International In-house Counsel Journal Vol. 1, No. 2, July 2007, 97 102 OVERSIGHT TO STRATEGIC LEADERSHIP: UNIVERSITY OF ULSTER GOVERNANCE JOURNEY EAMON MULLAN Head of Governance Services, University of Ulster Although there is nothing new about governance the phrase has got more prominent over the last 15 years. Corporate scandal after corporate scandal has led to an unprecedented focus on the individuals, structures, policies and procedures that inform the decision-making processes of organisations. Corporate boards are very much in the spotlight. Transparency, independence and informed decisionmaking processes are the order of the day in the contemporary boardroom. The higher education sector is not unique in having to come to grips with aspects of governance that heretofore have not come high up the agenda of priorities. In an era of risk awareness issues of financial, reputational and legal risks have become causes for concern in an environment where innovation is not only desirable but is necessary to the ongoing well being of higher education institutions. For UU this is expressed overtly within its vision statement. At the University of Ulster we decided to meet these developments head on. To take control meant that we could not only set the direction in relation to the development of robust and defensible decision-making processes and arrangements for creating strategic dialogue across the institution, we could also determine the most appropriate route for the University of Ulster. Doing so undoubtedly presented huge challenges, not least of maintaining the balance between innovation, academic freedom and collective buy in and the new processes and change that would bring about enhanced governance without overlooking the traditional elements of good governance that contribute to clear and distinctive strategic and accountable leadership. These are, ideally and aspirationally, that good governance is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable, inclusive and follows the rule of law. None of these are incompatible with the development of a strategic focused approach. This article considers the impact of these changes in the context of developments at the University of Ulster (UU), particularly since 2004, in the development of good practice governance at board level and of the growing appreciation that governance is as much about strategic leadership as it is about accountability. The Senate and senior management group have each also undergone change but the focus here is on the changes in governance arrangements at governing body level. UU is a complex organisation. That complexity is compounded by the fact that the University has four campuses, 3500 staff and some 27,000 students. Delivering a consistent message and achieving an effective level of corporateness is challenging. Providing clear and distinctive strategic leadership and direction is at the core of that challenge and requires a shift from governance being considered solely as a tool of accountability to becoming, ideally the very essence of the organisation, giving strategic leadership, mainstreaming value norms and securing organisational sustainability. International In-house Counsel Journal ISSN 1754-0607 print/issn 1754-0607 online
98 As the University s governing body the Council of the University has a significant role in bringing about that transformation. Background to the Councils role provides a useful context for any examination of governance. Its main responsibility is for the stewardship of the institution s assets, for determining its strategy and ensuring that the strategy is delivered. It is also responsible for the published annual report and financial accounts, in which are included the controls and assurance statements. With regard to corporate governance, it is therefore primarily concerned, historically, with establishing a proper control environment. The ultimate responsibility for ensuring that there is an adequate control framework for the University is also the Council s, so it is necessary for it to receive periodic reports from its committees and from the executive of the University to reassure it in this regard or to indicate that appropriate corrective action is being taken. The Council is accountable for the overall performance of the University. To ensure probity it must reserve certain decisions to itself. To maintain consistency with the Committee of University Chairmen guide the broad areas where the Council retains decision-making authority are: - approving the mission and strategic vision of the University, long-term business plans, key performance indicators and annual budgets, and insuring that these meet the interests of stakeholders; - appointing/removing the head of University as Chief Executive/Vice- Chancellor and putting in place suitable arrangements for monitoring his/her performance ( a new Vice-Chancellor was appointed in 2006); - ensuring the establishment and monitoring of systems of control and accountability, including financial and operational controls and risk assessment, clear procedures for handling internal grievances and for managing conflicts of interest; and - monitoring the University s performance against plans and approved Key Performance Indicators (KPIs), which should be where possible and appropriate benchmarked against other institutions. Apart from its clearly defined role, UU s governance journey was given a reference point by the publication, in November 2004, by the Committee of University Chairmen (CUC) of a Guide for Members of Higher Education Governing Bodies in the UK. Its launch coincided with the publication, by the Chems Consulting Group, of a report on good practice in six areas of the governance of Higher Education Institutions. This, although not the first such guide published by the CUC, was considerably informed by a report prepared by Richard Lambert and published in December 2003 considering the nature of business-university collaboration. Lambert s review dedicated a chapter to matters of management, governance and leadership of higher education institutions. Lambert made 7 recommendations in relation to governance. Of most relevance to us at UU were his recommendations that, firstly, the Committee of University Chairmen, in consultation with the sector and Government, develops a concise code of governance representing best practice across the sector. The code was to be voluntary but on a comply or explain basis that is if there were elements of the code that institutions were not adopting those institutions had to give reasons to CUC as to why that was the case. We adopted the Code of Practice in November 2004. The second recommendation from the Lambert review that had particular and significant relevance for UU was that each governing body should systematically
