The Governor - June 2011 by HQN Limited

Governor the

HQN'S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

JUNE 2011

Regulation Recedes inspection gone councils let loose

Is freedom just another word for nothIng left to lose - or a huge opportunIty for leaders? Board strategies for the future The Housing Ombudsman's view Serious detriment - what does it mean?

HQN Accredit Income Management and Estate Services "we're all delighted!" Congratulations to helena partnerships and greenfields Community housing (income accreditation) and family mosaic (estate services accreditation), the first in the country to achieve our award. HQN: Accreditation – providing a visible sign that organisations not only meet or exceed good practice standards, but are also proud to offer a best-in-class service to their residents. “We constantly look at ways to improve our services through innovative working; this was a great way for us to be vigorously and independently tested. It was challenging and made us look at our processes and how we interact with customers and partners. Customers were at the heart and were impressed by our work.” Bob Newton, Manager of Helena’s Rents Team “We’re committed to providing excellent services for our residents; it’s one of our core promises and this award endorses that. It provides motivation for our employees and our residents. The process was both challenging and constructive and has identified a number of best practice recommendations that we’ll adopt. It demonstrates how we have progressed as a specialist income team.”

The Helena Rents Team with Bob Newton, Rents Team Manager, second from left

Tracie Lovelock, Income Services Manager, Greenﬁelds Community Housing “I've seen a much improved service that's professional and responsive. Neighbourhood managers are more visible and better able to respond to local problems.” John Galvin, Resident, Family Mosaic

Lydia Dlaboha, Deputy Chief Executive, HQN, presents the Accredit award to Greenﬁelds Income Services Manager Tracie Lovelock, watched by David Hall, Director of Finance and Resources (left) and Phil Adams, Chief Executive

“It was incredibly thorough: it wasn’t all about having the right policies and processes, it was about outcomes – what our estates look and feel like, and what is it like for the residents who live there, and that’s what’s really important." Yvonne Arrowsmith, Group Director, Family Mosaic

Current accredit options include: HQN Accredit: DLO

HQN Accredit: Estate Management

HQN Accredit: Contractor

HQN Accredit: Responsive Repairs

HQN Accredit: Income Management

HQN Accredit: Gas

Residents and colleagues watch as Yvonne Arrowsmith, Group Operations Director, Family Mosaic, receives the award from Lydia Dlaboha

To ﬁnd out more, contact Anna Pattison (anna.pattison@hqnetwork.co.uk) or Russell Helms (russell.helms@hqnetwork.co.uk) on 0845 4747004. Rockingham House St Maurice’s Road York YO31 7JA

Telephone 0845 4747 004 Fax 0845 4747 006

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HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

well done grant shapps. Thanks for getting those pesky housing inspectors off our backs – freedom at last. Housing regulators won’t move a muscle unless there is, in the lingo, serious detriment to tenants. Broadly that means if you didn’t deliberately try to kill off the tenants you escape scot-free. Now that housing management and maintenance no longer matter, how shall we pass our time? Roll out those lazy, hazy, crazy days of summer… Except it never really happens like that, does it? After a year we know where the coalition is going on development, rents, benefits and tenure. But there has been no progress on housing management. No sign of John Lewis mutual organisations springing up. The guns of the private sector are silent. Is there nothing to worry about? Or is it just the lull before the storm that Sartre depicted in The Reprieve? Paris loved and partied in the days before the Germans kicked off. Is the last-ever CIH conference in Harrogate just a reprieve? Will pressure grow as the temperature drops in autumn? Recently the TSA published a lacerating analysis of association costs. Unexplained variations and inflation-busting hikes were the highlights. As far as I can tell, no one read it, perhaps because previous versions got a bad press. It still has flaws; there is no attempt to link cost and quality. But what information could the TSA have used? Satisfaction surveys tell you more about who the tenants are than they do about the quality of the service. The only way to really sort this out is for someone to visit landlords and get behind the reasons for cost variations. That was one of the aims of inspection – but it no longer happens. Tenant scrutiny panels are doing well at recruiting fresh blood. But they will fail without freely available objective information on costs. While the TSA analysis was fresh in nobody’s mind, Westminster announced the result of its housing management tender. Pinnacle won at around £450 per home per year. That’s around half the management costs from the TSA analysis – which included associations in areas where labour is cheaper than London. There will be an element of apples and pears in this, but how can Shapps ignore such a gap? Don’t forget that Westminster is an experienced client and Pinnacle has shone at inspection. This is unlikely to be a Southern Cross, Rok or Connaught-style fiasco. What will Shapps and Pickles do? My bet is they will demand that associations and councils think about the benefits of tendering. What should you do as leaders? Stop drawing comfort from benchmarking against other landlords that haven’t tendered either Ask for an explanation of how you fare on the TSA cost model (brace yourself for fair and unfair reasons) Act as if there is a war on when dealing with costs – scrutiny panels will spot waste, don’t fob them off by saying we’re the same as everyone else (in an industry that until recently was protected) Make sure you have quality management systems like accreditation in place

contents 3

well done, grant shapps… Comment by HQN Chief Executive Alistair McIntosh

fight – or flight? Rabbit in the headlights – or excited by the chance to do new things?

the dispute resolvers Is the government on the wrong track with the Housing Ombudsman?

to intervene or not to intervene Getting to grips with ‘serious detriment’

a change of gear What are the implications for asset management of the new council housing funding regime?

fresh blood or vintage stock? Is it best to promote to the top job from within, or from outside?

greening the sector Are social landlords ready to take the lead on the Green Deal?

the new transparency The first association to publish its spending explains why from the press Our regular round-up of the world press’s view of governance

share alike Ministers love the idea of shared services simples More and more housing associations are streamlining their governance structures women on board Diverse boards are good for business school’s out... Ofsted's new report will strike a chord with housing governors

