[Transcript below]

Let’s take a look at transparency, accountability, and the flow of information when using Policy Governance.

Before we go any further, know that John Carver has stated that a board can request any information at any time — this much is clear.

The key, of course, is that the request must come from the board, not from individual board members. In being accountable to the board as a whole, the CEO and staff members have to be wary of individual information requests that would take time away from doing what they must do as directed by the board.

We’re not talking here about quick and simple logistical questions, like is there free parking at the AGM, or what is the Zoom link for the board meeting, but rather requests that are going to take a lot of time or focus away from doing what’s needed by the board as a whole.

So different types of information requests from the board are handled in different ways. Information that assists the board in evaluating performance are delivered via monitoring reports. These reports connect the dots from the board’s words to how they are being interpreted to evidence of compliance. Normally this is done according to a schedule established by the board, but at any time the board can request an interim or supplemental monitoring report, if it feels that is needed.

Boards using Policy Governance also typically request decision information, that is, anything that will help the board know what it needs to know in order to make policy decisions. Ideally, the board has an information and support to the board policy, which specifies what types of information the board would like to receive either on a regular basis or when something happens.

We also encourage boards using Policy Governance to take the further step of incorporating a Board Education item at each board meeting at which the board learns about anything that will help them perform, including presentations about governance, legal issues, political or regulatory topics, emerging trends, and the internal and external environments in which the organization operates. Yes – the board can freely request staff presentations, as long as it is done in the spirit of learning, and not evaluating, which is done via the monitoring system.

The CEO can also provide the board with “nice-to-know” information, ideally in a manner that does not take significant time away from the board’s governance agenda.

Information is also expected to flow very readily between the board and its legal or moral owners. Ownership linkage activities feature the board communicating about relevant topics with its owners, plus asking key questions that drive at owners’ values about the long-term purpose of the organization. Staff will typically provide the board with what’s needed to support these ownership linkage activities.

So when it comes to transparency and communications, we have:

• a board policy manual that expresses the board’s values on everything
• monitoring reports that share evidence of the results being accomplished
• decision information and board education activities that the board can request as needed or on a regular basis
• ongoing dialogue between the board and owners about the purpose of the organization, current and future threats and opportunities, and the results being achieved, plus
• incidental information that can be shared at any time.

The skill that board members will hone when using Policy Governance is how to trace a concern they might have about an operational or effectiveness issue to the relevant policy or monitoring report that addresses that concern, or to the the board education item they’d like in order to learn more.

Meanwhile, the CEO and staff have to pay close attention to the Communication and Support to the Board policy [assuming there is one!] ensuring that the board is always well-informed on what they need to know in order to govern effectively.

This is Susan Mogensen, with Brown Dog Consulting.

See also: How to Assess the CEO’s Ends and Executive Limitations Monitoring Reports

and Effective. Affordable. Fun — More info about the Board EXCELerator online learning program.

by Susan Mogensen

The second installment of a series considering the relationship between Policy Governance and hierarchy, originally published in Board Leadership No. 98 (July – August 2008).

With the laudable goal of minimizing the conflicts and irresponsible use of power that often flow from hierarchical structures, is it possible to have a “nonhierarchical governance structure” that remains effective and accountable and not simply ineffective for the sake of being “nonhierarchical”? This question was addressed in Part One of this series (Issue 96 of Board Leadership), and it was determined that hierarchy is integral to any conversation about governance. Having concluded that it is impossible to completely avoid hierarchy, this second and final installment considers in more detail how common problems attributed to hierarchy are resolved by Policy Governance.

When authority flows from owners to board to management, a hierarchy of roles is very much apparent and necessary since there will always be (i) either a legal or moral ownership group, (ii) those who govern on behalf of the ownership, and (iii) those who achieve the results directed by the governors.

While this sets up a “top-down” chain of command, the “top” part of this chain is comprised of the (often forgotten) citizens, shareholders, members or however the ownership group is known, and not a sole authoritarian figure like a King, President, or Chairman and CEO. As such, the uppermost portion of organizational hierarchy resembles an inverted triangle rather than a pyramid. Those with more than a passing interest in Policy Governance understand the inextricable linking of the concepts of hierarchy, servant-leadership and owner-accountability in a free and democratic society.

