Wednesday, December 24, 2008

Roof on the financial health of on housing associations

It seems only yesterday there was all the Housing Corporation talk of housing associations "sweating their assets". Now the Tenant Services Authority has a watch list of half dozen or so housing associations in worryingly poor financial health.

The latest issue of the re-vamped Roof magazine brings more festive cheer (not). In its article on housing associations “On the edge” it sets out how 24 of the largest associations fared in 2007/8: 13 of them had interest payable greater than their operating surplus.

In the financial year 2008/9, things will be even harder. If associations breach loan covenants, lenders will play hard ball in negotiating new terms that reflect the new post-crunch world.

Merry Christmas.

Saturday, December 13, 2008

How to survive the credit crunch

While the newspapers are full of advice on cutting household bills and more generally responding to the recession. There have been fewer handy hints for managers delivering public services. However, Public Finance recently carried a useful article by Roger Latham on How to survive the credit crunch. Here are some extracts:

1) prepare for the long haul.

2) watch out for the secondary effects … Existing contractual arrangements around the Private Finance Initiative are already showing signs of pressure. In the long term, the implications on the pension fund will show up in increased employer contributions. Will these still stand, or would there be further changes?

3) efficiency is more than a priority, it’s a necessity.

4) look out for displacement of policy objectives. Existing policy priorities at central and local level are going to change and with them the existing funding arrangements…

5) place shaping on hold? Some of the proposals currently being considered by planners and proposed by developers are going to come to a grinding halt. The value of assets and the cost of borrowing might suspend some long treasured plans. The community facilities promised through Section 106 agreements and the like might not come to fruition…

6) a collapsing capital programme? Valuable parts of your capital programme might be underpinned by capital receipts based on assumptions of land and property values that are now unachievable…

7) check the pattern and flexibility of service demand … You need to think now where your budget flexibility lies.

8) tax base losses.

9) propping up the local economy … Establish immediately what you will and won’t do in discussion with the business community to avoid raising unrealistic expectations.

10) don’t forget the people. The morale of your organisation might take a real hammering…

While some of these are issues specific to local government, other parts of the public and third sectors will often have similar issues – or be affected by how local government responds to the credit crunch and recession.

It’s definitely a good time for revisiting risk registers.

Friday, December 12, 2008

House prices bears, bulls and the National Housing Federation

A good place to read about the property crash is the website An addition to that site is the inclusion of house price predictions. They vary from housing market bears suggesting falls of 50% from the market peak to bulls like the National Housing Federation who predict a 25% rise over the next five years.

I must say that I lean towards the bears. Capital Economics – who now forecast a fall of up to 35% over the next three years – had long warned that a house price crash was on the way. (Their voices should not have been so lonely. Ultimately house prices and incomes had to be brought back into line. Buy-to-let investors and permissive lending could only stretch the elastic so long.)

It is good to see that the NHF have moderated their predictions – last year the NHF was suggesting that house prices would continue to spiral with a 40% rise from 2007 to 2012. While the NHF was right to draw attention to the need for new homes and the problem of affordability, I still feel a bit uncomfortable. I have seen the suggestion on the blogosphere that the NHF was inadvertently helping to ramp up house prices.

It is worth noting some of the NHF’s members are painfully learning the reality of a market correction hitting property sales and land values.

Friday, December 05, 2008

Change and strategy – the perils of success

For some thought provoking blog posts on strategy and change I would recommend the Random Rantings of Freek Vermeulen of the London Business School. This week he flags up some research coming out of the States that indicates that Chief Executives from high-performing firms were significantly more likely to interpret changes in their business environment as a threat than the their peers at poor-performers, who tend to interpret change as a positive thing.

Vermeulen suggests that this may be the cause of the “success trap” about which he writes:

ample research and statistics show, for a variety of industries, that especially very successful firms have trouble staying successful, and adapt to fundamental changes in their business environments (such as new competitors, different customer demand, radical new technologies or business models, etc.). Over the years, they focused on the thing that made them successful (a particular product, service, production method, etc.) and as a result became even better at it.

The times are certainly a-changing. We live in manic macro-economic environment. For the public and thirds sectors a bracing funding regime looks set to be even tighter. On top of that there is major institutional change in many areas such as the end of the LSC in further education and the de-merger of the Housing Corporation in social housing. It all makes an interesting laboratory for success, change and strategy.

Thursday, November 27, 2008

The third sector – the new rulers?

Yesterday I attended the National Council for Voluntary Organisation’s 10th Hinton Lecture. This year’s lecturer was the Guardian columnist Simon Jenkins. The central argument made was that a vibrant, self-governing democracy needs strong local government.

In order to avoid (almost) everyone in the room agreeing with him, Simon Jenkins threw in a grenade when he suggested that the organisations of the Third Sector were “the new rulers of Britain”. I think this was a little distracting. However, when he said that the “new localism” seemed to be all about “consulting stakeholders” he had a point. How many people know what local strategic partnerships are? What they do? Do they contribute to accountability and transparency?

Saturday, November 22, 2008

Diversity, boards and the financial crisis

While the public and third sectors are (rightly) keen to become businesslike, it is worth noting that they can sometimes be ahead of the private sector. Diversity on boards is one area. For example, a third of FE college governors are women. Colleges and housing associations have been addressing the issue of having boards that have people from a mix of backgrounds. (Of course, they can do better.)

This week a report from Cranfield University School of Management found progress – albeit slow - in women getting onto corporate boards.

One of the authors made an interesting argument for more diverse boards: "We might not be in quite such a dire situation if there had been more females on the boards of banks. The evidence is that women are not more risk averse, but they are more risk aware."

More diverse boards were "less likely to fall into group-think or to accept the status quo," Ruth Sealy commented. "Decisions can take longer to reach, but they will be better."

Friday, November 21, 2008

Light touch or better regulation in social housing and beyond

This week in Inside Housing the new Chief Executive of the Tenant Services Authority tells us that he does not talk about “light touch regulation”.

It’s an excellent sound bite but I was wondering what the opposite of that is: heavy handed regulation? (To be fair, the TSA does not appear to plan to bring a big, clunking fist to social housing.)

It’s a pity that the term “better regulation” has gone out of fashion.

I had a certain fondness for the five principles of better regulation:

1) Proportionality
2) Accountability
3) Consistency
4) Transparency
5) Targeting

There is a real risk that the lack of regulation in the financial sector (or perhaps more accurately problems with what regulation there was) will lead to the rehabilitation of red tape.

Craig Dearden-Phillips wrote in the Guardian recently of his big worry that:

the main message of the credit crunch - that "markets don't work, we need more regulation" - is read across into other arenas like health, welfare reform, education. All areas where, pre-crunch, we were witnessing a rapid shift from 1970s statism to a more nuanced approach in which markets, competition and a diversity of providers are used to drive up standards

On the continent some thinkers used to talk about the “social market” as: the market where possible, the state where necessary. It would be good if in social housing (and public services generally) the regulators used the slogan: competition where possible, regulation where necessary.

I know it’s not snappy. But it is what is needed.

Thursday, November 13, 2008

Read this before you sack anyone

It may not be Christmas present and it’s not out yet, but if you have some tricky HR issues you may be interested in The Employers' Guide to Grievance and Discipline Procedures. It was written by freelance consultant Mike Parkin. I used to work with Mike so I can vouch that he knows his stuff. (I also proof-read some chapters of the book so know that it is a clear and useful guide for managers.)

Wednesday, November 12, 2008

Arguments at CityWest: finding a silver lining

It is disappointing to read about the boardroom problems at CityWest Homes (the arm’s length management organisation that manages council housing for Westminster Council). While I do not know enough to take sides (even if I wanted to), events there do demonstrate that ALMOs are not an example of “privatisation”. For good or ill, ALMOs have close links with and accountability to their parent local authorities.

Saturday, November 08, 2008

Tuesday, November 04, 2008

Lloyds of London, emerging risks and pandemics: be prepared

Lloyds of London have launched a website to "drive the debate on emerging risk". One of the emerging risks is that of pandemic flu.

