The Governor March 2010 by HQN Limited

Governor the

HQN'S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

MARCH 2010

LIVING IN YOUR

SPOTLIGHT All eyes on your boArd As the tsA steps bAck to wAtch the show under co-regulAtion â&#x20AC;&#x201C; stAnding ovAtion or supervision? The Governor is packed full of essenTial info To banish firsT-niGhT nerves

Matthew Taylor

The Walker Review

George Caswell

HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

“Life is what happens to you while you’re busy making other plans.”

It doesn’t. That’s why you need HQN’s newly expanded finance team to help find the best way to manage your organisation’s cash through 2010. We know tough choices lie ahead – prepare for them now. HQN head-hunted eminent finance experts to lead our revamped team. Robin Tebbutt was amongst Tribal’s top housing experts and led the finance function at high-performing Enfield Homes. Former three-star ALMO and housing association finance director Steve Wood joins too. Both have been consultants before – but they’ve plenty of real world experience too. HRA gurus Tony Huff and Hilary Vaughan are on hand, together with Dylan Chipp, Colin Small and Denis Thompson. We think this is the most expert and capable team in the industry.

Put us to the test. We can: Find practical ways through the HRA Subsidy maze – let others complicate it; we just want to solve it for you and your tenants

Drive real value for money without the usual gobbledygook

Help with the interpretation of, and decision about, the government’s ‘offer’ on HRA Subsidy

Provide indicative commercial tenders for services – a sharper test than benchmarking against more of the same

Make sure your organisation passes the TSA’s viability and value for money tests

Run straightforward training on finance/VfM/HRA for boards, councillors, staff at all levels and tenants

Boost performance and save money through shared service modelling

Recruit and mentor high calibre finance professionals for permanent and interim vacancies.

It’s a new year: make a new choice – HQN. We can’t make your money talk, but we’ll make it work hard. To find out how HQN’s newly expanded team of finance experts can help, contact Richard Waft, Business Manager, on 0845 4747 004, or richard.waft@hqnetwork.co.uk

Rockingham House St Maurice’s Road York YO31 7JA

Telephone 0845 4747 004 Fax 0845 4747 006

Internet www.hqnetwork.co.uk Email hqn@hqnetwork.co.uk

CONTENTS 3

Life is what happens... Comment by HQN Chief Executive Alistair McIntosh

Out of the woods? New NHF chair Matthew Taylor speaks out

Table manners Key recommendations from The Walker Review

Past the sell-by date? How long should board members serve?

The big temptation is to harp on about the past. When the crunch first hit us, news columnists argued over which crisis this most resembled: the 1920s, the 1970s or the 1980s. Idiots tried to work out what letter in the alphabet the recession would look like, as if we were playing Scrabble. Are we doing any better in housing?

Light fantastic Bolton at Home’s Chief Executive George Caswell on retirement

The least you can expect from a board is to learn from the past. More effective boards and executives deal well with the present. They put things right when they go wrong. Real leaders get the future right more often than not and plan accordingly.

Asking the right questions: asset management HQN’s Wayne Hughes on a fit-for-purpose asset management strategy

Codes of conduct The NHF’s new Excellence in standards of conduct

Good for everyone Housing co-ops

That’s what John Lennon said and it still holds true today. We await the outcome of a general election that no one can predict. Half of the economists want the national debt paid off now, while the rest say clear it next year. What are boards and executives to do in these uncertain times?

What are we seeing? The campaign to preserve the KLOEs, shunt tenants into the scrutiny siding and the obsession with checking services after delivery (not sorting them out beforehand) are thoroughly depressing. KLOEs were great and they did boost standards. But we don’t need boards and executives if the Audit Commission runs a satellite navigation service for housing. Scrutiny panels just crawl over decisions that have already been taken. Quality checking systems do verify promises at the point of delivery, often in what they call real time – but lag behind board decisions on service standards, IT, procurement and recruitment by years. There’s an awful lot of huddling together for warmth known as benchmarking. But in the future no one will ask you how you compare with 500 other landlords. It is entirely predictable that we will see fewer housing organisations to cut costs. My hunch is that the survivors will fall into two camps: big national or regional players that drive efficiencies and keep most tenants happy, alongside niche players for especially challenging areas or customer groups. A sort of Primark versus Prada marketplace, if you like. What should boards and executives do now to put themselves in a winning position post-election? I think the TSA standards offer a great opportunity. Most tenants in most places want much the same services – the best organisations will agree standards quickly, minimise pointless variation and campaign relentlessly to turn tenants into fans. Tailored services for particular customer groups will be delivered as effectively as the best supermarket chains. Bluntly, it’s the housing outfits with the lowest costs and happiest tenants that will prosper. It’s a deceptively simple formula that all businesses strive for. The TSA is interesting. The economy is interesting. The election is interesting. An awful lot of life could get in the way of your plans. The winners will be blasting into the future with a clear plan while the losers cling to the past or debate the present. Alistair McIntosh Chief Executive, HQN

From the press Our regular round-up of the world press’s view of governance 16

Keep it simple Streamlining governance structures

Never knowingly Co-production could become the latest buzzword

Quangos to go? Quangos face an uncertain future Impacts of devolution Has devolution helped to tackle disadvantage?

