There are lessons schools can learn from the Post Office scandal, advises Sam Coutinho

 

In October last year, the Institute of Directors (IoD) published a policy paper on the Post Office scandal, which set out, from phase 6 of the public inquiry, insights for those charged with governance. The most significant governance risk a school might encounter is likely to be a failure in governance. The Post Office scandal highlights many risks that were not managed adequately and led to one of the biggest, if not the biggest, failure of governance in the UK in recent times. It is important that as governors, heads and bursars we reflect on what we might learn.

Scandal recap

The Post Office scandal involved more than 900 sub-postmasters wrongfully prosecuted due to defects in the Horizon IT system. A High Court ruling in 2019 revealed that Horizon was flawed, leading to unsafe convictions. Legislation enacted last year exonerated previously convicted sub-postmasters, highlighting the need for improved governance and accountability.

Governance issues stemmed from a dysfunctional corporate culture and a lack of scrutiny from the board of directors. The governance failures spanned more than 20 years and in this time the directors failed to challenge groupthink and relied excessively on management’s reassurances and neglected to manage key technological and legal risks. Many of the directors lacked the necessary training and experience to make significant decisions and have adequate oversight over major IT projects. Above all they failed to see or respond to the red flags that were emerging.

Governance failures

There were many instances where the directors failed in their duties and these included:

• They did not confront uncomfortable truths and challenge ingrained assumptions to avoid groupthink and cultural blind spots.
• They didn’t engage with diverse stakeholders which is crucial for understanding organisational culture and addressing underlying issues.
• They ignored red flags and failed to recognise and investigate potential problems.
• They didn’t ensure proper governance of a significant outsourced relationship.
• They didn’t balance their roles, focusing on both strategic advice and holding management accountable for past and present issues.
• They didn’t have access to relevant information in decision-making and should not have accepted filtered data that hindered their independent decision-making.
• They didn’t have the training, knowledge and experience to ensure enhanced governance and performance.
• They didn’t maintain a strong moral compass and ethical standards to counteract toxic corporate cultures and ensure responsible decision-making.

So, what can we as a sector learn from these failings?

 Face up to uncomfortable truths

Most governors are very committed to their schools, giving significant time, expertise and knowledge freely. However, as the challenge of recruiting governors becomes increasingly difficult, schools are having to recruit from the alumni, former parents and current parents, which on the one hand brings true commitment to the role, but on the other hand carries risk. Conflicts of interest need to be identified and managed, and there is sector guidance on how to do this effectively. There is also the risk that board members find it difficult to be objective reflecting on their past experiences and can often only see the positive. Chairs are actively trying to recruit diversity of thought to their boards, however it’s important that those different voices are heard.

The Post Office scandal demonstrates how the directors were rapidly absorbed into the false narrative of the organisation, that is, that postmasters were not to be trusted and Horizon was fit for purpose. The board seemed to be guided by the perspectives of management without verification. It is reported that there was groupthink, and we don’t know whether diverse voices were not heard or listened to.

Key questions for governors:

• Do we get absorbed into our schools and see everything through rose-tinted glasses?
• Do we see asking questions as a negative response?
• Do we avoid asking questions that might suggest we don’t trust what is presented to us?
• Have we asked questions in the past that have not been received well by leadership and now we avoid asking the questions the head or bursar might not like answering?
• Do we listen and hear all voices in the room, even if it is not comfortable?

Not ignoring red flags

For more than 20 years, the Post Office ignored the numerous red flags concerning the viability of the Horizon system and the safety of its prosecution strategy. It is reported that some red flags were not visible to the board although many were.

Identifying and managing risk is fundamental in our schools. Reference to governors’ responsibilities can be found in the Independent School Standards (the Education (Independent School Standards) Regulations 2014), Charity Commission guidance (CC26: Charities and risk management) and charity reporting (The Charities Statement of Recommended Practice (SORP)).

Governors must ensure that there are processes to identify and manage risk, know that those processes and procedures are operating as intended, and that for the major risks identified that they understand the causes, consequences (including unintended consequences) and have put in place steps to manage those risks, where they are able to.

