Friday, February 29, 2008

Governance matters – at last proof that doing things right means better results

It was good to read in The Guardian this week that well governed companies do perform better than badly governed ones. This proves that it is worthwhile for organisations in all sectors to listen to the advocates of better governance.

In the past doubters could always stall and ask for the proof. As one of the many reports on governance in he 1990s reported a little feebly: “Business prosperity cannot be commanded. It is important to recognise that there is no hard evidence to link success to good governance, although we believe good governance enhances the prospect.”

But no more! The researchers at the Association of British Insurers analysed 241 companies with the best and worse corporate governance records. They found that governance drives performance rather than the other way round, and found lags of two to three years in the relationship between poor governance and inferior performance. For each year a company was in the worst category for governance, its return on assets fell by about one percentage point a year.

While the study was looking at the private sector, I think it’s reasonable to apply its lessons to the public and third sectors where practice can be found to be a lot better and a lot worse than the private sector.

The vulnerability of chief executives in FE and housing

In the FE and social housing sectors where I spend a lot of my time working, I’ve noticed that the industry press have been talking about the vulnerability and turnover of chief executives.

Inside Housing reported that arm's-length management organisations (ALMOs) have experienced massive upheaval over the last year with a quarter replacing their chief executives. It talked about pressure to meet the decent homes deadline, interference from parent local authorities and the desire of some chief executives to take on a new challenge

The FE pages of the Guardian reported that college principals are now like football managers - they don't last long if they don't get results. It also reported that research suggested had found that “excessive audit cultures, inconsistent funding and multiple community engagements” resulted in a growing disinclination for qualified candidates to apply for vacancies.

Should we worry? I am suspicious of the cult of the CEO – chief executives are not superheroes. (Nor in fact are football managers – see King Kevin at Newcastle United.) As one author has pointed out “Past success is no guarantee of future success”. Sometimes chief executives are just lucky – chief executives (and boards too) are at the helm of successful organisations (or what are perceived to be successful at the timel – look at Enron or Northern Rock).

Nevertheless, I have seen how a lack of leadership can be debilitating. Organisations in public services will be losing direction if they do increasingly lose their chief executives.

Saturday, February 23, 2008

The creative industries in UK plc: the third sector, education and training

It is good to read that the government is providing for 5,000 new apprenticeships in film, fashion, music and design as part of a new strategy for the creative industries.

I’ve been doing some work with third sector organisations recently – many of which are well placed to assist this push on education and training for the creative industries. I have learned a lot about how creative industries are a key element in the British economy.

Research by the think tank Demos has found that the creative industries employ 1.8 million people in the UK. The creative industries are definitely not a passenger in UK plc – they are a driver. Sadly this is not widely understood. (I once had to explain how the creative industries were as much "wealth generating" as manufacturing industry to a documentary maker who asked me how this could be!)

Tuesday, February 19, 2008

The property market and the implications for housing policy and housing associations

The property website Rightmove reports that the asking price for houses moved up last month. Rightmove's latest survey for the month to February 9 shows that asking prices rose 3.2 per cent to £237,856. The rise, averaging £7,428, pushed the annual rate of growth up to 5.8 per cent, from 3.4 per cent in January.

Don’t get over-excited. This is asking prices – the prices are much higher than the final sales prices recorded by the Land Registry. Rightmove also point out that there is often such a pick-up in February.

Perhaps the real picture is better shown by the falling prices – some pretty spectacular – on Property Snake.

No doubt there are some recession-proof areas, particularly in London – but the property market correction is surely here.

What does this mean for housing policy and housing providers? Some housing associations will be struggling to sell the shared ownership properties that they have built or got through section 106s. Where business plans rely upon shared ownership and even outright market sales there could be problems. Those problems could have an impact for the policy-makers (and those suffering the effects of the housing shortage) where difficulties prevent the delivery of ambitious affordable house-building plans (plans that already seem to be a bit of bother).

Sunday, February 17, 2008

The Healthcare Commission learning from investigations – mergers, targets, governance and other common themes in public services

The Healthcare Commission watchdog has published an interesting analysis of lessons from 14 investigations into patient safety failures. Such analyses of failing organisations are always to be welcomed. In social housing there are the Learning from Problem Cases series of reviews into "supervision" cases (see the Housing Corporation website here and here). Sadly in other sectors, such as further education colleges, there are ad hoc reactions to failures rather than systematic reviews and efforts to promote learning.

The Learning from investigations report (pdf available) found common themes:

1) Leadership and management: Poor leadership was a problem in nearly all of the investigations carried out by the Commission.

2) Some boards had been focused on mergers or targets at the expense of their broader activities.

3) Lack of continuity in leadership was a problem in some trusts, where frequent changes in management were a factor in poor care. Bullying and harassment by managers was a factor in two cases investigated. The Commission found there was a fine line between promoting change vigorously and bullying.

4) Investigations often uncovered a breakdown in leadership and management, with a lack of clarity on responsibilities from board to ward. Poor teamwork, either between management and clinicians or between clinicians themselves was another common factor in failings.

5) Use of information: The Commission found that most of the trusts investigated did not have adequate systems in place to routinely inform the board of trends or potential problems.

6) Mergers and restructures: Seven of the trusts investigated had recently undergone mergers or significant organisational change.

7) Safeguarding vulnerable adults: Poor understanding of adult protection procedures and responsibilities was a serious problem in the two investigations into learning disability services and also a number of interventions in trusts.

8) Poor care on general wards: When its investigations looked at acute hospital care, the Commission noted that care on general wards fell well below the care provided on specialist wards. Older patients were most at risk as they were often most dependent on good nursing care.