All articles in The Governor were written by Kate Murray unless otherwise stated. Designed by Paul Miller

Prontaprint Scarborough

the Governor MARCH 2010

hQn’s magazIne for boards, eXecutIves and leaders

Matthew Taylor has a lot of sympathy with housing association chairs. For since he took over as chair of the National Housing Federation last autumn, he’s seen just what hard work leading a housing organisation can be. “Whatever the advertised hours of the NHF chair are, the reality is considerably more,” he laughs. “And I am sure every single chair of a housing association would say amen to that.”

challenge, that they take the opportunity and deliver on it. People will have to step up to the mark. There is no doubt every housing association is going to have to look to its governance and the role of board. It can’t simply rely on doing what the TSA tells it to – that’s not how it will work any more.”

Once famously the youngest person ever to become an MP, he’s no stranger to the housing world, having been commissioned by the government two years ago to lead a review on rural housing. But his appointment represents a real departure for the Federation, which has usually been chaired by a housing association chief executive. So what new perspectives can this former Lib Dem frontbencher bring? His number one priority, he says, is to ensure that the NHF helps associations deliver for the tenants and communities they serve.

And of course all housing providers will be taking on these new responsibilities at a time of huge economic pressure. “The combination of the credit crunch and the government deficit means money is not going to be available as it has been in the past for new housing, for maintaining existing housing, or for supported care,” says Mr Taylor.“Things are going to have to be done differently. Government is going to be demanding more for less and we are going to have to show we offer the best value for money, experience and knowledge to deliver.

"I have a passIon for housIng and buIldIng strong communItIes"

“I don’t think there’s a housing association chief executive or board member who isn’t highly focused on the reality of the economic circumstances we are in,” he adds. “We are by no means out of the woods – we have yet to see the impact of the fall away in public spending.”

“This is a huge opportunity to help boards and housing associations to innovate and to shape their policies to suit their own tenants and their situation,” he says. Boards, he says, will really be empowered by the new regulatory environment to determine the future of their organisations. But he adds: “I think this is a moment of enormous opportunity – but with opportunity comes huge risk. It is really important that boards rise to the

out of the

New responsibilties

Yet despite the challenges, he sounds optimistic about associations’ capacity to respond. Since he took over as chair, he’s been out and about meeting Federation members, and he’s been impressed with what he’s seen. “Everywhere I go around the country, I have met fantastic people running housing associations,” he says. “They are talking about how they are going to meet those challenges. I think people are excited – they know they are going to have more flexibility, they know things are going to change.”

Diversity is strength A big question for the Federation will be how it responds to the differing priorities of its members – always an issue with such a diverse sector, but perhaps even more so given the challenges ahead. But Mr Taylor insists that diversity is strength. “With 1.200 members, they are not all going to agree all the time and they are not going to have same needs and pressures,” he says. “We have got to give people of all sizes and types the circumstances so they can seize the opportunities to thrive. Members have to understand that it’s not threatening for others to do things differently. We will champion people who come up with new ideas and new ways of thinking – that doesn’t say other ways of doing things are wrong.” At this time of change, the Federation is also focusing on its own future. His own appointment, he says, was the result of a ‘radical rethink’ of the way the Federation is governed, and that overhaul is still not complete. “We can’t be champions of good governance if the NHF isn’t an exemplar of that,” he says. “My ambition is that our governance is of the highest quality – we can’t afford to be anything else.” One of his particular aims is to look beyond chief executives for the Federation’s board.

"We WIll champIon people Who come up WIth neW Ideas and neW Ways of thInkIng" spearheading what he says is a ‘very clear offer’ from housing associations to whoever forms the next government. “Housing associations have a very simple case to make. They have been highly effective delivering new housing at very low cost to tax payer, using the resources they have built up over the years. I don’t believe anyone else can offer anything like the value for money we can.” He’s still finalising all of what he’ll be doing once he’s no longer an MP, but we can expect to see more of him in the housing world. “I have a passion for housing,” he says. “I have a passion for building strong communities for all kinds of backgrounds and all needs.”

