The leadership of an organisation is responsible for the creation and management of its culture and should aim to achieve alignment between managers’ and employees’ individual values and the organisational values. When hiring, it is best to hire for values fit before skills, experience or knowledge. Skills and knowledge can be trained and experience acquired. A person’s core values are something deep inside them, and not something that changes over time, if ever. A person with core values that do not match the company’s they work in will ultimately be unhappy, and less than highly-productive. And those are the least of the company’s worries. This person will eventually do things that are not in alignment with the company’s values, likely causing a negative situation.
There is also another journey - the initiators response to change – could do a slide: Start off with good intentions – benefits easy to see But then change starts to get difficult & benefits don’t look quite so tempting Uninformed pessimism to informed pessimism – there are then two paths 1) opting out or 2) continued progress Opting out occurs frequently as unlike the recipient of change the initiator can abandon it & that is why so many initiatives fail Opting out can be publicly or privately (the latter seen more often than former) – can become a habit If opting out does not occur the next phase is hopeful realism – difficulties haven’t gone away but perhaps the initiator can see light at end of tunnel a chink which original aims correct This leads to informed optimism and completion of the task
Those subject to change = Also Kubler-Ross Coping Cycle – shock, denial, anger, bargaining, depression, testing & acceptance Experience shows that change will be resisted and that managing the transition requires helping individuals through their personal change roller-coaster which should include: Accepting the reaction to change and not being surprised by it Plan for a downturn in performance during this period Provide information and support to those that need it Expecting the anger & what might seem irrational responses Negotiating realistically – giving way on those points which can be conceded, but not on those fundamental to the change Help people to experiment with new ways of working Set targets and goals as the situation becomes clear, in order to giver people the chance to be successful again There is also another journey - the initiators response to change – see later after coffee break:
McKinsey Working Paper on Risk (No. 18 A Board Perspective on Enterprise Risk Management) “ Most boards and management teams have only a vague idea of their actual appetite for risk and their overall risk strategy. ” Capacity refers to the level of risk the organisation can sustain and still function effectively. Tolerance is the level of risk the board (and therefore the organisation) is willing to sustain. For example, the capacity to sustain a significant risk to reputation might sit at a high level, if there is an experienced media team and defined crisis management processes to help the organisation survive, but the appetite for such risk will be at a lower level as it is better to avoid negative PR. (World Vision) As a result of X, there is a risk that Y may happen which will lead to Z (consequence). It also helps to consider the cumulative effect of several relatively low-impact risks occurring together.
Governance top tips: how to avoid some of the dangers
Prof Andrew Kakabadse,Cranfield Sept’10 80% of board members are not sureof their role
Tip oneUnderstand roles, responsibilities andliabilities of board members andunderstand what governance is allabout.
Trustees: who are they?persons having the general controland management of theadministration of the charity.Charity Law
Expectations of trusteesWhat is expected of trustees To act only in the best interests of thecharity To be involved in major decisions andto take decisions jointly with othertrustees Not to benefit
Personal liabilityTrustees will put themselves at risk of personalliability only if they cause loss to the charity by acting unlawfully,imprudently or outside the terms of the charity’sgoverning documents; or in the case of unincorporated charities, committhe charity to debts which amount to more thanits assets; or, in the case of charitablecompanies, continue to operate when they knowor ought to know that they cannot avoid insolventliquidation
Tip TwoWork hard to get the relationshipbetween trustee and executive right i.e.a partnership built on mutual respect,trust and confidence
The role of the Chair To provide leadership to the boardand to ensure that the board fulfils itsduties and responsibilities for theproper governance of the charity. To support, and where appropriate, tochallenge the CE and to ensure thatthe board as a whole works inpartnership with executive staff.
Holding the CE to accountLow challengeSupporters club“We’re here tosupport the CE”Partner orcritical friend“We shareeverything– good or bad.”HighchallengeAbdicators“We leave it to theprofessionals”Adversaries“We keep a verycloseeye on the staff”High supportLow support
Board effectivenessAn effective board should not necessarilybe a comfortable place. Challenge, aswell as teamwork, is an essential feature.Guidance on Board Effectiveness (Financial Reporting Council March’11)
Julia Unwin’s 5S modelSTEWARDSHIPSCRUTINYSTRETCHSUPPORTSTRATEGY
Spot the signs of adeteriorating relationship Trustees demand more and more detail then complain there is toomuch detail and feel that the executive are trying to bury problemsand contentious issues in the detail. Atmosphere of suspicion and blame spreads. Private/closed meetings/sessions of the board begin or increase. Executive start to get nervous and consciously or sub-consciouslystart hiding problems (both actual and potential) from each otherand from the board. Culture of hiding mistakes and contentious issues grows.Everything is given a positive spin in the hope that weaknesses,problems etc. are not spotted. Learning stops.continued
Spot the signs of adeteriorating relationship (continued) The CE rather than showing judgement retreats into only bringing‘matters reserved to the board’ to the attention of the board. The executive retreat into their own silos. Team work is affected andmistrust spreads within teams e.g. to within the executive team andsometimes within their departments too. Rate of resignations among executive increases rapidly causinginstability in executive leadership. Members of executive align themselves to rival factions (e.g. chair,or CE, or next CE, or …) in the hope they pick the winning side. Lot more major decisions are made by email (often with executivenot copied in)
Decisions by email Exceptional circumstances only. Danger there isn’t due consideration of all the relevant factors, risks andalternative solutions no opportunity for the proposal to be queried and challengedand for a sharing of opinions, as at a meeting Establish procedures and ground rules for decisions byemail. clarify the recipient of the emails notify all board members of the outcome and record the minute. It is more usual for decisions by electronic means to requireunanimity and the procedure can therefore not be used whereone of the board members is conflicted.