Make sure you have access to people that can run housing management procurement well – they are rare Take decisions on whether you tender out or retain services based on facts not prejudice. The TSA told me that not one board or scrutiny panel member asked them how their organisation did on the cost model. What a sad indictment of governance in our sector. alistair mcIntosh Chief Executive, HQN

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

Prontaprint Scarborough

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FigHt OR

FLIGHT? “as Billy Connolly said, there is no such thing as bad weather – just inappropriate clothing.” That’s how Origin Housing chair Colin Sherriff sums up his approach to steering his organisation through the challenging times ahead. It’s a useful philosophy to bear in mind, as housing providers gear up to deal with not only the squeeze on public funding for housing, but the fall-out from welfare reform. There’s been much debate in the sector about whether it’s time to retrench or to innovate. While the urge to hunker down and wait for the crisis to pass may be strong, housing need doesn’t simply go away. So, as our chairs suggest, organisations will need to find new ways of doing more for less to help the communities they serve. Bob Brady, fabrick housing group “Although we were not predicting the credit crunch, we did start to put things in place around making efficiencies and being more effective in how we work through the creation of Fabrick Housing Group, so when the financial downturn did hit we were already in a good position. However these are challenging times and we recognise that we have to do more and continue to innovate to come through these times even stronger. “We are certainly not retrenching. We want to continue to develop and we have put in a strong bid. We are also looking at what other services and support we can bring to our partners and communities.

Do you feel a bit like a rabbit in the headlights? Or are you excited by the chance to do new things? With the housing sector facing a period of tremendous change, we talked to a cross-section of board chairs about their strategy for the future

alison Inman, Colchester Borough homes “We are facing a cut in our management fee but we are approaching it by taking the opportunity to do a fundamental service review with the support of the council. We are going to have less money but are looking to totally reorganise how we work and we are quite confident we will have a better offer for the customer as a result of this and will save quite a lot of money. “It is hard – we are going to have some redundancies as a result. But overall there’s quite a positive feeling that we are going to be providing a better service. The alternative was to sit and have things imposed on us. One reaction [to having less money] is just to salami slice and take a bit off each department, but doing the way we are we feel a bit more in control. “Our board, and tenant board members in particular, felt a responsibility to all our customers not just to sit and whinge but to do as much as possible. There will be some things we are not able to do – for our part of the sector, development is going to be very very difficult, but we need to say: ‘Actually, let’s see what else we can do instead’. We want to take a look at the really positive parts of the organisation and try and almost get people to ‘catch’ that. We have got pockets of amazing positivity.” sinead mcQuillan, Innisfree housing association

“We recognise that housing associations have a massive role to play in supporting communities, especially as vital services are being cut, so we will continue to invest in initiatives such as financial inclusion and jobs and training, alongside our work in supported housing and neighbourhood management.”

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“There are possible opportunities that we don’t want to just say an absolute ‘no’ to, but we are not going to change to do things that don’t fit with our values or financially are too risky. We are trying to keep as open a view as possible as to what opportunities are available.

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“I am confident we have a very skilled set of board members and committed staff who will rise to the challenges but I am not naïve and I do recognise there are huge wider issues. But there are opportunities as well and we are making sure we can be fleet-footed enough if there’s a chance, for example, for associations to become more community-based. “If the whole financial model for housing associations crumbles, we are going to struggle like everyone else. But I don’t see it as ‘woe is me’ – we have been prudent and will take sensible decisions. Good governance structures do help.” Colin sherriff, origin housing “I have a sense there’s a lot more to come. The affordable rent regime is only the start of fairly dramatic set of changes, not all of which we can anticipate yet. There are opportunities you can take, but it is important to think about what type of organisation you want to be. There is no point in just hunkering down and waiting for things to go away. My experience in housing over last 35 years is that once the tide has come in, and then goes out again, things are entirely different. You don’t get to go back to the previous environment. “Housing associations are wealthy organisations – rich both financially and in terms of the people skills and knowledge within the organisation. We have a responsibility to put that wealth of finance and experience at the disposal of the community.

then you can. If you stand on the sidelines saying ‘it’s all terrible’, then inevitably you will fail.” sue roberts, wolverhampton homes “We are setting ourselves challenging targets. Even though we are high performers, obviously now that the Audit Commission is gone you’ve got to make sure your organisation doesn’t say: ‘Well we’ve got three stars, we will just leave that’ – you’ve got to continue to improve. “A key issue will be continuing to provide value for money in more challenging financial circumstances. We have already done a lot of VfM exercises within the organisation and there comes a point where you can’t trim any more.”

“IF THE WHOLE FINANCIAL MODEL FOR HOUSING ASSOCIATIONS CRUMBLES, WE ARE GOING TO STRUGGLE LIKE EVERYONE ELSE”

“We won’t necessarily be doing what we’ve always done but our focus will stay – it’s part of the fabric of the organisation and not just part of our heritage, it’s part of our present. “We are being imaginative in terms of way look at property development as we have to continue to look for new ways to develop new housing. It’s obviously not going to be easy or anything like it has been before, but it’s my firm belief if you set out a clear set of objectives and a determination to achieve them,

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If there’s one job that calls for a measured tone and a careful choice of words, it’s that of an ombudsman. So when Housing Ombudsman Mike Biles suggests the government is on the wrong track, you can bet things are serious 6