“A lot of board members have a lot to offer and I hope they will apply,” he says. He will be standing down from his Truro and St Austell seat at the forthcoming election. So instead of focusing on his own campaigning, he’ll be

WOODS? The new chair of the NHF says boards should now be centre stage in delivering for their communities

the Governor march 2010

HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

“Our experience shows that once a firm gets its corporate governance right, with a strong and effective board, everything else flows from that.” So said Graeme Ashley-Fenn of the Financial Services Authority as his organisation launched a consultation paper on effective governance standards in January. Governance is of course, as the FSA stresses, now a major issue both nationally and internationally, as attempts are made to strengthen standards in the wake of the financial crisis. The FSA says it is determined to correct what it now acknowledges was a failure to ‘adequately reflect the importance’ of good governance and to supervise it intensely enough. Its consultation papers comes in response to Sir David Walker’s review for the government, published late last year, of governance in the financial sector. The Walker Review is a hugely important one, setting out recommendations for the skills, input, self-assessment and time commitment that should be required of board members. But, given that its recommendations are directed at banks and other financial institutions, will it have any impact on the housing sector? The short answer is yes. Many housing organisations will already have been looking at Walker’s recommendations with interest, as part of the process of keeping their own governance arrangements under review. Places for People chair Zenna Atkins is also chair of Ofsted, and believes it’s crucial for the public and voluntary sectors to keep up to speed with wider developments in governance. “In the public sector, people have only woken up to governance issues in the light of some of the catastrophes. In the housing association sector, we don’t have shareholders saying ‘how have you lost so much money?’. Therefore I think it’s even more important that we think about how we run our businesses. “It’s not that our sector is without its own governance failures,” she adds. “But they are far less public – If you

TABLE 6

the Governor MARCH 2010

HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

really screw up, you are quickly taken over. It may not be quite so much in the public glare, but you are still really letting down your customers.” Some of the individual recommendations in the Walker Review will already have been considered by housing providers looking at their own roles and responsibilities (see box). Places for People, for example, already has transparent board recruitment procedures and a rigorous appraisal and performance review system in place. “Since 2004, I have asked three people to move on,” says Ms Atkins. “It’s not easy and not pleasant, but it’s never about the individual being a bad person, it’s about the fit with what’s around the table. If we have people who bring similar skills, we don’t need that, so let’s have that grown-up conversation, and say ‘it’s time for you to move on’.” Other issues raised by Walker may not fit so well with housing boards. Clocking people’s hours on board business is one such, claims Ms Atkins. “I’m not going to take on Walker,” she says. “But I couldn’t give a monkeys about the input people put in – I’m interested in the outcomes. What’s important is the people sitting around the table understanding the business and giving their perspective. I have had some people not giving lots of time who have been hugely valuable and some who have given masses of time and who have, quite frankly, been useless.”

It has often been bit too cosy, where people think they are doing a good thing for society by turning up, and don’t feel they are running a business. I don’t think that creates a culture of challenge. ”Governance doesn’t just

set systems, it sets the tone and culture of the organisation,” she adds. “If that doesn’t come from the top and permeate the organisation, it doesn’t matter how good you are on paper, you will make mistakes.”

The Walker Review: some key recommendations Prospective non-executive directors of FTSE-100 listed banks should be assessed by senior advisers with relevant industry experience The time board members are expected to put in should be ‘greater than has been normal in the past’ Non-executive directors should be provided with a personalised approach to induction, training and development, to be reviewed annually with the chairman They should be ‘ready, able and encouraged’ to test strategic proposals put forward by the executive

The chairman is ‘responsible for leadership of the board, ensuring its effectiveness in all aspects of its role and setting its agenda so that fully adequate time is available for substantive discussion on strategic issues’ The board should undertake a formal and rigorous evaluation of its performance, with external facilitation of the process every second or third year A remuneration committee should have a ‘sufficient understanding’ of the company’s policy on pay and employment conditions to ensure it adopts a ‘coherent approach’ to remuneration for all employees.

Ms Atkins believes governance in the housing and wider public sector is evolving and improving, but that some still need to ‘grow up and wise up’. “There is a reason non-executives get paid – and that’s good governance,” she says. “There are cultural issues.

MANNERS the Governor MARCH 2010

hQn’s magazIne for boards, eXecutIves and leaders

Margaret Thatcher famously once declared she hoped to ‘go on and on’ as Prime Minister. Ultimately, the decision about when she should leave office was taken out of her hands. But how long is long enough when you’re in a leadership position? Should you be free to choose when you step down – or are fixed-term positions the best way of ensuring the people at the top stay fresh? These are key questions for housing boards. The National Housing Federation introduced a nine-year recommendation for board members back in 2004 and its revised code of governance, produced last year, suggested six years, in line with the combined code of governance for the private sector. But the time limits are only guidelines. NHF Head of Governance Stephen Bull says: “It’s about considering what works best for your organisation. Some organisations have board members on for much longer because they bring a certain something that you can’t find elsewhere and that’s a very positive certain something. And some smaller organisations can’t easily get board members, so they are lucky to have them even if they’ve been on for 20 years.” The value of experience There’s no doubt that board experience can be hugely valuable, particularly during a period of change. John Pollard has been Chair of Plus Dane Group since it was formed in 2008 from the merger of Plus Housing and Dane Housing, which he had chaired for ten years. His experience helped him as