Lloyds have just published a report on the pandemic scenarios. The report suggests that society should not over-focus on any particular scenario. The report's author notes that much has been said of the 1918 Spanish Flu epidemic, which killed over 100 million people worldwide. While Avian Flu is seen as the most likely next pandemic, they suggest that other types of pandemics may require different responses. The writer notes that some of these may have higher rates of mortality than flu.

Monday, October 27, 2008

Football charity’s £440k own goal

This month the Charity Commission have published the results of their inquiry report into the Footballers’ Further Education and Vocational Training Society. An office manager at the training charity made unauthorised cash withdrawals of £444,400 over more than a decade.

The inquiry report should perhaps be required reading for all trustees (and certainly for audit committee members). It concluded:

It is important that trustees should work closely with their senior employees to ensure that their charities’ governance frameworks and internal control systems remain fit for purpose, especially during periods of rapid growth.

The report went on:

The Commission does not expect trustees personally to check every management decision taken, or every financial transaction, but trustees should ensure that there are procedures in place which allow them to monitor performance effectively and, especially, to identify discrepancies and system failures as soon as possible after they occur. It should not be assumed that every lapse will be spotted and put right by the annual audit.

Its worth noting that a civil action was brought by the charity against its external auditor although this was eventually settled out of court.

The economic crisis and affordable housing: Three million new homes please

Shelter has a petition on the No 10 website asking Gordon Brown to publicly restate his commitment to three million new homes by 2020 and to prioritise social rented housing. I would urge everyone to sign up. It takes less than a couple of minutes.

Boards – what are they good for? (Can they avoid the embrace of managers?)

Across the public sector, the need for effective boards remains on the agenda (and is arguably rising up that agenda). But can boards ever meet the expectations heaped upon them?

The Harvard Law School Corporate Governance blog makes depressing reading this month. Jonathan R. Macey summarises some arguments from his forthcoming book on Corporate Governance, Promises Made, Promises Broken.

It seems that Macey thinks that promises are not very likely to be kept due to board capture:

Public choice, social psychology, and historical observation all suggest that boards can be counted on to be only as honest and effective as the managers they are supposed to supervise. The problem with boards is their unique susceptibility to capture by the managers they are supposed to monitor. The problem of capture is so pervasive and acute that almost no board, not even those that appear highly qualified, independent, and professional, can be relied upon entirely.

He points to boards being sucked in and committing themselves to the strategies, plans and managers that they have chosen.

Is there any way out? Perhaps.Macey notes:

as board tenure lengthens, it becomes increasingly less likely that boards will remain independent of the managers they are charged with monitoring.

Arguably the opposite is true. Board renewal is not only about new blood – it’s about new brooms too. (Of course there remains the imbalance of information between executives and non-executives. That assymetry is trickier to fix.)

I hope the National Housing Federation reflects that in strengthening the commitment to a nine year cap on board membership across the housing association sector.

Friday, October 24, 2008

Beware successful Chief Executives?

I often have a look at the Random Rantings of Freek Vermeulen - an Associate Professor of Strategic & International Management at the London Business School. This month he has warned that some of top performing chief execs should be avoided like the plague.

The logic is:

Bad managers are those people who just don’t get it. They accept worse average returns for higher risks. And this is where it gets tricky. Because if they accept very high risks, in spite of lower average returns, every once in a while one of these morons will actually hit the jack-pot…

That is, if we take the top 1 percent – and only this 1 percent – of top performers, they’re likely to be those people who don’t get it at all… but just got incredibly lucky!

He goes on:

The same is true – as Stanford’s Professor Jim March asserted – for CEOs. The ones that are the eye-catching top-performers are likely the ones who just don’t get it. The dangerous thing is that they are also the ones with the absolute highest return in their business. Therefore we naively believe that they “do get it” and, in fact, are quite brilliant. Moreover, that’s what they start to believe as well… (“I win again; I must be brilliant…!”). Yet, they got lucky once, the might get lucky twice, or three times (at which point we start to notice them) but eventually their luck will turn (the names of Bernard Tapie, Jeff Skilling, Cees van der Hoeven and Conrad Black come to mind).

He concludes warning against “top performers” in any business or situation which involves risk:
The one coming out on top is likely to be a moron, who just got lucky.

I suspects the theory has the ring of truth for many people. (I also think that there are all sorts of interesting issues around management, leadership and success. How often do successful managers demonstrate themselves to be poor leaders when they are asked to lead people rather than manage things? How often is the asset of charisma associated with a dangerous risk-loving attitude?)

Nevertheless even if the theory makes sense, I think care should be taken in applying it to assessing, appraising and rewarding performance!

Thursday, October 16, 2008

Universities and mergers – is less more?

This week the new Higher Education minister (and the man tipped to be Britain's first black Prime Minister) David Lammy asked universities: "Do you have the right number of institutions? In the commercial sector there would have to be many mergers over the next few decades – far more than we have seen in higher education. Could more be done to encourage that among universities?"

I am a merger skeptic - too often mergers are driven by efforts to build empires or enhance salaries - or even worse, driven by bureaucratic convenience. Whatever the motives, too often the benefits are exaggerated and the costs overlooked (ask the bosses at RBS who out-bid Barclays for ABN-AMRO).

Nevertheless, some mergers can make sense as a response to changing times and challenging economics. While consolidation of existing institutions may take place, is there a case for increasing the supply-side? That actual or threatened competition from potential entrants can surely raise quality is increasingly recognised in the pre-18 education marketplace.

Audit Commission, value-for-money and Iceland

There will be red faces at the Audit Commission with the revelation in today’s Financial Times that it has £10million invested in Icelandic banks. Apparently they were investing in April 2008 – staff at the Commission obviously don't read the Observer which was making noises about Icelandic banks “feeling the chill” the previous month!

As the Commission joins councils, charities and universities with accounts frozen in the Icelandic meltdown, the rest of us in the public and third sectors have had a big reminder of the importance of good risk management and treasury management.

Friday, October 10, 2008

Non-customers having a role in governance: is that news?

Midland Heart have issued an intriguing press release: "For the first time, a housing association will include non-residents alongside existing customers on a unique decision-making body, giving them powers to shape the delivery of services."

For some time (to be precise, forever) almost all housing association boards have had a non-resident majority. Board members, like myself, have never had the social housing resident experience – and that can be a problem. Having accountants, bankers, lawyers, etc on boards is great in terms of professional experience, skills and “competences” but do some of us bring other baggage and lack some of the most relevant experience?

I don't think that Midland Heart’s press release is actually talking about boards. As always the devil is in the detail. I presume that Midland Heart are creating arrangements for accountability and scrutiny of service delivery - perhaps based on the Chartered Institute of Housing's model. If so, it all makes sense and should be welcomed.

The challenge of meaningful customer involvement remains for all public services.

Thursday, October 02, 2008

A history of the housing market collapse

With the credit crunch and the related problems in the housing market, financial services and the rest of the economy causing pain for families and difficulties across the private, public and third sectors, there is interesting historical background on the Housepricefacts website.

There are some cringe-worthy quotes such as Gordon Brown’s from 1997:

I will not allow house prices to get out of control and put at risk the sustainability of the future.

Friday, September 19, 2008

Thought for the day (and a postscript to yesterday’s posting on good governance)

This morning I stumbled on fairly profound quote that has relevance to the question of what is effective governance and leadership:

Managers are concerned with doing thing rights.
Leaders are concerned with doing the right things.


Thursday, September 18, 2008

Good governance – more than just getting the process right

I’ve been reading the National Housing Federation’s Code of Governance. (I do know how to enjoy myself. Moreover, I am attending a consultation event on changes to the Code so I thought I should do some prep.)

The Code may be four years old but it is hard to fault what it says – its content sets out best practice in governance. (It is probably easier to fault the application of the Code by many housing associations. Several have half-heartedly implemented time limits on board membership in order to avoid applying the spirit of the board renewal requirements. I suspect many others fail on other provisions such as publicising the membership of sub-committees – probably without even knowing.)