review its effectiveness in carrying out its obligations to all stakeholders every two or three years. The reviews, Lambert said, needed to take into account the stated objectives of the governing body, the performance of the institution against key performance indicators, evaluations of senior management and the results of effectiveness reviews of senate and committees. We are currently in the middle of a comprehensive review, not because Lambert recommended nor indeed because the CUC went on to reflect Lambert s recommendations in their guide, but in the belief that it will have far reaching implication for the future governance of UU. From all of this the Chems report identified the following as being of high priority N The selection, induction and support of governors N The involvement of governing bodies in an institutions key decision processes N The relationship between the governing body and the senate/academic board and the development of committee structures; N The role of the Governing body in overseeing commercial and so-called third leg activities; N How the governing body can measure the performance of an institution Whilst these are all important in varying degrees depending on the particular local situation it is important and was important in the UU context, that we considered the impact and relevance of personal relationships as well as those formal relationships encapsulated within a governance structure. The key nexus of governance within the University consists of three parts the Council, which is the governing body of the institution and has overall responsibility for all its affairs, the Senate, which is, in essence the academic board and is responsible for academic matters and the senior management group, which is charged with making the high level day to day decisions about the University s business within the overall framework set by the Council and the Senate. The Vice-Chancellor is the senior academic of the University and also its executive leader. As such he chairs both the Senate and the senior management group and is a member of the Council. The strength of his relationship with the Chairman of the Council is vital to the implementation of successful governance. Clearly, his is a key role within the University, influencing not only the strategic direction of the institution but also uniting the three strands of governance with a common goal. That common goal for UU is expressed in the University s Vision Statement and is to be a university with a national and international reputation for excellence, innovation and regional engagement. So whilst not setting aside the six areas identified by the CUC, indeed by following them in a way that was appropriate for the University of Ulster, our approach to developing appropriate strategic governance started from a first principle examination of the areas of responsibility of our governing body, analysing the work of the existing committees and identifying any gaps in overseeing significant areas of work. These were then enshrined within a scheme of delegated authority, ensuring that those making decisions had the legal authority to make those decisions. From a people perspective consideration was given, too, to the relationships between the Vice- Chancellor and the Chairman of the Council and the specific contribution of individual members. These are critical factors in the success of any governance arrangements and time invested in strengthening them is time well spent. A necessary approach, and critical to the performance of the governing body was the streamlining of the information flow to the Council, providing members with 99
100 appropriate training in reading financial statements, whilst at the same time presenting accounting information in an accessible format, timely distribution of papers, creating a culture of participation and board wholeness and developing robust audit, governance, finance, human resource, communications and remuneration committees. Of particular note was the establishment of a committee dedicated to the workings of the Council and with responsibility for ensuring appropriate appointments to the governing body. From consideration of the work of committees, both of the Council and of the senior management team it was evident that there was no clearly defined and articulated scheme of delegated authority. Decisions were being made, authority was been exercised and the institution functioning, probably as well as any other. However,inthefaceoflegalchallengewewereconsiderablyexposedtothe threat of judicial review on our procedures for making decisions. Herein lies the major challenge for the in-house legal or governance advisor within higher education. Whilst all seems well and institutions appear to be running smoothly issues of governance rarely come to the fore. If it is not broke do not fix it, the cry will come. In an apparently successful institution, where managers are in control of their portfolios, reporting to a governing body is often seen as a secondary consideration or as a rubber-stamping exercise. This, of course, leads to a lack of genuine accountability. It is also contrary toalongestablishedtenetthatofficers of a company can exercise only those powers conferred on them. This is as true in the higher education sector as it is in the public and private sectors. Deviation from that principle can lead to a lack of