9th September 2021Not For Profit sector – A month in review

This month’s digest provides an update on some of the top articles, reports, news, and events for Not for Profit (NFP) organisations.

Carol Rudge shares her opinion on governance in the NFP sector, looking at how directors can report the successes of their organisations, as well as how to achieve effective diversity on boards. On the same note, Directory of Social Change (DSC) has just released a useful tool that helps charities to manage their governance. Technology takes the spotlight in an NCVO report outlining how charities have used technology during the pandemic. Finally, we explore which exciting events are coming up next month and where you can hear our experts speaking.

Section 172 of the Companies Act 2006 applied to charities

Section 172 of the Companies Act 2006 requires directors to promote the success of a company and includes a list of matters which the directors should consider when carrying out this duty. The list includes the likely consequences of any decision in the long term, the interests of the company’s employees, and the impact of the company’s operations on the community and the environment.

Just over a year ago, a requirement was brought in for large companies (including charitable companies and universities constituted as companies) to include a statement that describes how the directors have had regard to these matters when performing their duty to promote the company’s success. At the same time, a requirement was introduced to include a statement summarising how directors have engaged with employees and taken account of their interests, and a statement summarising how directors have engaged with suppliers, customers and others in a business relationship with the company.

As with all new requirements, it is always sensible to step back after the initial implementation to see what could be improved; both at an individual level and more widely. The FRC issued a report last month looking at best practices in S172 statements; the report was not written for the charity or higher education sector, but does give some useful tips which boards may find helpful to consider when thinking about the next round of reporting (between pages 49 and 57). The idea of including examples of significant strategic decisions and how the stakeholders were considered is interesting, as well as explaining the reasoning why particular stakeholders are identified as key.

The FRC report is available here

 Board diversity and effectiveness: an FRC Report

The FRC have produced a report on board diversity and effectiveness in FTSE350 Companies in conjunction with London Business School, Leadership Institute and SQW. The report looks at three key questions:

• How have board effectiveness and dynamics been impacted by the increased gender and ethnic diversity of board membership?
• What attributes, skills and experience do today’s board members expect to be needed in the diverse boardrooms of the future?
• How can nomination committees be helped to take a more objective and diversity-friendly approach to board recruitment?

The research highlights that it is the responsibility of the board to drive inclusion and to maximise the benefits of diversity, the board should recognise that change takes time and that diversity without inclusion is unlikely to encourage new talent to the board. Additionally, the research identifies that diversity, over time, improves the performance of boards and the businesses they lead; this finding is not new, but it is good to see it being reinforced.

Quite a lot of the research revolves around gender diversity and it found that:

• Higher levels of gender diversity positively correlate with better future financial performance
• Diversity affects boardroom dynamics and that the percentage of women is highly correlated with an emphasis on boardroom relationships and collaboration

The research also found that the hallmarks of boards with more women included:

• Significantly greater decentralisation in how they operate where committees have strong delegated powers
• Increased likelihood of reaching consensus before important decisions are taken, rather than undertaking decisions that a substantial part of the board opposes
• Stronger belief and action on ensuring fair outside search when recruiting directors because standards should apply to everyone equally
• And reduced overconfidence about the board’s problem-solving skills

While the report is a long read, the executive summary is great and has some helpful hints and tips for nominations committees (or their equivalent).

Read the full report here

The Governance App from Directory of Social Change (DSC)

The Directory of Social Change (DSC), a not-for-profit organization providing online funding in the UK, have recently released the Governance App. We are often asked by charities how to assess their governance, and the app combines the Charity Governance Code with DSC’s governance model into an online tool. Best of all it is free, having been funded by The Clothworkers’ Foundation, The Tudor Trust and Lloyds Bank Foundation for England and Wales.

Discover the app and its features here

NCVO Report – How charities deploy technology during the pandemic

The National Council for Voluntary Organisations (NCVO) have been working with Nottingham Trent University and Sheffield Hallam to examine the impact of Covid-19 on charities, producing 15 monthly reports through to November 2021.

August’s report issued focuses on how charities used technology during the pandemic. While naturally there were tremendous challenges arising from remote working and making sure that services could still be delivered, almost half of charities surveyed reported an improved accessibility of their service as result of their online operation. They achieved this by using free platforms and software, combined with the creativity that comes from knowing their beneficiaries well and thus what would work.

As we perhaps return to some degree of normality, the report makes it clear that investment in digital technology and skills will be needed to maintain this impetus and build on the progress made. One aspect to this is board skills – The Digital Skills Report 2021 by Zoe Amar and the Skills Platform showed that there is a digital skills gap on boards with almost 7 out of 10 being unclear on, or don’t have a plan for, how to grow these skills. We suspect that trustees with the right skills will be much in demand over the coming year (they probably were already!).

The report goes on to list reflection questions and further resources on pages 14 to 15. Read it here

Charity Finance Group

With increasing pressure on the financial sustainability of charitable organisations, contract compliance and licensing reviews are valuable tools to find potential savings, which have never been more needed following the challenges of the last year. In our guest blog for The Charity Finance Group, Carol Rudge offers some insight into why this is important and how to ensure charities are receiving the full benefits of any agreement. We’re looking forward to sharing more of our insights and experience at the always excellent CFG Annual Conference in October, don’t miss the opportunity to join our session.

Read our guest blog here

Coming up:

Charity Finance Summit

We are delighted to be exhibiting at this year’s Charity Finance Summit on 7 October which is one of Civil Society Media Ltd’s flagship events. It looks like it will be a great conference and it will be fantastic to see people in person (Covid permitting!).

Find more details and sign up to the session here

We hope this is a helpful summary. Follow Carol Rudge on Twitter and LinkedIn for more regular live updates. If you have any further questions or discuss individual circumstances, please get in touch!