Effective governance - does your board make a difference?


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The presentation was part of a workshop called 'Effective governance: Does your board make a difference?' at NCVO's Trustee Conference on Monday 11 November 2013.

The presentation was by Anne Moynihan, senior consultant and explores what is meant by 'effective governance' and how it can be achieved.

Find out more NCVO's Trustee Conference: http://www.ncvo.org.uk/training-and-events/trustee-conference

Find out more about NCVO's work on governance: http://www.ncvo.org.uk/practical-support/governance

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  • Holding slide as people arrive for afternoon session – 14.10
  • Its very existence must be questioned if the charity has little effect or impact – therefore a major part of what a board does should be to concentrate on assessing the charity’s performance and the impact it is making.
  • An overall performance of governance score was computed for each participant, by averaging the scores across the 12 governance roles presented on the previous slide. 23% had an overall performance of governance score of ‘extremely good’, 36% ‘very good’, 27% ‘good’, 14% ‘quite good’ and none scored ‘not very good’.This was then the Dependent Variable for the Key Driver Analysis. We were seeking to understand what other variables influenced the overall performance of governance score.Each of the 12 roles on previous slide was assigned a scale of 4 to ‘extremely’ well, 3 to ‘very’ well, 2 to ‘quite’ well, 1 to ‘not very’ well. Then the “overall performance of governance score” was computed for each participant, as the average score across all 12 dimensions (on a scale of 0 to 4); scores of 3.5 or more were defined as ‘extremely good’, 3.0-3.49 ‘very good’, 2.5-2.99 ‘good’, 1.5 – 2.49 ‘quite good’ and less than 1.5 ‘not very good’.) The average “overall performance of governance” score for the whole sample of 228 respondents was 2.96, which is equivalent to ‘good’.
  • Having pinpointed the drivers of overall performance of governance, we then explored how well organisations performed on each of these specific characteristics. Each dimension was classified on a two way criterion of ‘good’ or ‘poor’ performance.And then we then looked at the proportion of organisations that achieved the threshold needed for ‘good performance’ on each dimension. Here we see the proportion of organisations that met our criterion for good performance and therefore have the key driver firmly in place. The key drivers that we found were most frequently in place were:A good relationship between the chair and chief executiveQuality of information provided to the boardThe skills and experience needed to provide excellent governanceOpenness and mutual trustEffectiveness of committeesAwaydays.Chairs and Chief Execs seem to think they have a good working relationship (89% top performance) –but they were the ones filling it in, so they would say that!More likely to think that board members in place have the right skills and experience (80% think so) than being sufficiently diverse (64% - next slide). Maintaining diversity was also cited by respondents as a key issue/concern which boards face in the next few years (also tied into payment of trustees but I know you might not want to mention that).Three quarters are confident in the quality of their board meetings (which is important as ranked 2)[NB The definition of performance varied on each dimension, according to how the characteristic was measured. In some cases it was whether they did the activity or not; on others it was the frequency of undertaking the activity; and on others it was the participant’s judgement of how effective their organisation was at performing the particular governance role].
  • team working (ranked 1) and strategic focus (ranked 4) have relatively fewer organisations doing well – 63% and 61% respectively – compared to some other aspects. Also having a positive attitude and praising management 63% (ranked 7th)There are also around half of organisations who have room to improve on performance reviews of individuals, and the same for formal reviews of governance performance ….which is something Compass can assist with!
  • Meeting etiquette Ensuring that a meeting is chaired effectively is everyone’s responsibility – every chair needs support in order to fulfil their role;Many charities have codes of conduct;No papers tabled at the meeting;No AOB unless agreed by Chair in advance;Zero tolerance on unacceptable behaviour;If members not fully engaged then decision making impaired;Doesn’t mean that a meeting is/or should be a comfortable place – challenge as well as teamwork is an essential feature;
  • ICSA – board room behaviours – worst examples?
  • Effective governance - does your board make a difference?