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RESOLVERS “I think people will look back and think that the ombudsman service as it was, was quite a good thing,” he says of plans to overhaul the Independent Housing Ombudsman’s oversight of housing. But why the concern? After all, the changes being introduced in the Localism Bill mean a big step-up for Dr Biles’service. In one sense, the bill is an endorsement of the progress the ombudsman has made in building good relationships with housing associations and their tenants alike. Thanks no doubt in part to the good reputation it commands in the social housing sector, the IHO will now take on responsibility for complaints made by council and ALMO tenants. plenty of work to do There will also be plenty more work to do. Not only because there will be more landlords and tenants under its remit from April 2013, but also because complaints are likely to become a more important way of judging a landlord’s performance once the more consumer-focused aspects of the TSA and Audit Commission’s work are swept away. But the real worry for Dr Biles and his team comes in the way the new system will be set up. Instead of, as now, being able to take their complaint directly to the ombudsman once a landlord’s complaints procedures have been exhausted, tenants will have to go to a councillor, MP or tenants’ panel, who will need to try to resolve their complaint locally before it can then be referred on. That so-called ‘democratic filter’ goes against a key principle of a good ombudsman, says Dr Biles.

“Direct access to the ombudsman is one of the crucial pillars [of the service],” he says. “The Cabinet Office guidance itself says that an ombudsman service should be independent, accessible, efficient and effective and accountable. For an ombudsman to be an ombudsman, citizen should have direct access.” a dual track approach Last year’s proposals from the Law Commission on improving the public’s access to public services ombudsmen recommended that the only‘filter’in existence so far – for the Parliamentary Commissioner – should be replaced by a ‘dual track’approach, where people could approach the commissioner directly as well as just through their MP. As the Localism Bill progresses through Parliament, ministers have been urged to adopt the same dual track approach for housing. But so far, they have stood firm. As junior housing minister Andrew Stunell put it:“The government’s view is that the filter that we have established is the best way to ensure that disputes are resolved locally and that the ombudsman focuses on addressing cases where effective local resolution is not possible. Intervention from the centre, whether by the government or the ombudsman, should be the last resort and not the first port of call.” That approach though leaves many unanswered questions. How should the tenants’ panels be set up, given that they will need to be independent from landlords? How will their members be trained? What if not enough tenants come forward? And if complaints go to councillors, will there be political points-scoring? How will local findings be enforced? Will tenants ask different councillors or MPs to look at their case if they are not satisfied with how another one has considered it? All of which leads to a sense that the government is asking tenants and landlords to take a step into the unknown – with potentially damaging results. “I am looking forward to going to [the CIH conference in] Harrogate and seeing what boards and chief executives think of the propriety of mending the democratic deficit through the medium of social tenants,” says Dr Biles. “Why not experiment on middle class people going to the Local Government Ombudsman complaining about planning, education or refuse collection? Why social tenants?”

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THE dispute RESOLVERS a turbulent period The ombudsman service is already preparing for the changes and some landlords too are starting to think about what it might mean for them. But Dr Biles says with so much else going on in the housing sector, the issue has not been at the top of everyone’s agenda. “Landlords are starting to gear up but the many unknowns are making it difficult for them. There’s quite a big tail that hasn’t yet caught up with what’s going on and the ramifications for risks, resources and training. A handful of tenant activists know what’s going on but my sense is the vast majority don’t know.” Once the new system comes in, there is likely to be what Dr Biles calls ‘a very turbulent period for customers’. “We will try everything within the terms of our jurisdiction and powers to help,” he says. “We will have a huge influx of inquiries in first 18 months to two years and we will be managing expectations.” One of the key problems in planning ahead is whether the new system will, as ministers hope, drastically cut the number of cases the ombudsman needs to resolve. No one yet knows for sure. But it would hardly be a good thing if complaints dropped simply because tenants were put off by the ‘democratic filter’ drawing out the complaints process. Pushing himself towards redundancy would, says Dr Biles, only be a good thing if it was as a result of progress in the sector. “I wouldn’t disagree with the ultimate objective of making the ombudsman redundant if what we have done with our processes and philosophy is get providers to a place where they can deal with complaints successfully locally.” Important lessons Ministers stress local solutions when they talk about the new filter arrangements. But the changes also risk undermining the ombudsman’s role in spreading the

word about what to learn from complaints, so that providers are not constantly reinventing the wheel when it comes to best practice. “There are important lessons – who is going to be the collator of those lessons?” Dr Biles asks. The service prides itself on its proactive approach to supporting the relationship between providers and tenants. Staff believe that over the last few years much progress had been made. “Attitudes have shifted. It takes landlords a while to trust that feedback and to recognise that complaints and compliments are good for business. But that has seeped much more into the culture,” says Deputy Ombudsman Rafael Runco. He hopes the changes do not mean that landlords slip back into being overly-defensive about complaints, or retreating from the positive and prompt way increasing numbers have been handling them. The ombudsman service has to take credit for helping to shift attitudes. Dr Biles puts the shift down to people knowing that ‘we have no agenda other than a fair resolution and supporting the sector’. That positive response to the service’s work is one that the ombudsman team hopes local authorities will come to share. “For local authorities, it will be different because we are different. Whether they like that difference or not remains to be seen,” Dr Biles says. “We are hoping what we have to offer is positive, flexible and proactive and we hope they will embrace it.” He hopes too that his service will be able to put its experience to good use as landlords and tenants get to grips with the new system, in whatever form it finally emerges once the bill is enacted. “We will work with landlords, tenants, councillors and MPs so we can help them with our expertise if they want it,” says Dr Biles. “We are not just going to sit and wait for stuff to come to us; we are going to be proactive.”

THE TASk AHEAD FOR THE HOUSING OMBUDSMAN The Localism Bill sets out plans for a single mandatory ombudsman for all social landlords from April 2013. The Housing Ombudsman and the Local Government Ombudsman will be expected to collaborate on cases which overlap their remits. Tenants will no longer have direct right of access to the ombudsman. They will have to ask for their cases to be referred by an MP, councillor or panel. Ministers hope the new system will mean many more cases are resolved locally.

