6 Tips To Build A Stronger Charity Board
10 January 18
With the fallout from high profile failures, a weaker economy and increasing regulation, to name a few, the challenges for charity boards have never been greater. Nevertheless, Trustees must ensure they keep a strategic focus whilst at the same time identifying and mitigating the biggest risks.
It’s all too easy for boards to delve too deeply in the operational detail, fail to spot a looming crisis and react instead of thinking ahead. The combination of the voluntary nature of charity boards and the emotional attachment to the purpose can often exacerbate the problem.
However, with good leadership and sound governance, all charities can build the strong board they need. Here are our six tips to building a stronger charity board that is well equipped to deal with the challenges ahead.
Set A Clear Vision And Strategy And Be Inclusive In The Process
Setting vision, mission and strategy is one of the key tasks of a board. This applies to all boards, not for profit and FTSE 100 companies. It is reasonable to delegate the analysis and presentation of options to the CEO and executive team. However, some boards may wish to play a more active role.
But the final decision on strategic direction is for the board, after a full assessment of the options. Too many boards play a passive role in this vital area. As a result, they fail to lead on an area for which they have the ultimate responsibility.
Own The Strategy But Delegate Delivery To The CEO
Delegate delivery of the vision and strategy to the CEO and senior management team. The accompanying strategic plan should set out key performance measures and form the main component of the CEO objectives. Review and scrutinise progress of both, regularly.
Review strategy annually and more frequently if there are major changes internally or in the external operating environment.
Get The Balance Right Between Challenge And Support To The CEO
This can be a tricky area to get right. I have seen boards where the CEO is very much in charge. On the other hand, some boards stifle senior management through excessive control. Avoid both at all costs.
Provide the space and support for the CEO to achieve the vision, mission and strategy. The chair and CEO should meet regularly to review progress, recognize success and identify barriers. The board must ensure the CEO has sufficient resources and capacity to deliver the vision and strategy. A clear set of delegated authorities from the board to the CEO will help.
However, the board must demand hard evidence, and not just verbal assurances, that performance is on track. Accordingly, expect the CEO to be scrutinized and challenged on any aspect. Trustees should keep delving until they get what they need or uncover problems. Defensiveness, blocking or withholding information by senior managers is a danger sign.
Set High Standards For Board and Organisational Performance
The performance standards and legal requirements of boards and trustees are high. However, trustees join boards through a commitment to the cause and a more general desire to give back to society. Both are to be strongly encouraged. But neither can fill gaps in the basic ability to operate at the level required to be a trustee.
A board needs to understand the range of skills necessary to succeed and ensure they are in place. These skills can be shared across a number of trustees. High board performance requires board succession planning, rigorous recruitment standards and thorough trustee induction. It also requires annual board and trustee performance review and a clear process for removing underperforming trustees.
In addition, have you asked yourself what is the difference your organisation wants to make? What are the key activities and outcomes required to make that difference? These are fundamentally important questions charities need to answer to achieve their purpose. This is your theory of change.
Measuring progress is important. But don’t measure for measurements sake. Rather, measure to see if you’re making the difference you set out to achieve.
A high performing board will spend most of its time on the most important issues. Almost always comprising, strategy, performance and risk. Make sure the agendas reflect this.
Understand Major Risks And Ensure They Are Mitigated.
One of the most common reasons for company failures is that boards did not identify and mitigate major risks. Common major risks are health & safety, safeguarding, cash flow, income diversification and CEO succession planning. But there are many other potential risks. Ask yourself, if your charity lost its largest income source tomorrow could it survive?
All boards should have an audit or finance committee that scrutinises top organisational risks and their mitigation. The board should review this analysis at each meeting. The CEO has responsibility for operational management of risks but the board must ensure it is comprehensive, accurate and dynamic.
Keep your eyes on the money
Most business failure, charities included, come down to money. Cash is King, goes the saying and it’s as true for charities as it is for any organisation. However, adverse trends such as reducing cash should be easily identifiable in the financial reports. So how well do you understand the charity accounts?
The sad fact is that many trustees do not understand financial reports to the depth required. Moreover, this lack of understanding can hinder the board in its duty to scrutinise the accounts.
In addition, accountants, like most professions, have an array of opaque acronyms and jargon. Whilst this is not intended to bar lay people from the debate, it often has just this effect.
All trustees should be able to look at the accounts, understand the financial performance, spot the risks and identify the trends. It is the role of the Honorary Trustee and Finance Director to make this as transparent as possible.
Being able, individually and collectively, to understand the money is a major strength for a board.
Following these 6 tips will not guarantee success or the avoidance of failure. But they will ensure your organisation is equipped to deal as effectively as possible with the challenges ahead. Moreover, they will create a foundation for a prosperous future.
Find out how Gallanach can help build a stronger charity board here.