    1. 1. PM5: Effective governance – does your Board make a difference? Anne Moynihan, Senior Consultant
    2. 2. Aims of the session • To explore what is meant by „effective governance‟ and how it can be achieved; • To consider why there is often a gap between the quality of the written governance systems & processes and how it is practiced; • To take a closer look at how individual trustees can improve the performance of their boards and add value.
    3. 3. Introductions • Name; • Organisation & role; • One thing your board must do in order to improve the way your organisation is governed and led.
    4. 4. Effective governance „If charities exist to create a better world (or part of it) then the whole point of good governance in a charitable organisation should be to deliver on its charitable objects and therefore to provide greater public benefit – not simply to do governance well!‟
    5. 5. Effective governance • • • The definition of board effectiveness keeps shifting – no clear link between board effectiveness and organisational performance; Since the financial crisis of 2008 research highlights that behavioural dynamics are key & can make the difference between a bad & good board or a good or great board; „Good Governance: A Code for the Voluntary & Community Sector‟; „Boardroom Behaviours‟ (ICSA), „Guidance on Board Effectiveness‟ (FRC), „Walker Review of Corporate Governance in the UK Banking Industry‟ and „The CIMA Boardroom Leadership Model‟.
    6. 6. Effective governance “The research clearly reinforced the „inconvenient truth‟ that a Board can have the clearest and the most robust processes and adherence to Governance principles, but if its members do not have the courage and judgement to call out and deal with the real issues facing the business in a timely and direct manner, the Board will fail to add value and may end up destroying it.” The Behavioural Drivers of Board Effectiveness: A Practitioners Perspective, MWM Consulting,
    7. 7. Delivering effective governance: insights from the boards of larger charities George Levvy, Senior Consultant Jacinta Ashworth, Research Consultant Compass Partnership 7
    8. 8. Outline of this presentation  Background to the research  Selection of findings  Key drivers of effective governance  Conclusions 8
    9. 9. Background  First survey of governance of large charities  Top 500 charities account for 46% of UK charity income  Over 100 questions  228 organisations participated (46% response rate)  Questionnaire completed by CEO, senior staff member, or Chair  Responses well balanced across different organisation types  Limitations include:  self assessment  no direct comparisons with private and public sectors 9
    10. 10. The Compass Cass Governance Model Governance Structures Processes Meetings Behaviours • Governance structure • Board size • Terms of office • Term limits • Representation • Committee types • Committee size • Task groups • Advisory groups • Subsidiaries • Representation of nations • Representation of stakeholders • Vice chairs • Succession planning • Recruitment • Appointment • Diversity • Induction • Remuneration • Skills and experience • Chair selection • Committee chair selection • Committee member selection • Setting strategy and tracking organisation performance • Governance of risk • CE performance evaluation • Performance of governance • Chair performance review • Member performance review • Frequency • Duration • Attendance • Agenda planning • Meeting management • Quality of papers • Consent item • Chief Executive‟s presence • Manager‟s presence • People in the room • Away days • Use of members‟ skills • Listening • Team working • Praise and challenge • Openness and trust • Strategic focus • Contact outside meetings • Conflicts of interest • Chair-chief executive relationship • Experience of other boards 10
    11. 11. Selection of the findings 11
    12. 12. Board size  On average, boards had 14 members  Terms of office were usually three years, with a max. of 2-3 terms 2% Number of members More than 30 3% 26 to 30 5% 21 to 25 Large 16+ 14% 16 to 20 21% 13 to 15 Medium 11-15 11 to 12 26% 6 to 10 26% 1% 1 to 5 members Base: All (228) Small <10 0% 5% 10% 15% 20% 25% 30% 12
    13. 13. Diversity  Women, ethnic minorities and disabled people are under-represented on boards of large charities Average % of board members who were: Female 32% Representative of beneficiaries 22% Known to be donors 22% * For ALL charities the equivalent is 48% women (Source: NCVO). * FTSE100 companies equivalent is 16% * FTSE 250 companies equivalent is 10% (Source: Cranfield Uni) 14% Active fundraisers Representative of volunteers 9% Ethnic minority 9% Disabled 0% 6% 10% 20% 30% 40% 13
