Tim Nicholls on Good Governance

Arrow PNG

Introduction

Governance can be explained as the systems and processes concerned with ensuring the overall direction, effectiveness, supervision and accountability of an organisation.

Those with ultimate responsibility in the VCSE are often giving their time voluntarily but this does not absolve them of responsibility and accountability if things go wrong. High profile charity collapses have pushed third sector governance into the media and public eye like never before.

Although sectors clearly differ greatly in terms of their aims and objectives, the principles of good governance will be fundamentally unchanged.  However, despite the formal legislative framework there must also be room for flexibility and interpretation to enable the unique needs of each organisation to benefit.

Systems of good governance far from encouraging a risk adverse culture can stimulate dynamic decision making.

Key Characteristics of Good Governance

Good governance should not merely be about compliance whilst ignoring underlying behaviours. A culture of good governance must be embedded and this is driven by a transparency agenda which links together the values, aims and objectives of the organisation.

If the corporate culture isn’t right then it can fester and ultimately cause problems resulting in long term damage.

Good governance can be summarised as:

  • Transparency
  • Assurance
  • Participation

The Board

The responsibility for Governance will sit with the Board of Trustees / Board of Members / Board of Partners.

As such, ensuring that the make-up of the Board is right will be fundamental to success. In some organisations, prior knowledge or some previous involvement / link to the organisation is deemed as the key requirement. In others this is seen as a potential barrier to effectiveness and recruitment is driven by a “skills set” evaluation.

Once a Board member has been recruited it is vital that they fully understand what is required and expected of them. It is now quite common for documented role descriptions to be developed for each Board Member. In the past this was not always the case as there was a feeling that everyone should be “grateful” that these individuals were prepared to give up their own time for the benefit of the organisation.

It may be that a Board Member has specific responsibilities over and above the legislative requirements. These additional or “organisational specific” responsibilities would be set out in the overarching governing document of the organisation (Articles of Association / Constitutional document).

Once appointed Board Members will play a key role in:

  • Securing the long term direction of the organisation by seeking to further its “objects” or purpose set out in its governing document.
  • Ensuring that policies and activities underpin the achievement of the objects.
  • Ensure the organisation is run in a way that is legal, responsible and effective.
  • Being accountable to those with an interest or “stake”.

The frequency of Board meetings will directly link to the effectiveness of the decision making and it will be important that papers are circulated in a timely manner to allow members to be a) up to speed prior to a meeting, and b) clear about decisions and any follow up actions after a meeting.

Board meeting dates should be set for an entire business year in advance to ensure that attendance is possible. In the event that Board members cannot attend there should be a mechanism for them to still make a contribution. Additionally there should be clear expectations around levels of attendance and processes which can be called upon if these are not maintained.

The meetings themselves should be supported by a seasonal rolling agenda. This will mean that there will be an organisational awareness of key items which should be discussed at certain meetings. This will also mean that from meeting to meeting the topics will be varied and it won’t slip into a routine nature. The only routine items covered at every meeting should be conflicts of interest and serious incident reporting.

A key information policy must also be implemented. This can ensure that the Board remain strategy focussed and do not get swamped with operational detail.

All Board Members should make a contribution. There is a real risk to effectiveness and overall governance if meetings become a listening shop dominated by a few loud voices. 

The Board and Management must be clear about the differentiation between their roles. The Board will be responsible for agreeing the purpose of the entity and setting the broad strategy. Staff would then take responsibility for the management and implementation of this on behalf of the Board. The Board would then be accountable for the reporting of performance through their annual report, and for ensuring that the performance was delivered legally and in full compliance with regulations.

The Board should be visible and engaging not just with staff but also with key stakeholders.

Every Board should take the time to consider the following questions regularly:

  • Do we periodically consider emerging trends / needs in our environment?
  • Are we the only player in the market delivering our service?
  • What is the landscape in our sector generally and what does it mean for us?
  • Is there scope for collaboration / sharing best practice?

To ensure that a Board remains dynamic, Terms of Office for Board Members are becoming ever more common. There has also been a move in some areas to recruit younger Board Members who bring skills which in some cases are more in line with the challenges currently being faced.

Bad Governance

Bad governance is a very easy trap for any organisation to fall in to. It is rarely a case of “bad management” causing this. It is more often a case of “distracted management” paying the price for taking their eye off of the ball. Effective systems must be in place to protect against this

The system is key – a bad system will beat a good person every time.

Conclusions

Good governance runs throughout an organisation. The Board is ultimately responsible for good governance but it runs far wider than that. The Board must rely on many different people to be able to govern well. Staff and the CEO, volunteers, advisers, supporters and anyone with an interest or stake in the organisation. 

Good governance will ensure:

  • Compliance with law and regulation
  • That the organisation is run effective and efficiently
  • That problems are identified and dealt with appropriately
  • That the reputation of the organisation and the wider sector is preserved and developed
  • That the objects and aims of the organisation are pursued and enhanced.

Together this will ensure that the organisation is well placed to deal with the challenges that will inevitably face it

Tim Nicholls