Growth is not a smooth or linear process; instead, it alternates between periods of evolutionary stability and revolutionary upheaval according to Greiner’s model. Revolutions occur when the organisation's existing practices and structures, which were effective in the previous stage, become inadequate to address new challenges. These crises act as catalysts for radical change, forcing organisations to adopt new management practices.

The interplay between these phases reflects the dynamic and often disruptive nature of organisational growth and requires the board to focus on new enablers of good governance. The five life cycle stages are: Creativity, Direction, Delegation, Coordination and Collaboration.

As you read through the characteristics and focus areas of the five life cycle stages, can you identify the life cycle stage of your charity?

This is the birth of the charity which focuses on creating solutions for beneficiaries. The start-up period usually involves long hours of work on a voluntary basis by the charities’ founders. It’s an entrepreneurial phase, and communication in the charity is frequent and probably informal. There’s a lot to do, just with getting to grips with regulatory obligations.

It’s critical for founders to find organisations that can help them meet their responsibilities, such as the ICAEW Charity Community, NCVO and the Charity Commission. It’s also likely that the charity will start to establish systems to capture data and to keep it safe. Feedback from beneficiaries may be informal at this stage and charities need to prioritise feedback and identify trends to inform the work of the charity.

Focus on:

• Communication with the charity’s beneficiaries so that service delivery meets their needs rather than relying on trustees’ assumptions
• Creating policies to start building the infrastructure around running the charity, for example using the Charity Governance Code
• Establish what information the trustees need to see (and how often) to enable them to manage the new charity effectively

In this stage, the charity needs to recruit new trustees to bring new skills to the board after the founder-led phase. It now introduces management structures and grows its team of volunteers and staff, and improves the accounting and budgeting process. In this stage, communications also become more formalised.

A documented delegation framework, also known as a Scheme of Delegation, now becomes vital for trustees to fulfil their responsibilities while delegating operational decisions to staff. Trustees also need to see relevant financial information regularly. Targets are set, disseminated and monitored so that everyone working for the charity understands what good looks like.

Focus on:

• Documenting the delegated authorities so that everyone understands the boundaries of their decision-making powers (including financial authorities)
• Refining the board’s skill mix by conducting a trustee skills audit and filling gaps through targeted recruitment
• Developing a budgeting process to bring stability and allow planning

The organisational structure becomes decentralised and individuals working for the charity gain greater responsibility. Management is now by exception as trustees communicate with executive leaders less frequently, while staff and volunteers gain motivation from increased responsibilities.

Monitoring delegation requires data to ensure the trustees can still meet their legal responsibilities. Risk management grows in importance and helps trustees determine what to prioritise. The targets established in the second stage should be kept under review as they may no longer be appropriate.

Focus on:

• Developing a risk management framework, including mitigation strategies and who is responsible for their implementation
• Introducing KPIs, for example financial, such as reserves levels, and non-financial factors, such as staff turnover
• Understanding the internal control framework and how this is implemented

Systems have evolved to allow better coordination between trustees, staff and volunteers, and investment in back-office functions is now prioritised to support the charity’s growing services.

Manual processes are replaced by automation and efficiency increases while the risk of human error reduces. Systems allow for remote access and coordination improves as teams start to work with real-time data.

Focus on:

• Investing in back-office systems to improve efficiency
• Ensuring that the trustees remain connected to frontline services and understand the needs of service user
• Using the Charity Commission’s CC8 checklist for internal financial controls to undertake a quasi-internal audit

This final stage of the life cycle focuses on collaboration, problem-solving in multi-disciplinary teams and innovation.

Data-informed impact measurement becomes increasingly important for internal and external reporting. Charities need to ensure they can demonstrate their impact with quantifiable results and via case studies.

Focus on:

• Measuring impact to ensure the charity is achieving its aims
• Innovating by seeking out feedback and ideas for alternative solutions
• Training and educating the team, including the trustees

Did any of the five stages resonate with your charity’s current governance challenges? Of course, reality never fits neatly into a theoretical framework but hopefully the model encourages you to identify your key priorities and collect relevant data to track progress. The only constant is change, so remember to check at regular intervals whether your governance focus needs to shift to keep pace with the charity’s evolution.

• Watch Nick Sladden’s session ‘Future-proofing your charity’ (part of our half-day webinar ‘Small charities – tackling financial governance challenges’)