Monday, February 1, 2010

Recreational Aviation Governance in Australia

In Australia we have a very effective legislative regime for recreational aviation - what used to be called ultralight aviation. CASA - the safety regulator - has delegated organisations to undertake the management and oversight of recreational aviation.
In the case of traditional ultralight aviation this role is undertaken by Recreational Aviation Australia (RAAus), the old Australian Ultralight Federation. You must be a member of RAAus to exercise the privileges of your pilot certificate.
Rec aviation has become extremely popular and RAAus has grown phenomenally over the last few years. Membership increased 13% in 2006, 12% in 2007, 8% in 2008 and almost 9% in 2009 to stand at around 9,180.
This has created some interesting challenges for RAAus. The two most important challenges that I see are:
  • Enhancing governance to reflect the changed scale and nature of the organisation; and
  • Ensuring that the activities of the organisation reap the available economies of scale.
Let's look at each of those. RAAus has grown from a small, easily understandable organisation to a large and increasingly complex organisation over recent years. The governance and management demands have changed and with them the demands on management and the Board.
RAAus has a Board of 13 which is elected on a representative basis. This doesn't represent best practise in corporate governance and raises a number of issues:
  • The Board is too large to be manageable and effective;
  • The Board meets only twice a year - too little to effectively oversight the organisation;
  • Representative boards involve a fundamental conflict of interest. Board members have a general responsibility to act always in the best interests of the organisation as a whole. At the same time the voters who elected individual Board members often have regional or sectional interests which may be at odds with the interests of the organisation as a whole (see Note);
  • Representative Boards do not ensure that the organisation has the best possible Board members and often lead to a lowest common denominator outcome from elections (see Note)
  • Representative Boards do not give the organisation the ability to seek professional directors to serve on the Board. This prevents the Board from effectively ensuring that it has the requisite expertise amongst its membership;
NOTE: To be clear I am not suggesting in any way that any past or present member of the RAAus Board has acted in conflict of interest, nor am I saying that any past or present Board member has represented the lowest common denominator. I am simply highlighting that the current system supports the occurrence of both of those things.
There are further issues of growth which also touch on Board roles and responsibilities. The most important of these is the transition from a Board that is intimately involved in every aspect of the activities of a small organisation to the role of a Board of a larger organisation which must focus on governance and oversight of the activities of the organisation.
An example at RAAus is that the Ops Manual gives Board Members specific powers with respect to operational matters. This is entirely appropriate for a small organisation and increasingly inappropriate for a large, complex organisation (like RAAus) with competent employed staff.
The difficulty with dealing with these issues is that neither the Board, nor membership has any real incentive for tackling them. For the membership, any meaningful change will see a reduction in the representative nature of the Board. For Board members there is that issue and also a reduction in the absolute number of Board members. What is certain is that governance challenges will increase unless action is taken. In that respect CASA has an obligation to seek constitutional change at RAAus as a condition of its continued delegation of oversight to RAAus. At a minimum the required changes are:
  • Board elections to change from regional voting to national voting;
  • Board to change from 13 elected members to 5 elected members;
  • Creation of a selection committee (see next point) to select and appoint 2 professional directors with specific required skills who are not members of RAAus;
  • The selection committee would consist of 2 representatives of CASA, 2 members of RAAus not Board Members, and an independent Chair all appointed by the Minister;
  • Professional directors would have a two year term with one of the initial appointees to have a 3 year term so that only one appointee is due for replacement in any given year;
  • Board meetings to be increased to 10 a year with at least 3 of those face to face;
  • Review of the Ops Manual to ensure that Board Members no longer have operational roles unless they hold another role (such as a CFI) that requires operational activities.
These changes are a first and urgent step on the way to improving the governance, Board effectiveness and financial viability of the organisation. These changes will allow for much more effective Board performance, a skilled Board and effective strategic direction and oversight of staff.
Once those changes have been undertaken we will have a Board that is in a position to direct a review of the organisation and its operation. As RAAus has grown there is little evidence that the per unit cost of doing its business has fallen as it should have. This means that too much money is spent on administration (issuing certificates, renewing them, etc) and therefore too little is available for safety, operational and technical oversight and indeed employment of suitably qualified management.
Food for thought for RAAus and CASA

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