The ACEVO Governance Commission report ‘ Realising the Potential of Governance’ which was launched on 17th September 2013 looks at the state of charity governance and makes recommendations for how it can be improved. Below we focus on the commission’s findings and recommendations on the issue of appraisal and accountability.
Appraisal and accountability
A key role of the board is to hold the CEO to account and ensure the organisations objectives and policies are being effectively implemented. Likewise trustees who have overall responsibility for the organisation must also be properly held to account to ensure they are fulfilling their duties effectively and in line with their legal responsibilities.
The Commission’s report looks at how accountability for both the CEO and their board can be improved by making used of formal mechanisms for appraisal and developing an organisational culture which promotes on going monitoring and improvement.
Appraising the CEO
When it comes to appraisals organisations can choose to undergo a formal or an informal process. The Commission’s survey found that while 65% of respondents were subject to a formal appraisal system 18% stated that their organisation never held a formal CEO appraisal.
The report found that while informal appraisal systems can be useful for ongoing observation of CE performance which can be written into a business plan, such arrangements can be easily overlooked or forgotten which may mean regular reviews do not take place. The report recommends all organisations have a formalised system of appraisal in place for the CEO. This will allow for stronger accountability against set targets and ensures the boards expectations and objectives for the CEO are agreed and communicated explicitly. A formalised system will also allow the board to see where the CE may need additional support and professional development which in turn benefits the organisation as a whole.
ACEVO have a number of useful resources which offer guidance on CE appraisal. The ACEVO publication Leading the CEO and Chair to Effective Governance looks at a number of approaches and includes useful templates and examples of how a CEO appraisal may be carried out. Ideally a CEO appraisal ought to be:
- Confidential
- Objective and impartial
- Recording conclusions and targets in writing
- Based on pre-agreed and understood structure and format which remains consistent
Appraising the board
The code of good governance recommends that a board appraisal take place every two years. Some survey respondents expressed worry that a formal appraisal of the board may put off potential trustees who take on the role voluntarily. While this may be the case for some it cannot outweigh the fact that appraisals provide a framework within which trustees are able to express their own views about the board and how it could be improved, as well as encouraging them to think about their own performance and responsibilities.
The two most common forms of trustee appraisal are individual trustee appraisals which are often led by the chair allowing for trustees to provide their views in in written or oral form. The second type is whole board appraisals often facilitated by an independent source such as with the ACEVO Governance Review Service which incorporates a whole board appraisal using a confidential online questionnaire to assess the skills and performance of the board.
Whichever method is chosen, an effective board review should be:
- Sensitive to the fact trustees are volunteers giving up their free time
- Forward facing with a focus on learning and improvement
- Conducted regularly
- Enables the CEO and SMT to feed in their views
It is important to ensure that within any organisation that there are systems in place for on-going accountability. One suggestion for ensuring this is the development of a subcommittee which meets and reports on governance once or twice a year to ensure governance issues are picked up and addressed on an on-going basis.
The Commission found that in comparison to other sectors external accountability for charity governance is low when compared to other sectors such as education and finance. Investment in strengthening external accountability may give way to improvements in governance standards across the sector as well as increased awareness as to the role of a trustee. In the education sector since 2012 Ofsted has begun to report on school governance in great depth, the national governors association reported to the Commission that this has produced clear expectations of the responsibilities of school governors and contributed to more effective leadership.
Recommendations
For charities:
- All charities establish a regular formal appraisal procedure for the CEO, board and chair
- Trustees consider the benefits of establishing a subcommittee or designated trustee with delegated responsibility for governance
For the charity Commission:
- Explore the development of a good governance kite mark
- Making a requirement for charities to include in their Annual Report a section reporting on key governance processes and standards
For funders and commissioner:
- To explore the strength of an organisation governance as part of their assessment process
