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 – or adventure – there is no reward. Innovation and transformation may be over-used clich├ęs, 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.