Main Idea
Strategy for exercising board leadership and serving owner interests by comprehensively defining roles, explicitly delegating authority, and systematically monitoring execution so as to assure organizational performance.
Author
John Carver developed this model over 30 years ago after serving at various times in the roles of board member, chief executive, and consultant helping boards govern. For info from Carver on his theory see http://www.carvergovernance.com
Board & Staff Issues Addressed
- Role confusion – unclear boundary between board and CEO responsibilities
- Unclear expectations held by the board toward its CEO, and vice versa
- Board decision-making at the operational level rather than at the policy level
- Tension over authority exercised by the CEO vs that exercised by the board
- CEO evaluation based on unknown criteria, unrelated to organizational success
10 Principles of Policy Governance
Relating to the Nature of Board Authority:
- Ownership.The Board acts on behalf of its ownership, those for whom it is a legal representative.
- Board Holism.The Board’s authority exists solely when acting as a whole board. The Board therefore speaks with one voice, or not at all.
- Governance Position.The Board is positioned between the ownership and the organization, and therefore has authority over the operational functions of management.
Relating to Policy – the Instrument by Which Board Authority is Exercised:
- Ends Policies.Ends policies are defined positively (telling the CEO what is to be achieved).
- Board Means Policies.Board means policies control how the board operates and how it interacts with staff
- Executive Limitations Policies.Staff means are defined negatively (conditions that are unacceptable…to be avoided).
- Policy Size.The Board sets expectations first in broad values, then in progressively greater detail.
Relating to Delegation & How the Board Assures Accountability
- Delegation to Management.The Board delegates authority to the CEO
- Any Reasonable Interpretation.Any reasonable interpretation of Board policy by the CEO is acceptable
- Monitoring.The Board monitors performance rigorously against criteria written in policy.
Policies by Which the Board Governs
Contrasted with the many operating policies that are usually drafted by staff and reviewed/approved by the Board, and that tell members of the organization how to function, the policies by which the Board governs the organization are much fewer in number, with much less verbage, and provide direction to only one of two entities: the Board itself, or the CEO. There are four sets of governing policies in the Policy Governance (R) model:
Ends
Ends policies describe the purpose of the organization, defining what good the ownership wants the organization to do for specified beneficiaries, at a specified cost or relative priority. With this essential guidance, the terms of organizational success are clearly set, and the Board can go about the main focal point of its self-defined job of monitoring the organization for achievement of its Ends. The executive, similarly, has clear guidance as to what is to be achieved, for whom, and at what cost or relative priority.
Executive Limitations
The second critical component of executive guidance, besides achieving desired Ends as defined by the Board, is that the CEO is expected to achieve those Ends without violating restrictions defined by the Board in the Executive Limitations. Executive Limitations provide limitations on the freedom of action of the executive in deciding how to go about achieving Ends. Rather than telling the executive how to function, limitations tell the executive what would not be acceptable, either legally, morally, ethically, or prudentially. With a clear idea of what would be unacceptable, the Board expects that the CEO is free to make any or all decisions needed to accomplish the main thing: achievement of Ends. As long as defined limits are not exceeded, the CEO is empowered with freedom of action to get the job done.
Governance Process
This important part of the Board’s guidance to itself constitute a key to the self-discipline which Policy Governance provides to the Board. Governance Process policies describe how the Board will operate, and institute the principles of policy governance for its own process. GP policies include a definition of the Board’s purpose and an operational definition of its job – assuring on behalf of owners that the organization works. As implied by the term used by Coherent Governance (Governance Culture) these policies establish a culture for how the Board operates.
Governance-Management Delegation
The second set of policies by which the Board governs its own activities, the Governance-Management Delegation policies describe how the Board will interact with its CEO, so that it effectively delegates authority to the CEO to perform the management function, while the Board itself takes care of the governance function. These policies clarify how the board interacts and relates with its CEO, including how CEO evaluation is performed, including the principle stating that the Board considers the performance of the organization and that of the executive to be identical. Coherent Governance calls this set of policies the Board-CEO Relationship policies.
Testimonial
A letter to the editor about the value of policy governance to a board in Newark, New York