I might fault the Code on what it does not say. I would suggest that what is missing from the Code is a full recognition of the importance of board dynamics and organisational leadership.

Moreover, the Code is weak in its overall tone. Good governance is about delivering excellent outcomes as well as getting the process right.

The Code notes:

Good governance is more than good practice – it is good business too … As such good governance enhances organisational reputation, and ensures better results are achieved.

That’s true in so far as the evidence demonstrates an association between governance and performance. But good governance is about focusing on results, outcomes and impact – you can’t just assume that procedural ticks will yield deliver the goods.

Monday, September 15, 2008

Poor governance again: under-achieving governors to blame for poorly performing colleges

The new Ofsted review of colleges' improvement has noted: "Ineffective governance and management lay at the root of many weaknesses seen in underperforming colleges."

It is sad that some governors do not get it. Ofsted found governors who were so absorbed by the financial position of their college that they didn’t pay enough attention to the success of students. As a Chartered Accountant (and someone who has seen the mess left by colleges lacking financial viability), I see the importance of finance - but it is only a means to an end.

The report also found that some governors and managers also avoided making difficult decisions.

The report also noted: "There was no culture, understanding or acceptance of accountability - these managers were not constructively self-critical and frequently looked for something or someone to blame when things went wrong or improvements were not forthcoming.

Friday, September 12, 2008

Some quotations on forecasting the future

As a postscript to my thoughts on the ability of university finance directors to foretell inflation, I thought it might be worth including some quotes on forecasting.

I always avoid prophesying beforehand because it is much better to prophesy after the event has already taken place.
Winston Churchill

Never make forecasts, especially about the future.
Sam Goldwyn

A pessimist is an optimist with more information.

To expect the unexpected shows a thoroughly modern intellect.
Oscar Wilde

Thursday, September 11, 2008

Inflation, risks and the “financial acumen” of university FDs

It’s an ill-wind of high retail price inflation that brings university staff pay rises of more than twice the government's public sector pay norm. The three-year pay deal for universities provided for a rise this year of 2.5% or the September retail prices index - whichever is higher.

Some universities will struggle to pay 5% and may defer its introduction. In response, the University and College Union has argued that the employers have had two years to budget for the settlement. The UCU general secretary has said that she would be “concerned about the financial acumen” of any institution that had failed to budget for the 5%.

As I often work as an interim finance director, I will resist the temptation to leap to the defence of higher education FDs although did anyone foresee that inflation was going to double? (Who wants to bet on inflation in two years time? The Bank of England’s central estimate for consumer price inflation is less than 2% although its range of forecasts ranges from under 1% to well over 3%.)

While no one (or almost no one) really expects FD and university governing bodies to foretell the future and provide for each and every contingency, this situation shows the importance of treating seriously sensitivity analysis – thinking through the “what ifs” of financial planning. Too often risk management is seen as a load of old risk registers – whereas good risk management requires a lot more of management and governance.

Sunday, September 07, 2008

Effective boards: 12 principles

The excellent Healthcare Governance Review blog notes that the recent publication by the Department of Health of a review of healthcare regulators includes an endorsement of the Carver policy governance model for boards.

As an appendix to the DH report, the Council for Healthcare Regulatory Excellence working group sets out the 12 principles for an effective board:

1. The board should determine the purpose and values of the organisation, and review these regularly
2. The board should be forward and outward looking, focussing on the future, assessing the environment, engaging with the outside world, and setting strategy
3. The board should determine the desired outcomes and outputs of the organisation in support of its purpose and values
4. For each of its desired outcomes and outputs, the board should decide the level of detail to which it wishes to set the organisation’s policy
5. Any greater level of detail of policy formulation should then be a matter for the determination of the chief executive and staff
6. The means by which the outcomes and outputs of the organisation are achieved should be a matter for the chief executive and staff; the board should not distract itself with the operational matters
7. The chief executive should be accountable to the board for the achievement of the organisation’s outcomes and outputs
8. In assessing the extent to which the outcomes and outputs have been achieved, the board must have pre-determined criteria which are known to the chief executive and staff
9. The board should engage with its ownership regularly and be confident that it understands its ownership’s views and priorities
10. The membership of the board should be capable and skilled to represent the interests of the ownership; this should not be done in a tokenistic way
11. Information received and considered by the board should support one of two goals - to enable decision making, or to fulfil control and monitoring processes
12. The board must govern itself well, with clear role descriptions for itself, its chair, and its members, with agreed methods of working and self-discipline to ensure that time is used efficiently

Perhaps the report might be read by the boards at Newcastle United and West Ham where there have been some issues around the involvement of boards in operational decision-making.

Glittering prizes? £20k to unleash the power of public information

On this blog I've occasionally moaned about Directgov. (I've moaned even more about the lack of imagination in parts of the third sector.) I was therefore pleased to read that the government is saying: Tell us what you'd build with public information and we could help fund your idea!

The Power of Information Task Force is offering a £20,000 prize. The government is even offering gigabytes of new or previously invisible public information. (You normally only get that much information on a pen drive or a couriered cd). The website reassures us: "Rest assured, this competition does not include personal information about people."

This approach is to be welcomed.

Tuesday, September 02, 2008

Better management reporting: How to make an Impact

I was disappointed yesterday. I saw that the Institute of Chartered Accountants is hosting a lecture by Jon Moon in Birmingham in November but then realised that I had a prior commitment.

Who is Jon Moon? He has written an excellent book on How to make an Impact – basically writing reports that are uncluttered so the message is clear. The report has certainly changed the way that I present information when I am working as an interim Finance Director.

I believe that so much management reporting in the public and third sectors is weak that I am sure that others could learn something.

People can attend the lecture even if they are not members of the ICAEW Finance and Management Faculty. I would also recommend the templates that Jon Moon gives away on his website.

Friday, August 22, 2008

Shared ownership - A problem shared?

This month’s Roof special on Affordability makes rather depressing reading – with perhaps the exception of the new Homes and Communities Agency chair promising things will only get better (after they get initially worse).

I’ve always been a bit of a sceptic with shared ownership. It is of course a cheap form of affordable housing for the public purse and a cheap form of asset ownership for families. But there have been problems with viewing it as a panacea – as well as issues such as with key worker schemes and Social HomeBuy.

Now Roof depressingly reports that shared ownership accounts for between a fifth and a quarter of the workload of some debt advisers. If they haven’t done so already, housing associations need to critically review the way that they assess the ability of applicants to sustain shared ownership. There is some bad practice out there – and it could lead to more people losing their homes.

Friday, August 15, 2008

The Housing Corporation's traffic lights set to be turned off – but what about other tick box exercises?

Everyone loves traffic lights when it comes to regulation, governance and management. So many reports are brightened up by red, amber and green. So it was with mixed feelings that I read that the new social housing regulator is likely to turn the lights off.

According to Public Finance magazine, Peter Marsh, the chief executive designate of the new regulator, believes that the traffic lights seen in Housing Corporation Assessments encourage a 'tick-box' culture without fully revealing to tenants how well their landlord is performing. There is also a belief that most associations gain green lights but do not have any further incentive to improve.

Perhaps there is too much complacency with the reality of continuous improvement not matching the rhetoric. Yet turning the lights off might not transform things.

Hopefully the new regulatory regime will see radical changes in the annual ritual involving housing association boards agreeing and submitting a self-assessment compliance statement against the Housing Corporation’s Regulatory Code. This exercise involves presenting evidence to justify a tick against a range of criteria. It is the epitome of box ticking even though the Housing Corporation allows a degree of flexibility and stresses that it should report on improvement. I fear that it does not.

Perhaps we might have a more robust assessment of organisational health and performance. There should be an expectation that strengths and weaknesses should be highlighted and honesty encouraged with the exercise driving improvement. Such an assessment should be directed more towards the customers rather than the regulators.

Tough times and the third sector

The impact of the current economic downturn on the third sector has been in the news. This week Oxfam announced plans for job loses and cost savings. While charities face falling income and rising costs – the people who need them most, need them even more. Earlier in the summer an NCVO study found that the third sector was expecting “tough times”.

