Advice to Boards on Collaboration

How this guidance note can help

This guidance has been developed by Collaboration NI to help the boards of voluntary, community and social economy (VCSE) organisations to apply good governance when working together towards collaboration.

As VCSE organisations seek to realise the potential benefits of working collaboratively, it is important that the legal duties of directors and trustees and the fundamental principles of good governance are kept in mind. Early consideration needs to be given to the important role of the board when collaboration is being considered and implemented.

Collaboration can range from a very simple arrangement to share resources or deliver a project together, through to a more integrated arrangement and possibly even a full merger.

As the level of collaboration increases, so does the risk and so should the involvement and oversight by the board. Further specific advice on governance in the context of collaboration is available in the CollaborationNI guidance note entitled, Good Governance: fundamental principles for collaboration.

This guidance sets out:

• trends in VCSE sector governance in relation to collaboration
• particular responsibilities of directors/trustees acting as board members during the collaboration process
• potential governance pitfalls when collaborating with others
• key questions and issues for the board to address
• legal implications
• tips for board chairs
• useful links to collaboration and governance support

Trends in VCSE sector governance–implications for collaboration

A number of trends that affect the governance of collaborations have emerged over the last few years.

An increasing focus on procurement by the public sector

In recent years the public sector has moved towards procuring services to be delivered in the community through open tenders, rather than giving directly awarded grants to organisations. These contracts are often for services which exceed the ability of one organisation to deliver on its own. The shift to procurement is also an attempt to reduce the amount of overlap of services. This is in part driven by the need to seek efficiencies, not least in contract management, by having fewer lead organisations (through working in consortia) for government to deal with.

This trend has led to an increased need for collaboration among VCSE sector providers. It is becoming increasingly common for organisations to collaborate in relation to tendering for work, and it is important that the boards and senior managers in each organisation get governance right in order to ensure everyone is clear about what is expected of each organisation, and what they will be expected to give and get out of any contract if their bid is successful.

An increased focus on performance oversight and ‘setting the tone’

To many in the public sector, and to more than a few board members, governance still means compliance. However, there is increasing awareness of the board’s role in driving and overseeing performance. There are implications for collaboration where two organisational cultures are very different, and bringing two staff teams together into a harmonious one can be a major task. There is a leadership role for the board in setting a culture of co-operation and collaboration, rather than competition.

Maximum terms of office

Increasingly boards are setting maximum terms for members. This allows for a mix of experience and new thinking. It is useful to have a fresh approach when considering collaboration as ‘new eyes’ may see new possibilities.

Appropriate leadership and oversight by the board

It is important that boards regularly ask for and receive accurate information in an ‘easy to read’ format if they are to keep their organisations safe and legal. This is a good discipline which makes the due diligence process easier as information on finances, key risks, performance, strategic development etc is readily available.

When two or more organisations agree to collaborate on a piece of work, then it is recommended that some form of due diligence is undertaken to give assurance that the partners are sustainable, reliable and well managed. A board should insist on this and be ready to meet a reciprocal request.

If there is evidence of failings in one area e.g. fraud or ineffective financial oversight, there may well be other issues, such as health and safety risks, safeguarding concerns, human resource management weaknesses and so on. Any board going into collaboration should ensure they do so with eyes wide open. This attention to governance must also apply to the other partnering organisations and their boards as your organisation’s reputation will now be affected by others over whom you have limited control.

Increased attention paid to board development

The Code of Good Governance states that the board ‘should ensure that all members receive the necessary induction, training and on-going support needed to discharge their duties effectively’. Based on developments in the arena of public appointments, voluntary board members are increasingly:

• being recruited for having relevant skills
• being fully inducted
• receiving on-going training
• having their performance reviewed regularly

In a collaborative situation, board members, like staff, go through a steep learning curve regarding the other organisation’s work, strategy, ethos and culture and will require support through this process.

During the last 10 years, there has been increasing recognition of the importance of effective governance for VCSE organisations. In addition to the compliance benefits, effectively governed organisations also tend to have more effective staff teams delivering better services. There is recognition that in this changing environment boards must also change.