    14. 14. Succession planning and remuneration  Nearly three quarters only considered skill requirements as each position arose  Four in ten used an agreed skills grid for succession planning  The most effective recruitment methods were board and staff contacts, followed by public advertisements  There was generally a good breadth of induction activities  14% said their Chair was remunerated, and 10% remunerated other board members Higher among larger charities, and linked to higher levels of attendance at board meetings  Suggestions for improvements: fill skills gaps, improve diversity, strengthen induction and board member development 14
    15. 15. Board meetings  Boards typically met 3 – 6 times per year, for less than 5 hours per meeting  Boards typically achieved 80 – 90% attendance Those that stated expectations achieved higher attendance  Two thirds said that Chair and Chief Executive plan board agendas together „extremely‟ or „very‟ systemically…  whereas a third were only „quite‟ or „not very‟ systematic  Two thirds spent some time meeting without executives present  Three quarters had held at least one Away Day in the last 12 months  Suggested improvements included better strategic focus, agenda planning, board papers and delegation to committees 15
    16. 16. Board member behaviours  Team working, praising management and strategic focus were slightly weaker aspects: Confident that operate in an atmosphere of openness, confidence & mutual trust 26% 54% Good at listening to each other 16% 55% Good at providing robust challenge to management 17% 51% 17% 27% 26% Good at working as a team 12% 50% 32% Good at praising management 11% 52% 32% Effective at focussing on strategic rather than operational matters 13% 48% 0% Base: (228) Extremely 33% 50% Very Quite 100% Not very 16
    17. 17. Main governance issues facing UK‟s top 500 charities in next few years Two thirds made predictions and the responses were grouped by theme. The top specific issues raised were, in rank order:  Ensuring financial viability or sustainability in a difficult and       competitive economic climate Attracting, recruiting and retaining high calibre trustees with diverse backgrounds and skills Understanding appetite for and management of risk Growing regulation and restrictions placed upon charities Finding board members who can devote sufficient time to the role Remunerating trustees and the difficulties of recruiting without remuneration Responding to a modernising society and tumultuous times. 17
    18. 18. Key drivers of effective governance 18
    19. 19. How well does board perform key governance roles? Ensuring economic viability of the organisation 43% Discharging legal and regulatory duties 43% Agreeing mission, objectives and strategies 13% 7% 25% 49% 28% 47% 8% Bringing novel or creative ideas to the organisation 24% 46% 18% Resolving the interests of different stakeholders 16% 52% 24% Understanding & reflecting views of all stakeholders 12% 51% 19% Establishing appetite for and management of risk 13% 47% 31% Managing the processes of governance 10% 46% 36% Providing insight, wisdom and judgement 9% 51% 39% Appointing and supporting the chief executive 7% 46% 36% Upholding the values of the organisation Tracking organisation performance against plans 48% 35% 44% 36% 32% 0% 20% Extremely 48% 40% Very 60% Quite 9% 12% 80% 100% Not very Base: All respondents (228) 19
    20. 20. Top 20 drivers of governance performance An effective board: 1. Works well as a team 11. Has strong chair /CE relationships 2. Ensures meetings deliver excellent governance 3. Has the required skills and experience 12. Holds at least one away day per year 4. Focuses on strategy 13. Spends time discussing performance of governance 14. Has high quality of board papers 5. Operates with openness and trust 15. Achieves high attendance levels 6. Has great diversity 16. Holds formal reviews of governance 7. Praises management 9. Uses committees effectively 17. Requires Chair and CE to plan agendas together 18. Reviews performance of members before re-election 19. Has chair / CE who speak 1:1 frequently 10. Gives thorough induction 20. Reviews individuals’ performance 8. Provides robust challenge 21
    21. 21. How prevalent are the top 20 drivers? Strength of driver % of organisations with good performance on each key driver Has strong chair and chief executive relationship 11 89% Has high quality board papers 14 82% Has the required skills and experience 3 80% Operates with openness and trust 5 80% Uses committees effectively 9 79% Holds at least one Away day per year 12 79% Spends time discussing performance of governance 13 75% Achieves high attendance levels 15 74% Ensures meetings deliver excellent governance 2 74% Gives thorough induction 10 70% An effective board: 22