The think tank
nfpSynergy has published an interesting mini-report on what happens to charities in a recession. They believe that this is a 10-month delay between an economic downturn and its subsequent effect on charities income although the falling disposable income is almost immediate.

I think the nfpSynergy research is useful but we need to be wary. Looking at the last two and a half decades tells us only so much as we have not had a recession for over a decade – and we might still escape one now. The combination of inflationary pressures and credit crunch is both toxic and unusual.

nfpSynergy link the economic downturn to risk management. I wonder how many charities and other third sector organisations included an economic downtown in their risk reviews and prepared contingency plans?

Going green in HE, FE and elsewhere in the public and third sectors: revolving funds and useful advice

It was good to read last week that the Higher Education Funding Council is launching with Salix Finance a £30m Revolving Green Fund to support the introduction of carbon-saving projects. Earlier in the year the Learning and Skills Council launched similar funding (and I believe that there will be more finance in the future.)

Even when funding bodies are not providing financial support, the public and third sectors can do something. I have come across a useful source of information on Canny Buying. This site is aimed at organisations in Scotland but sustainability has relevance south of the border too.

Saturday, August 09, 2008

No exit (interview) from governance: saying thanks and learning from ex-board members

The recent review of the third sector’s Code of Good Governance recommended that the Code be updated with a second edition. One thing that the update might consider would be encouraging exit interviews when board members, trustees, governors or whatever leave a boards.

I must confess that this is not my brilliant idea. It was suggested in one of the podcasts on the On Being Board website from BoardStar. (I suspect that this practice may be commoner in the USA than the UK as I have seen reference to it on another American website.)

The case for exit interviews for departing board members is perhaps obvious. They allow the organisation to say thanks for the contribution of the individual. They give the organisation the opportunity to learn as the individual is able to highlight issues and weaknesses with greater candour than perhaps previously.

No doubt many organisations who think exit interviews are useful for staff leavers forget to have them for board members who have the task of giving the organisation its strategic direction and monitoring its performance.

Disappearing universities: financial viability and demographic factors

Last weekend the Financial Times reported that the credit ratings agency Standard & Poor’s had warned of “certain universities ceasing to exist”.

The S&P identified the issue of changing demographics. They noted official forecasts that by 2020 there will be 16 per cent fewer 18-year-olds in the UK. (The implications of which will be felt by FE and sixth form colleges even sooner unless the government is successful in raising participation rates at 16-18.)

S&P distinguishes between “the newer, less research-oriented universities” and “leading universities”, which will continue enjoy strong demand from UK pupils.

The report expects the disappearing universities to go by merger rather than going bust. However, it is a little depressing if institutions cease to be financially viable largely through external factors no fault of their own. (Of course, badly managed institutions will go that bit sooner and with more mess!)

Monday, August 04, 2008

Governance: what is it?

On the Health Service Journal website there is an article on the role of NHS boards and their duty to the public. Paul Stanton argues:

There is significant confusion and muddle in the DH and the NHS about the nature of governance. It is not uncommon to hear senior figures talking about boards managing or leading their organisations. This implies a fundamental lack of clarity about the explicit separation that should exist between the task of a board, which is primarily legislative (making policy, setting strategic goals and holding the executive, and through them the organisation, to account) and the task of the executive (albeit some executives are also corporate directors within the legislative board), which is to lead and manage the organisation so that policies are implemented, strategic goals are achieved and the local community is served.

He credits the American non-profit governance guru John Carver whose model distinguishes governance and management. The board's role is primarily to set policies - essentially, the ends.

While Carver was influential in thinking about the governance of FE colleges soon after they were incorporated as autonomous bodies, his thinking does not get enough attention in the public and third sectors where many bodies drift and range far and wide rather than focusing on their core tasks.

An alternative take on governance was the recent comment that "[Good] governance is a little bit like porn" from Robert Daines, the co-director of Stanford University's Rock Center for Corporate Governance. (This was apparently referring to a Supreme Court judge's comment about recognizing obscenity. "I can spot it when I see it, but it is hard to say what it is.") Who ever said governance was boring.

Governor workload and remuneration in FE Colleges: an Irish problem

While I am generally sceptical about board remuneration – particularly for smaller organisations – I can see a case for chairs of boards in the public and third sectors being paid. There was an article in the Irish press this weekend reporting that four of the six chairs of Northern Ireland's newly merged further education colleges have now resigned due to an escalating workload in the absence of payment for their services.

When the positions were created, the commitment was estimated at eight to 10 meetings per year, but the appointees said they attended up to 70 meetings a year.

Friday, August 01, 2008

More on pay, incentives and motivation: donating unpaid overtime in the for-profit and not-for-profit sectors

There is an interesting article in the Spring issue of Research in Public Policy from Bristol University’s Centre for Market and Public Organisation.

The article summarises some CMPO research In search of the public service ethos. While people talk of a public service ethos, do they actually demonstrate it in behaviour through donating labour in the form of unpaid overtime. It crunched raw data that showed 46% of employees in education, health and social care in the non-profit sector do some unpaid overtime compared with 29% of their counterparts in the for-profit sector.

After adjusting for demographic variables and for the possibility that unpaid overtime may be motivated by the prospect of promotion or bonuses, it concluded that people working in welfare services in the non-profit sector are 12% more likely to do unpaid overtime than those in the for-profit sector.

The authors point out that:

[The] estimate of the premium suggests that an additional 120 million hours are donated in the public sector compared with similar people working in similar jobs in the private sector. This is equivalent to an extra 60,000 people.

But before we get to the unlikely scenario of advocates of keeping the NHS (and other public services) public using the argument that the private sector is bad because it fails to extract unpaid labour from its employees, its worth noting that the researchers did not find that people changed behaviour when they moved between the for-profit and non-profit sectors.

Where does that leave us? Perhaps the research strengthens the case for a mixed economy in public services. The existence of non-profits and for-profits may allow better matching of people to the sector and the motivational structure that works for them. Of course, non-profits cover a range of models and the research did not explore the interesting question of how public sector or third sector employees may work differently.

Thoughts on pay: declining pay rises

Pay is in the news a lot. If its not local government workers striking over pay rises below inflation, its Carol Vorderman saying that a 90% pay cut doesn’t add up for her.

On her podcast, the management columnist Lucy Kellaway condemned Mervin King for not taking part of his remuneration package as Governor of the Bank of England. She suggested that if a chief executive declines a pay rise, he (or she) should be dismissed for presiding over a dysfunctional pay system. She advocated sacking remuneration committees as a solution to excessive pay.

Before public and third sector organisations sack anyone, they should check that their remuneration committees demonstrate best practice in terms of rigorous scrutiny of pay and performance.

Monday, July 28, 2008

Ujima governance and regulation: lessons for everyone

After something of a wait, the Housing Corporation website today carries the report of the independent Inquiry into the circumstances surrounding the collapse of Ujima Housing Association (pdf available). My first impressions are favourable. It appears to advocate better regulation rather than more recognition.

The report notes:

Ujima’s fate has starkly highlighted issues of governance and regulation that should be salutary for the Board of every registered social landlord, and for the Corporation and its successor bodies, and also contains important issues for the sector’s lenders and for government to consider.

It goes on:

It is not the objective of the Inquiry to seek to attribute blame. But, in our opinion, Ujima’s collapse was the result of bad management and an ineffective Board.

As so often in reports studying the entrails of failed and collapsed organisations (both in the social housing sector and elsewhere such as the NHS and charities), governance problems were found to include board members providing insufficient challenge to management and failing to insist on the provision of proper information sufficient to fulfil their responsibilities. For example, the report notes the limited and “poor quality” financial reports and the lack of risk management information.

These are things that board members at housing associations as well as other organisations need to consider carefully while the Housing Corporation (and its successors) implement the recommendations relating to better communication and earlier, more effective regulatory action.

In need of treatment: some research on boards at poorly performing hospitals

I recently came across some American research on hospital board dynamics published by Trustee magazine. Too often auditors and consultants focus on governance processes when the best processes in the world will fail if the governance dynamics and behaviours are weak.

