European Governance, Carrots and Sticks

On Friday Euclid Network is holding an event in Paris to compare third sector governance in the UK and France. This event is part of a significant project led by Euclid Network to define the common principles of governance across the EU. The commonalities in Anglo-French governance will later be tested against standards in Scandinavia, Germany and Mediterranean countries.

I have been delighted to be part of the steering group for this project. It is important for a number of reasons. If the sector doesn’t lead on defining high standards of governance then it is only a matter of time before these standards are imposed by regulators or governments. The European Union is the largest funder of civil society in the world and so has an interest in how the organisations it supports are run. Equally important though is the way codes which outline universal principles and best practice can be a major catalyst for improving governance and raising the profile of organisational performance.

The Code of Good Governance in the UK has been a crucial part of improving governance standards in the UK. Created in 2005 by ACEVO, NCVO, ICSA and Charity Trustee Networks, the code is very well known across the sector (88% of ACEVO’s members knew about it by 2007) and forms the basis for many governance assessment tools such as ACEVO’s own governance review service. The Code’s principles are currently undergoing a refresh to ensure that they are universally understandable across the sector.

The relationship between the Code and the Charity Commission as the regulator has been one of the keys to the code’s success. The code was created by the leading sector support organisations rather than the regulator, but the Commission has warmly endorsed it. This balance means that there is a clear standard which the sector, funders and regulators can all agree upon but the sector also feels complete ownership of the principles. Achieving this at a EU-wide level will be an important step.

Why does this matter I hear you ask?! Well the sector faces a number of significant challenges and we still have a long way to go to improve our governance. 70% of ACEVO members think that this is a priority for the sector. Only half of those who are aware of the code are actually using it regularly. We know that the public don’t understand us, and we know that we need be better at demonstrating the impact that we bring, and make the case for it, if we are to play a more significant role in transforming the public realm. Improved accountability and performance management are key elements of improved governance. You cannot meet the principles of the Code without understanding your stakeholders and effectively communicating with them, and without measuring your performance and improving what you do as a result. Well governed organisations are pretty much always effective organisations which deliver for their beneficiaries, and that is no coincidence.

It is true that governance is not a particularly sexy subject. Much more attention has been given to issues such as chief executive pay and expenses in the sector press over recent months. But as ACEVO argued strongly in our response to the consultation on expenses, all that fuss is an attempt to solve a problem that isn’t there. Any board no matter how incompetent can spot a fraudulent expense claim. Cost control is important in all organisations but we’re not prescriptive about how a charity chooses to buy its envelopes, or even its computers, so why should we need rules about expenses? Good governance and effective internal controls take care of all these issues, but they also take care of the real issues about accountability and performance and that is where we should we focusing our attention.

So what’s next? I hope that the eventual outcome of Euclid Network’s work will be a standard of good governance against which organisations from across Europe can seek accreditation; a passport for funders and other stakeholders to know that the organisation is properly run.

I hope too that we can move in that direction in the UK. This is something for which ACEVO has been calling for many years since our Rethinking Governance report in 2004. The steering group for the Code of Good Governance has more immediate priorities but we will need to revisit this ambition soon. It may be that accreditation is appropriate for some of the larger organisations in the sector. A combination of carrots and sticks may be what is needed to get the whole moving on improving governance.

The "New" Circle Line

Anyone who knows me well might want to stop reading right here because all of their fears about my geekiness are about to come true.

Seriously though, what is the point in the “new” circle line? As far as I can tell the Circle line will now run in a spiral from Edgware Road via Victoria and Liverpool Street to Hammersmith. Exactly whose journey is going to be made easier by that? The problem with the shallow lines (Circle, Hammersmith and City, District and Metropolitan) is that they are running the oldest infrastructure and are beset by delays and signal problems. The modernisation programme is therefore very welcome. But that programme should actually seek to make journeys easier.

I think TFL should get rid of the Circle line all together. There isn’t any part of it which doesn’t share track with another line. And unless you are actually on a pub crawl no one wants to go round in a big circle. If the Circle line wasn’t there you could run more trains on the District line and the Hammersmith and City line, thus actually connecting different destinations.

Let’s compare a few journeys:

If you want to go from Hammersmith to Liverpool Street you can take the new Circle line, but you can also take the existing Hammersmith and City line. All that matters here is how frequent the service is. More trains on the H&C line would do the same job.

If you want to go from Hammersmith to Victoria, you are not going to travel all round the Circle line via Aldgate to do so, you’ll take the District line straight there. More trains on the District line would help improve that.

If you want to go from Wood Lane to Barking you can get the Hammersmith and City line but you might have to change trains if you get on a Circle line train by mistake which would only take you as far as Aldgate. More trains on the H&C line would obviously help that journey.

If you want to go from Latimer Road to Earl’s Court then you can go via Hammersmith but you will have to cross the road to go to the other station to get on the District Line, just as before. Noting gained there.

I could go on but I think you get the idea. See if you can find a journey made easier by these new arrangements rather than scrapping the Circle line all together?

While we’re on it, if I was Boris I would also change the name of the bit of the District line which runs from Edgware Road to Wimbledon. It doesn’t share any of the route with the main bit of the District line and is just confusing. I would call it the Baysdon line and make it very dark green.