the merged group got up and running and positioned itself as a ‘neighbourhood investor’. “With that experience, you have the knowledge to challenge the senior executive,” he says. “You can do it from a position of greater strength.” Mr Pollard recognises the tension between the benefits of experience and knowledge and ‘on the other side becoming stale and not wanting to change’. He says a succession policy, which helps bring on good new people, is vital not just for the chair, but also for board members. “Chairing a big organisation is a pretty demanding role and takes a considerable amount of energy,” he adds. “I wouldn’t want to do a Tony Blair and put a time limit on it, but having said that I don’t anticipate being there forever.” At Endeavour Housing, Chair Pat Buckley has been on the board for more than ten years. But she’s a novice compared to her former board colleague Brian Wake, who stepped down last year after 35 years’ service. “Brian himself made the point he was 26 years past his sell-by date if you go by the recommendation of nine years,” she says. “At Endeavour we took the view that, providing you are not the sort of ‘older father’, saying ‘I’m the one who knows’, then it is good to have a balance of newer people and those with more experience. That experience is actually very valuable. Brian was a founder member, and there was nothing that had happened in the housing association and the housing association movement that he’d not been involved in.”

Recruiting and refreshing Endeavour has no shortage of people interested in joining the board, so it can regularly recruit and refresh, she says. “It’s important that we keep the right skills mix and that we always have good people from different walks of life,” she says. She says it took her some time to get up to speed with the housing sector. That’s not uncommon. Supporting and training people to get up to speed with your organisation, only to see them leave the board, can be a real issue for some housing providers. It’s a particular issue for stock transfers and ALMOs, with their local authority representatives, and of course, for councils themselves. Alison Inman, chair of Colchester Borough Homes, says her ALMO has had about 30 council representatives, who are appointed for a year at a time, on its board since 2002. “You might get someone really supportive, but at other times you get people who find it more difficult and who don’t necessarily understand the distinct legal role,” she says. “Sometimes it’s like you are doing an induction all year round. You get somone to the point of being really useful and then they’re gone. It makes it difficult to run things smoothly because you never know who you are going to have.” Too-short stints, then, are clearly problematic. But as for what’s too long, there’s no consensus. The important thing, whichever side of the fence you come down on, is to keep the performance and contribution of all members, old and new, under review.

past the SELL-BY DATE? How long should board members stay on the board? The Governor looks at the value of experience 8

the Governor march 2010

“WHAT WE WOULD WANT TO GET AWAY FROM IS THOSE PEOPLE WHO STAY ON A BOARD BECAUSE IT GIVES THEM A SOCIAL LIFE. THEY BECOME A BIT STALE WHEN THEY COULD GO OFF AND BE A BRAND NEW PERSON ON ANOTHER BOARD.” Stephen Bull, Head of Governance and Company Secretary, National Housing Federation

“SOMETIMES YOU INVEST TIME AND MONEY AND EFFORT IN PEOPLE AND SUDDENLY THEY ARE GOING, ESPECIALLY IN THE CASE OF TENANTS, WHERE YOU CAN OFTEN LOSE GOOD PEOPLE AT THE BALLOT BOX. BUT IF PEOPLE STAY TOO LONG, IT CAN GET TOO COSY AND COMFY, SO SOMETIMES YOU HAVE GOT TO BE BRAVE AND LET PEOPLE GO.” Helen Jaggar, Chief Executive, Berneselai Homes

the Governor march 2010

hQn’s magazIne for boards, eXecutIves and leaders

George Caswell won’t be sorry when he leaves Bolton at Home, the three-star ALMO he has led since it was set up in 2002. Not because he won’t miss the job: “I couldn’t wish for a better one,” he says. “Working in housing is fantastic; it really is a ball.” But because he believes in looking forward. “For me, the glass is always half-full and I’m not going to change that now,” he says. “I’ll be moving on to other opportunities.” Mr Caswell has spent 26 years at Bolton, first as Assistant Director of Housing, then Director, before taking the top job at the ALMO. He’s proud of the organisation’s achievements, not just its three stars, but also its strong record of customer involvement and neighbourhood regeneration, including an award-winning community art programme. Much of that success he puts down to a positive attitude. Firstly, it means investing in staff.

hQn’s magazIne for boards, eXecutIves and leaders

towards self-realisation and you have clear objectives, you are going to be an excellent organisation.” Bolton at Home, he says, is a values-based organisation, where a strong, positive ethos is promoted and where success is celebrated. Or, in that phrase again: “It’s about trying to get a lot of people together who believe the glass is half-full.” The same positive attitude, he believes, needs to be carried through into the engagement housing organisations have with their residents. “One of the things you have got to do with communities is make them feel better about themselves,” he says. “People often have no faith in themselves; they think they are third class citizens. There’s a real job to be done getting people off their knees before can get them into training courses and employment.”

The glass is half-full

In Bolton, a new sense of pride has been fostered through working with communities on public art through the ALMO’s Housing Percent for Art project.