However, seeing governance and hierarchy as inextricably linked does not mean that problems typically attributed to hierarchical structures inside organizations are inevitable or cannot be mitigated. It is easy to see, though, how one could incorrectly attribute the source of hierarchical problems to governance “structures” if one didn’t have a clear view of the distinction between governance and management. In fact, without the ability to draw a clear distinction between governance and management functions, the potential for problems attributed to hierarchy is highly probable.
 
Imagine, for example, that governance and management functions are mixed together like strands of cooked spaghetti on a large plate. Gathered around this plate, ready to eat, are all the board members, the CEO and even other senior staff members like a CFO, Communications Director, and/or VP Human Resources. As everyone digs in at once with their forks, the inevitable result will be multiple parties tugging at the same noodles from both ends. This, in fact, describes the crude and confused state of governance today. Without a system that clearly differentiates between governance and management, people working on both sides of the equation will never be entirely sure whether or not someone else has already grabbed a noodle at the other end. Inside this messy tug-of-war, problems such as turf wars, power struggles and micromanaging may be attributed to hierarchy.
 
To begin to resolve this mess, one could attempt to try to designate which noodles on the plate belong to whom, and which should be shared. Outside the Policy Governance paradigm, it is tempting to do this. A quicker and more enduring strategy, however, would be to give one full plate to those who govern and one to those who manage or lead the operational side of the organization. While this constitutes a kind of separation of labour between governance and management, the Policy Governance approach still ensures that all are still gathered at the same organizational table, aiming at the same result.

A more appropriate question to explore then is, given that governance is by definition a hierarchical concept, and given that the job of governing can and should be distinguished from the job of managing, what can be done to mitigate problems attributed to hierarchy inside organizations? Further, what impact could the use of Policy Governance have on typical hierarchical struggles?
 
First, let’s think about some typical problems or complaints that could be attributed to the existence of a hierarchy. Perhaps a staff person cannot get a critical tool fixed without approval from a boss who has other priorities. A board of directors might turn down a project proposal presented by a staff committee because the board didn’t agree with staff on the value of the project. One set of board members might resent the perceived power of another set of board members, such as an Executive Committee, because they seem to have all the information and forge ahead making key decisions on behalf of the board as a whole.

In all cases, the players involved experience frustration at not being able to get something done, or they perceive a lack of fairness or equity. These frustrations are attributed to people having a certain level of authority or decision-making power while others do not. In Top Down: Why Hierarchies Are Here to Stay and How to Manage Them More Effectively (Harvard Business School Press, 20025), Harold J. Leavitt puts anti-hierarchical complaints into four categories: “First, hierarchies are inhumane. Second, they are inefficient. Third, they are anti-democratic. Fourth, they are breeders of immorality.” But to ensure we do not get tangled up in the governance–management spaghetti plate as we examine this question, let’s look more closely at where these hierarchical frustrations can occur.
 
If we accept that the actors in organizations are essentially owners, board, CEO and staff, then we can categorize the preponderance of problems attributed to “hierarchy” to frustrations occurring (a) between the people at one level and the people working at one level “above” or “below” in the chain of command, i.e., between board and owners, between board and CEO, and between CEO and staff, and (b) amongst the people working inside each of these levels, i.e., among owners, among board members, and among staff. 

Generally speaking, if a governance system is achieving what it should — that is, owners’ wishes, as expressed by the board of directors, translated into outcomes achieved by the organization — then one would expect a minimum of frustration or barriers between these role players and maximum alignment of purpose from owners to board to staff.
 
Most organizations, however, don’t operate inside a system that effectively aligns owners’ wishes into results achieved by the organization. Instead, one commonly sees wasted effort, duplication of effort, and lack of direction. Imagine, for example, a heavy rock that must be moved by 10 people. If 10 ropes are tied around the rock and everyone pulls in a different direction, the rock will go nowhere, despite the best efforts of the 10 people pulling earnestly on their ropes. If everyone agrees and knows in advance where the rock must go, an equal amount of effort will move the rock into place much more quickly.

Similarly, we consider that a good deal of the blame on hierarchy could come from people simply not agreeing or knowing what the overall purpose or goal of the organization is. A reader of an online article, “Meetings and Dominance Rituals: Implications for Corporate Governance,” on a blog by Stephen Bainbridge (www.professorbainbridge.com/2006/05/meetings_and_do.html), comments that, “… if a meeting has a clearly pre-defined structure/agenda/goal, then the pecking-order will fall into place more easily … The worst power struggles always seemed to occur when the purpose was most vague.” Like vagueness in a meeting agenda, lack of clarity in organizational purpose can create a vacuum that will inevitably be filled with a power struggle of one type or another.