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In the past few years, the Independent Housing Ombudsman’s caseload has been rising steadily. In 2009/10 its dispute resolution team dealt with more than 4,800 complaints – a 25% increase on the previous year. The Local Government Ombudsman service estimates that around 20% of its 18,000 complaints and inquiries in 2009/10 were housing-related (although some concerned non-social-housing areas like grants for private housing).

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The new regulator will only step in if a problem risks ‘serious detriment’ to tenants. But what will this ‘serious detriment’ mean? Emma Duke and Alistair McIntosh take a look this is a time of dramatic change for the social housing sector. The Localism Bill introduces various practical and regulatory changes, one of which is the concept of ‘serious detriment’. It will mean that the threshold for the regulator to become involved will be much higher. But its precise definition and extent is, as yet, unknown. The Localism Bill does not provide any statutory definition of ‘serious detriment’. Although the concept exists in other legislation and is considered in case law, it primarily relates to land and pollution issues, family law cases and employment claims. Serious detriment in those areas cannot directly translate into social housing – but it is essentially where a person is put at a disadvantage and that disadvantage is serious. DCLG’s paper Review of social housing regulation, published in the run-up to the Localism Bill, provides some helpful guidance. It says the regulator should have regard to the severity and the extent of the impact in deciding whether it should intervene. Failures which resulted in a severe impact on a large number of tenants would represent strong grounds for intervention, DCLG says. It expects that information about serious failures will come from a variety of sources, including: Complaints made to the Housing Ombudsman, tenant panels, MPs or councillors Performance information Intelligence from councils which become aware of evidence of serious failures Evidence from other expert bodies such as auditors or health and safety enforcing authorities Whistle-blowing employees or whistle-blowing bodies working closely with social landlords.

inteRVene OR NOT TO inteRVene Anyone will be able to submit evidence of a failure by providers to the regulator. However, only evidence from specific bodies such as the ombudsman, councils, MPs, tenant bodies, the Health and Safety Executive and the Secretary of State must be taken into account by the regulator. Any other information, for example from performance information or whistle-blowing staff, may be taken into account. DCLG says the regulator will have to consider two things. First, whether any breach of standards might have taken place, and secondly whether that breach is – or could be – sufficiently serious to warrant regulatory intervention. It is for the regulator to determine what is serious: this could obviously vary substantially between different organisations and circumstances. The TSA is now working to define what ‘serious detriment’ means, reviewing examples of serious detriment and assessing the role of the regulator in investigating issues that could be serious enough for enforcement action. We will have to await this guidance before we can fully understand the way that providers will be regulated. As with much of the Localism Bill, the actual effect of the changes will not be known until the provisions are in force, cases arise and reality strikes. Emma Duke is an associate at Anthony Collins Solicitors LLP

WHAT IF...? I’m really worried about having to show serious detriment to tenants before the regulator acts. Today I’ve been with the tenants of a large housing association.There’s huge enthusiasm for resident inspection and empowerment. But what if the business plan crumbled? What if the board and executive team weakened and screwed up? Can the regulator really do anything? It will be tough to prove that failure to involve tenants leads directly to serious

detriment. Where do you draw the line on repairs and Decent Homes? Of course the home must be watertight and safe. But if someone cannot aﬀord to keep their home warm in winter because their landlord hasn’t carried out Decent Homes yet, does that cross the serious detriment line and trigger action? It will be up to tenants to hold their landlord to account. Will tenants do this or will badlyrun and ﬁnancially stretched landlords be

able to avoid their responsibilities? In the absence of detailed regulation, it may all come down to choices. There is, it could be argued, even an incentive to cut standards to the bone. The more cash you save, the more new homes you can build. We have promised tenants that standards would improve. But will standards now fall? As Emma Duke says, the guidance will have far-reaching consequences. Alistair McIntosh is Chief Executive of HQN

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the new self-financing regime represents a huge shift in the way council housing services are funded. The government says the reforms will ‘give local authorities the resources, incentives and flexibility they need to manage their stock’. So what are the key issues for local authorities and ALMOs as they consider managing their homes under the new regime? the basis of the stock valuation Each authority's stock will be valued in a 'one-off' exercise, based on assumptions about rental income, and expenditure on managing and maintaining the stock over 30 years. Local authority rents will rise until rent convergence occurs in 2015-16, after which rent increases will be limited to RPI + 0.5% pa Expenditure assumptions will be based on research commissioned by DCLG from BRE and HQN, and will be based on: – A major repairs allowance of £956 pa – Management and maintenance allowances of £2,061 pa – An allowance of £60 per unit pa for disabled adaptations. These allowances represent a typical increase in allowable expenditure of 14% (it will be less for some authorities). All authorities will have more cash to spend on their properties over the life of their business plan, although some business plans will remain under severe pressure. the implications for asset management On the face of it, a 14% increase in allowable expenditure is not bad! However, the safety net of government support will have been removed, and the settlement can only be re-opened if there are major changes to rental or environmental policies that have a ‘substantial, material impact on the landlord’s business’.

Clearly the government sees this as a once-and-for-all settlement, and has no plans to bail anyone out or to listen to pleas for more cash in the future. The expectation is that authorities will develop and implement a 30-year investment plan, and will deliver the repairs and maintenance services that customers require and conﬁrm to all statutory and landlord responsibilities withint the constraints of the business plan. Overspending will not be an option, and neither will any unplanned or unaccounted for expenditure, but 100% of any savings can be retained for use within the HRA. The eﬀective planning, monitoring and controlling of costs and programmes of work will be essential, and authorities will need to ensure that they have the right systems, information and controls in place.