“I have a very genuine belief that people can do wonderful things,” he says. “People have a range of experience, skills, nous and abilities – some of which may not be immediately evident. If you can create an environment where people believe they can move

“We have had a huge degree of support from customers. They want their neighbourhood to look different and warm,” says Mr Caswell. “I often say I’m not worried about the outcome in sense of what it [the art] looks like or will it win a prize – it’s about getting people involved.”

A spirit of optimism The spirit of optimism and innovation hasn’t been matched by everyone, though. Bolton Council didn’t originally plan on setting up an ALMO. Instead, it wanted to establish a community regeneration company, which would lease the Council’s homes – an idea which was ruled out by the government. More recently, the ALMO resurrected the leasing idea, pushing hard to pursue a leasehold transfer which would have avoided the controversy which still dogs full stock transfer, while still making the funding available for regeneration work. Again the government blocked the plan, leaving Bolton to announce it would need to go for a conventional stock transfer instead. The government’s attitude clearly frustrates Mr Caswell.

“Labour has done a brilliant job of funding Decent Homes: it just seems a shame that they couldn’t come up with an answer to the further aspirations.” Had the leasehold transfer option gone ahead, Mr Caswell would have stayed on for a while to steer such a novel project through. As it is, he decided it was time to let his successor head up the transfer. He will be keeping on his role as chair of Liverpool First, and perhaps looking for some other non-executive positions and opportunities to pass on what’s he’s learnt. But his priority when he’s retired is a change of pace. “I’m going to try not to be hammered by the watch.”

“I despair of the civil service,” he sighs. “They say things won’t work – and it’s a self-fulfilling prophecy. That’s why we’re planning to transfer – we just gave up on them.” He’s disappointed that there aren’t more options for ALMOs, set up to deliver Decent Homes improvements works, but already offering much more to their communities. “Decent homes are hugely important but that can’t be the height of people’s aspirations or we are doomed,” he says.

LIGHT fantastIc What does it take to lead a top-performing housing organisation? As he prepares to step down from one of England’s leading ALMOs, George Caswell shares his views on success Main picture: the door to door project, part of bolton at home's housing percent for art scheme, which works with communities to improve neighbourhoods through arts projects.

the Governor march 2010

hQn’s magazIne for boards, eXecutIves and leaders

With the MPs’ expenses scandal still rumbling on, probity in public life is at the centre of debate as never before. Salaries, redundancy payments and conflicts of interest can all have a devastating effect on the reputation of an organisation or even, as politicians and bankers have found out, of a whole profession. The big losers in the reputation stakes may have been elsewhere so far, but the housing sector cannot afford to ignore the issue.

by Wayne Hughes

askIng the rIght QuestIons:

ASSET MAnAGEMEnT A fit-for-purpose asset management strategy is fundamental to the success of any housing organisation. The strategy sets out how decisions will be made on investment, divestment and disinvestment and presents a clear plan for the stock over the short, medium and long term. Asset management challenges are outlined and investment needs are made explicit. There should also be clear links with the business plan to ensure the strategy is affordable.

What degree of confidence do we have in our stock condition survey, what are its limitations, and how is it used to inform investment decisions?

So what questions should board members ask to make sure that their organisation’s assets continue to meet the needs and expectations of both existing and new customers? Try the following:

How confident can we be that the strategy reflects the needs of existing and new tenants?

Do we have an asset management strategy, and if so is it periodically reviewed by the governing body?

Does the strategy attempt to reduce our reliance on the need for responsive repairs and is the balance of revenue spend directed towards activities that can be planned and programmed?

Are the links between the business plan and asset management strategy explicit, and do we have in place the financial resources required to secure success?

Does the strategy provide for regular regimes of maintenance in order to arrest deterioration of the stock and do they reflect current best practice in this area?

How much will the strategy cost to deliver, and how will we measure its success?

What service standards does the strategy assume and what role have customers played in setting these? How do they compare with our competitors?

How does the strategy address the key risks including fluctuations in supply and demand, movements in rent levels and works procurement costs?

Is the strategy in tune with what it is the governing body wants to achieve and does it detail what our key asset management challenges are?

the Governor march 2010

Wayne Hughes is HQN’s Executive Director of Asset Management.

Stephen Bull, the National Housing Federation’s head of governance and company secretary, says housing associations will be under the microscope in these troubled times. “One of the big issues for associations is going to be the whole issue of reputation. There’s a constant hum in the background over chief executive pay, especially in the context of the credit crunch and bankers,” he says. “I think it’s imperative that our house is in order around probity, honesty and integrity.” It’s a good time, then, for the federation to have published its new code, Excellence in standards of conduct. The new code is designed, the Federation says, to ‘safeguard the housing association sector’s long-standing reputation for integrity and honesty’. Landlords will not be forced to comply. But the Federation says it offers a framework for associations to use once the long-established ‘schedule 1’ provisions of the Housing Act are repealed as the TSA’s new regulatory regime comes into force on 1 April.

