1.1 The organisation’s purpose is clear, recorded in its governing documents and
understood by the board
1.2 The board approves a strategy to carry out the organisation’s purpose
1.3 Decisions by the board further the organisation’s purpose and strategy
1.4 The board regularly devotes time to consider strategy
1.5 The board periodically reviews the purpose and strategy
Every organisation will have a purpose. For the organisation to be successful the purpose must be clear, and there must be a strategy that sets out how the organisation will work towards achieving its purpose.
are five critical questions relevant to determining purpose
- Why does this organisation exist?
- What does this organisation do?
- Who does this organisation benefit?
- How will this organisation achieve its goals?
- What does success look like for this
What is a purpose?
An organisation’s purpose is what it hopes to achieve. It
is the reason the organisation exists, and all its activities
should contribute to achieving its purpose in some way.
It is the ‘what’ and the ‘why’ of an organisation’s work.
Purpose is the centrepiece of governance in the NFP sector.
NFPs are set up for many different purposes. For example,
NFPs may have purposes such as:
- Promoting participation in a particular sport;
- Supporting the practice of a certain faith; or
- Providing accommodation and care to older Australians.
Some organisations may have more than one purpose.
For example, a faith-based school might have the dual
purposes of providing education and facilitating
Registered charities must only have
‘charitable purposes’ as are set out in the
Charities Act 2013 (Cth). These include
purposes such as: advancing health,
promoting reconciliation and preventing the
suffering of animals.
Some NFPs may have the same purpose for many years,
while others may find themselves revising their purposes
from time to time or creating new ones entirely. The role
of the board in defining purpose will depend on several
factors such as the maturity of the organisation or
changes in its operational environment such as a cessation
Because purpose goes to the heart of an NFP’s identity,
any changes to it are often the product of a collaborative
process involving considerable thought and debate.
Consideration of purpose will typically involve consultation
between directors, staff, volunteers, members and other
stakeholders such as clients and donors. It is important for
an organisation’s stakeholders to understand and support
its purpose if it is to be successful in pursuing it.
For an organisation to effectively and properly pursue its
purpose, the people involved in the organisation must share
a common understanding about the way that this is done. To
do this, an organisation will have:
- Values that express what the organisation considers to be
- Principles that express what the organisation considers to
Together with purpose, these values and principles form the
ethical framework of an organisation. This framework guides
the decisions of the people involved in the organisation and
should be reflected in its policies, systems and processes.
The board should work to embed its ethical framework
into all aspects of governance so that the organisation can
pursue its purpose effectively and in the right way.
Organisational values are discussed in greater detail in
Principle 10: Culture.
Communicating about purpose
An organisation’s purpose should be communicated as
clearly as possible so that it can be easily understood by
everyone involved with the organisation. It is important that
there is clarity about what an organisation aims to achieve
and the way it does this.
There are many ways to communicate about purpose. Many
organisations choose to express their purpose through a
combination of mission and vision statements.
Mission statements describe what an organisation does to
achieve its purpose. They are high-level statements and will
generally aim to provide a clear and succinct summary of
the reason the organisation exists.
- “To prevent cruelty to animals by actively promoting
their care and protection” (RSPCA Australia);
- “To present opera that excites audiences and sustains and
develops the art form” (Opera Australia); and
- “To support people who are blind or have low vision to
live the life they choose” (Vision Australia).
Vision statements express what an organisation aims to
achieve through its work by describing what the world
would look like if they were successful in achieving their
purpose. Vision statements are aspirational and should be
something that inspires the people involved with
- “All young Australians are supported to be mentally
healthy and engaged in their communities” (headspace);
- “A world in which all children realise their full potential
in societies that respect people’s rights and dignity” (Plan
International Australia); and
- “For cricket to be Australia’s favourite sport, and a sport
for all Australians” (Cricket Australia).
The way an NFP defines and expresses its purpose is a
matter for the board, but careful consideration should be
given to the way this is done so that any legal obligations
are met. For example, changes to an organisation’s purpose
may affect its eligibility to access certain tax concessions or
registration as a charity.
It is common for an NFP’s purpose to be set out in its
governing document, usually in the form of ‘objects’.
Mission and vision statements are often used to develop
the organisation’s objects so that they can be more easily
communicated and understood.
In this document the term ‘governing
documents’ refers to the documents that
set out how an organisation must be run.
These documents are usually known as the
constitution, charter, rules or articles of
In some cases, an organisation’s purpose may be recorded
in several different documents. An organisation might have
relatively simple objects recorded in its constitution which
are developed in greater detail through other sources such
as its strategic plan.