The American study compared between high (financially) performing organisations and low performers. It certainly found differences in board dynamics indicating that effective governance improves organisational – as suggested by some British research that I outlined here.

In its conclusion, the report noted the importance of:

1) The roles played by management and the board
2) The inclusiveness of all board members, not just a small subset, in the decision-making processes
3) The usefulness and transparency of educational guidance and information
4) The level of respectful disagreement among trustees
5) The board chair’s role and his or her dedication to performing it.
6) If the answers to these questions suggest that your board’s dynamics need improvement, it might be time to talk with the chair or to form a coalition of board members who will seek outside, independent help—such as a governance consultant.

It is worth also hearing some of the observations and comments from board members at poorly performing organisations. These may have a degree of familiarity for many board members who do not think their organisations have governance “issues”:

"Some members were encouraged by the CEO to intervene in operating decisions rather than strategic ones, while others failed to ask the CEO tough questions. "

"Board meetings ran anywhere from three to four hours; every operational detail was discussed. It went on and on with lots of socializing and stories among the 25 or so people in attendance. Governance was a social event. "

"There were a lot of people who were not serious about showing up and participating and being informed."

"The [strategic planning] process begins with management deciding what is needed. Usually, by the time management brings something to the board, [they] feel very strongly about what should be done … In my view, as a board member, either you trust management or you don’t."

[The] board members of low-performing hospitals described their information packets as unorganized. One board member called the pre-meeting packet “just a bunch of stuff not linked together.” Another described it as “thick, but containing only six or seven pages of useful information.” Some even described part of the information they received as incorrect. Board members at low-performing hospitals consistently expressed concern about the totality and timeliness of the information they received. Others complained of receiving important supplemental information without sufficient time to consider it—for example, receiving information at a board meeting and being asked to vote on a related decision at the same meeting.

Risk management - developing a sense of adventure

Last week I went to a joint meeting of the West Midlands Charity Finance Directors Group and the ICAEW Charity & Voluntary Sector Group. One of the speakers outlined the tax definition of “trading”. One characteristic of “trading” was “adventure”. It struck me that this was a synonym for risk. (I expect a tax specialist to correct me!)

Adventure sounds so much more positive than risk. So often risk management is interpreted as risk minimisation. I had a colleague who loved to include in his training sessions on risk management a slide showing a man smoking and handling flammable materials. While risk management is sometimes about stopping stupid and dangerous behaviour, more often it is considering and taking, when appropriate, informed risks.

Without risk Рor adventure Рthere is no reward. Innovation and transformation may be over-used clich̩s, but change is vital for public services and it comes with risks that need to be taken and managed.

Anyone for adventure management?

Thursday, July 24, 2008

Mission (statement) impossible?

When bored, one way of passing time can be to compare and contrast mission statements in social housing. Here are a random selection from some local housing associations:

1) Working with residents to excel at creating and sustaining communities where people want to live.

2) We will provide our future and present customers with well maintained and affordable homes, in safe and attractive neighbourhoods.

3) Our vision is to build successful communities. Our communities will be famous for good quality homes, excellent services and a cleaner, greener environment. People will feel safe and have pride in their homes and neighbourhoods.

Some adopt a slightly different tack:

We are a social business providing:
- Support and services to individuals and communities through good business practice;
- Quality accommodation in an economically viable manner.

It’s not easy to have a distinctive mission statement that works. Yet such statements do convey something of the organisation’s brand – its value and culture.

As an accountant by profession, I’m not going to give lessons on inspiring mission statements. However, I would recommend a perusal of the 2008 Getting Attention Nonprofit Tagline Awards. The blog might be from the other side of the Atlantic but it has some useful advice on effective taglines (specific, positive, brief, clear, accessible) that are relevant to mission statements too.

Friday, July 18, 2008

Payment by results: rewarding teachers in Washington DC

It was interesting to read in last week’s Economist of plans in Washington DC to improve failing schools by rewarding teachers better and flexibly:

Starting salaries would leap from about $40,000 to $78,000, and wages for the best performers would double to about $130,000 a year. In return, teachers would lose tenure and be paid according to merit, measured in part by their students’ results. Current teachers would have a choice: they could join the new system or stay in the old one. New hires would have to join the new system.

I wonder if it could happen here?

Wednesday, July 09, 2008

Good governance improves performance even if effective board members don't save lives

It is always reassuring to see evidence of how effective boards result in better performance. Board trainers like myself like something to prove the need for good governance with more than horror stories of where governance went off the rails. Therefore, I was pleased to read about Stuart Emslie's study Exploring the Association Between Board and Organisational Performance in NHS Foundation Trusts (pdf available on the Healthcare Governance Review blog).

Stuart Emslie found "strong and highly significant correlations" between board performance, as measured using a self-assessment tool with "measures of financial performance, and measures of staff satisfaction derived from the annual national staff survey". However, he did not find any correlation with better patient mortality. Perhaps that will change as better financial management generates surpluses for re-investment and as improved staff morale benefits service quality.

Monday, July 07, 2008

Hallmarks of success: charities in a more bracing financial climate

The Charity Commission has issued a revised version of their governance guidance, Hallmarks of an Effective Charity.

The new Hallmarks are not radically different. The Commission says that:

As well as updating the Introduction, the Hallmarks themselves have been redefined in order to clarify the overarching principles that an effective charity will want to adhere to. For example, we have drawn together good financial practice points to create a new Hallmark ‘Financially sound and prudent’.

There are some interesting changes to the financial elements to the Hallmarks including new references to monitoring cash flow, structuring in a tax efficient way and minimising the risks of trading activities. Its reasonable to suggest that these revisions reflect recognition of the challenges that charities (and other not-for-profits) face in a more bracing financial climate with the credit crunch and public finance squeeze.

Sunday, July 06, 2008

Time to go: Bill Gates, Founders’ syndrome and good governance

As Bill Gates logs off from the hands-on management of Microsoft, perhaps his example will be followed by others, including one or two pioneers in the third sector, handing over to others. He is moving on, although not far, to the non-executive role of chair.

The founders’ syndrome is a recognised sickness in the third sector. There are few things sadder than a good (or even great) organisation going wrong (or even bad) due to an often-inspirational founder losing their way. Charismatic personalities who can provide the energy, direction and leadership that start-ups need in any sector are often not those best suited to letting go when they should.

Treating founders’ syndrome is inherently difficult. Founders are unlikely to self-medicate and hand over to new leaders. The need for an effective board is obviously essential – yet, dominant personalities are unlikely to have developed such a counter-weight. While I believe strongly in the autonomy of the third sector, funders and regulators should be require the good governance that enables organisations to deal with their own problems.

Saturday, June 28, 2008

Some thoughts on 200 blog entries: the FE sector, social housing and the third sector

As I’ve posted 200 entries on this blog, I thought it was time cast a look over my shoulder.

Back in late 2006 when I was setting up I thought that a blog might be interesting as an opportunity to share ideas and information as well as occasionally pontificate. Everyone seemed to have a blog. Many blogs were interesting – either informative or a little weird such as the President of the Islamic Republic of Iran. Perhaps not everyone had a blog – there seemed to be a lack of blogs on housing and further education – two sectors where I have done a far bit of work over the years.

Since 2006 we’ve acquired a new prime minister – and a fair few commentators speculate that we may have another one before long whether before or after the next general election. Public sector reform is still on the agenda. The language has shifted a bit – away from competition and choice towards contestability and personalisation. Some of the agenda has been adopted by the Conservatives - and taken further as in the case of Michael Gove’s proposals on schools choice. Even the Liberal Democrats are advocating empowering the user of public services. One major change that we have seen in the policy environment is a significant tightening of public finances although the implications of the Comprehensive Spending Review were well-heralded and analysed by the experts at the Institute for Fiscal Studies.