Bonuses and severance payments are another tricky area, the code suggests – and again, boards are recommended to make them only at a level which will not harm either the association’s or the sector’s reputation. The provisions also cover declarations of interest, where board members are reminded to ensure they declare all relevant personal interests. New board members need to be aware, the code says, ‘that they are required at all times to act in the best interest of the association and that anything which may jeopardise their ability to do so would be a conflict of interest’. Standards of behaviour are crucial too, and the code reminds board members and the staff of the need to show respect, impartiality and tolerance. It also includes provisions of gifts and hospitality and benefits, including the provision of housing for staff and board members, an issue which has caused negative headlines in the past.

“It's ImperatIve that our house Is In order around probIty, honesty and IntegrIty" Excellence in standards of conduct, National Housing Federation, £5.95 to members, £6.95 to non-members: www.housing.org.uk/default.aspx?tabid=913

Perhaps the provision that will spark the most debate is on pay, given the disquiet big salaries can cause in the housing sector and beyond. The code says boards should consider chief executives’ salaries carefully. “Boards should be mindful of the reputational risk to the association and the sector of setting a level that significantly exceeds that paid in other comparable organisations and/or is disproportionate to the management costs of the organisation,” it says.

codes of

COnDUCT the Governor march 2010

hQn’s magazIne for boards, eXecutIves and leaders

good for

EVErYOnE Co-ops have not always had the best record on governance. Now the only governance project among the TSA’s local standards pilots is aiming to change all that

from the

PrESS Building societies have not been immune from the governance shortcomings which have hit the financial sector, according to city minister Lord Myners. Speaking at the launch of the Building Societies Association’s governance report, Lord Myners said poor governance was a significant factor in the failure of Dunfermline

the Governor march 2010

Talk to a resident of a housing co-op and the chances are you’ll find someone who’s incredibly happy with the way their housing is run. Tenant satisfaction levels for co-ops are markedly higher than those of other social housing providers.

Building Society. He said good governance was now rightly at the forefront. “I have been convinced for some time that the mechanism for delivering better decision-making is good governance and stewardship,” he said. “Good governance provides a check and balance that ensures that firms are run effectively and meet the objectives of their owners, whether they be PLC shareholders or mutual members.” www.FTadviser.com The financial crisis offers all organisations the chance to rethink their values. That was the message from the Reverend Jim Wallis, chief executive of American social justice organisation Sojourners in an interview with McKinsey Quarterly. Revd Wallis said the crisis had been spiritual as well as structural. “If we don't rethink things,

Yet co-ops have had a bit of an image problem within the housing sector over the last few years. Rows, supervision cases and even forced takeovers have often dominated coverage of the housing co-op movement.

impact on the general governance of the organisation.” But he is heartened by the recent recognition of co-ops’ strengths – including public praise from TSA chief executive Peter Marsh.

Now, however, things are changing. Politicians of all parties are lining up to endorse mutuals, with Cabinet Office minister Tessa Jowell launching a commission on extending the co-op model across public services, and the Conservatives proposing new mutual-style local housing trusts. And just as this new recognition of the strengths of co-ops has emerged, the Confederation of Co-operative Housing has embarked on a project to create a new accreditation framework for co-ops under the TSA’s local standards pilots programme.

“The significant majority of housing co-ops perform very well,” he says. “It’s quite a change for our sector to have the regulator publicly stating that. We have a regulator now that is prepared to take an approach based on what’s the outcome for tenants, rather than what’s the particular governance model that we understand, and having less flexibility with those who move away from that standardised framework.”

Governance guidance for co-ops

The key strength of co-ops – the genuine involvement of their residents – does of course fit well with the TSA’s tenant-focused approach. And Mr Lambert says residents can and do run highly responsive services. “I often say to people who own their own homes ‘if someone said to you you weren’t the best person to make decisions about maintaining your home and how much money to invest, you would laugh them out of the room’. It’s the same rationale. As long as the systems are in place, there is no reason why residents should be less able to make decisions which affect them than anyone else.”

CCH treasurer Blase Lambert says co-ops have been keen for some time to have advice specifically drawn up to meet their needs. “We started having discussions a couple of years ago that it would be desirable to create guidance for co-ops on governance,” he explains. “Many of the difficulties that co-ops were getting themselves into were based around governance, so we felt it would be useful to have tailored advice.” Mr Lambert says co-ops have suffered for some time from ‘negative stereotypes’ around resident control and governance. “There are a small number of cases where housing co-ops have got into difficulties,” he says. “That’s the nature of people interacting – residents fall out and that has an

all the pain and suffering of this great recession, let's call it, will have been in vain,” he said. He added that huge disparities in salary between chief executives and their staff had undermined 'the sense of fairness, the sense of a social covenant'. University governance arrangements are 'ramshackle' and should be replaced with a two-tier system with separate courts representing staff and student interests, according to an article in Times Higher Education. It outlines the call from Roger Brown, Professor of Higher Education Policy at Liverpool Hope University, for a new system to replace the current unaccountable governing bodies which are 'on the one hand, not small, expert or time-committed enough to be able to take effective