And I would also change the name of the bit of the Northern line which runs from Kennington via Charing Cross to Edgware, and then have all the trains running from Morden via Bank to High Barnet. That would make things much more simple. People may need to change at either Camden or Euston but people need to change anyway if they get on the wrong Northern line train now. So nothing lost. I would call it the Kenware line and it would be black and white striped.

It’s OK friends, you can come back I have finished. Anyone still reading?...

I thoroughly enjoyed the DSC Social Change awards last night.

DSC is an organisation which has a rather different outlook from ACEVO. We have been known to disagree on the odd issue such as whether or not charities should seek to become more involved in the delivery of public services, or whether it should be possible to pay trustees. But as with most third sector spats, we agree far more often than we disagree and have many of the same goals.

Debra Allcock Tyler gave a rousing speech before the awards themselves. I found myself agreeing with almost everything that she said: government should trust us and our capacity to innovate, that the state can never solve complex social problems on its own, that the public hasn’t engaged with the sector’s role in delivering services and that is a risk for public trust in us, that we must maintain our independence when delivering publically funded services.

I didn’t agree, however, with her critique of large charities. Her analogy was one of the elephant and the ant. The ant knows the details of the ground in much greater detail than the elephant, implying that larger charities cannot know as much as small ones about what is happening on the front line in communities.

This doesn’t sound to me like any large charity I know. I have spent today as an external panel member interviewing potential new trustees for a well known very large charity. The passion of direct experience with which the candidates spoke, and the very apparent connection between front-line experience and the strategic governance of one of the UK’s largest charities was striking. Size does of course bring challenges but one shouldn’t under-estimate the ability and skill of the leaders of the largest charities (both executive and non-executive) to connect on-the-ground experience to high level strategy, and then to their significant ability to affect change.

While at the awards I also enjoyed my conversation with Ben Wittenberg (DSC’s Head of Policy) about the OTS’s cutting of campaigning grants. It was an astonishing decision from the department which is currently tasked with leading the refreshing of the Compact within government. Also if you are going to upset a group of charities, picking on the best campaigners in the country is probably not a good idea. The case is being well championed by DSC, Compact Voice, NCVO and others.

The affected organisations learned of this decision three weeks after having received a grant letter from OTS confirming the success of their application. Now in my experience grant letters are the end of the process. You can go ahead and hire staff, buy equipment or make all the commitments you need to make on the back of a grant letter. Except clearly you can’t.

I wrote a piece a few months ago about the relative merits of grants and contracts in the third sector. One of the advantages of contracts is that it gives groups an equal legal recourse when things go wrong. Contracts aren’t appropriate for all types of funding relationships as I spell out in the article, but you have to wonder if the campaigners had had a contract rather than a grant letter, would OTS have been able to ditch them at the last minute?

One more thing for a Friday afternoon, great article in the Times today on charity accountability from the Finance Director at Oxfam. This is exactly the kind of message we are promoting through the sector with the ImpACT Coalition which is now hosted at ACEVO. Lots of exciting developments will be taking place now that Liam Cranley is in post as Head of ImpACT. Watch this space!

What we can learn from the X Factor

My colleague Richard McKelvey has just started a blog, and an excellent first post it is too (http://richardmckelvey.blogspot.com). Rather alarmingly in referencing mine he says I focus on the details of the relationship between government and the third sector. Not so high-brow today I’m afraid…

I am an unashamed fan of the X Factor. One of the reasons I like it is the way in which it highlights some interesting British trends. When three weeks ago Danyl Johnson was amazingly in the bottom two the nation turned to itself horrified and wondered how this could possibly have been able to happen. Someone with talent may go out, and Jedward are still there! In most cases the people most outraged were the very same people who didn’t vote. Now that’s fine. Voting in the X Factor cost money and it doesn’t of course actually matter. But it isn’t a very large leap of the imagination to see how this same passive horror could be much more acutely felt following a success for the BNP say in forthcoming elections. I remember clearly John-Marie Le Pen’s shock result in the French election of 2002 caused in exactly the same way. If we don’t vote for what we want things can turn out badly.

There are many reasons why this is a poor analogy. One of them is that lots of people actually hate Danyl and so were pleased when he was in the bottom two. I can’t see it myself but lots of people in the twittersphere despise him for being too cocky and arrogant.

Err, cocky and arrogant pop stars? Isn’t that the point? I don’t want my celebrities to be humble, least of all those who are most entertaining when they have a swagger. In the distorted mirror of X-Factor-land this is a symptom of a chronic British disease. We far too easily translate a positive confidence into a negative arrogance and cockiness. It goes deeper than that though. In our nation’s popular narrative those who are successful through hard work are often derided rather than celebrated. Academic achievement is something we feel we have to apologise for rather than take pride in. And this is something which starts at an early age. The most popular kids in school are not those who do well in class. Think about the last time you said that you were really good at something. Did you feel a bit uncomfortable about doing so? We have all be trained to do so.

