Andrew Barnett, chair of the Novas Scarman Group

The charity's problems after a merger all came down to governance, he tells Paul Jump

Andrew Barnett likes a challenge - which is just as well given that he is the new chair of an organisation that was staring into a financial abyss this time last year.

Social justice charity the Novas Scarman Group was formed at the end of 2007 by a merger of the Scarman Trust, homelessness charity the Novas Group and employment charity Path.

"The motivation for the merger was strategic and financial," says Barnett, who accepted the role of chair in September last year. "There was a big vision to deliver more together than they could separately, which is a perfectly legitimate driver."

However, the charity underestimated the costs involved. Exacerbated by the recession, this culminated in a Tenants Service Authority investigation in late 2008 that was highly critical of the charity's financial management and questioned its ability to survive.

"It is inevitable that we will be seen as a case study of an organisation that got into difficulties," Barnett concedes. "But we also have the opportunity to be seen as an example of an organisation that overcame its problems."

So what went wrong? According to Barnett, it all comes down to governance. "This case is a real lesson to organisations that risk management and the ability to look at worst-case scenarios are really important," he says. "This wasn't done as rigorously as it might have been."

Barnett says he will not be channelling any money from his current employer, the Calouste Gulbenkian Foundation, to the Novas Scarman Group, even though the strong fit between the foundation's funding priorities and the charity's areas of operation is partly what drew him to the role. But as a veteran of the public, private and voluntary sectors - his previous employers include HSBC, the Joseph Rowntree Foundation, the Arts Council and the National Consumer Council - Barnett is well placed to address the charity's problems.

Some changes have already been made, with the addition of five new trustees to the five survivors of the meltdown. They replace the three who were imposed by the TSA - who, Barnett says, have done "sterling service", but will automatically stand down when the charity sells off the last of its housing stock and is deregistered by the TSA.

The role of co-chief executive, which was previously shared between Maria Donoghue-Mills and Michael Wake, has also been scrapped. With former Scarman Trust chief executive Matthew Pike also retaining the position of executive director, the merged charity found itself with multiple centres of power - according to Barnett, this made it difficult for the board to know which one to hold to account. Nor was the situation helped by the fact that Wake and Donoghue-Mills, who is now the sole chief executive, were both founders of the Novas Group.

"There is a bell that needs to ring in trustees' heads when providing governance to an organisation that has strong characters with a long history there," Barnett says. "They must fully exercise their functions, regardless of the history of the participants."

Barnett is now carrying out a wholesale governance review to decide, among other things, optimum board size and group governance structure. He describes the charity's current financial position as "tight but secure". But because the organisation derives 60 per cent of its income from local authority contracts, he admits the coming public spending squeeze is a worry, and he can't guarantee that none of the charity's 350 employees will lose their jobs.

He notes that many private sector mergers, where figures are more readily available, do not achieve their anticipated cost savings. But he argues that mergers should also be about improving services. "Being more than the sum of our parts is about spreading good practice in a way that might have been more difficult if we had to persuade completely separate organisations to take on things we have piloted," he says.

It is also about letting go of services - such as being a social landlord - unless the organisation can be sure no one can deliver them better, he says. He admits this sets a high bar, but he is confident it can be cleared. "But I'm not so naive that I don't recognise the challenges are significant," he says.

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