THE ASSET MANAGEMENT ISSUES ARE LIKELY TO BE: stock data Authorities must be satisﬁed that their housing stock condition information is accurate, reliable, and generally ‘ﬁt for purpose’ to inform key business decisions. The information should be up to date, and ideally there will be a rolling programme of data-gathering, rather than using stock condition surveys as a series of ‘snapshots’ of asset condition. Best practice is that the data is held in a purposedesigned database, where investment scenarios can be tested and modelled. The investment plans produced through the database should be agreed with customers, and should be fully funded by the business plan. asset management strategy Best practice requires the authority to have an asset management strategy that describes the stock, identifies the asset management issues that the authority faces, and describes how those issues will be addressed through planned programmes of investment, improvement, repair, renewal, regeneration and rationalisation. The asset management strategy will generally cover a period of five years, but will be placed

A CHANGE OF Now that the council housing funding regime is being transformed, what are the implications for the way assets are managed? Mike Jones, HQN’s Director of Asset Management, gives some pointers

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A key issue in the asset management strategy will be to demonstrate a clear understanding of how the authority will structure itself to procure, manage and deliver the planned programmes.

The conditions attached are that the receipts are retained for affordable housing, regeneration or paying off HRA debt, but this offers the opportunity to sell unwanted and underperforming assets. It will be important that authorities have the systems in place to enable them to identify and carry out options appraisals on this asset type.

Value for money

new build

within the context of a 30-year investment plan.

The guidance is very clear that value for money improvements are expected, and that the improvement must be demonstrable. DCLG’s evaluation of the self-financing pilot between 2006 and 2008, which included six authorities, highlighted savings of 10% in stock investment costs, brought about by: Better contract rates through longer-term partnering Client-side efficiencies, based around long-term planning and the use of larger, longer-running contracts Avoiding unnecessary repair and patch-up works prior to elemental renewals Better packaging of works Better planning of environmental works. The government has applied the results of this study to all stock-holding authorities over a period of 30 years, and anticipates savings with a net present value of £6.49bn. Clearly authorities should be examining their costs, and should be developing cost reduction strategies. Perhaps given the recent advances in IT and developments in mobile working and dynamic work planning, these savings are more easily achievable than they first appear.

New build remains an aspiration for many authorities, although DCLG has noted that most authorities’ambitions are modest in this area – typically five to 30 units pa. It will be possible for authorities to build, although they must do so with savings generated elsewhere in the business plan and within an overall borrowing cap (the council house borrowing limit). If authorities are considering new build, they should consider that it can be a cutthroat market, and that it is not an area where many authorities have up-to-date skills. Perhaps it would be better to buy in the required skills from housing associations, or to work with associations that often have considerable experience in this complex area. The new self-financing regime offers significant opportunities for authorities to improve and enhance their services, to take advantage of savings and efficiencies, and to engage with residents on the shape of future services and investment plans. However, to be successful, they will need: The right structure and systems for long-term planning and service delivery Accurate and up-to-date information on both the housing stock condition and the cost drivers of the business

receipts

A well-planned asset management strategy which details how the authority will manage and invest in its stock

In addition to the 25% of Right to Buy receipts that can be retained, the guidance includes two areas where 100% of sales receipts can be retained:

An option appraisal system for failing or underperforming assets

The sales of unwanted vacant stock The sale of vacant land.

A strategy to drive improved efficiencies and value for money enhancements across the asset management service.

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Is it best to promote one of your own to the top job? Or should you bring in fresh blood? As a new report finds more of the world’s top companies are recruiting from within, housing chief execs from both camps give their views

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HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

when times are tough, the planet’s biggest firms look within for the steady hand they need. According to the latest study by Booz and Company of chief executive turnover worldwide, 81% of the CEO appointments made among the world’s 2,500 largest public companies last year were to insiders. This ‘Japanese tradition’, the global management consultancy says, is now becoming a worldwide phenomenon. It may be widespread in Japanese businesses, but it’s long been common practice too in social housing in this country, where an understanding of the ethos of the sector is highly valued. But does the riskier environment for social landlords mean appointing from inside is likely to become even more entrenched? That’s certainly one possible reaction from wary boards to the pressures the sector is facing. As Brian Cronin, Chief Executive of Arena Housing Group puts it:“When things are going well and there’s a lot of growth around and a lot of money, boards start to think they need to bring in fresh blood and new ideas. That’s a good thing – new approaches are always useful. But in times like now when the sector is under pressure, and with something like affordable rents potentially changing the ethos of organisations, one of the main roles of boards is to protect that ethos. When faced with difficult decisions you go back to your values.” Mr Cronin stepped up from Deputy Chief Executive to the top job at Arena in 2007 after a long career in housing. He says there are pros and cons to both external and internal appointments at a senior level, but that one of the key advantages of an internal candidate is experience of the organisation’s fundamental values. pros and cons “That’s not to say that you don’t do things differently, but you do things within that value set,” he says. “Housing associations are very emotional organisations and people put in lot of effort above and beyond what is required. They may understand the need for change but they want to see it carried out within our values.” Mike Hinch, another chief exec appointed from within, says when he was appointed as Chief Executive of Newlon Housing Trust in 1999 after joining six years earlier as Finance Director, the organisation was in the middle of two stock transfers which he went on to steer through. “There were a lot of things I understood. The board probably saw it as a low risk appointment because they really wanted those stock transfers to work,” he says. “It sounds a bit drab in terms of continuity and being safe, but

