Understanding and building effective governance in end-point assessment organisations

One of the most common areas I get asked for support from #EpAOs relates to how to meet @Ofqual’s requirements on governance and governing body, and I can see why; every rejection letter I have read cites issues related to governance / governing body amongst the reasons for rejection.

As readers will be aware, end-point assessment organisations are a mixture of limited companies, limited liability partnerships, corporations, charitable trusts, those with shareholders, those whose directors own other companies, EpAOs that are subsidiaries of larger companies/organisations, professional bodies, and so on. For this reason, there is no one size fits all, and it is probably the reason why there is no specific guidance on how organisations can meet the Ofqual requirements.

To try and help EpAOs understand and address the governance / governing body requirements, I thought I would share some of the approaches I have used to help EpAOs work through their governance structure and governing body set up. As with all my articles, I am sharing ideas designed to help.

I am not a representative of Ofqual, the IfATE or Ofqual, nor do I claim to provide guaranteed solutions, but I hope my articles help the sector to understand and find approaches that are fit for purpose for both the EpAO and Ofqual.

Please also be aware that, for the purposes of this article, I have tried to write Ofqual terms in EpAO style language, for the full and accurate definitions, please refer to section A4 and J1.8 of the Conditions. The following are my suggestions to help work through the governance and governing body requirements:

1, Understand the Criteria and Conditions

The Ofqual Conditions state that a Governing Body is: (a) for a limited company, the board of directors is the governing body; (b) for a company that is not a limited company, a person or group of people having the equivalent status within the organisational structure is the governing body.

The Ofqual guidance on the criteria section A6, details the sorts of things that Ofqual will expect to see in relation to a governing body. It must have defined roles and responsibilities, it must have members with appropriate skills and experience, it must integrate across all parts and levels of the organisation, it must oversee, and take responsibility for performance across the whole organisation, it must manage risk, and ensure compliance with the conditions.

The Ofqual Condition B2.4 states that the governing body must approve and sign the organisation’s annual statement of compliance to Ofqual.

2, Understand what makes good governance and a strong and effective governing body

Based on the criteria, conditions and the principles of governance, the governing body must at all times retain oversight of the EpAO, and be responsible, and accountable, for compliance, ethical strategic leadership, ensuring sufficient resourcing (people and budgets/finance), risk and performance management, monitoring and continuous improvement, and the protection of the apprentice. It is there to support the business, not run it. Its members must act with integrity and objectivity, be able to provide a broader perspective, a balanced view, and be able to question and challenge. Any decisions it makes must be transparent, open to scrutiny and challenge. A governing Body may delegate functions, perhaps to sub committees, but will at all times retain accountability.

The UK Corporate governance code 2018, by the Financial Reporting Council, provides some useful ideas around governing body structures to ensure integrity and to manage conflicts, for example: “The board should include an appropriate combination of executive and non-executive (and, in particular, independent non-executive) directors, such that no one individual or small group of individuals dominates the board’s decision-making” and that “At least half the board, excluding the chair, should be non-executive directors whom the board considers to be independent”. It also states that “The roles of chair and chief executive should not be exercised by the same individual”

3, Take a whole organisation approach

Try not to think about governance and the governing body in isolation, instead think of it as part of the entire organisation/business. In other words, it is not just about the approval of the annual statement of compliance, it is about its strategic role from business start up all the way through design and development, delivery, award, to review and continuous improvement.

Once you understand its role in strategic oversight, scrutiny and decision making, you can then start to work though what would need to be in place in order for the governing body to carry out those roles across your business/organisation.

Or more importantly, you will start to understand the sorts of things that may prevent them from carrying out those roles effectively, in particular conflicts of interest. I personally believe that if you can find ways to effectively mitigate and manage conflicts across your organisation, you will, by default, find ways to effectively govern your organisation. I will explain further below.

4, Recognise that conflicts of interest are a major factor in shaping your governance structure and governing body

In the context of organisational conflicts, the Condition A4 guidance says that a conflict of interest exists when an organisation has competing interests, which might impair its or their ability to make objective, unbiased decisions.

Ofqual condition J1.8 also provides a definition, which essentially says that an organisational conflict is where the interests of an organisation have the potential to lead it to act in a way that is contrary to its interests in the operation of the end-point assessment service.

The guidance on the criteria, provides some helpful organisation level examples of where conflict may arise:

• training organisations who are also EpAOs
• EpAOs that are subsidiaries of training providers
• national governing bodies for sports acting as EpAOs
• professional bodies acting as EpAOs

Although not specific to end-point assessment, readers may also find the examples provided in Condition A4 useful to aid their understanding.

As an example, if the EpAOs is a subsidiary of a larger organisation, or if the EpAO is just one business activity of the organisation, there is a risk that the wider organisation, or the other business activities, may cause conflict in the operation of the EpAO. Where an EpAO is a subsidiary, Ofqual have provided some additional instructions in the guidance on the criteria: “If you are a wholly owned subsidiary, you will need to show that your governing body has visible and authorised independence from the parent company. This is to ensure the opportunity exists for the awarding organisation to challenge operations in the parent company which may affect your ability to comply with the Conditions”

The definition of conflict of interest also extends to individuals; this is important in the context of governance as an EpAOs governing body will have individuals on it, which means that individual conflicts at the governing body level are as important as organisational conflicts. For example, where a governing body member has financial interest in other companies, it may impact their ability to make objective decisions on behalf of the EpAO.