Wherever an organisation’s purpose is recorded, it is
important that it is clear and understood by everyone
involved in the organisation, including the board.
Can an organisation’s purpose change?
An organisation’s purpose may change over time. For
example, the organisation may have achieved its goal, or a
new goal may have arisen. Boards should regularly review
their purpose to make sure that it is still relevant and make
changes if necessary.
An organisation’s governing documents
and any laws that apply to it may set out
requirements about how an organisation’s
purpose can be changed, including any limits
on what the purpose can be.
How often a purpose needs to be revisited will depend on
the nature of the organisation and what its purpose is.
Some purposes may last forever (for example, “to educate
the children of Toowoomba”) whereas others may be time
limited (for example, “to commemorate the centenary of
Sometimes, an NFP’s activities may drift away from its
purpose over time because of a lack of control or because
the relevance of the purpose has diminished. This is called
‘mission drift.’ This can give rise to significant problems and
it is important that the board monitors alignment between
the organisation’s activities and purposes, and takes steps
to address misalignment if it occurs.
It is a good idea to seek legal advice before changing
a purpose, as even small changes may have significant
impacts, such as to an NFP’s entitlement to access
certain tax concessions. Changes to purpose may also be
constrained by other factors, such as the terms of grants
Having a not-for-profit purpose
Purpose is important for NFPs, but it is not what sets them
apart from for-profit organisations (businesses). Many
for-profit organisations also have a purpose (for example,
Telstra’s purpose is “to create a brilliant connected future
for everyone”). What sets NFPs apart is that their purposes
The ACNC provides the following definition of NFP:
Meaning of Not-for-Profit
Generally, a not-for-profit is an organisation that
does not operate for the profit, personal gain or
other benefit of particular people (for example, its
members, the people who run it or their friends or
relatives). The definition of not-for-profit applies
both while the organisation is operating and if it
‘winds up’ (closes down) i.e assets and income of
the organisation shall be applied solely to further
its objects and, no portion shall be distributed
directly or indirectly to the members of the
organisation, except as genuine compensation for
services rendered, or expenses incurred on behalf
of the organisation.
This definition does not mean that the people involved
with an NFP cannot benefit from it, provided this benefit
is consistent with the NFPs purpose. For example, an NFP
could provide aged care services to its members provided its
purpose was to provide those services. By comparison, if an
aged care service made a profit from its operations, it could
not share these profits with their members. This would be
private benefit and not consistent with being an NFP.
In most cases, NFPs are required by law to have clauses
in their constitution requiring the organisation to operate
as an NFP. These clauses should set out how an NFP’s
assets and income are to be used when it is operating and
if it winds up.
The ACNC provides example clauses that NFPs can use:
The assets and income of the organisation shall be
applied solely to further its objects and no portion
shall be distributed directly or indirectly to the
members of the organisation except as genuine
compensation for services rendered or
expenses incurred on behalf of the organisation.
The Dissolution Clause
In the event of the organisation being dissolved,
all assets that remain after such dissolution and
the satisfaction of all debts and liabilities shall be
transferred to another organisation with similar
purposes, which is charitable at law and which has
rules prohibiting the distribution of its assets and
income to its members.
What is strategy?
If an organisation’s purpose is the ‘what’ and the ‘why’
of its work, strategy is the ‘how.’ Strategy brings the
organisation’s purpose to life by setting out the way by
which it will be achieved.
“…If you don’t know where you’re
going, any road will get you there,
said the Cheshire Cat to Alice…”
Lewis Carroll, Alice’s Adventures in Wonderland, 1865
Strategy is the way an organisation defines its goals and
aligns activities and resources with them. Strategy is also
inherently linked with risk which is discussed in greater
detail in Principle 5: Risk management.
Many organisations will develop a single document to
express their strategy. This helps with communicating
the strategy to the people involved in the organisation.
Wherever a strategy is recorded, it is important that it is
clear, understood by relevant stakeholders and that board
decision-making processes are aligned to it.
Many organisations use strategic plans to define how
resources and activities will be aligned to a set of goals
within a defined period. Strategic plans typically include
several high-level goals which span several years and are
reviewed at regular intervals.
Strategic plans make it easier to understand and
communicate how an organisation is pursuing its purpose.
Most strategic plans also include measures which are used
to evaluate its performance. They can be useful tools to
communicate with stakeholders about strategy, but they
are not a strategy in and of themselves.