clear direction. In those circumstances, if the governing body is ever brought into play it is generally to deal with some form of crisis, deflecting from the more important role of providing strategic leadership. This will become even more crucial. With the advent of top-up fees, the possible introduction of student contracts and the increasing awareness of students of their rights it will no longer be sufficient to make good decisions, nor even the right decisions. We will have to be able to show that decisions have been made in the right way and that they are defensible in law. None of that can deflect from the need to continue to make decisions that add strength to our institution. Of course, there is also an external context within which any institution or business operates. In considering the governance of UU it was important to have due cognisance of the political context within which it operates. Northern Ireland has, in the last ten years gone through a well reported political transformation. Whilst an Assembly is currently in place the period since the first signing of the Belfast or Good Friday Agreement at Easter 1998 has been politically turbulent. From the University s perspective the issue was who was providing clear political direction particularly in the development of the region and the role of the higher education sector in facilitating that development. Strategic corporate governance must develop the structures and processes to interact with the political institutions of a region both at local and central government level. A complicating factor is that, traditionally, internal governance structures at board level (probably at all levels) tend to move and change more slowly than the external environment. If this is true of the private sector it is even more true of an organisation such as UU, which, although autonomous, operates closely with the public sector and within a region that is heavily dominated by public sector employment Department of Enterprise, Trade and Investment figures for 2005 show that almost 1/3 of those working were
101 employed directly in the public sector. A complicating factor in the political stability of Northern Ireland, and thus organisational stability, has been the inertia of political progress compared to the demand for change form the population generally and from the business world in particular. Thus, whilst on the one hand UU, recognising the need to operate as a going concern, was faced with the political vacuum leading to uncertainty whilst at the same time having to keep pace with the demands for progress from the wider public. How, then, do these matters add value to an institution. How do political awareness, clearly defined information flows, ownership committee structures, executive remuneration and clear delegated authority lead to a high performing board and does a high performing board necessarily mean a high performing institution? Further, have improvements in governance at UU led to improvements in the University s overall performance either absolutely or in comparison to its benchmark institutions. In answer to the last, UU s journey is ongoing. Undoubtedly, the governing body of the institution has a greater understanding now of the role that is expected of it. Individual members, too, have a more informed acceptance of the role they are required to play and the responsibility that goes with it. They are more aware of the responsibility they have for staff and other key resources, they are more aware of their ability to influence and enhance the student experience and they are more aware of the importance in using the limited time available to them to focus on strategic matters and at a strategic level. They also have a greater understanding of the role of their advisor on legal and governance matters. This role itself, with the changing focus of governance has become more complex, where diplomacy is almost important as the able to negotiate the various potential legal minefields. Awareness is one thing, putting that awareness into effective practice is necessary for the many advancements that have been made to be sustained to the benefit of the institution as a whole. That is as much the responsibility of the Vice-Chancellor and senior management as it is for the members of the Council. However, much of the time of the current governing body has been taken up with consideration of its own workings. Some new structures have bedded down more readily than others. Some will point to those that are not working as been at best ill judged at worst totally unnecessary. This is, however, a journey along a continuum. It is a process of continuous improvement. As UU strives for excellence, for high achievement, as it seeks to expand human knowledge through excellent teaching, learning and research, as it continues to provide graduates to influence and drive progress in the region economically, socially and culturally so too the role of our governing body must evolve to individually, collectively, corporately and strategically. Whether changes in governance are effective cannot satisfactorily be measured at one point in time but must be measured in the context of the institution s changing internal and external environments. What is certain and what our on going consideration of how our governance works is striving for is that for the University of Ulster to be excellent, innovative and engaging effectively with the region in which it operates then our governing body must be and do all of those things. It is in a stronger position to do that now than it was in 2004. Eamon Mullan is a graduate in both business studies and literature. His career has spanned the public, private and Higher Education sector, spending a number of years in Whitehall during the Thatcher years. He played a significant role in the
102 establishment of the Northern Ireland Legal Services Commission in 2003. He acted as secretary to the first Commission, before moving to the University of Ulster in 2004 as Head of Governance Services. In that role he has responsibility for governance and legal services.