ONE WAY TO GOVERN
by Caroline Oliver
All our futures, wherever we are in the world, depend upon our ability to come together in order to envision the future, create solutions to our problems and put our visions and solutions into practice.
Successful governance does just this. Successful governance provides a mechanism for people to direct and control the organisations we create to make the differences we desire and thereby take our societies forward. Whether we are talking about national governments, public organisations, for-profit organisations or non-profit organisations – governance is what makes their wheels go round.
This article describes one way to govern. It is based on what I believe is the most advanced theoretical and practical model we have today – the Policy Governance®ą model created by John Carver – and it all starts with the concept of ownership.
In our day to day lives, we all tend to operate from our immediate personal needs and desires – understandably so. But, when we set out to govern something, we cannot do so successfully unless we can transcend our own personal needs and desires, and even those of any particular constituency from which we may have come, and collectively put ourselves at the service of all those to whom the governing body is accountable. If we can do this successfully, then there is hope that we can work together and create great things, for we are at least all agreed that we are all here to do the same job (governing) on behalf of the same people (those to whom we are all ultimately accountable). If we cannot transcend ourselves sufficiently, there is little hope of real governance for there is little hope of any real collective will ever being achieved on anything.
The “ownership” to which any given governing body is ultimately accountable may simply be all the people who have the legal right to hire and fire the board but the answer can also be more complex. The voting public are the legal owners of government, association members are the legal owners of their associations, but who are the owners of the many nonprofits whose legal membership does not extend beyond their board members? And how, for example, should we think of the ownership of a public hospital which is funded from the national public purse but has a local community board? In this article I want to suggest that boards should think of their ownership at a moral as well as a legal level. Legally, to illustrate my point with an example from the corporate sector, day-traders are among the owners of the companies in whose shares they trade. But, morally, are these the people on whose behalf boards should be doing business?
It is my belief that it is in all our best interests that boards run organisations on behalf of those they believe are, or could be, owners as defined by the extent of their economic, practical and, or, emotional investment in their organisation’s future, whether that “ownership” is legal or purely moral. Sticking with the corporate sector for a moment, and going further, I would suggest that boards operating on behalf of all those who are or could be legally and morally invested in their organisation’s future provide the mechanism that legitimates capitalism in a democracy. In other words, I believe that, without properly functioning boards, capitalism cannot and should not survive.
Starting with the fundamental principle of the board as owner-representative, it becomes possible to distinguish the board’s governance role from the role of management. As owner-representative the board’s first job is to connect its leadership to its owners’ wishes. This is not to say that the board is simply the owners’ messenger, it is to say that the board must be able to demonstrate how its leadership represents a wise summation of owners’ best interests.
The board’s second job is therefore to translate that summation into a comprehensive set of standing controls or policies that govern everything that the board is accountable for – which is indeed - everything. Crucially, the Policy Governance model offers very specific “how to” precepts for creating board policy that is comprehensive enough to cover all actual and possible organisational activity yet specific and concise enough to enable the rigorous monitoring that board accountability requires.
Last but not least, the board’s third job is to ensure that each of its policies is indeed rigorously monitored such that it can account back to its owners that it has reasonable assurance that those policies are actually being implemented. To understand how all this can be accomplished we need to go back to the aforementioned “how to” precepts for board policy design and therefore policy monitoring.
Putting Policy Governance into practice means just that – getting your board into a position whereby it can govern through policy. The word “policy” here has no special meaning other than a written board instruction. The first precept is that you need to separate out your instructions regarding purpose from your instructions regarding how that purpose gets achieved. There are several reasons for this. Firstly you want to make sure that your purpose is crystal clear and therefore framed in terms of the difference your organisation exists to make in the world. To provide true leadership, your board needs to be unequivocal about: what benefit you exist to produce; for which people; and with what level of cost-efficiency. Secondly, you need to be sure that the means that get chosen to fulfil your purpose never inadvertently defeat that purpose. Thirdly, choosing what should be done to fulfil your purpose is in any case not a governing function but a management function. Of course the boards of very small organisations that do not have a separate executive may have to provide the management function as well, but they still need to separate the two functions out in order to ensure that both jobs are getting done properly.
In Policy Governance the policies that define what benefit you exist to produce; for which people; and with what level of cost-efficiency, are typically called Ends but can be called whatever you want as long as they meet the foregoing definition. All other matters are matters of means that can be divided between governance means and management means. The policies that set out the board’s collective will on governance means are typically called Governance Process policies and Board-Management Delegation policies. The former covering matters such as the board’s purpose, relationship with owners, code of conduct, role of officers, and agenda creation, and the latter covering how the board delegates its authority to management and monitors the use of that authority.
The policies that set out the board’s collective will on management means, are typically called Management Limitations or Executive Limitations and they are distinct in two very important ways. Firstly, they are all about organisational safety in terms of prudence and ethics and secondly they are expressed negatively. Let me explain. As the board is a function of ownership rather than management, its role is to ensure that the Chief Executive (or otherwise identified management) achieves what owners’ want (the Ends). As long as those outcomes are being achieved, the only other concerns the board should have are those pertaining to the organisation’s safety. If the board goes further and starts telling the Chief Executive how to do his or her job, it is a) usually getting out of its depth, b) disempowering its delegate, c) undoing the delegation it said it was making when it made the appointment. Thus Management Limitations are used only to prohibit what the board believes it must prohibit on the grounds of prudence or ethics, rather that to dictate all that it could dictate.
And, there is a further point. A board that creates a policy which it does not monitor might as well have saved its breath. In other words, an unmonitored policy is a pious hope rather than a real control and the trouble is that the more policy you have, the more onerous monitoring becomes. Boards need to be very conscious of the fact that all the management time needed to ensure proper compliance with, and reporting on, each of their Limitations policies is time not being spent on fulfilment of their owners’ Ends. Therefore boards must strive to keep their policies to a minimum.
Which takes us to two further aspects of the design of policies in Policy Governance - the broadest-to-narrowest architecture and the concept of “any reasonable interpretation”. All policies in each section of policy in Policy Governance start from the broadest most all-encompassing level first and progress through sequential levels of further specification until the board reaches the point at which it feels that it can responsibly accept any reasonable interpretation of what it has said. This is the level at which the Chief Executive takes over subject to regular board monitoring of compliance with what it has already said.
Monitoring in Policy Governance is far more rigorous than the “look how busy we have been” reporting that I am sure we are all guilty of having given and, or, accepted. Monitoring in Policy Governance is about the board getting regular evidenced assurance that delegates are operating within “any reasonable interpretation”of its policy. And evidenced assurance, means assurance in the form of explicit interpretations that set out justified, compliance standards for fulfillment of every policy together with data on the same.
To sum up all the above, Policy Governance offers one way to govern. A way that has the board at the helm of a leadership cycle that starts with the linking with us as owners to ensure that our organisations are making the right kind of difference and finishes with ensuring that those organisations’ are accountable back to us for making that difference. In the middle is a whole lot of empowering yet safe delegation and much healthy board debate.
Boards bring people together to make a difference. When did we ever need them more? When did we ever, borrowing from the International and UK Policy Governance Associations, have more need for owner-accountable ethical and effective governance? I hope that as a result of reading this article, you may be interested to learn more about the way to govern it briefly describes or that, at the very least, you are seeing the importance of boards in a new light.
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ąPolicy Governance® is the registered service mark of John Carver. Used with permission. The ® after Policy Governance is a symbol used to protect the integrity of the principles and practices that make up the Policy Governance model. Its use does not imply any financial obligation to the service mark owner. The authoritative website for the Policy Governance model can be found at www.carvergovernance.com.