Governance is the systems and processes concerned with ensuring the overall direction, effectiveness, supervision and accountability of an organisation. It ensures:

  • compliance with law and regulation
  • that an organisation is well run and efficient
  • that problems are identified early and dealt with appropriately
  • the preservation of the reputation and integrity of the sector
  • that you make a difference and the objects of the group are advanced

To start with you need to understand your structure. Voluntary/community organisations need a structure and each type of structure carries with it certain legal responsibilities and implications. The basis of most legal forms is a two-tier power structure whereby a small group of individuals are responsible for the running of the organisation (called a board of directors, board of management, management committee, or board of trustees), but are accountable to a wider group of individuals (often called members or in for profits: shareholders or owners). This basic structure may be developed in many different ways to suit the particular organisation, but the structures adopted by most divide into the following five types:

  • Oligarchy
    • The individuals who make up the board are the same people as the members, and new appointments to the board are made by the board. When someone ceases to be on the board, they also cease to be a member of the organisation. This is a straightforward structure and is common to many voluntary/community organisations. It should always be considered by those that are new and still small.
  • Representative
    • This is used by organisations that wish to have members who are organisations instead of individuals. For example, the members may be local authorities, charities, etc. Each member then appoints an individual to serve on the board. A version of this model can also be used for 'joint ventures' where two or more organisations (which may be charities, co-operatives and/or private companies) wish to establish a legal form to run a joint project. Each 'owner' of the new legal form has the right to appoint an individual to the board.
  • Membership
    • This is a useful model to adopt where it is important that a number of individuals or organisations have rights in relation to the organisation. It is sometimes used by community organisations who wish to involve local individuals and organisations and wish to adopt a democratic structure. The members elect a small number from amongst themselves to be the committee/board/trustees.
  • Co-operative
    • The International Co-operative Alliance (ICA) Statement on the Co-operative Identity describes a co-operative as ‘an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise’. All co-operative organisations operate under the ICA co-operative values and principles. There are many different legal forms that can be used to create an organisation which falls within this definition. One of the key features is usually 'one member one vote'. Contact Co-operatives UK which is the national body that campaigns for co-operation and works to promote, develop and unite co-operative enterprises. It can provide advice, help and support on setting up new co-operatives.
  • Appointed board
    • Here board members may or may not be members of the organisation, and are appointed to provide particular knowledge or skills to the board. Recruitment of board members in this way should be treated with the same care as recruitment of staff.

So it will be the role of the board or committee to carry out effective governance. Governance is making sure things happen and not management, which is making things happen. It includes:

  • Setting and monitoring strategic aims and direction
  • Ensuring there is strong management of its money, assets and reputation
  • Having effective systems, safeguards and controls

Mike Hudson in Managing without Profit has a useful diagram to show the different focus of governance and management.

We have a useful factsheet about the essential responsibilities of a Board which although talks about charities is useable for all groups.

Charities can make use of the Charity Governance Code which is nationally recognised practical tool to help charities and their trustees develop high standards of governance. It is based on seven principles:

  1. Organisational purpose
    • The board is clear about the charity’s aims and ensures that these are being delivered effectively and sustainably.
  2. Leadership
    • Every charity is led by an effective board that provides strategic leadership in line with the charity’s aims and values.
  3. Integrity
    • The board acts with integrity, adopting values and creating a culture which help achieve the organisation’s charitable purposes. The board is aware of the importance of the public’s confidence and trust in charities, and trustees undertake their duties accordingly.
  4. Decision-making, risk and control
    • The board makes sure that its decision-making processes are informed, rigorous and timely and that effective delegation, control and risk assessment and management systems are set up and monitored.
  5. Board effectiveness
    • The board works as an effective team, using the appropriate balance of skills, experience, backgrounds and knowledge to make informed decisions.
  6. Equality, diversity and inclusion
    • The board’s approach to diversity supports its effectiveness, leadership and decision-making.
  7. Openness and accountability
    • The board leads the organisation in being transparent and accountable. The charity is open in its work, unless there is good reason for it not to be.

We have a simple checklist and we have found this more detailed worksheet. This framework can be easily adapted to voluntary and community groups that are not charities.

The law firm Bates Wells has produced a useful governance framework for CICs.

Julia Unwin has produced a useful summary of five roles of governance:

  • Support
  • Stretch
  • Scrutiny
  • Stewardship
  • Strategy