In social housing we’ve seen a review or two leading to end of the Housing Corporation as we know it – with a de-merger seeing English Partnerships absorbing investment (aka funding of new affordable housing) and a Tenant Services Authority (briefly known as Oftenant) taking over regulation. The TSA might even have a sector-wide remit including all social housing if the government listens. The nature of regulation is a bit of an unknown. Housing inspection will live on at the Audit Commission for the moment anyway – with new short, sharp, shock notice inspections coming in after some years of talk. We’ll probably see some new council houses at long last – although not many. Indeed there is a bit of uncertainty over all house-building after the credit crunch – who worried about sub-prime in 2006? (Arguably not enough people.)

In further education we’ve seen the announcement of the death of the Learning and Skills Council. Its role will be parcelled out – perhaps neatly, perhaps not - among a Young People Learning Agency, Skills Funding Agency, a National Apprenticeships Agency and dozens of local authorities and “sub-regional clusters”. We’ll see how joined-up that is. As a result of the changes we’ll probably see LSC staffers finding new homes – hopefully not too many will compete against me as freelance consultants. Another key development will be sixth form colleges “rejoining the local government family” – a good or bad thing depending where you are. (I won't quote Tolstoy or Larkin.)

Of course, the third sector – particularly social enterprises – are even sexier now than 20 months ago. Politicians are falling over themselves to woo charities and other third sector organisations. The other week it was the Conservatives offering the sector treats including the Office for the Third Sector which NCVO welcomed. Yesterday it was the government promising the third sector a role in service delivery. As always, reality may be less rosy – as seen in the disappointment when the Department for Work and Pensions gave the lions share to the private sector in a major commissioning exercise. Still we have seen actions as well as words – funds for third sector organisations, ambassadors for social enterprise, training for commissioners, new and flexible forms of legal entity for social enterprises.

I am sure that I have missed a few developments. Its seems a lot has been happening even if much of it is skated over in the mainstream media.

I wonder what I’ll be writing about after another 200 blog entries.

Friday, June 27, 2008

Stock transfers delivering on promises: more evidence of improvements

The Housing Corporation just published a thematic review of housing association formed by “stock transfers” from local councils.

The thematic review found stock transfer associations are “making considerable progress towards the delivery of its promises to tenants made at the point of transfer. The one or two cases where associations have been unable to deliver on their promises are generally due to circumstances not directly related to the transfer process.”

While the study was primarily one based on self-assessment by housing associations, it is consistent with other evidence such as the National Audit Office’s finding in 2003 that “RSLs have largely delivered the expected benefits to tenants of better quality social housing, better housing services and opportunities for tenant participation.”

Thursday, June 19, 2008

“Poking” civil servants: the public sector on the internet

Today we learned that senior civil servants are to be taught to use social networking sites by junior ranking "digital pioneers". Its sounds like Whitehall is being Beboified.

Maybe before long the civil servants at HM Customs and Revenue will be allowed to use email. On the other hand, perhaps things are not that advanced.

Tuesday, June 17, 2008

Ujima and the Housing Corporation: why stricter regulation may not be the answer

Along with the news that Oftenant will be given the catchy title of the Tenant Services Authority, last week's Inside Housing carried a feature on the fall of Ujima (pdf available). The article asked "Why didn't anyone step in?" and set out the warning signals in the run-up to the first housing association to go bust.

The magazine highlighted that over the last five years the Housing Corporation's regulation staff shrank by 31% and its investment (i.e. funding) staff reduced by 26%. This apparently reflected the demands of the Gershon "efficiency agenda" – fewer staff were overseeing the expansion of funding in new social housing.

There are some echoes with the Financial Services Authority’s handling of Northern Rock. As the Economist noted when discussing that case in March: “Writing more rules may do more harm than good if the regulator is unable to enforce them”.

Monday, June 16, 2008

Equality and diversity: the Third Sector struggling to match words with actions

The community investment foundation Olmec has just published A Guide to Equality and Diversity in the Third Sector (pdf available). The guide provides a useful set of signposts to more information.

The guide came out of the findings of an Olmec survey of 159 third sector organisations (pdf available). The study found that the third sector had its heart in the right place with 97% of organisations having an equality and diversity policy but problems in putting it into practice.

The study found more work needed to be done in two main areas:

Firstly in ensuring that the commitment to equalities is demonstrated at the
highest level of an organisation. Secondly that this commitment is transmitted across all policy and strategy areas as well as in individual work plans, performance targets, measurements and reporting requirements. In particular organisations current monitoring systems do not lend themselves to reporting on outcomes and the difference their work has had on those who it is set up to serve. Equalities monitoring was largely directed by funders requirements rather than because it was part of an internal drive to achieve better equalities outcomes or part of externally accredited quality standards.

Friday, June 13, 2008

Comparing performance: tenant satisfaction in council housing

The polling and research firm IPSOS-MORI have published an interesting analysis of tenant satisfaction data. The Housing Futures study (pdf available) aimed to offer “a more useful insight into tenant satisfaction levels than is possible from a simple league table approach”.

The study modelled the effect of largely external factors on tenant satisfaction – “the nature of place and the challenges it brings”. The model predicts tenant satisfaction on the basis of four factors:

1) Deprivation - the more deprived an area the lower the level of satisfaction.

2) Ethnic fractionalisation – “a measure not only of the proportion of people from ethnic minority communities, but the extent to which there are a wide range of different ethnic minority communities in an area” – with it being more challenging to meet the needs and expectations of more diverse populations

3) The proportion of elderly social tenants (aged 60+) - older tenants that are more likely to be positive about the services they receive.

4) The proportion of housing stock which is council owned – “As the percentage of total stock owned by the council increases, satisfaction levels decrease”

The study went on to identify where local authorities out- (or under-) performed the tenant satisfaction levels predicted by the model. Carrick, Ealing, Blyth Valley and Welwyn Hatfield were the joint top performers. (Three of the four have Arms Length Management Organisations.)

The fastest improving local authorities were identified as Ealing, Leeds, Redditch, Gloucester, Bury, Hounslow, Stevenage and Islington. (Again with ALMOs well represented.)

The study does usefully disentangle organisational performance from external factors. Perhaps similar studies should be performed and published for other public services. (If they have been, I don’t think they have been publicised enough)

My only criticism is the lack of any analysis of how relative performance maps across to different models – in particular, comparison of housing department performance with that of ALMOs. The study does contrast various types of local authority but ignores the ALMO debate.

Social HomeBuy initiative: three council houses sold

I’ve not read all 111 pages yet but yesterday the Department for Communities and Local Government published an independent evaluation of the Social HomeBuy initiative.

The evaluation is timely. Only three council houses had been sold via Social HomeBuy by the end of 2007. The scheme has been more successful with housing associations but we are not seeing great strides towards an asset-owning society.

In the executive summary, the evaluators note:

An average of 70% of tenants receive benefits and therefore would be ineligible for a mortgage. Of the remaining 30% of tenants, demand remains limited by income, demand to be a home owner and the desirability of their current property.

That has relevance across housing policy more broadly.

Wednesday, June 11, 2008

Is big beautiful? Futurebuilders' heavyweight board

As the size of boards is one of my stable of hobbyhorses (as evidenced on this blog), I was interested to read Stephen Bubb, chair of the Adventure Capital Fund, suggest on his blog that his 14-strong Futurebuilders board was rather on the large side. He wrote:

I wanted a diverse board which combined talent from investment banking and venture capital and great people from the sector. And we have managed to get sector people from small, medium and large charities and a social enterprise. But to confess. we have done this at the expense of a perhaps too large a Board. But in time people leave so it will work out I guess. A challenge for the Chair. It will keep me on my toes; but that is good . I do not like the supine. Nothing better than intellectual challenge to sharpen decision making.

Managing those meetings with all those high-powered professionals on board will definitely be a challenging task. My concern would be whether such a large board will be able to keep managers on their toes.

I would be a bit uncomfortable relying on people leaving “so it will work out” – although members might walk if they feel that the board is too large to be cohesive and effective (and they struggle to get their voice heard in the crowd).

We’ll have to watch this one.

Putting people into public services: better regulation and inspection

The National Consumer Council has launched a new, short report on Putting people into public services: better regulation and inspection (pdf available).