5, Identify where there may be conflicts of interest across your organisation

Take a detailed look at your organisation to see where conflicts may arise:

1. if the EpAO is a subsidiary (whether wholly or partly owned), identify all the subsidiary companies, and the parent company and the business activities they undertake
2. if the EpAO is not a subsidiary, but is part of a company with many business units / arms / activities, identify the activities of each business unit / arm / activity.

Once identified, you can start to note any perceived, potential or actual conflicts of interest. Not all perceived conflicts will turn out to be actual, but it is a process you must go through as the management of conflicts is critical for robust, fit a for purpose end-point assessment service.

If a conflict is identified, then you will need to identify ways in what this can be mitigated, not just through your day-to-day operation, but also via your governance structures. For example, if a the EpAO is a subsidiary of a training provider, how can the governing body of the EpAO ensure the independence of decision making from the parent company, and decision making in the best interest of the apprentice? I have added some ideas in later sections of this article.

6, Identify where there may be conflicts of interest across governing body members

Take a detailed look at your existing governing body membership and see whether it is comprised of people that have the skills and experience to govern, that are free of conflicts, and able to provide scrutiny and/or make independent, objective decisions in the interest of the apprentice. This will include reviewing the business, financial and personal interests of governing body members.

Once identified, you will be able to work out if the membership of the governing body facilitates independent decision making, and enables scrutiny and challenge. It also enables you to identify if the members have any conflicts, and to work out how to manage those. I have added some suggestions in later sections of this article. Don’t forget that the review of governing body business interest / conflicts of interest is not just a one off, you must ensure you have a process to ensure ongoing review and management.

7, Review your organisation governance documents

I am presuming that all EpAOs will have governance documents, whether they be articles of association, charter, or partnership agreement. It is important to review these documents and any existing governing body terms of refence to check if they are fit for purpose.

Do they capture:

1. roles and responsibilities
2. accountability to the regulator Ofqual
3. member details
4. details of any non-exec directors / external practitioner members
5. processes for identifying or electing members and the chair
6. conflict of interest requirements
7. member appointment / selection procedures and terms of office
8. member skills and experience requirements
9. meeting details
10. meeting agenda structures
11. details of subcommittees and any delegated powers or responsibilities
12. governance principles
13. decision making protocols
14. conflicts of interests (principles and procedures)
15. integrity requirements and so on.

I am not saying that all of these must be in the articles of association, but if they are not, the governance documents must support and complement the governance structure and governing body terms of reference and their compliance with Ofqual requirements.

8, Explore solutions to conflicts of interest, and ensuring ‘visible and authorised independence’ of the governing body

There is no single approach to this, but you may want to think about how your organisation ensures that it upholds ethics and morals, and who is there to act as a critical friend to scrutinise what you do, making sure that you are always acting in the best interest of the apprentice? Perhaps your organisation could consider some of the following:

1. Bringing non-exec directors and / or external practitioner expertise to the governing body to provide experience-based scrutiny and challenge and to ensure balanced voting. However, be mindful of size, too many members may make it difficult to manage and decision making more challenging.
2. The delegation of powers from the governing body to subcommittees for each part of the business to ensure that decisions across each part of the business are independent (but please remember that the governing body must retain oversight and accountability, and that any delegated powers must be authorised by the governing body);
3. Setting up independent advisory groups that feed into the governing body
4. Reviewing decision making and reporting arrangements across and between functions of the business. It could be that you need to create more separation, or that that you need to factor in an additional groups or reporting lines to bring in the required level of scrutiny and challenge.
5. Make sure that the governing body membership does not duplicate other groups in the business, because that would mean that it is essentially governing its own work. Overlap of membership is fine as that enables information to be shared, but I would recommend that the overlap is minimised where possible.
6. Update the governing body terms of reference to be very clear on roles and responsibilities. This will be particularly important if the governing body plays any role in making decisions on, for example, appeals.

9, Ideas for micro EpAOs

Micro EpAOs will have a very small numbers of staff, and will often be using contracted staff for many aspects of the business. This means that the governance solutions may be harder to identify. Here are some of my thoughts and tips:

1. bringing a range of external expertise to the governing body may feel scary or feel that you may be losing control of the business, but if managed well, with clear terms of reference, external expertise will add value.
2. review your staff functions, micro EpAOs will often have staff covering a range of functions of the business. In terms of governance, cross check that the staff member does not end up reporting to themselves
3. map out where any external representation on the governing body will best support the business and meet the requirements of governance. For example, could it be using external independent experts, or could it be involving other EpAOs, or both. Could it be industry experts, small business experts, assessment experts, equality champions, and so on. Whatever the member, always be mindful of potential conflicts of interest.

10, Capturing the apprentice and employer (customer) voice

I am not saying that you need apprentices and employers represented on the governing body of an EpAO, but think about how you can capture their voice and feed that into the strategic operation, decision-making, and continuous improvement structures of the business.

Jacqui Molkenthin, JEML Consulting

I hope my ideas and suggestions are helpful. You can find a whole range of other articles of mine supporting the EpAO sector on FE News and my LinkedIn updates.