Dispelling myths

Published quietly last year, the National Housing Federation’s merger code, or Mergers, Group Structures and Partnerships: a voluntary code for housing associations to use its full title, has caused quite a stir in the sector. Called a predator’s charter by some, a distraction by a few and the regulator’s opportunity to drive consolidation by others, there are many myths around its origins and its purpose.

Having been one of the initial consultees and having seen some of the early drafts, I think I can dispel a few of these and suggest some practical things that both those who are considering approaching others, or indeed those who are approached by others, should be doing.

Firstly, while the regulator set out the challenge for the sector to think about its size and shape, it was the National Housing Federation who grasped the nettle and sought to find a way for mergers, partnerships and collaboration to be considered in a more structured and open way.

We are now a mature sector that will receive less regulation and less prescription. However, with that comes a greater responsibility to be the guardians of our own missions and to be objective in our assessments of the best way to safeguard that mission.

If we were truly private sector organisations we would have a shareholder pressure that asked the fundamental questions: how can we best deliver our objectives? And are there better ways? The perception, however, is that we think of our own organisations before we think of our mission.

A good organisation considers these questions and reaches conclusions based on objective criteria. Hopefully with some passion in the mix. This does not mean that merger will be the right option for an organisation. The type of homes you provide; the location of your homes; the range of services; or the culture of your organisation may offer better value independently rather than in partnership. However, a well governed organisation will be open to listening to a proposal that might just offer better value and a greater chance of achieving your mission.

“We should put to one side what the regulator and government may or may not think about the shape of the sector and self-critically ask ourselves what is the best way to safeguard our mission.”

We are working with a number of organisations; some of whom are considering their options; some looking for merger opportunities; others considering merger offers. I’m also a member of the joint steering group of the proposed Viridian/Amicus Horizon merger.

I’ve seen all sides and the biggest challenge for boards is to ask the searching question: what is genuinely in the long-term interests of our mission? Johnnie Johnson is the most publically known housing association that carried out a full options appraisal and concluded at the end of it that a merger wasn’t the best option. And that was open, considered and defensible.

However, we should ask ourselves how many of us can be so objective, if the conclusion of an options appraisal is a different outcome? But our responsibility as guardians of our mission is to make those big decisions.

We should put to one side what the regulator and government may or may not think about the shape of the sector and self-critically ask ourselves what is the best way to safeguard our mission. For many it will be an independent organisation, which might be transformed to respond to the more difficult economic environment that we now face. A number of organisations looked at the prospect of anything more than a 1% reduction in income and asked themselves whether they could survive. For those organisations, an independent future means building their resilience, diversifying their range of services and looking completely differently at the way they deliver services and to whom. For others, the future may well be either collaboration, partnerships or merger.

There is no right answer. It will be different for different organisations. However, good governance suggests that the board must consider options for its own future seriously and objectively. The voluntary code is therefore just a reflection of good governance and a process for applying good governance in this particular area.

As we gather for the annual National Housing Federation board members’ conference, I suggest you don’t turn the sessions into a dating game but do consider whether your organisation’s best long-term interests may be better served by working in a different way with one of those in the room with you. And if someone makes an offer, be prepared to consider it. At the very least have an idea of what a good or not so good partner might look like.

Steve Douglas, partner, Altair