How trustees can do the right thing
Only a year or so ago and Kids Company was the example of Big Society and passionate social action we should all be following. A few months later, the charity had closed its gates and endless media coverage showed us how bad it could get in a charity. Earlier this year, the Public Administration and Constitutional Affairs Committee (PACAC) published a report on Kids Company. So does this tell us what went wrong?
Understand your operating model
A striking finding by PACAC was that the charity trustees did not seem to appreciate the implications of the charity’s operating model. Kids Company had an open door policy and was demand-led. The PACAC report makes the point that to operate this policy, you have to hold the financial reserves to back it up, or have access to funding that matches demand.
Trustees should understand the business model of their charity and the risks this brings. How well matched are your income drivers to your expenditure? Trustees need to ensure that they have an appropriate reserves policy to fit the business model and risk profile of the charity.
Get the board right
You need to have the right people on the board. Yes, it’s useful to have a lawyer and an accountant, but you need people who have first-hand knowledge of the work of the charity and bring relevant experience to discussions.
Get the balance right between continuity and fresh board members. It is important to retain knowledge but you need to manage trustee succession. It is a golden rule that trustees should not serve for more than two terms. Good practice suggests that a term of three years is about right. This requires good planning, good inductions and trustee training.
All too often, trustees stay in their roles because there is no one to take over. But with support and training, others can be prepared for these positions, particularly the chair and treasurer roles. Some charities have a vice chair role, with assumed succession into the chair role after one term. Rolling succession like this will work for some charities, and might be a good model for the treasurer role too.
Get the balance of information right
One of the most difficult things to get right is the balance between governing and managing. This is highlighted when it comes to the getting the balance of information right. Half the time, boards are saying “this is too much information” and the other half they are saying “why didn’t you tell us about this?”. It’s hard for managers to get the balance right.
Managers have to make a judgment about when to bring an item to the board and when they should just get on with the job. The board and managers need to acknowledge that this is difficult to get right all the time. It’s not necessarily bad to have differences, and they should be treated as opportunities to learn about how to get the balance right.
Trustees ultimately have to accept that they will not know about everything and that a governance role is not the same as being on the executive team. The board needs to be able to trust the management team.
On the other hand, the trustees should not be uncritical supporters of the CEO and other senior managers. Trustees should seek information and ask questions.
Translating values into action
Trustees and staff must share the values that underpin all that the charity does. Getting the right skills and knowledge is one thing, but it is becoming obvious that the banking industry is not the only sector that needs to pay attention to culture. Charities have been very good at articulating values and recruiting people who are committed to the cause, but there is more. You need to be committed to the same values.
Individuals can be highly committed to their own beliefs, but these may not be quite the same as the charity’s values. The differences may not be noticeable at first, but can be exposed when tested. For example, the chair of a charity decided to publish a statement condemning the building by Israelis of settlements on the West Bank. This was the expression of personal beliefs, not those of the charity.
Other board members may or may not have agreed with the stance, but it was inappropriate for that charity to have a view at all about this particular issue. In developing statements about the values of the organisation, it is useful to bring them to life with real situations and differentiate between charity values and personal beliefs.
In addition, values need to be translated into strategy, policies, business plans and workplans. If you are not careful, contradictions can arise. For example, a charity which works with children has strong safeguarding values and these are strictly enforced. The investment committee has been charged with maximising the return on the charity’s investment portfolio and this is the basis of the instructions to the investment managers.
Next the charity is hit by a negative press story revealing investments in a company which exploits children as workers on low pay and working in poor conditions. You need to make sure policies and values are joined up.
Your reputation is everything
The killer blow for Kids Company was a hit to its reputation through reports of sexual abuse and financial mismanagement. The police have closed their case and we shall probably never know the truth, but rumours and disgruntled staff or beneficiaries can damage your charity’s reputation beyond repair. It will help if you have translated your values into action and if you have the right culture.
But as well as doing the right thing, you need to build up a positive reputation. Charities can all improve their transparency and accountability in terms of how they report their performance, which would certainly help to build up a reputation for being open and honest.
Measure outcomes and impact
Perhaps the most shocking finding to emerge from the Kids Company review by PACAC was the discrepancy between the number of clients it claimed to help and the actual number of children’s files it handed over. At least as shocking is the fact that the trustees of Kids Company had never asked about these statistics and just assumed that the charity’s CEO and staff were doing a good job.
Trustees can play an incredibly important role in asking questions about the impact of the charity’s work. If they understand the results of the charity’s work better, then they are able to make better decisions about where to allocate resources and spend more effort.
Make yourselves approachable
The boards of some charities never meet the staff. Board meetings may be held offsite and staff are never invited. As a trustee, it is really important that you get out and see the charity’s work first-hand. You get a much better sense of what the beneficiaries’ needs are, what the operating difficulties are and you are visible to staff.
This has an added benefit that a member of staff is much more likely to approach a trustee to voice concerns, rather than allowing it to build up to a formal complaint, major whistle-blowing incident or, even worse, a leak to the press. This is how reputations are managed in practice – understanding all stakeholders and being open to hearing from them.
Potent mix of Kids Company
I have worked with hundreds, probably thousands of charities over my career and I don’t think I have seen any charities that managed the potent mix of Kids Company. But I have seen aspects of poor governance and poor management. Of course I have. We cannot expect any sector or group of organisations to be perfect. And each individual charity will go through different stages and change over time.
What I do know though is that there are thousands of trustees giving up their time to do something for others and trying their very best to do a good job. Let’s hear about this for the vast majority of charities and trustees who do a great job.