Responsive services

The project, which includes a sounding board made up of co-op residents and partner organisations, is aiming to finalise its accreditation framework for co-ops, and a separate one for service providers, by March.

decisions but are, on the other hand, not large and democratic enough to be properly representative of the institution and its stakeholders'. If the US were run in the way its companies are run, it would be a dictatorship rather than a democracy, argues a comment published by TheStreet.com. In an article on the Kraft takeover of Cadbury, Odysseas Papadimitriou, Chief Executive of Evolution Finance, argues that the British system of corporate governance, with a stronger role for shareholders, is more democratic than the American. “It [the British system] might serve as a model for America to revamp its own board system, which is run from the top down against the democratic principles upon which our nation was founded.”

the Governor march 2010

hQn’s magazIne for boards, eXecutIves and leaders

Over the past few years, more and more housing associations have opted to streamline their governance structures. One of England’s largest housing groups is the latest to embark on a radical overhaul Eight boards, eight committees – and a host of board members and board papers. That’s the way Home Group is currently governed. It’s a structure that has caused a ‘lack of clarity’ in lines of responsibility and accountability, according to Home’s Executive Director for People and Performance, Peter Stott. “We have had the group board and a housing operations board, which has oversight of some aspects of the housing business, but it has been very difficult in practice to draw very clear boundaries,” he explains. “If there is a major financial decision or a major development project it has to be referred to the Home board. Things can become quite long-winded and there are too many layers of scrutiny.” Now, under proposals to transform its decision-making process, Home is planning to move to a simplified structure with one main board, supported by expert panels and a fresh emphasis on customer involvement. The shift will not affect Home’s subsidiary in Scotland or the market rent and outright sale parts of the business. But it will mean dissolving the boards for housing operations, for Home’s care and support organisation Stonham, and for black and minority ethnic association Nashayman Housing, which merged with Home in 2003.

keep It

SIMPLE 16

the Governor march 2010

Eventually, too, it will mean the end for the Copeland Homes board, set up to oversee a housing stock transfer in Cumbria, and the Rayners Lane estate committee, which looks after a major regeneration project in Harrow, north London. Home says the overhaul, proposed after a review led by board member Richard Raeburn, will allow it to transform itself into the ‘truly outstanding organisation we want to be’. The changes will also sit well in economically challenging times, with estimated annual savings of £120,000. The Home board will be tasked with focusing on strategy, performance scrutiny and the implementation of the business plan. And more responsibility for day-to-day issues will be delegated to the executive team, supported by expert panels on issues such as

care and support and equality and diversity. Mr Stott says a previous governance review in 2004 had aimed to place the responsibility for strategic, legal and financial issues with the main board, and for service delivery and performance with the other boards such as Stonham and housing operations. “When we’ve gone back and looked again, actually so much about operations and delivery depends on strategic decisions made elsewhere,” he says. “We came to the conclusion that the previous view taken in 2004 needed to be revisited. These strategic decisions about investment had enormous impact on our customers.”

“We Want people Who are able to make a dIfference to the QualIty of our decIsIon-makIng” A key feature of the new governance structure is that, for the first time, places on the main board will be reserved for one resident and one Stonham client. Home has already launched a campaign to find the right recruits, using an agency to make sure, Mr Stott says, that ‘people know what they are letting themselves in for’. A consultation exercise has shown strong support for the changes, which also include creating a national customer panel and national client panel. Ninety percent of the 2,800 people who responded were in favour, with 3% against. Clearly, in the new regulatory environment, a stronger focus on resident involvement in decision-making is bound to play well with the regulator. But will residents on the board really make a difference? Peter says they will. “We are very conscious of the dangers of tokenism and that is absolutely not what this is about,” he says. “The customer and client we recruit will be able people who can take a board view and bring their experience of how the reality of what we do impacts on the ground. We do want people who are able to play a full part and make a difference to the quality of our decision-making. ‘It’s easy for all housing organisations to lose sight of the point in terms of delivering a high quality experience, when we are talking about things like business planning, risk management and the relationship with the regulator,” he adds. “The impact I can foresee is that having that [customer] insight and experience represented in the discussion will add a dimension.”

the Governor march 2010

hQn’s magazIne for boards, eXecutIves and leaders

governance rOUnD-UP

never

KnOWInGLY We’ve all heard of co-regulation. Now it’s co-production that could become the latest buzzword. The Conservatives are talking about workers’ co-ops for the public sector. Labour wants to bring the John Lewis model to everything from hospitals and schools to housing. And a new think tank report suggests that radical reform is required to allow citizens to become more actively involved in the design and delivery of services – in a ‘co-production’ between service provider and service user.

