Getting back on your feet when things go wrong
9 November 2015
Last weekend saw me wrestling a sheep which had got herself ‘cast’ on her back in the field next door to my house. She was sodden and muddy, exhausted from struggling, and hypothermic. Eventually we helped the farmer get her into a cosy barn for nursing, unsure whether she’d pull through.
Afterwards we speculated as to whether it was the steep terrain or the fact that the sheep had been a little unwell that had led to the original tumble. It dawned on me, rather ruefully, that charities often look like this poor sheep—teetering on the brink in a hostile environment, or sick from inadequate governance. And the righting of a charity that’s got itself into a pickle can be difficult, costly, and uncertain.
Last week was trustees week so I’ve been thinking a lot about the enormous responsibility trustees have. As I’ve said before, when things go wrong the buck stops with the entire board. Not just the chair, not just the treasurer. Everyone. So don’t let your colleagues fob off your concerns with ‘don’t worry it’s fine’. It can take a long time to fix problems, so if they are emerging, you may need to act fast. But what exactly can go wrong? And more importantly, what should trustees do to resolve these issues?
- Changes in the external environment. Action: Revisit your strategy, reassess your financial projections, analyse the new environment using a tool like PESTLE, cease activities that don’t add value, and redeploy assets to activities that do. Finally, check your reserves position—if this is weak, you may need to cut costs.
- Continued failure to operate within budget. Action: Test whether your financial management is up to scratch. If not, invest in better financial management (ie, people). You must have numbers you can believe. Make sure your CEO and key SMT members understand the numbers, and that you the board understand them too.
- Frequent deficits that erode your reserves. Action: Revisit your strategy, revisit your financial model, and support the top team to cut those activities you can’t find a means of paying for. This may be painful but if not addressed quickly the problem will only get worse. Assess risks carefully, even if you think you can balance the budget—if reserves get low, contingency plans for liquidity (eg, working capital finance) may be necessary. If you think the situation cannot be reversed, look for a ‘white knight’ to merge with or have take over vital services. And if it comes to it, ask yourselves: What’s best for beneficiaries—your survival or an orderly exit?
- A senior management team that is unstable or failing to deliver. Signals like eroding reserves, continual bad news, or frequent exits from the top team, mean it may be time to consider whether you have the right top team in place. It’s likely you have the wrong CEO for what you need.
Action: Develop a strategy to facilitate the CEO’s departure, preferably a voluntary exit on good terms. Some honest discussions about life as well as how things are going may reveal the CEO is ready to leave. An entrenched CEO may need tougher performance management sanctions—it’s vital that proper appraisal systems are in place between Board at Chair to achieve this.
Fixing big issues like finances, delivery and the top team take time to achieve. Exit is delicate and it will take many months to recruit and put in place a new CEO, as will as get them up to speed, and see them leading a change direction. A new top team may also want resources to invest in new solutions eg, sensible fundraising initiatives that may stress finances in the short term but will pay back in the longer term. The sooner these problems are addressed, the sooner they can be solved.
When running a charity problems will inevitably arise. There is no point in being totally risk averse, but knowing what the risks are, keeping an eye on these areas, knowing what action needs to be taken, and acting as soon as trouble arises can help a charity stay on its feet.
What happened to the sheep? I’m told that, thanks to our speedy action, she is recovering snugly in the barn.