Looks Looks Looks

First impressions are dangerous things. So are rhetorical questions.

What does a good board look like? Well, first of all it shouldnʼt be too big, should be diverse, and should have a good mix of skills. So far so good? Add to that the fact that nobody on the board has been there for more than nine years, and that the previous chair was a government advisor on corporate responsibility, and it all looks text-book. Right? Well, no. Unfortunately youʼve just been looking at the board of Carillion. I did warn you about first impressions. (And rhetorical questions.)

The debate over where the Carillion board went wrong has already started, but even the Financial Times (1) has commented that on first impressions the board seemed to fully look the part. “Looks, looks, looks,” as Sparks sang on their 1975 single, before adding: “You had sense, you had style, you had cash galore…” Well maybe not.

When it came to decision making the Carillion board took too many risks. It failed to halt its acquisitions programme, despite a backdrop of increasing liabilities; it authorised bonuses despite KPIs not being met; and it supported aggressive accounting policies that allowed profits to be booked whilst delaying costs. In the end the business simply ran out of money.

Some of us will remember it was a similar story that brought about the demise of Connaught, the social housing contractor, in 2010. So what was it that the Carillion board (and Connaught board) was lacking and how can we stop such a governance failure happening in the housing association sector?

By choosing our boards wisely I would suggest. Certainly board size and diversity are important factors, as are the technical skill-sets board members bring, but the most important factor is actually the people you have around the board table, as Mike Owen (2) argued in his recent Inside Housing article.

It is relatively easy to undertake a board skills analysis for recruitment purposes, and most housing association boards will quickly establish they need expertise in finance, housing/maintenance and regulation/governance. Further cross referencing with the organisational risk map will suggest where other specific skills are required, health professionals for example if you have a large care business, or private developers if you have a large new-build programme etc. Now just the addition of an annual board skills gap analysis and maximum terms of office for board members and itʼs job done. Isnʼt it?

Of course it isnʼt. At this stage youʼve only built a board that looks the part. A board that on first impressions ticks all the governance boxes, and we know how dangerous that can be. What we need to build is a board that plays its part too and for this you need more than technical skills.

WhenThe Guardian ran an article on housing association board membership (3) it suggested the key skills needed were: listening; team-work; seeing the big picture; and crucially in light of the recent Carillion revelations, analysing and questioning strategy proposals and performance data. If your board members also share the organisationʼs social purpose, have an interest in the long term survival of the business, and really care about the locality then that would seem to be an even better starting point.

You shouldnʼt need to look too far for these board members. They will be your tenants. They will be professionals living or working where you operate. The difficult part will be to look beyond their practical experience and professional qualifications. Past the first impressions to discover what really drives them.

Housing association boards donʼt simply need accountants, lawyers or tenants on them. They need the right people joining the board for the right reasons, who might also happen to be accountants, lawyers or tenants.

A board should be judged on how it feels, not how it looks. Does that make sense?

Footnotes:

1 Carillionʼs board: misguided or incompetent? (Kate Burgess – Financial Times) 17.01.2018.

2 Do we really need to be more commercial? (Mike Owen – Inside Housing) 17.01.2018.

3 Top five tips for becoming a housing board member. (Arun Misra – The Guardian) 30.05.2013.