The report should be required reading for the new Oftenant in social housing. Indeed all regulators and inspectors should be asked to think about the issues raised.

The report warns of the danger that services are modelled on what satisfies regulators rather than the public.

The report’s vision is of a regulatory system that:

1) is organised for the benefit of the people who use services, not for the convenience of regulators and the regulated;

2) inextricably links efficiency, value for money and satisfactory outcomes for the people –specially as new and different providers enter the market;

3) builds on continuous conversation with service users and the public – starting from where people really are, rather than from assumptions of how they might think and behave;

4) makes the most of service users as the experts on what it feels like to receive a service; and

5) builds popular support for difficult regulatory decisions.

I would also add that wherever possible choice and competition should be used to drive improvement – rather than relying exclusively on regulation and inspection regimes. While the regulator and the inspector may ensure recognition of social benefits and costs, promote good practice and protect the vulnerable and poorly-informed, they are not so good at generating innovation, encouraging value-for-money and tailoring services around individual needs.

A social enterprise stocktake

Now – with the sale of ECT Recycling – is a good time to take stock on social enterprise. There is a timely review in this month’s Director magazine.

If anyone thought the situation was simple, the article will disabuse them of that notion. It warns of charitable and corporate entities being re-sprayed as social enterprises – “carpet-bagging”. It also suggests a distinction between the Body Shop as a social business and the Big Issue as a social enterprise. (I'm not sure about that one: it sounds like the government when it suggests that the "business" in the Department for Business, Enterprise and Regulatory Reform is something different from the "enterprise".) The article also points to the challenges – such as “scalability” with capacity issues in expanding to be in a position to deliver big contracts.

I have recently worked with one social enterprise that was thinking about seeking growth through mixing commercial and public funding. That poses a whole set of new challenges – not least for governance and accountability.

I suspect this bandwagon will keep rolling.

Tuesday, June 10, 2008

Social enterprises, muck and brass

I was surprised to read that the social enterprise ECT Recycling (linked to leading social business Ealing Community Transport) has been bought for £3.4m by private sector company May Gurney.

ECT Recycling is a community interest company required to return only 35 per cent of its profits to shareholders with the rest reinvested in operations.

The CIC regulator has said it will be monitoring developments. It will be important that this deal does not go sour – otherwise there will more cries of “privatisation” when new providers are involved in delivering public services.

Friday, June 06, 2008

HA boards: one-third fits all?

On the Great Governance blog for Welsh housing associations there is the executive summary of a report on governance commissioned by the Community Housing Cymru for the current Welsh Assembly Government review on the subject.

The report rightly recommends that

boards recognise that citizen and community engagement should be a defining feature of the governance of housing associations, constantly seek to innovate in their engagement with citizens and communities, sharing experiences and learning from others, and ensure that the direction and decisions taken by the board are informed by the engagement.

It also recommends that boards of associations which are responsible for providing housing services include one-third of their membership from tenants. Does one size really fit all?

Monday, May 19, 2008

Admiring the colourful housing in Albania

Interesting colour schemes in Tirana.

Temporary interrupton in service

Over the next couple of weeks, there may not be any postings. I'll be back on June 4th.

Are colleges open for business?

I have spent much of today trying to speak to colleges about them providing construction training for a client. While some FE colleges are enthusiastic and accessible, others offer unreturned emails, labyrinthine websites and ringing-out phones. I am lucky to escape the loop of one college’s telephone system.

It will be a challenge when they are assessed on their responsiveness to customers under the LSC’s Framework for Excellence.

Maybe choice and competition will sharpen up their act.

The NHS, Polyclincs and progress

As the NHS awaits the July report from Lord Darzi with its likely promotion of polyclinics (where several GPs’ surgeries are brought together linked to other services), I thought this quote was worth pondering:

We tend to meet any new situation by reorganising [to create] the illusion of progress, while producing confusion, inefficiency and demoralisation.

Usually attributed to Roman Consul Petronius but possibly dating from a British Army officer after the second world war.

Better integration of primary services makes sense. The fact that the medical profession does not like polyclinics could be seen as positive as the BMA has always opposed change including the foundation of the NHS.

On the other hand there is a risk that polyclinics will make primary care more distant from the individual – at least geographically. Nevertheless, we should all be conscious of the investment of time and resources (including the reserves now being accumulated in parts of the NHS) - will it be value-for-money?

Sunday, May 18, 2008

Sunday, May 11, 2008

Data, community cohesion, equality and diversity

Last week’s Public Finance has an interesting article by Professor Ted Cantle of the Institute of Community Cohesion (iCoCo for short).

On this blog I have expressed a certain wariness of some of the thinking behind the community cohesion agenda. In particular, I am uncomfortable with the hostility to multi-culturalism and the shift towards an emphasis on inter-cultural ignorance rather than inequality and discrimination. (I would add that I also believe that the public and third sectors need to treat this agenda seriously and connecting it in a progressive way to work on equality and diversity.)

After that caveat and caveat to my caveat, I would recommend Ted Cantle’s article. While talking primarily about the variety in the Muslim community (or communities), he notes more widely:

There is a real need to refine the crude total population data from sources such as the census to reflect the turnover of population and to map the complexities within communities. This would allow a move beyond a uniform approach to engagement and service delivery.

Too often organisations adopt a simplistic approach to using data in these areas – sometimes narrowly focusing on “targets” for “BME” (black and minority ethnic) access to services rather than thinking about what level of use would be expected and by which communities.

Thursday, May 08, 2008

Double whammy for social housebuilding targets

The impact on social housing of the credit crunch and property market is at last getting some attention in the mainstream media. On Monday's Radio 4 PM programme, the chief executive of Southern Housing Group warned that the reticence of lenders was making it hard for housing associations to plan new developments. Combined with a likely decline in homes earmearked as affordable coming through Section 106 planning agreements, this adds up to a double whammy.

Can and will the government increase grant rates from the Housing Corporation to provide more socially rented and other affordable homes?

Wednesday, May 07, 2008

One Plus governance issues equals organisational failure

The Office of the Scottish Charity Regulator (pronounced Oscar for those of us south of the border) has issued a report into the collapse of the Scottish charity One Plus: One Parent Familes (no relation of One Parent Families/Gingerbread or its sister charity One Parent Families Scotland). One Plus went down with an overdraft of £2m plus – as well as other debts. OCSR’s case study report found “important lessons”.

The section on governance issues reads like a visit to a chamber of horrors. This is even sadder as the board were interested and enthusiastic.

1) “The Board did not appear to contain adequate skills and independence of thinking to reflect the needs of a multi-million-pound business” - including poor arrangements for recruitment and development, a finance committee that had difficulty meeting, the Board did "not seem capable and willing to hold the previous Chief Executive and Senior Management Team (SMT) to account".

2) “The lack of timely or full financial information being presented to the Board” - including tabled papers, out-of-date and insufficient information.

3) “The scale, skills and leadership of the finance department seems not to have been adequate for the size of charity”.

4) “The apparent lack of independent third party advice sought by the Board” - "The charity and the directors tended not to seek advice nor engage with the external auditors between audits", no internal auditors and no audit committee.

5) "Both the Board and the SMT appear not to have taken responsibility for making decisions to resolve difficulties when they were identified".

The other sections of the report, including those dealing with broader funding issues, are worth a read too.

Its worth noting that the same themes recur in so many organisational failures in the public and third sectors. The sooner those lessons are learnt, the better.

Tuesday, May 06, 2008

Codes of conduct and the bad behaviour of board members

The Charity Trustees Network is drafting a model Code of Conduct for charities. This recognises the difficulties that can arise from problem board members.

Its worth remembering that having a code is one thing; having the ability and willingness to apply it is another. I know of at least one college that had a code of conduct but did not know how it was going to use it when a governor was accused of breaching confidentiality.

The CTN would like to hear about:

1) the kinds of trustee behaviours that have caused concern and difficulties

2) experience of putting in place and using a code of conduct

Blue Avocado on governance: abolishing board committees

There is a new blog and website for not-for-profits, Blue Avocado. It comes from across the Atlantic but a lot of the issues are the same.

