The finance team are of course essential on charity finance, whether they are a Treasurer, a Chair of finance committee, a Finance Director or other member of the finance staff and they do much of the heavy lifting. But Chairs need to play their role too – starting with these five key areas of financial leadership.
1. Attend to emotions
People have a range of emotional responses to finance, some of them intense, ranging from love and enthusiasm to hate, shame and fear. Sadly, it means too many trustees fail to engage with their financial responsibilities. No matter where the Chair is themselves on that spectrum, they need to notice where others are and help them engage. Often that means showing it is safe to ask questions and admit not knowing.
Emotions also manifest when it comes to risk, with varying appetites for taking or avoiding risk. Big decisions may be influenced not so much by the facts in the finance papers but by personal levels of risk appetite. Understanding trustees’ individual attitudes to risk can help Chairs understand the strength of emotion around a high-stake decision and help tease out the organisational risk appetite rather than that of individuals.
Financial difficulty can also unleash unexpected emotions around the board table. It might show up as excessive caution, anger or blaming behaviour. And it might get displaced on to something or someone else. Chairs need to be on the lookout for such emotion and learn how to recognise and channel it appropriately.
2. Shape board culture and behaviour
How the Chair behaves on finance shapes the culture and behaviour of trustees and staff. A Chair who disengages and proudly announces financial ignorance is a problem and legitimises unhelpful attitudes in others. Good Chairs work alongside their finance colleagues and are demonstrably interested in the finances. They understand the information presented or are willing to ask for more clarity. They are not concerned about not being an expert but place high priority on ensuring all trustees understand the charity’s finances, and any implications for their decision-making and creating an atmosphere where people are encouraged to ask questions whatever their level of knowledge.
3. Help the board develop its financial understanding
Chairs need to ensure that financial matters are properly covered in trustee induction. Make sure that trustees understand key concepts like reserves, restricted and unrestricted funds, and have a basic understanding of reading charity accounts. That may mean offering dedicated training to new trustees who need it. Induction should include a thorough introduction to the charity’s finances. Make sure people understand the business model, the key income sources and main expenditure items; the key risks, and can understand the financial reports, especially the regular management accounts.
The Chair can also work closely with the Treasurer and the Executive team to ensure the financial information they bring is presented in a way that works for the board, ideally using graphs and narrative as well as numbers. It may also be useful to have top-up training for the whole board. For example, at this time of financial difficulty, several boards might benefit from a reminder of core concepts such as going concern and good practice in managing financial difficulty. Don’t forget to bring in experts when you need them.
4. Work with the team to manage board time and committee input
Aspects of finance are often delegated to one or more committees who can work in more depth and save Board time. Working closely with finance colleagues, the Chair can make sure they have clear terms of reference, and work well together, avoiding duplication or boundary disputes, but never lose sight of the fact they are there to serve the board. Simple things help, like an annual plan for the Board and its finance committees, with clarity about who is doing key work when, such as preparing, amending and signing off the budget or annual report. The Chair also has a role to play in who serves on these committees. It’s a good idea to include some non-financial people. And depending on your constitution, you may be able to bring in external expertise too.
5. Stay mission focused
Finance enables mission but mission is our ultimate purpose and should guide all our decision-making. Particularly when things are getting bogged down, it can really help if the Chair explores how to reframe the choices you face in terms of the risks and opportunities to your mission.
If you know a Chair who needs some help in exploring their role on finance, signpost them to these two new workshops from Association of Chairs in June and July. Workshop 1 is an introduction to the Chair’s role on finance. Workshop 2 focuses on the Chair’s role in leading through financial uncertainty.