Governance, legal and compliance Accounting and reporting

The key to good governance - truly understanding the business

Trustees need to make informed and appropriate strategic decisions for their charity and to do this, need to fully understand the business. Suzanne O’Brien, CXK, highlights the need for information to be accessible and appropriate to the board, and shares her useful reporting method which will be discussed further at the Annual Conference.

Whether you are a trustee or an executive, it is vital that you understand the business of your organisation.  If you don’t, the consequences range from mild embarrassment, when you can’t articulate why you volunteer, to severe, when you can’t demonstrate leadership and management to the regulator, and potentially catastrophic, when you take Board decisions that are ill-informed.

The challenge is significant.  The charity sector, like the business sector is diverse, but with the added dimension of delivering charitable objectives while remaining solvent!  Without the profit motive focusing business decisions, and in a world where it seems more difficult every year to stay afloat, it can be a struggle to identify an effective and appropriate strategic direction.

Working as a trustee can be daunting.  Board and committee meetings may be held only four times a year, with a full agenda and a mountain of paperwork to assimilate. Like many, I became a trustee, with the intention of ‘giving back’.  Having spent decades working in the private sector (financial services mainly), I wanted to bring my knowledge and experience of business to serve those less-fortunate than myself.  The world of fund-raising, grant-funding and commissioned income was entirely new to me and brought its own language, stakeholders and motivations.  So, how to govern wisely, and to add-value effectively?

For many the starting point is with the charity’s website and any other information in the public domain or with the Charity Commission.  As an accountant, a key resource for me is the annual report.  When done well, the narrative gives a sense of the organisation its aims and culture.  However, for many, tables of numbers are intimidating and there is the perennial problem of the distortion caused by accounting conventions such as provisions, depreciation and asset valuation.  I appreciate that financial information is somewhat one-dimensional, and definitely historical, so not necessarily an accurate indication of the present situation, much less the future.  This was always the case, but the problem is particularly acute today when the pace of change is so rapid and is unprecedented.  Government policy shifts, democracy surprises and the world keeps on turning!

Of course this is not new and it is widely recognised that focusing on just the financial is to view an organisation through a limited lens, when what is required is a multi-dimensional prism.  Ideally this would reflect strategy management, operations management, human resources, organisational behaviour, information systems, and marketing – did I forget anything?

There are many methodologies that have developed over the years, to try to capture the business of the organisation.  These usually focus on developing a framework to capture and measure performance, with a view to incorporating the measures as of a process to challenge the content and validity of the strategy.  A pioneering development, which has stood the test of time, is Kaplan and Norton’s Balanced Scorecard.  I fully subscribe to their persuasive argument; why would you want to be a passenger in a jet where the pilot was only interested in airspeed and ignored altitude and fuel consumption?  However, it is complex incorporating operational measures such as innovation and learning, customer satisfaction and internal processes.  Implementing such a framework takes huge commitment from the executive and the trustees both in terms of time and resource.  While there are many stories from the private sector lauding the results of an effective scorecard implementation, there are many more salutary tales of difficult or trite implementations which added little or no value.

What I have developed to great effect is a hybrid report marrying financial information with organisational structure to give trustees and the executive a basic business sketch – ‘BuSk’!  It is an ‘at-a-glance’ overview of the organisation aligning charitable objectives with resource.  Including beneficiaries and where possible, outcomes, speaks to the core of the organisation; its charitable objectives.  Financials are necessary, as the old adage ‘no money, no mission’ endures. Organisational structure reflects the allocation of resource and is intended to break down silos.  While BuSk reflects the rationale behind the Balanced Scorecard methodology, is intended to deliver a broad-brush view of the organisation in a simple, clear and understandable way so that we begin ‘understanding the business’.

Hear more on ‘Understanding the business’ from Suzanne O’Brien at the Annual Conference. Secure your early bird place now at

This post was last reviewed on 25 July 2018 at 11:19
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