Tough times ahead: How the Charity Governance Code can help
There has been no shortage of headlines about the pressures currently facing the charity sector. But how should those steering charitable organisations respond? The Charity Commission have developed clear guidance for trustees on fundamental considerations. The Charity Governance Code with its seven key principles can also provide a road map which can steer conversations and help establish priorities among trustees.
Here are some of the ways in which the Code can help your charity to weather tough times.
Thinking strategically despite uncertainty
On the macro scale, the UK is contending with a sense of both political and economic uncertainty which is unlikely to resolve itself any time soon. War in Ukraine, instability in domestic politics, the ongoing impacts of Brexit and a year-long recession all lend themselves to a rather gloomy outlook. In times of uncertainty, there can be a tendency to respond reactively to the most pressing challenges, and to abandon more long-term or strategic planning until the seas are calmer. It is understandable that boards are tempted to take a ‘batten down the hatches’ approach, and the Charity Governance Code certainly emphasises skilful risk management and prudent stewardship of resources. Nevertheless, the Code is also clear that boards should continue to rely upon their organisation’s purposes to provide a linchpin for longer-term, strategic thinking. Under the principles of Organisational purpose, and Decision making, risk and control, trustees should consider desired outcomes and impacts in accordance with the charity’s purposes, whilst also taking steps to mitigate the effect of risks and uncertainties on its ability to deliver.
Creating positive board dynamics
At this time, trustees will be faced with difficult decisions to which there are no easy answers. Disputes and relationship issues at board level have an impact on a charity’s success, and so the tone that the board sets is critical. One of the Code’s principles is Integrity, which includes acting with honesty, trustworthiness and care, as well as in accordance with the charity’s values. Conflicts of interest and inappropriate power imbalances among trustees must be resolved swiftly.
The Code’s fifth principle, Board effectiveness, is particularly instructive in situations where the board dynamic may be under strain. When discussing thorny issues, board members must be able to raise diverging viewpoints, and should welcome constructive challenge and feedback. The Code reminds trustees of the value of compromise and the importance of considering a range of perspectives and alternative outcomes. The Association of Chairs has developed guidance to support with board dynamics and NCVO also has support on managing relationships.
Shoring up financial resources
The economic climate is placing significant strain on the charity sector, and as funding drops, many organisations are simultaneously seeing demand for their services increase. This means more charities are dipping into their reserves, taking cost-cutting measures or launching alternative and entrepreneurial approaches to fundraising. In particular, the use of reserves can be a point of contention, with differing views between trustees and among staff as to when and how these should be deployed. The Charity Governance Code takes a balanced view towards ensuring the financial stability of an organisation. Under the principle of Decision making, risk and control, the Code empowers boards to pursue innovative means of fundraising — while matching this with a considered approach to risk and the sound management of resources.
Supporting staff as the pressure mounts
As organisations are feeling the squeeze, so too are their staff. Burnout and turnover among staff are certainly not new — but in the midst of the cost-of-living crisis the charity sector is under pressure to take steps to address these and offer increased support. Charities should first ensure that their employment policies are in order, including those around new appointments, remuneration (including of executives) and dismissals. This forms part of the Leadership principle of the Code. Chairs should ensure that the topic of employee support makes it onto the board’s agenda, and trustees must check in with CEOs and (where possible) the wider staff body, to listen to and address their concerns.
Under the Equality, diversity and inclusion principle, boards are encouraged not only to set ED&I targets and report on these, but also to embed inclusive behaviours in their charity. As such, boards should ensure an equitable and fair approach to staff pay and consider implementing employee benefits which ease the impact on living standards. NCVO ran a webinar in October 2022 full of practical tips for supporting and retaining staff during this time, you can watch the recording here.
Handling organisational change
An extremely challenging operating environment may unfortunately mean that some organisations become unable to continue in their current form. The Code naturally assumes that trustees will seek to contribute to their charity’s continued improvement, and endeavour to fulfil its purposes with the resources available. As part of this principle of Organisational purpose, the Code also acknowledges that there may be cases where a charity’s viability is uncertain, or where other charities are better able to fulfil its purposes. In such cases, it recommends that trustees take time to consider the risks and opportunities of any potential partnership, merger or even dissolution. Merging or winding down a charity is a process of fundamental organisational change, which requires careful management both of the people involved and of the significant legal and financial implications. While this is rarely an outcome that anyone would wish for, it is important for boards to act in alignment with the principle of Openness and accountability and to maintain clear, two-way communication with each of the charity’s stakeholders throughout the process.
Introducing and implementing the Charity Governance Code
If you are involved in charity governance, now is the time to remind your organisation’s board members of the Code — or even to introduce it to them for the first time. The Code comes with no mandatory reporting obligations, but will improve the preparedness and effectiveness of the board in dealing with these uncertain times.
The full Charity Governance Code can be found here and there are diagnostic tools to aid with its implementation available here.