Boards using Policy Governance principles can drastically reduce the probability that anyone will be unclear about the purpose of the organization and reduce the chance for conflict between the board and owners. The principle that the board connects its authority and accountability to those who morally if not legally own the organization … seeing its task as servant-leader to and for that group calls on boards to first know who their owners are, and secondly, to link with the owners so they can accurately formulate the purpose of the organization. When boards wholeheartedly acknowledge their accountability to owners, engage themselves in this ownership linkage process, and have a mechanism to turn input into action, they can create direction that is clear, justified, and credible. Everyone knows where the rock must go, and they are more likely to understand and to accept the rationale.
 
Helping boards to create this clear direction on behalf of owners is the principle that the board defines in writing the results, changes or benefits that should come about for specified recipients, beneficiaries, or otherwise defined impacted groups and at what worth or relative priority for the various benefits or various beneficiaries. So not only does the board link with owners, but it is required to write down the Ends, and to include those three components of results, recipients and worth. “Get it in writing!” seems like common sense to most people, but few boards are as precise — and concise — about the course they have set for their organization as the ones that are using Policy Governance principles in their entirety. Not only do the CEO and staff become clear about the purpose of the organization, but the ownership does as well.
 
Some of the most typical types of hierarchical conflict between board members can be mitigated through the use of Policy Governance principles, aided by the principle that the board makes authoritative decisions directed toward management and toward itself, its individual members and committees only as a total group. Application of this principle eliminates the common syndrome of Executive Committees, for example, where a small subset of board members make key decisions ostensibly on behalf of the board as a whole, leaving board members not part of the Executive Committee in the dark or bypassed entirely. Many Executive Committees will roll up their sleeves and get to work on everything from budgets to strategic plans to hiring the CEO, and then expect the rest of the board to agree to their recommendations or rubber-stamp their decisions after the Executive Committee considers its work done. This practice sets up a hierarchy within the board of directors that can lead to conflict, apathy and dysfunction.
 
Of course, boards using Policy Governance delegate the role of Chief Governance Officer to a director, a role which requires the ability to make reasonable interpretations of board decisions when necessary. Boards might also create committees to help them with their job. Direction to board committees is, however, written, once again, and created by the board as a whole, along with all the rules that the board develops for itself in Governance Process policies, which are then regularly monitored. So while individual board members might fulfill a variety of functions from time to time, all board members understand that their authority as a board is group authority, and no single board member is asked to or allowed to “run the show.”
 
The Policy Governance principle that the board defines in writing those behaviors, values-added, practices, disciplines and conduct of the board itself adds valuable, written clarity to board processes so that directors can be on the same page with respect to how they interact with each other. Of course, the purpose of Governance Process policies and the “one voice” principle is not to eliminate or diminish the diversity of viewpoints around the table, but rather to provide the space in which to have rigorous, thought-provoking dialogue. While interpersonal conflict can always occur, boards operating inside these principles can focus on the conversations that really matter and avoid most of the misunderstandings, frustrations and squabbles that proliferate in far too many boardrooms.
 
Policy Governance principles are also extremely effective in mitigating common conflicts between the board and CEO. In organizations where Policy Governance principles are not in use, for example, board members will typically be asked to approve various projects, budgets, and even hiring and firing decisions. When a board decides to not approve something prepared by the CEO or staff, complaints aimed at “the hierarchy” can immediately ensue. When staff put time, effort and resources into a project that is halted at the board level, it can very well be said that hierarchy is to blame. If only the staff had the freedom to make its own choices, without meddling, micromanaging or nitpicking from above.
 
Of course, Policy Governance boards bypass this hierarchical complaint in part by applying the Executive Limitations Policies principle, the board makes decisions with respect to its staff’s means decisions and actions only in a proscriptive way in order simultaneously (a) to avoid prescribing means and (b) to put off limits those means that would be unacceptable even if they work. By setting out the criteria for good staff decisions in advance, and by allowing any means available except those that are prohibited, and then following through with the monitoring process, boards provide staff with far more freedom to make decisions, create results and get the job done. The CEO or staff do not need to approach the board on bended knee to ask for approval for everything and instead there is clarity around the Ends to achieve, and the means to avoid. The CEO must know his/her limitations.
 