For many organisations, the process of strategic planning
is as important as the plans that result from it. Strategic
planning gives organisations the opportunity to reflect
on their goals and to develop an understanding of their
operational environment which assists in the development
and execution of strategy.
The board’s role in strategy
Strategy is a key responsibility of the board. How the
board performs its role in developing strategy will vary
depending on the organisation’s characteristics.
Some boards will take an active role in strategy
development, working with management and other
stakeholders to define and communicate their short and
long-term strategic direction. In other circumstances, the
board may test and approve the strategy, but it will be
substantively developed by management.
In this document the term ‘management’
is used to refer to an organisation’s staff,
typically, the CEO and executive staff.
Not all NFPs employ staff, so in some
circumstances this term may not be
Whatever the board’s contribution to strategy
development may be, its role in providing strategic
thinking in decision-making is critical. Because
directors are not generally involved in the day-to-day
operations of a business, they are able to bring a more
high-level perspective to their work. This is one of the
most significant ways that boards can contribute to the
effective governance of their organisations.
It is common in NFP organisations for directors to be
more ‘hands on’, however care should be taken that this
does not prevent them from bringing the necessary focus
and attention to their role.
For example, boards might consider strategic questions
- What decisions do we need to make now
to meet future financial needs?
- To what extent are we prepared to tolerate
failure in pursuit of innovation?
- How does the community’s perception
of us impact our ability to achieve our
Boards should apply a strategic lens to their decision-
making. This means that they should make their decisions
in the context of the strategy, but also consider how their
decisions may impact the organisation’s strategy. For
example, a decision they make could mean that the strategy
needs to be amended.
Making time for strategy
There are many issues that demand boards’ attention.
Although boards should consider the organisation’s
strategy in all aspects of their work, they should also
make time to consider the strategy directly.
Good strategy is designed to suit an organisation’s
operational environment. As a result, strategy must
adapt to changes in the organisation’s context to remain
effective. Boards should review the strategy periodically
and whenever a significant change might impact
It is common for boards to reserve time in their annual
calendar dedicated to discuss and think about strategy.
Some boards will do this by making strategy a standing
agenda item while others may hold regular strategy days.
Whatever the case, it is a good idea to create space to
address strategy separately from other matters.
Questions for Directors
- Is the organisation's purpose clearly articulated and communicated to stakeholders?
- How does the board know if the organisation's activities are aligned to its purpose?
- How frequently do the purpose and strategy need to be reviewed?
- How does the board align its decision-making with the strategy?
- Is time set aside in the board's agenda to consider strategy?
HelpfulCare’s purpose is recorded in its constitution as:
“To support people in need through the provision of
world-class services delivered with the care of a family.”
To bring their purpose to life, they have developed
a policy document called ‘Being HelpfulCare’ which
explains what their purpose is, what it means and how
it is incorporated into their operations.
The board of HelpfulCare has approved a rolling
five-year strategic plan which was developed by their
Chief Executive Officer (CEO) under the supervision
of the board who set expectations of timeframes and
consultation. The strategic plan articulates five key goals
which help give form to the organisation’s purpose.
The board reviews progress towards achieving their
strategic goals annually and, as part of that, reflects on
how effective its strategy has been. If necessary, the strategy is refined or changed. It also formally reviews
its strategic plan mid-way through its life.
To assist with making strategic decisions, the board of
HelpfulCare requires management to provide at least
a short explanation for any matter they are asking the
board to make a decision on, describing how the issue
relates to the achievement of their purposes. Agenda
items and management reports are also categorised
based on which strategic plan goal they relate to so
that the board is always thinking about the relationship
between their work and the strategy.
Strategy is a standing agenda item at every second
board meeting and the board of HelpfulCare has a
dedicated annual strategy day where directors meet for
an extended period to discuss strategy, changes in their
operational environment and ‘big picture’ ideas.
The Friendlies’ purpose is recorded in their
constitution as “to facilitate and coordinate the
goodwill and generosity of the local community.”
They have developed an ‘organisational charter’ that
expands on this, describing the three main ways
through which they aim to achieve this goal.
Every year in December the Friendlies hold a
‘community planning day’ where they identify
three key goals for the year through a consultative
process with their members. These goals are then communicated to members and other stakeholders in
their monthly newsletter and on their Facebook page.
They are reported on at the end of the year in their
annual report. This forms their strategic plan.
Twice a year the Friendlies’ board holds a half-day
meeting at which they meet with members to talk
about their progress towards achieving their
purpose and make any refinements necessary based
on their consultation.