Board members’ particular responsibilities when collaborating

All board members should be very clear about their particular duties and responsibilities, which are:

• keeping the organisation legal and safe
• agreeing the strategy, vision, mission and values to make decisions clearer, and to motivate staff, existing supporters and potential funders
• being aware of, and managing risk
• overseeing performance, including financial, to monitor progress towards agreed goals
• ensuring integrity and transparency to maintain the trust of stakeholders

Keeping the organisation legal and safe

Board members need to know the legal framework within which their organisation works, and the legal implications for any collaboration. Appropriate policies, procedures and reporting mechanisms should be put in place to achieve compliance. It’s not enough to just adopt the policies and procedures of your partner organisation. Each should be checked for compliance with the law, best practice, and relevance to the organisation.

In addition to carrying out an appropriate level of due diligence on the partner organisation, a process of introspection is useful in ensuring your own organisation is ready for the collaboration. If there is any doubt in the boardroom, your board should take appropriate advice.

Agreeing the strategy, vision, mission and values

The board has a key role in the strategy development process, which should include:

• defining the vision or the ideal state that the charity wants to achieve; the mission or the role the organisation will play in working towards that vision: the values or how people in the organisation will behave
• looking at the governing document, and the objects that were listed when it was written to ensure they are still appropriate and relevant or if they need to be updated; a revised governing document will need to be written and approved at an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM)
• planning the impact and outcomes it aims to achieve, and the detailed plans of activities and outputs to be undertaken, within defined timescales

It is important to undertake some form of strategy review prior to collaboration in order to check if the agreement to collaborate is aligned to your existing strategy or whether your strategy needs to be adjusted to allow for the new move.

Being aware of, and managing risk

Risk is defined as uncertainty of outcome, whether in relation to a positive opportunity or a negative threat. All collaborative or partnership working will carry risks, and these must be included in the corporate risk register. It may be useful to consider risks in the following categories:

• Regulatory risk e.g. failure to comply with the reporting requirements of Companies House or the Charity Commission; collaboration may lead to new reporting requirements, or the work of the organisation being subject to additional regulations.
• Governance risk e.g. lack of skills on the board, particularly if additional skills are needed to ensure the success of the collaboration.
• Financial risk e.g. loss of significant funding; conversely, there is also a significant risk if, for instance, an organisation collaborates to tender for work, and having won the tender, either because of failings in its own operations or those of its new partners, fails to provide the services contracted.
• Operational risk e.g. theft or loss of computers or other equipment with important data; if the collaboration leads to information sharing, the board will have to assure itself that both organisations’ information is held securely and in line with the data protection regulations.
• Strategic risk e.g. changes in legislation, economic downturn, bankruptcy of a major client; boards should remember that strategic risks may affect one or more than one member of the collaboration, and the risk assessment should take into account how this might impact on the other partners.

Overseeing performance, including financial, to monitor progress towards agreed goals

The board should agree a clear timeframe and budget for the collaboration process from the outset, ensuring that there is sufficient provision for professional advice, especially on legal matters and due diligence.

Ensuring integrity and transparency to maintain the trust of stakeholders

The board should be clear which of its key stakeholders need to be kept informed about progress with the collaboration. This might include funders, other partners, beneficiaries and, in some cases, key suppliers. It should ensure that they receive regular updates on progress, except where confidentiality is essential e.g. where specific employment matters are being considered.

Once risks have been identified, assessment should be made of the likelihood of the risks happening and the impact of the risks on the organisation if they did happen. The resulting scores can then be mapped to enable the highest priority risks to influence the agenda of the collaboration, and ultimately that of the full board. For each of the risks, actions should be agreed to them, like:  

• board training
• secure data storage
• policies and procedures for staff to follow
• insurance to cover theft

Again, the risk calculation must now extend beyond your own organisational boundaries and include consideration of partners who can now impact on your performance and reputation.

Key Governance Stages for Collaboration

The following diagram summarises the key governance stages in relation to collaboration.

Setting up a Steering Group or Transition Committee will help manage the process and this should be agreed early in the collaborative planning process.