it is also important that when you appoint you go for someone who has a vision of where they want to take the organisation. An internal candidate has to have that vision which is different from where the organisation is now.” Of course every organisation has to have the right balance. “There’s a range of more commercial and entrepreunerial skills required in these times that doesn’t necessarily need to be at chief executive level,” says Mr Hinch. juggling Brian Johnson, now Chief Executive of Moat Housing Group, is a more recent recruit to the housing sector. He landed his first job in housing in 2004 when he became chief exec of the arm’s length management organisation CityWest Homes after working in the chemical industry and more recently for the not-for-profit organisation Remploy. He knew little about the housing sector when he joined – but says the detail he has picked up since is not as important as other skills. “I spend my time leading the organisation, influencing people externally and figuring out how to make the organisation stronger and better so we can deliver more to our customers,” he says. “I would argue that once you get to a reasonably senior level, your functional skills are much less important than your leadership and organisational management skills.” What is crucial, he says, is the ability to juggle commercial imperatives and social purpose. “Some people don’t have the mindset where they can juggle those two things – but it is one of things I really enjoy about it.” Of the other three members of Moat’s executive team, two are from outside the sector, but other senior managers have strong housing-specific skills – and it’s a mix which works well. skills from both sectors Mr Johnson argues that while the temptation for housing providers in this challenging environment might be to stick with what they know, it is actually a good time to bring in new talent. “One of the opportunities we have now is to look around for good people who might be available from both the private and public sectors who have the skills they can bring to organisations to complement the housing skills we already have,” he says.“The opportunity right now is to create teams with a variety of strengths. After all what’s true is that housing in ten years’ time won’t be like housing is now. We’ve all got to learn from each other and it would be arrogant to say the private sector has got all the skills, and equally arrogant to say the housing sector has.”

Blood

OR VINTAGE STOCK? the Governor JUNE 2011

HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

For salix Homes, becoming a trailblazer for the government’s green revolution makes sense. For the arm’s-length management organisation has this year secured £51.8m in Decent Homes funding, and is embarking on a major programme to bring council homes in Salford up to scratch. The work gives Salix a golden opportunity to pioneer the Green Deal – a scheme which, ministers hope, will transform housing in both the public and private sectors.

the programme are high. It calls the Green Deal the‘most ambitious energy-saving plan ever put forward’and hopes it will create up to a quarter of a million jobs, as well as slashing carbon emissions. But much still needs to be resolved. How exactly will this transformation of the nation’s housing stock be financed? Who will train up the new workforce needed to carry out the work? How will households be encouraged to take part – and to change their lifestyle to make the most of the work once it’s done?

“The whole fuel efficiency and fuel poverty issue is as important as Decent Homes. We want to use the opportunity while doing Decent Homes work to address that,” said Matt Roberts, Salix’s Head of Investment and Maintenance.

One thing is for sure, social landlords need to be thinking now about their role.

“Fuel prices are rising and welfare reform will be kicking in and these will have a real impact on our tenants. We need to use the opportunity we have.” Much work to do As a pilot for the Green Deal, Salix will be helping to develop a model to be rolled out nationally next year. And there is much work to do. The government’s aims for

John Swinney, Strategy Director at Carillion Energy Services, says the government is likely to want social landlords to take a lead. “Getting individual [households] to commit is going to be challenging,” he said. “But the government can sort of influence landlords and local authorities. I think there will be quite a push on social landlords as we get closer and closer to the start date. I would say it is going to be very slow starting up and social housing can kickstart things. Organisations should be thinking now about the opportunities.”

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HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

what’s the plan? key issues for social housing providers, added Mr Swinney, include financing and potential partnership deals. “Social landlords, whether housing associations or local authorities, need to be thinking: ‘What’s our plan, what’s our strategy going to be – are we going to partner with another council or housing association? Do we become an agent for the private homes around our stock? Will we need a beauty contest to team up with someone?’” But he warned: “Local authorities and housing associations can be so risk-averse that if they are not starting to look seriously at what their options are, they will miss the start of the Green Deal.” payback time In Salford, some of the most crucial issues already being looked at include how to encourage behavioural change among residents, the accreditation and training required for suppliers and the funding needed to bring ex-Right to Buy properties up to scratch. Then there’s the issue of payback.

“We are very mindful of our vulnerable customers – we don’t want to move people into fuel poverty by them having loans,” said Mr Roberts. “Doing some modelling around this is critical.”

“GETTING INDIVIDUAL HOUSEHOLDS TO COMMIT IS GOING TO BE CHALLENGING”

But he is clear that, although there are a lot of issues still to be worked out, there is huge potential for the social housing sector. “We certainly see it as business opportunity,” he said. “There are a lot of organisations which have already gone through their Decent Homes programmes and have still got staff in place who are ideally placed to do this work. Organisations could be Green Deal advisors to the private sector. It’s a funding source – and if it’s the only funding for this level of retrofit then you have to go for it.” John Swinney agrees. “It is a fantastic opportunity,” he said. “The Green Deal could blur the margins between social housing, the private rented sector and owneroccupation – it makes sense to do all of them when you are making a blitz on a community.”

THE SECTOR

The Green Deal has been dubbed the most ambitious energysaving plan ever. But are social landlords ready to take the lead?

