A brief break in postings

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.

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.

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!)

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.

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 FT.com 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.

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 clichés, but change is vital for public services and it comes with risks that need to be taken and managed.

Anyone for adventure management?

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.

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?

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.

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.

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.

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.