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.
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 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.
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!
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.
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.
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.
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.
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.
Anonymous
Managers are concerned with doing thing rights.
Leaders are concerned with doing the right things.
Anonymous
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.
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.
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.
Anonymous
To expect the unexpected shows a thoroughly modern intellect.
Oscar Wilde
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.
Anonymous
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.
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.
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.
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.
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.
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