Should you use a covenant in your small group? Yes and no.
Yes, I believe in having a covenant up front with a group. That is, I believe it is good to plan and set goals as you begin, and I think it's a good idea to agree on a number of disciplines and ground rules. Doing so can help group members have an idea of expectations and it puts everyone on the "same page."
Speaking of pages, no, I do not believe in covenants for most types of small groups. That is I believe a written covenant can tend to close what should be an open group. What do you do when a new person shows up? How would you feel if you came into a group of people who had already decided upon and put into writing formal rules for the group? Like an outsider? Like you're intruding? Like you are the only one in the group who didn't have a say on the rules that you must now obey?
I'm of the opinion that most "basic Christian community" groups (CARE groups, FLOCKS, cell groups, fellowship groups, etc.) ought to have an informal feel; that is, it's an organism, not an organization … a family, not a form … a community, not a club … an incarnation of Christ, not an institution of the world.
Yes, I think it's good to agree on a covenant together. No, I don't think you should write it down and have everyone sign it. In the group that I lead, for instance, we agreed on the purpose of our group, on a number of ground rules, on who would do what, on a few disciplines. I had the apprentice leader write these down as we spoke about them, but then I left it at that. We go over some of these things as we need to, but I never "pull out the covenant" in front of the group and say, "See, you all agreed to this!" Rather, I simply and gently remind the group ...