Third Sector ‘Investment Readiness’:

A peer review process to assist third sector

organisations assess their readiness for
public sector and other investment

March 2008

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Finance Hub
Charities Aid Foundation
St Andrew’s House
18-20 St Andrew’s Street
London EC4A 3AY
Tel: 020 7832 3016
Email: financehub@cafonline.org
Web: www.financehub.org.uk

B:rap
9th Floor Edgbaston Hse
3 Duchess Place
Hagley Road
Birmingham
B16 9NH

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Content list

1 Introduction..............................................................................................................4
1.1 What is ‘peer review’?.......................................................................................4
1.2 Who should do a peer review?..........................................................................5
1.3 What will my organisation gain?........................................................................5
2 Guidelines: undertaking a peer review.....................................................................6
2.1 Identifying participants.......................................................................................6
2.2 Agreeing ground rules.......................................................................................6
2.3 Preparation & reviewing initial evidence............................................................7
2.4 Undertaking the review......................................................................................7
2.5 After the review.................................................................................................8
3 Peer Review Form...................................................................................................9

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1 Introduction

The third sector funding environment is undergoing dramatic change. What has been
a gradual shift from grant-aid funding through to service level agreements through to
fully-fledged contracts is still happening. However in many cases this change is
accelerating as local authorities and other public sector partners move to fully
developed commissioning models to determine the services they require from third
sector organisations.

In private sector business support, the concept of ‘investment readiness’ – the

degree to which a business is ready to receive external investment, and why, and on
what terms – is well established, but this is new territory for the third sector.

1.1 What is ‘peer review’?

This peer review process has been developed as part of work commissioned by the
Finance Hub in 2007.

Peer review is a process in which an organisation or individual (a ‘host’) receives

critical feedback from others (‘reviewers’ often working in a similar area) to help them
improve what they do. There are many different models of peer review.1 The
approach outlined in this short paper is not complex and focuses on one specific
aspect of organisational performance – ‘investment readiness’. In the context of this
paper we use investment readiness to mean the degree to which an organisation has
in place the systems, processes, management capacity and relevant financial
expertise and controls to be considered investment ready. The process can be used
as a preparation for funding applications, bidding and tenders for commissioned
services.

The process offers third sector organisations a structure for gaining ‘peer feedback’
from critical friends who will assess the host’s progress against key sets of
information typical of most funders’ requirements. This is important because many
funders provide applicants with little if any feedback and as a consequence it can be
difficult for organisations to understand where they are falling short.

In particular, the aims of this peer review process are to:

• Generate critical feedback which will help third sector organisations (TSOs)
consider their progress towards ‘investment readiness’.

• Provide a space in which TSOs can learn about different approaches to

improving investment readiness and prioritise relevant actions for their own
organisation.

1
The Performance Hub commissioned the development of a model of peer review for third sector
organisations in particular. See Purcell, M., Hawtin, M., Peer Review: A Model for Performance
Improvement in Third Sector Organisations?
http://www.ncvovol.org.uk/uploadedFiles/NCVO/What_we_do/Research/Research_Events/Purcell_
%20M_and_Richardson_P_PDF.pdf

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1.2 Who should do a peer review?

The peer review process is designed for any organisation that is gearing up to
improve its acquisition of funding from external sources – whether grant support from
charitable and independent sector funders, or bidding for commissioned services as
part of a relationship with a local authority or other purchaser.

While it is not intended for smaller community based organisations seeking very
small sums of grant-aid (under £10k, say), these organisations too should find the
tool useful as part of their longer term planning.

If you are undertaking a peer review as a ‘reviewer’, then there are particular skills
and experience that it would be useful for you to have (see 2.1). If you are
participating as a ‘host’ then you will need to be ready to engage in a process like this
and share information about your organisation with others.

1.3 What will my organisation gain?

As part of the same Finance Hub work, a self-assessment tool to help third sector
organisations determine the priorities they should address in order to become
investment ready has also been developed (linkXXX). The peer review process is
designed to help you check the developmental priorities identified through self-
assessment as part of a ‘reality check’ with other organisations you know and trust.

The benefits of undertaking a peer review in addition to completing the self-

assessment tool are:

• An additional objective perspective through engagement with a group of

‘critical friends’.

• An improvement in skills and knowledge regarding how to achieve investment

readiness.

• Supportive assistance that can help you prioritise the things you’d like to
improve.

• A space in which organisations can discuss the challenges they face with
others whose work is rooted in a similar context.

This peer review process was piloted with a group of TSOs from the North West, the
East and the West Midlands. Those taking part in the pilot identified a number of the
benefits listed above. However, one of the main messages to come out of the pilot
was that organisations will only get out of the peer review what they are willing to put
in. And in order for TSOs to invest their time in something like this, they need to be
confident that it will help them to improve their organisation’s investment readiness.

The brief guidelines to the process that follow aim to address some of those issues.

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2 Guidelines: undertaking a peer review
2.1 Identifying participants

Identifying peer group participants can be challenging, particularly when involvement

rests on goodwill alone – when there are no resources attached to that activity.

A ‘host’ must first identify peer group participants that you trust with what will
sometimes be confidential information about your organisation. You may choose to
find a group from your local area, or you may think there advantages to finding
participants from outside your local area.

The group will also need to have the right kind of skills and experience to offer you
useful advice on how to improve your investment readiness. Obviously, the kind of
skills you might require from a group of reviewers will depend to some degree on the
issues you’d like to discuss and improve (e.g. your business plan, your financial
policies etc). What follows is an indicative skill-set:

• Experience of generating income in a third sector context.