WHAT IS THE GREEN DEAL? The Green Deal is being launched to encourage householders to insulate their homes with no upfront costs. The work will be paid back in instalments via fuel bills. The work will need to meet the ‘golden rule’ – that expected savings must be equal to or greater than the cost of the work. For the social housing sector, there may be opportunities for social landlords to become Green Deal providers – offering finance to residents, potentially in the private sector too, and carrying

out improvements to homes. Using renewables and the Feed-in Tariff could help subsidise retrofit work. Secondary legislation is expected next spring, with the first Green Deals due to appear in autumn 2012. According to climate change secretary Chris Huhne, ‘were all 26 million households to take up the Green Deal over the next 20 years, employment in the sector would rise from its current level of 27,000 to something approaching 250,000’. the Governor JUNE 2011

HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

Communities secretary eric pickles calls it a ‘transformation in transparency’ which will root out waste and over-spending. But his move to order councils to publish all spending over £500 has been controversial. Council critics complained of the time, money and effort involved in processing and publishing the data – and some authorities were slow to meet the January deadline. But where councils – and DCLG itself – have had to go, the rest of the sector is now being encouraged to follow. Housing associations haven’t so far been forced to publish, but the signs are that the government could make public funding dependent on them doing so. According to housing minister Grant Shapps, associations should welcome the move as the start of a new ‘spirit of openness’: “I'm calling on organisations that deliver and manage social housing to throw open their books and show the people they serve where the money is going.”

THEneW tRanspaRencY Ministers are now extending their drive to encourage more transparency over spending to housing associations. The first association to take up the challenge gives an insight into the experience Many housing associations fiercely oppose the idea, warning that it undermines their independent status and risks pushing their borrowing onto the public sector balance sheet. On top of that, setting up the systems involved and deploying staff to do the work would waste money at a time when resources are tight, they claim. But one association has blazed a trail for publication. home group Chief executive mark henderson explains why his organisation has no regrets.

FROM THE pRess More and more charities are facing problems with their governance, according to the Association of Chief Executives of Voluntary Organisations. Peter kyle, acting Chief Executive of Acevo, said his organisation’s ‘chief executive in crisis’ helpline took seven calls in one week last month – compared with nine in the whole of 2009. “The root cause of most of those calls was ultimately an issue with governance,” he told a charity law conference reported by

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civilsociety.co.uk. “In some cases if the chair and chief executive relationship is good, some misery can be avoided. This is something we need to be talking about.” The Barcelona way may be the key to more than just success on the football field. An article in The Economist highlights the Catalan football club’s values-driven management – including its focus on developing home-grown talent and putting down deep roots in its community. It is owned by its members, with management answerable to an assembly of members. Nobody, the magazine says,

HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

“The coalition agreement made a firm commitment to enhance transparency. Ministers believed that putting all types of data into the hands of people who actually use services – the ‘armchair auditors’ – would be a key driver for delivering enhanced value for money in public services. These are still early days but the signs so far are that it has brought renewed focus on value for money. In practice, this means publishing reports, financial records, minutes, contracts and other data. It should mean making available data that helps people assess the effectiveness of an organisation and be able to benchmark performance against both private and public sectors. Details of all Home Group’s expenditure over £500 are now published on a monthly basis. It’s a small step but a real start and we are actively working with customers and clients to see how we can take this agenda forward. The decision reflects Home’s policy to embrace transparency, openness and above all accountability to the people whose lives we work passionately to improve. We are not a public body and we cherish our independence – but that does not distract from what we are trying to achieve. We know from listening to our customers and clients that demonstrating value for money matters a great deal. At a time when many of them are feeling the effects of a difficult economic environment, we must play our part in delivering more for less. It’s not the only factor – but certainly one important way they judge our overall effectiveness. We live in an information age. Leading products beloved of the tech community – including iPads and iPhones – rely on open source programming. For many, there’s inevitability about much of the transparency agenda. Ultimately, open data can help products and services more accurately reflect the needs of customers rather than providers.

‘has gone as far as Barça in giving customers a direct say in big decisions’. Executive salaries in the private sector are rocketing out of control – with Britain’s top bosses set to earn 215 times the average wage by 2020. A report published last month by the High Pay Commission found that the top one-thousandth of the working population now receives 5% of national earnings. If current trends continue, the highest paid will receive 14% of total earnings by 2030 – the same proportion as in 1900. Commission chairman Deborah Hargreaves told

Our objective is to understand what information our communities want and then to release it in a userfriendly format. We accept that our data will be of most use in its raw format and should therefore be published as quickly as possible after it is produced. This is an agenda which is‘demand-led’in response to our customers. We also believe information should be made readily accessible to the public for use and re-use – where possible, published in open and machine-readable formats. It’s not new exactly, but it’s not something which has been embraced by others within the housing sector. From the outset our financial and procurement team bought into the idea behind it and wanted to make it work. Out of courtesy, we wrote to all our suppliers to inform them we were going to publish the information. Only a dozen partner organisations got back to us with queries or concerns. When people did have an issue, it was usually because they misunderstood our intentions and were concerned we were going to disclose commercially sensitive information. This was never going to be the case. Perhaps the biggest challenge was to ensure that all our classifications were correct and in meaningful categories which would be easily understood. It involved a one-off time commitment, but this wasn’t rocket science. With that done we were able to run the reports and publish it without major hassle on our website. It’s now a part of our ordinary workstream. Four months on we believe that colleagues are even more mindful about their expenditure. With tight budgets to manage, that’s something we welcome. Our experience should be a reassuring one for others. It wasn’t difficult or costly, nor did it lead to a rush of press calls or negative publicity. So our message is simple – why not?” mark henderson, Chief executive, home group

The Independent: “This is the clearest evidence so far that the gap between the pay of the general public and the corporate elite is widening rapidly and is out of control.” Senior executives may have a strong track record – but they can’t always sell it. According to HR magazine, too many bosses are letting themselves down when they go for a job with a poor CV. The magazine reported on a survey of 100 headhunters which found that senior CVs were often too long, filled with jargon or irrelevant information, and dutiesrather than accomplishments-driven.

