Good Governance: fundamental principles for collaboration

 CollaborationNI Guidance Note-Governance: fundamental principles for collaboration
This guidance outlines the eight fundamental principles and duties of trustees of boards of VCSE organisations. Together these form the building blocks of good governance for collaboration.
Every effort is made to ensure that the contents of this document are accurate, but the advice given should not be relied on as a definitive legal statement.

How this guidance note can help

This guidance has been developed by CollaborationNI to assist trustees of boards of voluntary, community and social economy (VCSE) organisations to understand that there are trustees’ legal duties and fundamental principles which together form the building blocks of good governance for collaboration. These are illustrated below:

Legal Duty of Care

All board members of VCSE organisations have a duty to exercise care and skill, and to get appropriate external advice when needed.

When entering in to a collaborative agreement, it is the responsibility of the board to ensure that due diligence has been exercised. This means that the board needs to know who it’s ‘getting in bed with’, and satisfy itself that the partner organisation complies with all legal and statutory requirements. Even if the board includes people with legal and accountancy qualifications, they should engage specific professional advice, particularly when it comes to any legally binding collaboration agreements, and the exercise of due diligence.

A sample due diligence checklist is available from the Charity Commission for England and Wales (CCEW).

CollaborationNI also has board checklist entitled, Board Checklist for Planning Collaboration.

Legal Duty of Compliance

The board must act with integrity and comply with the governing document of their organisation and all laws. Before entering into any collaborative agreement trustees should ensure their constitution permits it. When it comes to employment law, in the case of a full merger, they need to comply with TUPE rules (Transfer of Undertakings, Protection of Employment).

Care should also be taken when revising policies and procedures for any merged organisation so that they cover all activity being undertaken and are in line with the law and with best practice.

It is also important to check if collaborating organisations can share electronic records, and records of clients and customers.

Delegation of Authority

Appropriately delegated authority is critical in developing collaboration. Boards should consider whether the wider membership should be consulted at any point, at an AGM or EGM, as it is the members that delegate the running of the organisation to the board.

The board should ensure clarity about the level of its delegation to the chief executive when exploring collaboration. The chief executive should be given authority from their board to enter into discussions with potential partners, with guidance on the level of priority this has. As plans for collaboration develop, a ‘Collaboration Steering Group’ should be established, with clear terms of reference established early, to determine its level of authority, and when full board involvement is needed. The steering group should be led by the board chair, and include at least one other board member, and the chief executive.

The amount of time involved in negotiating a collaboration cannot be underestimated; everyone signing up to the collaboration steering group should be aware of what is involved, and prepared to fully commit to the process.

Staff should fully understand any authority which has been delegated to them during the collaboration process. This should be clearly stated and documented, so that any staff working groups know that the work they are doing on the collaboration is meaningful. This is essential to maintain staff morale.

Checks and Balances

Collective decision making seeks to ensure that no single person can hold too much power. The separation of the chair and chief executive roles, and the requirement for payments and important documents to be authorised by at least two people helps to prevent fraud and mistakes, and ensures that the board is fully informed.

In a collaborative situation, checks and balances should be built into the Terms of Reference for the Collaboration Steering Group. Each board should make it clear how often that this sub-committee needs to report back to it.

The boards should ensure that an appropriate level of due diligence is carried out. This exercise will bring out all of the information needed to enable the board to make an informed decision about whether or not to proceed. The scope of the exercise will vary according to the level of collaboration envisaged, and the size and complexity of the organisations involved. Full due diligence may require the involvement of legal and financial professionals, with a separate team working on behalf of each of the organisations.

The areas due diligence looks at include:

  • the current financial position, and future viability of the partner
  • property ownership and occupation, and other assets
  • income sources and contracts
  • employment practices, policies and procedures
  • any conflicts of interest

A sample due diligence checklist is available from the CCEW.

Professional Decision Making

Research has shown that groups tend to perform better than any one individual when decisions are being made. Having a board to make decisions should enhance the quality of decision-making, as long as the board members have the skills and experience needed, and understand what is required of them.

When considering collaboration, it is important that each of the boards gives serious consideration to the benefits and potential risks of the proposed arrangements. It is particularly useful to have board members with legal and financial skills, to ensure that due diligence is undertaken properly to protect all involved.

The board should ensure that a realistic timescale and budget is set for the collaboration. It may be useful to talk to the chair and chief executive of an organisation that has been through a similar process in the past, to learn from their experience.

The board should be clear that the potential collaboration appears to be in the best interests of the organisation and its clients/beneficiaries and that the objectives of potential partners are compatible. As the leaders of the organisation, board members are both drivers and custodians of the strategy, and it is up to them to decide if the proposed collaboration is a good strategic and cultural fit for the organisation.

Accountability

Effective governance should ensure clear lines of accountability at all levels. This supports the development of stable and effective relationships between the members, the board, management, and other stakeholders. The providers of funding for the organisation will be particularly keen to get assurance that funds are being used effectively, and for the purposes agreed with them.

It is vital that proper minutes are taken at collaboration meetings to show what thinking was done, what risks were considered, and what decisions were made. It is also important to show that the board is monitoring the development of the collaboration, ensuring that objectives are achieved in line with the strategic plan, on time, and on budget.

Transparency

Like any change, engaging in collaborative activity can be scary for staff, clients and board members. There is a particular danger that those not involved in the collaboration negotiations get information in dribs and drabs. This fuels the ‘rumour mill’, and is unhelpful both to the collaboration discussions and morale. It is therefore vital that all of the key stakeholders are informed about the negotiations with an agreed, consistent and aligned message. There may be issues that must be treated as private and confidential for a period of time and so a board will need to balance this with the wider duty to be open and accountable.

Collaboration offers exciting opportunities, but the prospect of it can also bring fear to funders and staff. People may be concerned that their jobs will change or disappear. It is vital that a clear vision of the future is communicated, and that all stakeholders are consulted and kept fully informed as negotiations progress. A sense of ownership of the new arrangement is essential if energy and motivation are to be maintained. Stability during negotiations and changes is really important, and the board should set the tone on this.

The board should ensure that the organisation’s key funders, and any other partner organisations, will not withdraw their support if the collaboration goes ahead. The chair of the board will have a key role in maintaining their trust and support.

Conflicts of Interest

Conflicts of Interest can occur when the personal or professional interests of an individual may affect their ability to put the organisation’s well-being first. It is not always possible to completely avoid conflicts of interest, but it is vital that there is a clear and effective policy on how they are managed. The chair of each board should ensure that a Register of Interests is held and updated at least annually. Remember, as you begin to collaborate, the potential for conflict of interest extends beyond your own board to that of the interests associated with the other board(s). The Register of Interests needs to be updated to reflect this.

This must be handled sensitively when organisations are collaborating, and there should be transparency about any potential for conflicts of interest to occur in meetings or in negotiation of contracts.

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