Key questions for governors:

• Are red flags reported to the board and if so, how?
• Do we demonstrate curiosity and persistence is understanding how the school is addressing them?
• Do we understand our legal responsibilities as governors in addressing red flags?
• Is our perception of the magnitude of the risk greater than management’s and are management addressing the risk as we would expect?
• Are the red flags signalling an issue management might not want to focus on?

Ensure proper governance of decision-making

 According to the IoD, “a fundamental cause of the Post Office scandal was the mismanagement of the IT outsourcing relationship with Fujitsu. The Post Office relied too heavily on Fujitsu’s assurances regarding the viability of the Horizon system. Fujitsu’s narrative became entrenched in the organisation because it was too difficult to challenge or uproot.”

Governors bring to boards an abundance of skills, knowledge and experience gained from outside the school environment. Governors are expected to use their skills and experience to inform decision-making and benefit the school. They are also expected to take professional advice where they feel they need to.

There may be instances where governors feel they don’t have the detailed knowledge to ask the right questions. As schools develop digital innovation and embrace technological risk, over-reliance may be placed on management judgement and the school may become vulnerable to IT suppliers. Having technological skill on the board or advising the board may need to be a priority. The Charity Commission guidance on decision-making sets out seven principles of decision-making including trustees must be sufficiently informed, consider all relevant factors and must exercise reasonable care and skill. In facing the current challenges schools need to be creative which inevitably means taking more risk, albeit managed risk.

Key questions for governors:

• How do you hold management and others to account particularly where it’s not an area of expertise?
• How is risk and opportunity identified and managed in areas of significance or specialism?
• Have you determined the information you need to receive from management?
• Are you satisfied that you are receiving the right kind of information to inform decision-making?
• Is the flow of information being filtered in a way which inhibits you from forming an informed and independent perspective?
• Do you understand your role as a governor and the tension between not being operational and being sufficiently informed to hold to account?
• Are your questions being deflected as operational to avoid being answered?
• Are you ensuring the school is not taking undue risk?

Recognise ultimate responsibility

 The Post Office board accepted without challenge the views of internal and external legal advisors and accepted their recommendations without question. Although governors are required to take professional advice if they need to, they are legally responsible for the school and therefore must apply their own judgement and moral compass to any advice they receive. Ultimately governors need to be able to make the decision themselves and the advisors’ role is to provide knowledge and insight so that the governors are sufficiently informed with the relevant information to make the decision.

 Key questions for governors:

• Do you feel sufficiently informed to make the decision and to justify it if required?
• Do you require training to fulfil your role to the best of your ability?
• Does the board require training to enhance its ability to deliver organisational performance and good governance?

Ensure the board is effective

 The duration of the Post Office scandal was more than 20 years. During this time there had been several changes of chair and chief executive, suggesting a deeper issue regarding culture, values and the moral compass of the organisation as a whole. The report suggests a robust board evaluation process might have offered the Post Office board an opportunity to reflect on its functioning and an externally facilitated review would have provided an independent perspective on director behaviour.

Governors are encouraged to carry out an annual self-evaluation of their governance. However, it holds very little value if governors are marking their own homework. When analysing the feedback from the self-evaluation, it us unhelpful if any comments that appear critical or could touch a nerve are merely dismissed as being one-off outliers. Equally, board culture could be damaged if such negative comments are directly attributed to the board member who made them as a way of justifying why they are not representative of the board as a whole.

Key questions for governors:

• To what extent does the board seek to evaluate and improve

its own performance?

• Why might it be resisting challenges to existing ways of doing things?

Conclusion

 There is much the sector can learn from this scandal which may not have been evident on the first read of it. All those charged with governance must confront uncomfortable truths and challenge groupthink and cultural blind spots. As we continue to look to diversify boards, we must be considering our motivation for doing it and whether we truly want to hear alternative views. Red flags should not be ignored; curiosity and persistence are essential in investigating potential problems. Governors must balance their roles, focusing on both strategic advice and holding management accountable and make decisions that are informed by experts and with a strong moral compass.

 

Sam Coutinho is director at Sam Coutinho Consulting