• Experience of business planning and strategic planning.
• Experience of managing and planning staff resources.
• Experience of bid writing and contact with a range of external funders.
• Knowledge of different types of organisational policies (e.g. financial policies,
quality assurance policies etc).
• Ability to offer critical advice to people in a constructive way.
• Ability to maintain confidentiality and trust.
• Willingness to commit to doing a review.
• A participative and collaborative approach and a commitment to activities
based on mutual benefit.

As a ‘host’ you will also need to have a number of qualities. You will need to be able
to accept constructive criticism and engage in an open discussion about your
organisation’s policies and processes. You will also have to be willing to make the
necessary evidence available to reviewers to help them understand your
organisation’s approach to becoming investment ready (e.g. sharing your financial
policies etc).

2.2 Agreeing ground rules

It is important to agree the scope and focus of a peer review early on. And in this
regard it is worth emphasising an important point. Host and reviewers are not in
competition with each other. It is a constructive, collaborative process based on
mutual benefit.

The host organisation should think about the issues it would like to focus on (e.g.
improving the business plan). As host you may also have some broad ideas about
the criteria you would like to be assessed against as part of the review. These ground
rules should be discussed and in some case negotiated by the peer group before
starting a review. In particular you should consider:

• Where the review will take place.

• The type of evidence that will be provided.
• The criteria that will be used to judge progress of the host.

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 • Who will be available in the host organisation to answer questions on the day
of the review.
• The issues that the review will focus on.
• The nature and purpose of any follow-up meetings.
• The overall time/effort that the peer group is able and willing to invest.
• Whether the process will be repeated in the future, with the host acting as a
reviewer for others.

2.3 Preparation & reviewing initial evidence

After completing the self-assessment questionnaire and agreeing the areas of focus
for the review, the host should send a completed questionnaire, along with any
supporting evidence for the review (e.g. business plan, evidence of need for their
organisation etc) to the reviewers.

This is an important part of the peer review process because it allows reviewers an
initial opportunity to consider the evidence provided by the host. Reviewers should
make some preliminary assessments of the host’s progress against the issues the
review will focus on. Similarly, reviewers should compose a list of questions that they
would like to ask the host as part of the peer review, the answers to which will help
reviewers make a more comprehensive assessment of the host’s progress while also
offering constructive advice. A basic form for reviewers to record this information is
included at the end of this document.

2.4 Undertaking the review

The length of a peer review depends very much on the extent of the review. A half-
day or full day is a useful amount of time to spend. The following process can be
used to undertake the review:

• Reviewers meet initially to feedback on their initial reviews of the evidence

provided by the host, agree an approach to probing the host for more
information (e.g. which questions will be asked), and agree an approach to
evaluation and offering feedback.

• Reviewers meet with the host to ask critical questions to find out more about
the organisation’s progress. This may involve speaking to more than one
person from different parts of the organisation if appropriate (and agreed
beforehand).

• Reviewers meet without the host to discuss the host’s progress and to identify
practical suggestions and advice for improving the host’s investment
readiness.

• Reviewers meet with the host to feedback their views on progress and advice.
This is an opportunity for reviewers and host to discuss the practical
implications of implementing the reviewers’ advice. Reviewers and the host
should also share their views about:

o The usefulness of the process;

o Whether anything could be improved for next time;
o Whether the host would like any additional advice and/or information
from reviewers to help them implement the changes needed;

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 o Follow-up – whether the review process will be repeated after an
appropriate interval.

2.5 After the review

When the review is completed, the host should consider the implications of the
reviewers’ advice for their organisation and future business planning. In particular,
the host should consider:

• When will each action be completed?

• Who has responsibility for each action?
• Over what timescale will each action be completed?
• Who in the organisation will be involved – e.g. service delivery staff,
volunteers, and briefing meetings for trustees?
• What are the cost implications? For example, have you identified training or
staff development needs that it might be possible to secure external funding
to help resource? If so, where do you think that funding might come from? Jot
down the potential funders – remember to highlight whose job it will be to
investigate the potential of these funders.

The host may also have agreed to act as ‘reviewer’ for organisations from the peer
group, in which the case the whole process will be initiated again.

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3 Peer Review Form
This form can be used by reviewers to make an initial assessment of the host’s
progress. The form can also be added to or amended as part of the peer review
process to compose a final assessment of progress and advice given. An example is
included to show how the form could be used (if the focus of the peer review was on
the host’s business plan).

Investment Evidence Core Progress: Additional Advice

Readiness Provided Assessment (Score of 1-5 Questions
Measure Criteria with for Review
comments)*
Score 1: Do they have Useful to
E.g. Business E.g. Income any plans include a
Business plan 07-08 generation Business plan regarding basic income
plan and potential and clearly where they generation
strategic strategies. indicates will find future strategy within
plan 06-09 resource funding business
(But these needs for 07- and/or income plans to show
might also 08, however generation? the potential
include: there is no risks and
marketing indication of challenges of
strategy; how income generating
‘sales’ and will be income to
income generated. match
targets; key resource
growth and/or needs/ how
development these will be
objectives overcome.
etc.)

Notes
* Scoring: while the precise numbers used are not all that important, it is important to
attribute generally agreed standards to what these scores mean. So in this example
the following are used: 1 = Completely inadequate, significant work needed; 2 =
There is something here that can be built on – more work needed; 3 = An adequate
starting position but can be further strengthened; 4 = Extremely good, little cause for
concern; 5 = outstanding, no additional work required. Peer groups may wish to
discuss their own scoring variants. It is important to remember, however, that the
process isn’t meant to be too easy – it’s meant to identify areas of weakness and
methods for improvement.