This is not always the case in other countries. In the US you’re allowed to tell people if you’re good at something and take pride in your achievements. My very good American friend got the shock of her life when at our school and told us she was good at Basketball. Our classmates looked on horrified at her arrogance. But it was also true. Why shouldn’t she be allowed to say so?

Danyl isn’t nearly so entertaining now he’s trying not to be cocky. The British disease has defeated him. Arrogance is not a good thing, but confidence and taking pride in your success is, and they are not the same. So put a sock in it Cheryl.

Right, enough serious talk. I’m off to vote for Olly.

Cameron learning from Reagan

David Cameron made some important commitments in his speech at the Guardian last night. He clearly sees an expanded role for charities and social enterprises in the delivery of public services, and crucially as he outlined in response to a question from Stephen Bubb, that role will be funded by the tax payer.

This is very welcome clarity. That commitment is not something which is common to all centre-right politicians as they approach public service reform, as Philip Collins’ excellent recent piece in the Times highlights. There is a widely held fallacy that charities and philanthropy can easily compensate for a withdrawing state. This is simply not the case.

To explore that false argument in more detail, it goes something like this: Charities operate where the state does not. The services we provide are additional to those which are paid for through our taxes, hence we are motivated to give. The needs of the less advantaged in our society are met either by the state (though public services), or by charity; and it is the relative proportion of state provision versus charity support which separates “small state” countries like the USA from “big state” countries like Denmark.

This view is false because it fails to recognize what has been a seismic change over recent decades. Charities now deliver £billions of services for the state, not outside of it. The very significant growth and professionalisation of the sector is a function of this greater interaction with the state.

However, a cursory glance at the history of the relationship between the state and charities would go a long way to explain the false view of the relationship. As AJP Taylor famously wrote, until 1914 the average Englishman could pass through life and hardly notice the existence of the state. Vast swathes of core services were delivered by charities and paid for through philanthropy. During the 20th Century the state slowly took on more and more responsibility for services which were previously charitable. The probation service was nationalised in 1907, and the creation of the NHS in 1946 effectively nationalised a huge volume of charitable activity. During the 1970s the state was at its apex, and for a short time is was largely true that the role of charities was additional and peripheral.

Since then, though, and particularly in the last 15 years, the clear water between the state and charities has drained away. As market based reforms have dominated the new era of public services, charities have found themselves delivering services not as an alternative to the state, but rather for the state. ACEVO is proud to have championed this transformation from within the sector and helped to build the capacity of the sector to deliver more state funded services. Charities are very well placed to deliver services which focus on the needs of the user, joining up fragmented government silos, tackling the root causes of social problems rather than treating their symptoms, and seeking our innovation. These are qualities which are being increasingly valued by public commissioners.

The polarity between state and charity therefore no longer exists. More than a third of the money charities spend comes directly from government, and the links go much deeper than that. Each year central government alone spends over £ ½ billion on building the capacity of the third sector to be more effective at delivering services and providing advocacy.

This transition in the role of the sector is not one, however, with which the public have engaged. Recent research by ACEVO and YouGov showed that only 16% of the public were in the right ball-park in estimating the proportion of charitable income which comes from government. However it is a vital point for policy makers to understand, and as Philip Collins rightly says they must learn from history.

To risk over-stating the point again, it is this: The charity sector has only grown in size and strength because of its relationship with a state which has been committed to using charities to deliver public services in a state funded market. The capability of the sector to thrive is therefore completely intertwined with buoyancy in those markets. It is simply not plausible that charities could step in to the space vacated by a shrinking state, because they will be shrinking too. Even if a smaller state was a catalyst for greater philanthropy, the public would need to roughly treble their current giving to make up for the loss of state funding.

President Reagan faced this dilemma in the early 1980s. He had been elected on a significant tax-cutting mandate and saw the charitable sector as a cheap alternative to federally funded services. However, Reagan and his advisors did not appreciate the extent to which charities were already spending money given directly to them by the federal government, or given to them by the states on behalf of the federal government. Cutting those budgets would cut the life support of the very organisations who were meant to take on the delivery of those services, at precisely the time when demand on their services was rising. In the areas of health and social care in particular Reagan was not therefore able to cut spending as much as he had originally wished.

After spending a week at the Conservative Party conference I left much enlightened about the party’s broader policy agenda. But there are a variety of views within the party about the extent to which the state should shrink. To believe in the fallacy outlined above will be a temptation which all elements of an incoming Conservative Government will need to resist, especially when the party has a clear desire to reduce public spending and stimulate philanthropy.

George Osborne has claimed that the Conservatives are the true inheritors of Blairite market reforms in public services. For this to be true he and his boss must be sure that all of their colleagues understand that charities are not an alternative to the state, but a key partner. The theme of the week in Manchester was to prepare the public for spending cuts. If we really are “All in this together” then the only solution, as Cameron recognises, is for the Conservative party is to use the best of the modern enterprising third sector to bring about real public service reform. A greater role for the third sector in public service markets can both improve outcomes for service users and use public resources more effectively. These outcomes can not be achieved without recognizing the reality of the sector’s relationship with government. Pulling the rug out from under us would not create the stronger charity the sector which the party says it wants, and crucially it would result in a double whammy for service users.