The Delegation to Management principle further reduces the potential for board-CEO or board-staff conflict, because if the board chooses to delegate to management through a chief executive officer, it honors the exclusive authority/accountability of that role as the sole connector between governance and management. As a result, individual board members are not doing end runs around the CEO, using their position as directors to tell staff what to do, or how to do it, or interfering in any way in management or staff operations. Once staff understand this and the board holism principle, they know that even though the board as a group stands higher than staff in the governance chain of command — or hierarchy — individual board members have no power (unless a task has been specifically delegated to them by the board as a whole). How many CEOs or staff members grumble every day about direction or meddling by individual board members? The hierarchical position of the board over CEO and staff is not to blame. The system — or lack thereof — generates hierarchy-based problems. Using Policy Governance principles effectively, board and management can exercise their power and freedom with minimum frustration.
 
The Policy Governance model does not specifically address conflict or issues that might occur between the CEO and staff members. It does, however, give boards the opportunity to create a Treatment of Staff policy, for instance, and monitors compliance with the CEO’s interpretation of that policy. If the staff have access to the CEO’s reasonable interpretation of this policy, they should see with a fair degree of clarity the parameters in which they work. CEOs can also share board policies with staff members and engage them in the process of developing reasonable interpretations and essentially cascading out board policy language into staff-level policies. The need for multiple levels of approval-seeking inside the organization might also be eliminated if a similar process of Ends and Executive Limitations is developed between the CEO and staff.

While many Policy Governance principles can help to create a more motivated, purposeful and productive staff, hierarchical complaints among staff members throughout the organization are not otherwise addressed. Further, whether or not the organization is structured in a flat or pyramidal manner will depend entirely on the CEO’s interpretation of any relevant board policy.

And so, in response to the original question posed in Part One, whether there can be “nonprofit governance structures that do not fit what has become the standard org-chart model of hierarchical chain of command,” we conclude that hierarchy in governance is necessary but that it is not necessarily evil. Organizations clearly can be governed fairly, effectively and accountably in a hierarchical structure.

Power struggles or competition between people can never be eliminated entirely. It is the nature of humans. However, many of the frustrations typically experienced inside organizations and around board tables can be minimized among people of goodwill and common purpose, thereby allowing more good work to be done. Boards using Policy Governance principles have many advantages in this respect, and the time and energy they save in avoiding some of the most common needless battles can then be directed toward doing so much more than Policy Governance principles require of them. For instance, better decision-making processes facilitate conversations and improve interactions between board members, between board and owners, and between staff members. The fields of emotional intelligence, appreciative inquiry, spiral dynamics and so many other disciplines can also help people to live, to work and to succeed together. By using Policy Governance principles, boards can overcome the frustrations of yesterday and enjoy the opportunities of tomorrow.

See also: Who’s at the Top? The True Nature of Hierarchy and Authority

How Policy Governance® Resolves the Common Complaints

The first of two parts

By Susan Mogensen

This article was originally published in Board Leadership No. 91 (May – June 2007).

I was puzzled. A question posted in an online discussion forum with the subject header, “Non-hierarchical governance structures,” asked for thoughts and information regarding “nonprofit governance structures that do not fit what has become the standard org-chart model of hierarchical chain of command.”1

As soon as you accept that boards are accountable to moral or legal owners, a hierarchy has been born. If we go one step further to say that CEOs are accountable to boards, we have established a three-tiered hierarchy that delineates clearly who is accountable to whom. Even if individuals in this system wear more than one hat (a CEO who also serves on the board, for example), there is a still a hierarchy of roles, and a principle of “sequentially linked authority” that “connects these elements of enterprise from owner on through to filing clerk,” as Carver stated in Issue 12.

My bewilderment stems from the understanding that governance is, by definition, a hierarchical concept, and so to seek non-hierarchical governance seems like looking for a clock that doesn’t keep time. I also appreciate the ways in which “Policy Governance seeks to ameliorate the potentially negative effects of hierarchy,” (John Carver, Board Leadership Number 12, March – April 1994) and accept that hierarchy is neither morally beneficial nor intrinsically non-beneficial. As Carver succinctly put it, “Hierarchy is.”