“there Is a groWIng polItIcal consensus that the tradItIonal model of publIc servIce delIvery, Is neIther sustaInable or desIrable” The report, Capable Communities, forms part of a project by IPPR and PriceWaterhouseCoopers looking at the shifting relationship between the citizen and the state. And many of the proposals in the report will chime with the housing sector, as landlords move towards involving tenants more fully in designing services and checking performance. “There is a growing political consensus that the traditional model of public service delivery, predicated on people passively consuming services whenever they need them, is neither sustainable or

the Governor march 2010

desirable,” the report says. A partnership between providers and communities, it adds, means better services, more satisfied and connected citizens, and better value for money. But it will require a big cultural shift from service providers. Professionals will need to ditch a paternalistic way of working in favour of a more partnership approach. “It will increasingly involve building a relationship with the service user, working together with them to identify how to solve a problem, managing the relationships between people and building mutual support systems.” All of this fits, of course, with the shift in the housing sector from providing ‘take it or leave it’ services, to involving, empowering and working closely with communities. But what barriers might there be across the public sector to this kind of approach? Encouraging professionals to become enablers rather than fixers is a key challenge, the IPPR says. It also acknowledges the difficulty of promoting involvement. “Not everywhere has the same levels of trust, social capital and resources to contribute.” Capable Communities – Public Service Reform: The next chapter, www.ippr.org.uk

QUAnGOS to go? Quangos face an uncertain future, given the Conservatives’ vow to slash their numbers if they form the next government. And housing won’t be immune, if comments by shadow housing minister Grant Shapps are anything to go by. He’s already said he just doesn’t believe there’s a place for both the Homes and Communities Agency and the Tenant Services Authority. The Local Government Association’s quango report cards, published at the back end of last year, won’t have done much to convince him otherwise.

Ironically using a Housing Corporation-style traffic light rating system, the score cards gave the HCA a positive green rating for value for money and openness, but a red – or serious problem – for accountability and decision-making. The TSA, which has worried Mr Shapps with the length of its consultation over the new regulatory framework, scored amber – or cause for concern – on all three counts of value for money, openness and accountability and decision-making. There were some positive comments about both organisations in the report – but as many housing associations can testify, with a traffic light system, it’s the reds and ambers that get noticed. So which quangos fared worst under the LGA’s scoring system? The Equalities and Human Rights Commission ended up with two red lights, while Passenger Focus, which exists to represent rail, coach and bus passengers, got two reds and an amber. Perhaps then housing won’t be first in line if and when the quango cull comes to pass.

IMPACTS of devolutIon Bringing decision-making bodies closer to the people they serve has been a fundamental of UK policy for more than a decade. A key example of this is, of course, devolution. But, according to a new study for the Joseph Rowntree Foundation, the jury is still out over whether devolution has had a positive impact on tackling disadvantage. The research, commissioned to mark ten years of devolution, suggests that despite falling poverty levels and improving employment levels in the devolved countries, most progress has been due to the use of reserved UK-wide powers.

The JRF says some devolved policies, in areas such as social care and regeneration, are having an impact. But many will need longer to take effect, while others would need to be applied on a bigger scale. Devolution was not specifically designed to address poverty – although many have argued that devolved governments should be closer to their communities and so able to better identify and target their policies. Impact of devolution, www.jrf.org.uk

the Governor march 2010

Whoever wins the election, governance has changed forever. The TSA could survive, disappear or get relocated on political whims. But its big message will live on. Boards and executives must regulate themselves. There won’t be any more tutoring from the Audit Commission or the TSA. Yet if you fail the new tests, the penalties will be even more severe. How can HQN help? Board briefings: the practical impact of co-regulation explained to your board in a punchy one-hour session for £200

Co-regulation action planning: an independent audit of your arrangements for setting and monitoring standards. Board report and action plan included – for under £1,000

Standard setting: hands-on help with setting national and local standards at your organisation. When is it right to set your own standards? When should you fit in with other local providers? How do you run realistic tenant consultation that makes a difference? Tenants don’t want more talking shops Standard checking: are you delivering on board promises? HQN runs the leading inspection and improvement service. Hard-hitting findings with practical recommendations to get better – no one comes near our track record for boosting performance Credit crunch challenge: HQN challenges your costs and performance against what’s possible through better joint working, procurement and IT. We compare you to the market – not the herd.

HQN is working with the TSA local standards pilots to produce the toolkit on setting local standards. If you are interested in any of these services please contact Anna Pattison on 01904 557197, or anna@hqnetwork.co.uk Please note there is limited availability for our board briefing and co-regulation action planning services.

Rockingham House St Maurice’s Road York YO31 7JA

Telephone 0845 4747 004 Fax 0845 4747 006

Internet www.hqnetwork.co.uk Email hqn@hqnetwork.co.uk