It is note-worthy that the first five of these themes are found widely across public services.

Northern Rock and mutualism

As the government nationalises the Northern Rock its worth taking this opportunity to remember that the bank used to be that most solid of institutions, a building society owned mutually by its customers.

If Northern Rock had not succumb to de-mutualisation in 1997, it is unlikely that it would have experimented with such a risky business model based on lending long and borrowing short with wholesale funds.

Friday, February 08, 2008

Its official: efficiency gains claimed by housing associations "do not reflect the whole picture"

Readers of this blog will know that I am a long time skeptic about the huge efficiency gains being claimed by housing associations through the annual efficiency statements to the Housing Corporation. All sorts were being claimed without much concern for definitions or common sense. (The efficiency gains reported reminded me of reading Soviet Weekly on grain targets.) I was heartened to read that the Audit Commission has one or two doubts too.

In the Commission’s new report on procurement (Better Buys - pdf available) they note that reported efficiency gains represent 3.5 per cent of aggregate turnover and 4 per cent of total expenditure of the sector in 2005/06. Yet they observe that “these global cost savings do not reflect the whole picture” and remark on the reliability of these figures.

It is particularly interesting that in an attempt at verifying of a sample of annual efficiency statements, but it was not possible to track the efficiency savings reported in the statements into associations’ management accounts.

Thank goodness the Housing Corporation has abolished this requirement. It is a lesson in how efficiency gains cannot be brought forward at regulatory behest.

Monday, February 04, 2008

Corporate fundraising: the cautionary tale of the Northern Rock Foundation

Northern Rock gives us a cautionary tale on corporate fundraising for charities. For a decade the Northern Rock Foundation has made an poured millions of pounds into voluntary and community organisations in the north east and Cumbria. But the future of the Foundation and for its beneficiaries is uncertain.

The Financial Times reports that the Foundation ploughed 5 per cent of the Northern Rock’s pre-tax profits each year into charitable works. In 2008, it looked set to receive in excess of £35m from the bank, its largest injection of funds ever.

Believing future funding was assured, the Foundation spent most of its money, rather than tying it up in endowments. Of the £190m it had received, it spent £171m to date. In response to the bank’s difficulties, 2007 foundation spending was trimmed to £23m and 2008’s cut to £7m. Future grants are expected to be much reduced especially for some sector such as culture and heritage.

Third sector salaries in 2007

The Workforce Hub has just published the main findings from the 19th Annual Voluntary Sector Salary Survey. Its makes interesting reading which will be of particular interest to those responsible for human resources and financial management (including business planning and financial forecasting).

The Salary Survey found that average salaries and earnings in the voluntary sector each increased by 3.7%, a higher rate than the Average Earnings Index of 3.0%, but below the Retail Price Index of 4.3%. The increases are slightly lower than twelve months ago when both increased by 4.9%.

The Salary Survey found that 62% of organisations had experienced problems with staff recruitment in 2007: an increase of almost 10 percentage points from last year. The main reasons behind these difficulties were a lack of suitably trained applicants and the salary levels available. Likewise problems with staff retention were more widely reported as was an increase in staff turnover.

2008 may be the year when the squeeze on public finances impacts more radically on salaries in the third sector as well as the public sector.

Sunday, February 03, 2008

Eco-office - an example for all

I’ve had a busy weekend. As well as the NHF Board Members’ Conference, on Friday I attended the official opening Christ Church Memorial Hall eco-office – a part of a £2.3m eco neighbourhood project led by Family Housing Association (Birmingham).

While I must declare an interest as a board member of FHA (Birmingham) board, the eco-office is an excellent exemplar of good practice for private, public and third sectors. Moreover the opening was well-timed as last week was European Sustainable Energy Week.

There is more on the eco-office and the associated projects on the FHA (Birmingham) website.

Social housing reform - priorities for housing associations

I spent the weekend at the National Housing Federation’s conference for housing association board members. One of the more interesting sessions was speech by Terrie Alafat, Director of Housing Strategy and Support

In an update on the government’s agenda of social housing reform, the main policy priorities with a bearing on housing associations were identified (according to my scrawled handwritten notes) as:

- Preventing homelessness.

- Addressing worklessness.

- Specialist services for the socially excluded.

- Tackling overcrowding.

- Improving choice and mobility for tenants eg choice based lettings, common housing registers.

And, of course, there is the challenge of ramping up house-building to about 70,000 affordable homes a year by 2010/11.

It was good to hear a range of policy concerns being talked about – without disproportionate emphasis on shared ownership.

Better Buys – housing association procurement and repairs

On Friday the Audit Commission published an enlightening and challenging study on housing association procurement. The Better Buys report (pdf available) includes the diagram above which presents the “low hanging fruit” and the less easy wins available diagrammatically.

The study found that a third of efficiency savings by housing associations in 2006/7 came from procurement. But significantly shows that further annual savings of about £100 per home could be made through the better procurement of housing maintenance services.

The report’s main recommendations for housing associations (but with relevance to other social landlords) are:

• identify gaps in procurement skills and take steps to fill those gaps, either by building in-house capacity or seeking external expertise;

• identify and collect information on the market before considering procurement options and ensure that performance monitoring and benchmarking is undertaken as part of the procurement cycle;

• consider and evaluate all models of collaboration for achieving greater efficiency, including shared services in groups and consortia;

• explore and evaluate a greater role for e-procurement tools; and

• ensure that residents are involved in, and have appropriate opportunities to influence, relevant procurement processes.