To contemplate no hierarchy at all would require at the very least that boards not be accountable to owners, or possibly to have owners, boards, CEOs and staff members all equally accountable to each other, in which case one can well imagine that all would be accountable to no one. It would be an interesting social experiment, perhaps, but other insights into creating highly effective human systems are more worthy of our attention.

Let us assume, then, that the troubles attributed to “hierarchical governance” do not relate so much to the existence of an order of who is accountable to whom, but rather to the irresponsible use of power, and other factors that must be indentified. John Carver was right: hierarchy just is. Now, how can we ensure that it is fair?

Now, there are instances of benevolent dictators or enlightened despot, who, for whatever reason, choose to be fair and to “transcend” their personal interest to do what’s best for the common good. So while there is still have a single authority at the top, at least the supreme autocrat is nice about it, most of the time.

Still, even if people are lucky enough to have a benevolent dictator, most would feel much more comfortable if this dictator were in some way accountable to them, the citizens. Just in case the dictator eventually loses his or her mind, friendly disposition, or general interest in the common good, citizens should have the ability to choose this person or another leader: let the will of the people decide.

Now, with this system, some progress has been made. By making this single authority accountable to the people, on a periodic basis, the risk that he or she will run amok is mitigated. Then again, even though this authority’s power is subject to review every few years, would it not seem better still if this authority’s power were not concentrated in the hands of one person, but rather shared in the collective hands of a group? This way, we can increase the odds that the diverse views of “the people” will emerge in the discussions of this group authority, and one would also have a more sustainable and practical way of keeping the singular authority — who reports to this group authority — in regular check.

If this operational side is led by one person (in the CEO function), the uppermost portion of our hierarchical organization looks more like an upside-down triangle, and not the pyramid that is commonly associated with authoritative organizations or systems. The emphasis here on having the top-level authority vested in the owners (citizens, shareholders, members, and so on) should resonate with anyone who believes in basic democratic principles, and, perhaps, those seeking new governance models.

The inherent fairness of this system is not attributable so much to the fact that, most commonly, the ownership group at the top is the largest group of people in the hierarchy, but rather that the whole entity is subservient to the ownership — moral, legal or otherwise. Unless one believes that it is wrong to own things, even if legitimately obtained, or (b) it is wrong to have a say about the things one owns, even if that authority is subject to the law and social acceptability, the primacy of the ownership community in a governance system has to be acknowledged. It is a telling characteristic of most governance discussions that this crucial starting point is overlooked or is viewed as unimportant.

The supremacy of owners does not depend on the form the entity takes, whether they be the citizens of a municipality, shareholders of a corporation, or members of a trade association. This ownership group is still positioned at the top of the hierarchy, subject only to legal, ethical and social laws and norms imposed on it by the broader society.

In the next installment of this article, I will attempt to answer this question by looking at the ways in which hierarchy is typically abused in organizations, how Policy Governance principles mitigate these common abuses, and how organizations using Policy Governance can not only mitigate these abuses, but also set new standards in how fairly people are treated. While the quest for “nonhierarchical governance structures” clearly seems misdirected, Policy Governance advocates recognize the desire to search for ways that organizations can be governed fairly and accountably. It is, after all, that very kind of search that led to the creation of Policy Governance over thirty years ago.

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1Posting in the ARNOVA listserv, Nonprofit and Voluntary Action Discussion Group, by Hildy Gottleib, June 16, 2006.

See also: Hierarchy: Necessary but Not Necessarily Evil (originally published in Board Leadership No. 98, July – August 2008)

The True Nature of Hierarchy and Authority

[VIDEO TRANSCRIPT BELOW]

Have you ever felt powerless in the face of an apparent top-down power structure?

Maybe the way we think about hierarchy is upside-down.

When people picture hierarchy, they commonly imagine something like this:

…With a CEO, or Chair & CEO at the top, a board of directors maybe off to the side, then senior managers and staff.

Power structures are inevitable. What’s missing is understanding the true source of authority in organizations, whether it’s a company, a nonprofit, a legislative body, or other type of public institution.

A CEO or Executive Director is not magically powerful because of their personality or background. Authority or power in any type of organization flows from the people in a legal or moral ownership position.