Tip ThreeWork hard to get the board to stick togovernance by careful planning andhigh-quality board papers.This is a particular, and joint,responsibility of the CE and the chair
The chief executive’s roleResponsibilities of the CE are: for the management and administration of thecharity within the strategic, policy andaccountability frameworks laid down byBoard. together with the chair to enable the board tofulfil its duties and responsibilities for theproper governance of the charity and toensure that the Board receives timely adviceand appropriate information on all relevantmatters.
Planning agendas to get the boardto keep to governancePurpose Enable trustees to fulfil their duties and responsibilitiesfor the proper governance of the charityAgenda planning group Chair, CE (+) in consultation with board and executiveteamMain contributors to planning agendas Board’s routine work of planning and monitoring Programme of review of high-level board policies Annual programme of 2-3 ‘spotlights’ or ‘trustee audits’ Board’s additional work plan for next 12 months The strategic big issues and strategic challenges to beaddressed in the next twelve months
Quality-control of board papers The executive should take the task of preparing boardpapers very seriously recognising that papers need toconcentrate on governance aspects and should allocatesufficient time to the task. The board should agree basic rules for board papers withwhich the CE and senior managers must comply. All papers to the board should be sent to the CE and thechair a fortnight before each meeting in order to ensurethey are quality-checked i.e. governance focussed. Bothshould take this responsibility very seriously.
Preparing for the board meeting The CE and chair should meet (or speak on the phone)about a week before each board meeting to prepare forthe meeting. This should include: identifying proposalslikely to attract robust scrutiny and on which aspects theboard is likely to focus; and identifying potentialcontentious and/or sensitive issues and how best theseshould be aired at the board meeting. If board members identify what they believe is potentially acontentious issue, they should notify the chair in advanceof the meeting, copying the CE into the correspondence.
Organisational culture andvaluesWhy are core values so importantCore values are important building blocks ofculture and are deep-seated and enduring. Theymotivate behaviour and emotional responses.They underpin the very way people approach theirwork, make choices and decisions, and deal witheach other.
RNLICore Values:Our work is based on and driven by our values.Our volunteers and staff strive for excellence and are ...Selfless: willing to put the requirements of others before our ownand the needs of the team before the individual, able to see the biggerpicture and act in the best interests of the RNLI, and to be inclusiveand respectful of others. Prepared to share our expertise withorganisations that share our aims.Dependable: always available, committed to doing our part insaving lives with professionalism and expertise, continuouslydeveloping and improving. Working in and for the community anddelivering on our promises.Trustworthy: responsible, accountable and efficient in the use ofthe donations entrusted to us by our supporters, managing our affairswith transparency, integrity and impartiality.Courageous: prepared to achieve our aims in changing andchallenging environments. We are innovative, adaptable anddetermined in our mission to save more lives at sea.
Tip FiveUnderstand the finances and get themoney right especially in sucheconomically difficult times
Prof Andrew Kakabadse,Cranfield Sept’10 Board members knew their companywould fail 50 months before it happenedbut would do nothing to prevent it 47% of UK board members neverdiscussed issues deemed ‘too sensitive’ 70% of board members did not knowhow to raise difficult issues
Challenging financial climate Hard economic times are here for at least another 5years i.e. decade of cut backs Largest charities Pension fund deficits After continued income growth, income starting todrop Medium/Smaller charities Income hit hard early on Insufficient oversight and understanding of finances Pension auto-enrolment
Common solutions Reducing costs by cuts Reducing costs by sharing Working differently – partnerships Possible mergers Possible takeover/acquisition Commercial ventures
Where problems can arise Public services Full cost recovery? Risk appetite Claw back Trading companies Weak risk management Fraud Board / auditor relationship
Bumps in the road on thejourney through change Different levels of involvement affecting riskappetite Confidence in those driving change decreases Private/closed meetings of the board Cracks appear – teams fall out Cold feet – courage fails One or two break ranks and start briefing against
Tip SevenMake identifying and managing strategicrisk an important part of governance.
A strategic look at riskincludes: Consider Risk Appetite i.e. identifying the charity’scapacity and tolerance for different categories of risk.(Note: Defining appetite for risk across different business activities willprovide the foundation for a more strategic discussion at board level. It willalso give the CE a clear, consistent and precise understanding of the levelsof risk your charity is prepared to take, mitigate, respond to or avoidaltogether.) Consequences and scenarios – Introduce thediscipline of considering consequences (both intendedand unintended) and various related scenarios shouldbe part of a strategic look at risk
Advice to boards: discuss, set and annually review (with guidance andadvice from the executive) the risk strategy and riskappetite across the main different business activities; use the trustees’ and executive’s diverseprofessional expertise and experience of ‘horizonscanning’ to help identify potential ‘new’ risks andpossible impact on the charity of major changesoccurring elsewhere; consider in partnership with the executive (and theAudit Committee if you have one), what might be the‘big events’ that could make or break the charity;continued
Advice to boards: (continued) consider whether the board is comfortable with theassumptions and dependencies behind core businessactivities; ask the CE to report at each board meeting what thecurrent top two or three risks are and how they arebeing managed on behalf of the board; and insist that every major proposal to the board(including the budget) carries a genuine riskassessment.
Tip EightEven though being a trustee is a seriousbusiness especially in such difficulteconomic times, have fun and celebratesuccess