the Governor JUNE 2011

HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

GOVERNANCE Round-up

sHaRe ALIKE ministers love the idea of shared services. Communities secretary Eric Pickles claims councils clubbing together and spending more wisely should be a key part of their approach at a time of tough cuts. “A renewed and concerted focus on better procurement, greater transparency and shared services that puts the emphasis on productivity above processes will end duplication, wasteful spending and wasteful working,” he has said. Plenty of councils are exploring – or have already gone down – the shared services road, pooling everything from chief execs to procurement, payroll and IT. Back office services are perhaps the first, and easiest, to be considered. But Westminster, kensington and Chelsea and Hammersmith and Fulham’s ‘super council’ initiative – which will cover a number of services including libraries, children’s services and adult social care – has shown that more wide-ranging programmes may well now be implemented. So are shared services really a panacea? The New Local Government Network’s report on the issue says organisations must ‘boldly go beyond the back office’

siMples more housing associations have embraced the trend to streamline their governance arrangements. The latest wave to restructure includes Genesis and Regenda. Genesis has merged its subsidiaries PCHA, Pathmeads and Springboard, creating Genesis Housing Association. Genesis said the new structure, which went live last month, would ‘cut down on duplication and bureaucracy’and allow it to respond more quickly to the changing environment. Chief Executive Neil Hadden said:“The creation of Genesis Housing Association will allow us to make quicker decisions that will see us deliver better services. This new structure puts us in a positive place for the future and I’m greatly optimistic that these changes will help Genesis thrive.”

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if sharing is to deliver significant efficiencies while protecting frontline services. Back office savings, it says, will only yield a small proportion of the savings councils now need to make. Its survey of local authorities found a number were already sharing in areas such as legal, IT and financial services – but saw big untapped potential in areas such as revenues and benefits and refuse. The NLGN says the ‘market’ for shared services is underdeveloped, recommending the development of a market place for councils looking to trade and share services. “Those councils that boldly go beyond the back office when considering shared service agreements will emerge in time as leaner and sharper organisations better able to deliver the services people need,” said Tom Symons, at NLGN. In housing too shared services are not new. But the development of the new east kent ‘super ALMO’ suggests there may be more potential in the sector. Will it be enough for Mr Pickles? He famously accused some councils of having ‘a supermarket-sized budget but a cornershop mentality’. Will social landlords club together to become new Tesco? http://www.nlgn.org.uk/public/2011/sharednecessities-the-next-generation-of-shared-services/

Regenda’s restructure, which also switched to its new structure in May, has similarly reduced the number of subsidiaries in the group. Regenda Limited, a charitable organisation, now owns and manages the group’s general needs and sheltered housing while the non-charitable Regenda Homes takes on the leasehold properties. Former subsidiaries Templar, West Pennine and Wyre housing associations have all been amalgamated within the group parent Regenda Limited. Maritime Housing Association has transferred a large majority of its stock to Regenda Limited. Another subsidiary M & Y, provides Regenda’s repairs service. Group Chief Executive Bernard Gallagher said the restructure should allow the organisation to reduce its tax bill, as well as to move budgets from one subsidiary to another. Meanwhile Lincolnshire-based Acis Group has adopted charitable status.

HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

WoMen ON BOARD diverse boards are good for business – but how can organisations get their gender balance right? In the private sector, targets – rather than firm quotas – look to be the way forward. A government-commissioned review, led by Lord Davies, has recommended that FTSE 350 companies should set out the percentage of women they aim to have on their boards by 2013 and 2015. FTSE 100 boards should aim for a minimum of 25% women by 2015 – double the 12.5% sitting on boards in 2010. Companies should also be required to disclose the proportion of women on their board and the number of women in senior jobs and in their workforce as a whole. “There is a strong business case for balanced boards,” the review said. “Inclusive and diverse boards are more likely to be effective boards, better able to understand their customers and stakeholders and to benefit from fresh perspectives, new ideas, vigorous challenge and broad experience. This in turn leads to better decision-making.” Without action, the review says, it will take more than 70 years to achieve gender-balanced boardrooms in the Uk. Yet research cited in the review suggests a strong link between women’s participation in decision-

scHool’s OUT... running a housing organisation has its own particular challenges. But good governance in housing has much in common too with best practice in other sectors. So there will be much in Ofsted’s new report on excellent governance in schools which strikes a chord with housing board members keeping their own practice under review. The report, published in May, aims to identify key characteristics of 14 school governing bodies where governance has been judged as outstanding at inspection. Among the most important factors were: Trust, openness and transparency between governors and school leaders High-quality, focused information provided to governors

making and strong business performance, with a Leeds University Business School study showing that having at least one female director appeared to cut a company’s chance of going bust by 20%. Quotas are in force in a number of other EU countries. In Norway, they have helped drive the proportion of women on boards above 40%. But Lord Davies said he had decided not to recommend quotas, because appointments should be made ‘on the basis of business needs, skills and ability’. In social housing, the picture is somewhat brighter than in the private sector – with women making up around 30% to 40% of board members, depending on the type of organisation – and some social landlords doing much better still. But, after years of effort to promote more women in senior executive roles in housing resulted in just a tiny increase in the proportion of female chief executives, there is still work to be done on gender balance in the sector. And what better place to continue the drive than on the board? Women on boards review http://www.bis.gov.uk/assets/biscore/businesslaw/docs/w/11-745-women-on-boards.pdf

Governors who are able to take hard decisions in the interests of their school – including replacing staff or the headteacher where necessary Honest and insightful self-evaluation Absolute clarity about the roles and responsibilities of the governors and headteacher Effective leadership from the chair and committee chairs Integrity and mutual support An efficient use of time, with good systems in place for delegating tasks and reporting back Effectively-organised meetings, allowing governors to come well-prepared Clear induction procedures. School governance, learning from the best, Ofsted: www.ofsted.gov.uk/ ofsted-home/publications-and-research/ Browse-all-by/ documents-by-type/thematic-reports/school-governance the Governor JUNE 2011

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