For our sixth Eastern Leaders Masterclass session we were joined by Zoe Wortley, Managing Director at Soar Consulting, and Alan Lewin, Non-Executive Director at Greenacre Recruitment, who explored the role of governance, as well as a number of frameworks that are in existence to support and assess how housing associations achieve good governance. The session also explored the expectations which are placed on registered providers by the regulator, and the processes used to assess a registered provider’s compliance within the regulatory standards.
The term ‘governance’ covers quite a broad spectrum, and conjures up many different terms, however, governance generally relates to the framework that encompasses your decision making. It ensures accountability of those decisions and that decisions made by an organisation are made for the benefit of all. It is about ensuring there are no conflicts of interest and that decisions are made in the best interests of every stakeholder, including residents/tenants, other customers, the community, suppliers, employees and others who are affected by those decisions. It is also about the hierarchy of decision making, appropriate oversight and accountability.
“Good governance is important as it provides the infrastructure to improve the quality of the decisions made by those who manage businesses. Good quality, ethical decision-making builds sustainable businesses and enables them to create long-term value more effectively” – The Chartered Governance Institute
Effective governance frameworks support ethical decision making, which is an integral part of the affordable housing sector, as the vast majority of organisations are ethical, non-profit making organisations. The sector has however grown and diversified significantly over the last decade or so with some RPs adopting more commercial activities, whilst others retain a focus on more traditional activities.
A Basic Governance Structure
All organisations will have a board and all housing providers will generally have an audit committee and a committee that has oversight of remuneration. There are also likely to be other committees that look after various elements of the business which also feed into the board. There might be working groups and tenant panels that sit beneath these, which feed into the decision-making process. In recent years however there has been a concerted drive to simplify these structures.
The Regulator for Social Housing is our biggest regulator and works with all registered housing providers. In part, it’s job is to protect social housing assets and ensure the public’s investment is safeguarded and that residents’ homes are not put at risk. Robust regulation also give lenders the confidence to invest in RPs, especially as in recent years there has been less government funding injected into the industry, forcing housing providers to seek much higher levels of borrowing in order to fulfil their obligations.
Setting regulatory standards and regulatory judgement
There are two sets of standards: Economic standards, and Consumer standards.
As housing providers we must comply with all of these standards and each year every RP will have to go through a self-assessment process, where they consider the standards and evidence how they feel they meet them, or not, as the case may be.
There are four governance grades, and four viability grades, running from G1 and V1 to G4 and V4, and G1 and V1 ratings are where RPs aim to be. Once you get into G2 territory, this is when the regulator will start to become more interested in your organisation and will want to see that you are making the effort to improve your rating back towards G1.
In Depth Assessments
In depth assessments (IDAs) take place every two to four years with organisations to ensure that requirements and standards are being properly met and there is no need for further investigation. More recently it is becoming common for operational professionals and tenants to become involved in IDAs, as well as boards and audit committees, as it becomes common practice for more diverse involvement across these processes and decisions.
Alan gave his perspective on being a board member and explained the purpose and application of the new code of governance
The National Housing Federation published a new code of governance last year, which most organisations are now considering, and consists of four basic principles:
- Mission and values
- Strategy and delivery
- Board effectiveness
- Control and assurance
Mission and values
“The board sets and actively drives the organisation’s social purpose, mission, values and ambitions, and through these embeds within the organisation resident focus, inclusion, integrity, openness and accountability.”
As the above quote from the code suggests, there is more focus now on residents and inclusion, and in future there are indications that the regulator will be looking for us to make up boards that are of a diverse and inclusive nature and culture, and contain individuals that reflect resident voice.
Strategy and delivery
“The board sets ambitions, plans and strategies which enable the organisation to fulfil its social purpose and remain viable and sustainable, and exercises demonstrable and effective oversight of their delivery.”
The above statement really summarises what the board is there to do; to set the strategies and to then ensure those strategies are delivered, and whilst we are there, ensuring that the organisation is viable and sustainable.
“The organisation is led by a skilled and diverse board which regularly reviews and capably manages it sown performance and effectiveness, and ensures that it complies with this code.”
Board effectiveness is really the board looking at itself. We can look at the strategy and the structure of the organisation, and we can change the business plan, but we also need to look at ourselves and make sure that what we are doing reflects the business needs at that time.
Control and assurance
“The board actively manages the risks faced by the organisation, and obtains robust assurance that controls are effective, that plans and compliance obligations are being delivered, and that the organisation is financially viable.”
In many ways this is the toughest thing for us to do as board members, and there is a responsibility to be accountable for delivering a high standard of service, ensuring robust processes are followed and satisfactory outcomes are assured.
How many of you have actually met your board? How much do you know of what your board are about and who they are as people? It’s really important to ask these questions. It’s important to open that door and become connected. The more you understand the governance of your business, the better you’re going to be able to do your job, and to become an effective leader.