Blue Avocado has just posed the question: Abolish Board Committees?

It goes on:

Too many boards are bogged down by committees that are inactive or maybe even semi-fictitious. And board members can feel compelled to be on three or four committees each!

It suggests time-limited, task-orientated taskforces or working groups. I do not have too much of a problem with that (especially for small community and voluntary groups) although I have seen working groups end up blurring the management-governance dividing line.

It is also noteworthy that Blue Avocado answers its own question by saying:

One permanent (standing) committee you'll probably need is the Finance Committee, which must oversee financial performance on a continuous basis.

I would also urge any organisations with internal audit (or some too small to have it) that an audit committee is fairly essential in good governance.

Tuesday, April 29, 2008

A leaner public sector?

Today’s Global Business on BBC World Service was about applying the Toyota-style lean production methodology to service industries. (The podcast is avilable but only for a week or so.) Its worth noting that lean is particularly relevant to making public services more effective and customer-centred.

Lean production includes a range of tools including a focus on dealing with the seven wastes:

Defects in products
Overproduction ie the costs associated with the production or acquisition of items before they are required
Transportation of products
Inventory ie the capital costs of raw materials, Work-In-Progress (WIP) and Finished Goods
Motion of staff and equipment
Over-processing ie using a more expensive resource than is needed

The ideas of lean are already being applied in some public services such as the NHS and social housing. But much of the potential is being left untapped.

Sunday, April 27, 2008

The third sector and terrorism

The Institute of Chartered Accountants’ seminar on charities on Thursday included a thought-provoking session on charities, terrorism and fraud.

I must confess a degree of doubt over whether the WRVS would be targeted by Osama Bin Laden. Moreover, I think that the banks’ money-laundering regulations get in the way of civil society much more than criminals and terrorists who would merrily steal identities to circumvent the bureaucracy. Nevertheless, terrorism should be borne in mind when addressing fraud and other criminal threats as good risk management.

The Charity Commission’s operational guidance on Charities and Terrorism is useful and relevant in the public and third sectors beyond charities.

Thursday, April 24, 2008

Lies, damned lies and performance management

Last week’s Public Finance magazine carried an interesting article about performance management – yes, really. It included a disturbing statistic: over 70% of recipients in a recent survey admitted to fabricating performance data. (How many of the others didn’t like to admit it?)

We know about perverse incentives, erroneous errors and even issues with performance data to regulators and clients, but this is organisations telling themselves lies.

(Before I go on, I should stress that I am a sceptic when it comes to “targets” as reform and performance information as a panacea. But performance information is integral to good governance.)

What can be done? A mature attitude to performance information would be a start – seeing it as a means to an end rather than an end in itself; measuring what matters rather than what is easily measurable.

There is also value in assurance. Boards and managers should ensure that key information systems are reliable. How can they do their job if they are driving with a faulty dashboard?

Larger housing associations have to get certain operational performance information systems verified periodically. Other organisations could get internal auditors to check out performance information systems. Yet in most of the public sector and third sector performance information is just accepted at face value.

Wednesday, April 23, 2008

What’s the point of complaining: learning from mistakes

This month the Heathcare Commission has published its second report on NHS complaints systems. It suggested that the NHS should use complaints to learn from mistakes and promote improvement.

It’s not a new or radical idea. As Bill Gates commented: “Your most unhappy customers are your greatest source of learning."

Yet reporting on complaints is often seen as chore of governance rather than an opportunity for learning. Reports labour over who complains, what about and what happened (in terms of whether complaints “upheld” and remedial action) – with hardly a mention (probably no mention) of what lessons were drawn from upheld complaints (and, of course, even rejected complaints might indicate scope for improvement).

If public and third sector want to improve their complaints processes, there is help out there. The Housing Ombudsman published a guide some year ago which sets out key principles and best practice (pdf available).

Tuesday, April 22, 2008

Productivity and diversity of perspectives

This week’s Global Business on BBC World Service was about developing effective teams. (The podcast will only be available for a week or so.) Professor Lynda Gratton of the London Business School talked about the key ingredients – which don’t include mandatory team building!

Like James Surowiecki in his excellent book The Wisdom of Crowds, Professor Gratton argues that diversity of perspectives results in creative tension and from that great ideas. She suggested that productivity in the UK would improve if corporate boards had a better gender balance.

That logic applies to the public and third sectors – and other perspectives: culture, belief, disability ethnicity.

Saturday, April 12, 2008

Audit committees - some (late) new year's resolutions

I am not having a week of plugging the Audit Committee Institute (sponsored by KPMG). But I would recommend the ACI’s latest quarterly. It carries an article on Ten To-Do’s for Audit Committees in 2008.

A couple of the To-Dos are, in my opinion, less priorities for the audit committees of the public and third sectors. The rest are:

- Be a catalyst for improving risk management and oversight.

- Make sure the CFO (chief financial officer) and the finance team have what they need to succeed.

- Ensure there’s a shared vision for internal audit.

- Encourage (expect) frequent, informal communications with the audit engagement partner.

- Be prepared for a crisis.

- Make sure the full board is aware of the audit committee’s activities and needs.

- Assess the tone at the top and throughout the organisation.

- Take a hard look at the audit committee’s performance.

The article has some suggestions on all of these too.

As I’ve signposted before, there is plenty of useful guidance out there for audit committee members in all sectors.

Friday, April 11, 2008

How well will housing associations be able to digest the credit crunch?

Yesterday I went to an excellent seminar for housing association audit committee members run by KPMG’s Audit Committee Institute. One of sessions was delivered by the Housing Corporation’s head of financial regulation. He spoke about the financial health of housing associations. It was somewhat depressing hearing his summary of the sector's Global Accounts. He noted the pressure on association’s operating margins and their heavy reliance on profits on property sales.

It is rumoured that there are only two lenders in the housing finance market. (And, of course, the margins are higher and expressed over the inter-bank rate LIBOR.) This week Inside Housing is reporting the lenders' loss of appetite. This will hopefully change once the credit crunch passes - eventually. If housing associations struggle to sell shared ownership (and outright sale) new build, they may also lose interest development.

Housing associations (including their boards) need to watch this very closely although there scope for action is fairly limited.

Sunday, April 06, 2008

Housing repairs PIs, inspectors and targets

This week’s Inside Housing has a challenging article by John Seddon (the management guru who has popularised “lean thinking” in the UK). He writes on performance improvement in housing - and how, he suggests, targets and the Audit Commission inspection regime hinders it.

Sadly there is no copy of the article on Inside Housing website. However, there is an article making a similar case on John Seddon’s website, Systems Thinking. I have some sympathy with the case being made.

Inspectors (and politicians) often assume that everything can be fixed by targets (or higher targets if performance is not good enough). Sometimes “targets and terror” can work – but I would argue that such an approach cannot deliver sustainable improvement.

Housing associations and ALMOs should not give up all hope. They can do something. For a start, they should remember that the Housing Corporation has shifted the focus on repairs performance indicators from response times to resident satisfaction. It appears to be that few housing associations have re-thought their own repairs PIs and introduced a more holistic and sophisticated framework for repairs performance.

Saturday, April 05, 2008

Boardroom furniture – the role of the chair

The recent kerfuffle about Stuart Rose being an executive chairman at Marks and Spencer (ie combining the roles of chairman and chief executive) should be a useful reminder of the importance of the chair in acting as a balance to executive management.

A degree of tension between a chair and a chief executive can be creative. That is more difficult if the roles are combined. In the public and third sectors, we don’t get the roles combined although weakness in either party can result in a similar type of imbalance.

Perhaps relationships between chairs and chief executives are a bit like marriage. The National Council of Voluntary Organisations’ website has suggested prenuptial agreements as a way of avoiding relationship breakdowns.

There is a lot of truth in the old cliché: the chief executive manages the organisation, the chair manages the board. Unfortunately useful advice in applying that can be harder to find. I would signpost new (and not-so-new) chairs to the Governance Hub if they are looking for some guidance.