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Sunday, 17 March 2013

How Do Boards Really Know What's Going On?

Corporate failure continues to be in the spotlight, whether in private or public sectors. How do Non-Executives, Independent Directors and Governors really know what's going on? Are Unitary Boards best, or can they become too managerial? How do Boards set a good cultural tone by finding the right balance of challenge and support? How do Board members 'test' the information they are given to assure themselves of its accuracy?

I hold four board roles - one, as Chair of a drug and alcohol treatment charity, is wholly concerned with the delivery of public sector contracts and has a board with private, public and third sector experience. We seem to face in all directions at once, responding to and affected by public sector commissioning and payment by results, concerned about our charitable objects, and needing to create an operating margin to secure a sustainable financial future. 

When I joined the organisation I was soon conscious that senior staff and Board members portrayed the charity in different ways, emphasing various strengths and weaknesses and holding different views of how we might manage the future. It was important for me to  establish quickly a position where there was a shared understanding about the basic 'facts' - our financial standing, what we were delivering, how our customers and commissioners saw us, and our position in the current and future markets. This has stood us in good stead. It has enabled us to take some difficult but necessary decisions. We may still hold different views and have a range of ideas about the future, but at least we are able to identify our differences from a common starting point.

For me as Chair, this experience in the first six months, has been very hands on and not what I might have expected of the role. The culture of the Board is managerial with non-executive trustees who are very experienced and intellectually able and who are very challenging and highly supportive at the same time. We are a unitary board, with a third executive membership and this is a relatively recent evolution which may not be fully embedded. Executives tend to contribute in their areas of expertise, rather than in general on any matter. As we develop the board over the coming months we will think very carefully not only about our constitution but also about our behaviour, and how our structure affects the way we act .

In the NHS Unitary Boards are the norm in hospital and community trusts and have been in the shortly to disappear commissioning bodies, the Strategic Health Authorities and Primary Care Trusts. Having been a Non-Executive Director on both and SHA and a PCT over the last six years, I reflected on how things might change in the new NHS in a Guardian Public Leaders Forum at the end of last year. The new Clinical Commissiong Groups generally have two lay members to eight GP members with other professional members from local authorities or other sectors. If the lay members represent the only source of independent challenge, they are going to be a small voice. I noticed this week my local Commissioning Support Unit - the arms length structure set up to provide back office services to CCGs- advertising for a Lay Adviser. Positive that outside expertise is being sought, but interesting that it is clearly not a decision-making role.

Governance is so much in my mind this week for two reasons - the first is having the opportunity to participate in a Leadership Foundation event on the role of Universities in the current economic climate. This thought-provoking conference allowed us all to think about the purpose of universities and how independent governors in particular might encourage a more outward facing approach. Our creative thinking was balanced by very focused sessions on the very complex regulatory framework and on Key Financial Indicators. 

What this brought home to me was that, whilst I had been recruited as a university governor for my expertise, knowledge and connections in particular areas, my obligations as a governor require me to understand the business  well and to be able to ask the kind of questions which our regulators, funders and students would be asking. Talking to staff and students, taking the temperature of the organisation is a valid way to hear whether the information in board papers rings true. Comparing performance with other univerisities or similar sized organisations in different sectors is important in evidencing how progress is being made and what your organisation is choosing to do and why. You can be an outlier, but with good and conscious reason.

Also this week I spent 24 hours with the Board and senior officers of a large social housing provider whose Board I joined last year. Like the university,  we are a large organisation with charitable objects operating in an increasingly commercial context with reducing public funding. We are a refreshed board with a majority of new members and a new execuitive team, so building relationships and finding out about one another is important. The organisation is in a state of rapid transformation and the context is also changing with Welfare Reform and a challenging housing market being  twin peaks of concern. How can the Board, meeting six times a year, keep a focus on what matters and oversee the development of strategy and the management of risk at a volatile time. At the moment, our approach is to involve as many members as possible in the business through role on subsidiary boards and Committees. This is all very well, and engages us in the detail, but it also generates a lot of governance business which distracts from delivery and results in information being reproduced and processed by the same people in different groups. 

We are conscious of our responsibility for good governance, so we are prepared at the moment to have more detail rather than less. But data and information are not the same as knowledge - we have to understand and know what the numbers mean whether they are about finance or activity. So again, seeing how the organisation runs, what our homes and estates look like, listening to residents where they live and around the Board table are essential parts of testing the reports we receive.

Boards are not there to do Management's job - what many Chief Executives fear- but we can't govern well without understanding what Management's job is and how well they are doing it. Governance is about assurance, assurance is provided through evidence, evidence is multi-dimensional . Boards need to understand the dimensions of the organisations they govern in order to do their job well.

At The Open Channel our support for Board Development and Leadership reflects many of these experiences. Let us know how they reflect your.

1 comment:

  1. Great stuff Janet. Do you think many board members "contribute" but don't get "involved" (which is what I think you're saying)?