curtin University’s School of Accounting and Elizabeth Carr, chairman of the Macular Degeneration Foundation and board member of the Kokoda Track Foundation, at the media briefing about the release of the Directors Social Impact Study 2012.

By Yasmin Noone

Board directors want to dump the tag line ‘not-for-profit’ (NFP) from descriptive organisational terminology in a bid to escape the negative connotations associated with the phrase, according to a new report.

The Directors Social Impact Study 2012, released by the Australian Institute of Company Directors yesterday, claims that a number of experienced directors involved in focus group sessions for the study said – without prompting – they want the NFP term to go.

They believe the tag, used to describe organisations whose primary objective is something other than the generation of profit, promotes what they are ‘not’ rather than what they are.

“They were very keen to communicate that they believe the term is inaccurate, misleading and diminishes the sector’s reputation,” the report states.

“Their view is that all organisations – NFP and FP – must make a profit and/or a return on investment/assets and that this term simply makes people focus on the wrong element.”

The study, conducted by Curtin University on behalf of the institute, was based upon an online survey of over 2,050 NFP and FP directors and a series of five, two-hour follow-up focus groups.

The report cites comments from focus group participants who said: the term, NFP “affects recruitment as people think we are not as professional or something”; “Making a profit is crucial for not-for-profits”; and “It doesn’t describe us or what we do”.

Professor David Gilchrist from Curtin University’s School of Accounting also expressed his dissatisfaction with the phrase, NFP.

He said the NFP tag was a “misrepresentation of the sector” that makes the sector “appear second best and gives the impression of a sector that is not as professional as it is”.

“What they [the directors] were saying was that the NFP tag carries too much baggage,” Prof Gilchrist said.

“We’ve got to get rid of this tag because it’s not a homogenous sector …and [the term] carries so much meaning.

“It has been used for so long – it is time to change it.”

A new name, a new perception

The directors interviewed said they want a new term to replace ‘NFP’ in the modern vocabulary that is positive and clearly defines what mission-based organisations do.

New tag options proposed by the focus group include ‘for-community-purpose’ or ‘community-purpose-organisations’.

Executive general manager of sustainability for the Commonwealth Bank and director of Clown Doctors (The Humour Foundation), Tristan Wills, agreed with the call to change the NFP name.

“I’ve heard the sector referred to as a number of things, including some people calling it the third sector,” Ms Wills said.

“I’m not a particularly big fan of [that term] either. But the one thing I hear people use and in the most positive way is ‘for community’, rather than ‘not for something’…

“But then it just depends on how you define your community.”

Commenting on alternative names, Prof Gilchrist added that any new title should depict the unity and sense of purpose that mission-based organisations express.

It should also emphasise the important role the sector and its volunteers play in the overall community, from sport to health to education and beyond.   

“From my perspective… it needs to reflect the positive attributes of the sector instead of describing it something it’s not. I think it needs to describe what the sector is and what contribution it makes.”

Prof Gilchrist said further research is needed into community perceptions about the NFP tag and greater collaborative efforts between sector peak bodies, industry groups and volunteers about what a new tag should represent.

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6 Comments

  1. NFP tag is not appropriate. A profit must be made for the organisations to stay in business and to pay directors and senior executives exhorbitant salaries. These people cannot expect to get the same salaries as private sector roles, but they demand it. When are directors going to realise that they are government employees. Most income coming from government. They would not lastfive minutes in the private sector.

    NFP does not affect recruiting of direct care staff it’s the salaries that are paid.

  2. The NFP aged care sector provides worthwhile care services for the elderly without doubt and should be commended accordingly.
    Until this sector can demonstrate the same prudent approach to managing its financial affairs as the FP sector is forced to do, then a name change will do nothing to change the NFP tag.

  3. Perhaps we can called them the “Not For Tax” sector, as opposed to the “:For Tax” sector.

    Cynical I know, and I think the NFP organisations do an amazing job and are a critical part of the health care landscape.

    However, there are without doubt significant benefits and advantages provided to NFP organisations.

    If the NFP name goes are they happy to forgo their NFP privileges also?

  4. Seeing the NFP Directors raised it I agree the “not for tax” would be appropriate.
    Everyone owes it to society to be profitable in all their endeavours, so we should all be treated the same.
    If businesses are running in the same conditions , in the same sector then the Tax status should also be the same.
    Same opportunities for raising capital, investment, attracting staff with same wage and salary conditions.
    Yes and this would also the require Government to fund the “mission” activities to which the current NFP businesses contribute.

  5. I am proud to be a director of a NFP – and the idea of actually getting paid in this role sounds very odd. That’s not why I do it. Most of us work hard for our organisations because we have a vision of how things should be and a passion to help the community move in that direction. If we get a little recognition for doing something worthwhile, it is a nice bonus but taking resources away from the cause to which we donate our time is not on the radar for many of us.

    There seems little point in dumping the tag unless it is replaced with something more meaningful and I am still waiting for something more useful to emerge. We are all trying to make a profit – but the NFP sector defines that in terms of the social dividend it delivers to the community, whereas the FP sector defines it as the dollar profit from which it pays a dividend to its shareholders. Our shareholders are the whole community, both those that do and those that do not contribute capital (in a variety of means and ways) with the intention of delivering benefit everyone – whereas the FP sector only pays dividends to those who invest directly in the enterprise. The two are worlds apart and that should be recognised with a label that has significance.

    At this stage though , I think we are still a fair way from defining that label.

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