    22. 22. How prevalent are the top 20 drivers? Strength of driver % of organisations with good performance on each key driver Provides robust challenge 8 69% Requires Chair and CE to plan agendas together 17 68% Has great diversity 6 64% Has chair and chief executive speak 1:1 frequently 19 64% Works well as a team 1 63% Praises management 7 63% Focuses on strategy 4 61% Reviews performance before re-election 18 54% Holds formal reviews of governance 16 51% Reviews individuals’ performance 20 50% An effective board: 23
    23. 23. How many key drivers do organisations have in place? Strength of governance: 15% Medium 43% of orgs. Stronger 33% of orgs. 10% 5% Average % of organisations Weaker 23% orgs. 0% 1 Base: All (228) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Number of Key Drivers in place 24
    24. 24. Top innovations introduced by charities in last 2 years The top innovations introduced by charities in the last two years were, in rank order:      Changes to the committee structure Undertaking a formal governance review Changes to the board composition Carrying out board appraisal or board effectiveness review Reporting innovations (e.g. reporting framework, KPIs, clearer or more concise board papers)  Doing a skills audit or enhancing skill sets  Use of an external consultant or facilitator. 25
    25. 25. Future improvements The top actions that participants would like to take in future were, in rank order:  Carrying out a board appraisal or board effectiveness review  Greater strategic focus  Broadening the skill sets of board members or conducting a skills audit  Creating boards with greater diversity and more balanced membership 26
    26. 26. Hierarchy of governance improvement Increasingly gain from making improvements Increasingly demanding to implement change Behaviours Meetings Processes Structures 27
    27. 27. Conclusions 28
    28. 28. Conclusions 1. The four most important drivers of effective governance are:  team working  great meetings  people with the required skills and experience  a sharp focus on strategy 2. Overall picture is that many of the top 500 charities report high standards of governance 3. Charities have to pinpoint those drivers that are most securely in place and those that require attention 4. Working on the top 20 drivers will deliver the greatest improvements 29
    29. 29. Conclusions 5. Improving structures and processes may be prerequisites for strengthening governance. Making significant improvements, requires work on behaviours 6. Greater diversity also contributes strongly to better delivery of governance roles (although may make team working more of a challenge) 7. Among the UK‟s largest charities the top 20 drivers with the greatest potential for improvement include:     Regular reviews of governance and individual performance Greater focus on strategy Praising management Working as a team 30
    30. 30. Obtaining the full report “Delivering Effective Governance Insights from the boards of larger charities” Mike Hudson Jacinta Ashworth Available from Directory of Social Change www.dsc.org.uk/guc 31
    31. 31. Chair‟s role is critical ………but even a good chair can‟t do it alone
    32. 32. Personal effectiveness “Personal effectiveness means making use of all the personal resources at your disposal talents, skills, energy and time to enable you to achieve both work and life goals. How you manage yourself impacts directly on your personal effectiveness. Being selfaware, making the most of your strengths, learning new skills and techniques and developing behavioural flexibility are all key to improving your personal performance.”
    33. 33. Questions for discussion 1. What can an individual trustee do to improve board performance? 2. Given that team working is key to improving governance, how do you engender trust and team working in a board/how do you make a group of talented individuals greater than the sum of their parts? 3. Any questions you would like to pose for us…
    34. 34. Higgs report Advice for non-executive directors • Question intelligently • Debate constructively • Challenge rigorously • Decide dispassionately
    35. 35. Additional resources Good Governance: A Code for the VCS http://www.ncvo-vol.org.uk/codeofgovernance The Good Trustee Guide, NCVO, 2010 http://www.ncvo-vol.org.uk/productsservices/publications/good-trustee-guide NCVO‟s Annual Trustee Conference - http://www.ncvovol.org.uk/trusteeconference2013 NCVO‟s Events and Training calendar http://www.ncvo-vol.org.uk/training-events