Potential governance pitfalls when collaborating

There are several potential governance pitfalls associated with collaboration. These include:

• mistrust between the partners due to poor or weak relationships
• lack of transparency - failing to share important information with each other
• lack of strong agreements which clearly set out roles, responsibilities and rewards for each of the parties
• selecting the wrong partners in the first instance, and not recognising it until it’s too late

Conversely, you may have picked the right partner, but the process of forming a relationship has been difficult. It’s useful to remember the Tuckman model of group development which reminds us that forming a productive partnership is based on a recognised process and does not happen as a one-off event; the process requires time and attention:

Tuckman’s Process for Change in Group Dynamics

When any group undergoes a change, such as when a board begins a process of collaboration, they go through the team development process of:

• Forming – coming together as a group
• Storming – testing and competing with each other
• Norming – finding the team’s ‘rhythm’
• Performing – working really well as a team

Knowing that conflict is normal and is to be expected can be constructive and can help you get through difficult times when forming collaborative arrangements.

Undiscovered governance failures in partner organisations, such as:

• Stagnation of the board – perhaps founders have not introduced new people to the boardroom, with new ideas and perspectives, and this may mean that the strategy and culture of the organisation have not been led effectively.
• Lack of expertise on the board - leading to inadequate control systems and performance management; though people may be well meaning if they don’t understand their legal duties, they may not have provided sufficient oversight and there may be key risks that they haven’t identified e.g. fraud, employment issues, health and safety issues, safeguarding issues, etc.

One way to avoid these pitfalls is to have a positive and productive governance review with collaboration as the catalyst and from this to draw up a compensating Governance Action Plan at board level. A template is available from the tools section of the CollaborationNI website entitled, Governance Action Plan for Collaboration.

Some key questions and issues for the board to address

Legal implications

There are many legal options in relation to collaboration. The board should ensure that it receives specific legal advice and that each of its members really understands and accepts the implications of the agreements being made.

Where organisations join together only for the delivery of specific projects, a light touch Memorandum of Understanding may be enough. For more significant joint working, a more detailed and binding contractual agreement may be needed, for example, with non-performance penalties included. The higher the stakes and the higher the risk, the more a board will need to seek mitigation and protection for the organisation and its members.

Where there are joint strategic developments, some organisations opt to set up a separate company with directors appointed by each of the partners. This is often referred to as a ‘Special Purpose Vehicle’, set up to create co-ownership and joint governing arrangements for a particular purpose and/or service contract.

If a full merger is required and agreed, then the new single, incorporated entity will be subject to all of the same legal requirements as any other company or registered charity.

Tips for board chairs

There is a particular onus on the chair of a board to ensure that their board operates to good governance standards. Chairs are no more or less liable than any other board member however there is an expectation and often a specific duty approved by a board for the chair to act with authority on the board’s behalf. When seeking to collaborate with another board the chair has to be particularly mindful that the organisation is protected and that its interests are served at all times.

Here are some tips that may help a chair:

• Develop relationships with the chair and chief executive of the intended partner(s); get to know what they do, with whom, and how.
• Insist on getting good, evidence-based information on the proposed collaboration, including some form of due diligence (light touch or a full formal review) on the proposed partnering organisations.
• Ensure all board members are clear about the plans and understand the potential benefits and risks.
• Ensure everyone is clear about decision-making and any delegated authority, to a Steering Group/Transition Committee or staff team.
• Communicate with key funders and staff as much as possible to keep them on board and maintain trust.
• Involve at least one other board member if a Steering Group is established, preferably someone with skills and experience in collaboration.
• Be realistic about the resources and timescale needed for collaboration.
• Keep your board informed about progress and about any emerging risks.

CollaborationNI has developed a template to help a board in the process of planning for collaboration entitled,  Board Checklist for Planning Collaboration.

Conclusion

The central message from this guidance is that any board contemplating collaboration needs to make sure that:

• It is involved in the collaboration process from a very early stage.
• It has discussed and approved any formal decision to pursue collaboration.
• It has its own house in order in terms of good governance and making provision for the resources required to plan for collaboration.
• It has evidence that any potential partner organisation is well governed, positive, and serious about working collaboratively.
• It has set aside time to deal with the workload associated with planning, negotiating and executing a collaborative working agreement.

Useful sources of support and advice to boards on collaboration

More advice to boards on collaboration can be found in the CollaborationNI guidance note entitled, Good Governance: fundamental principles for collaboration and at the links below:

NICVA

The Charity Commission for Northern Ireland

The Charity Commission for England and Wales

Locality

Leading Governance

DIY Committee Guide