For example, in a company, the owners would be the shareholders. In a government, the owners would be its citizens. In an association however, it could be the members -or- people who value its mission.

Since these people are not usually in a position to make governing decisions directly, they elect or appoint a board of directors or legislators to make decisions on their behalf.

That authority flows from the owners, who influence the governing body, which then usually delegates to a CEO. The owners have causal authority, the board has directing authority, and the CEO has operational authority.

All that’s needed next is a system for translating the values of these owners into organizational performance.

Think back to the end of Wizard of Oz when Glinda told Dorothy that she had the power to return home all along.

Well, when we look at public institutions and corporations, people have far more power than they realize.

I’m Susan Mogensen of Brown Dog Consulting. To learn more about good governance principles, visit browndogconsulting.com.

See also:

• “The Ups and Downs of Hierarchy,” by Susan Mogensen, published in Board Leadership No. 91 (May – June 2007), and
• “Hierarchy: Necessary but Not Necessarily Evil,” by Susan Mogensen, published in Board Leadership No. 98 (July – August 2008), and
• Policy G: Take it from me! Podcast Episode #6, “Hierarchy.”

Both the Board and the CEO/staff make decisions relating to Ends and means. The board makes Ends decisions when it creates Ends policies, and makes means decisions when it creates Executive Limitations policies (i.e., about means the CEO/staff should not use or allow, even if they would be effective in achieving the Ends.)

The CEO/staff make Ends decisions when interpreting Ends policies, as well as when planning, achieving, and reporting accomplishments. The CEO/staff also make means decisions while carrying out day-to-day activities within the boundaries set by Executive Limitations.

Video transcript:

When it comes to accountability, clarity saves time. One way that Policy Governance principles enable clarity is in the distinction between Ends and means.

Ends policies describe a benefit, who experiences that benefit, and its worth or relative priority.

Means are everything else, and break down into means used by the board, and means used at the operational level.

Here’s an example of what an Ends policy at the global or broadest level might look like, showing the beneficiaries in red, the benefit in blue, and the worth in green. This language might be specified further in subsequent, lower levels of this policy.

Ends decisions are made on both the board and the operational sides. The board starts the process by creating Ends policies, and once the board is comfortable delegating any reasonable interpretation of the Ends, the CEO and staff take it from there.

Similarly with operational means decisions. The board creates Executive Limitations policies to start, and then the CEO and staff interpret and act in compliance with these boundaries.

So you can see, the board makes the upper level Ends and Executive Limitations (policy) decisions (shown in the blue oval), and then the CEO interprets and applies the policies (shown in the green oval). As such, both the board and the CEO make both Ends and means decisions.

Another Critical Step: Monitoring

There is one more critical step — the board will assess monitoring reports from the CEO to ensure that their interpretations of board policies are reasonable, and that evidence shows compliance or accomplishment.

Policy Governance includes ten principles, and they all work together to create a practical, logical system.

Our online learning program, the Board EXCELerator, helps people learn what these ten principles are, and how they work in practice. To get started, please set up a call with us at browndogconsulting.com.

This is Susan Mogensen, with Brown Dog Consulting.

See also: Strategic Planning, Policy Governance-style

What’s the Difference Between Vision, Mission, and Ends?

The Top Five Benefits of Executive Limitations

Originally published in Govern Update, April 2019.

“The servant-leader is servant first… It begins with the natural feeling that one wants to serve, to serve first.” – Robert K. Greenleaf

Customer service is a very well-known concept in management and organizational life, and it is widely acknowledged that serving customers well leads to increased loyalty, progress, and/or profit. A primary challenge for board members, however, is to understand and embrace the concept of “owner service,” whether those owners are members, a community, shareholders, or people sharing an interest in an organization’s purpose.

Boards using Policy Governance principles learn that governance is founded on the principle of owner-accountability, i.e., boards are accountable to legal or moral owners for ensuring that the organization achieves what it should. This principle means in turn that boards must engage in dialogue with owners to discern what relevant results look like, or what difference in the world the organization exists to make.

The fact that boards must engage with owners in this manner, combined with the board’s leadership position within the organization, requires boards to focus on owner service much moreso than what we typically know as customer service.

By serving owners effectively, boards help to create long-term sustainability for the organization and better Ends focus and achievement. Boards that embrace the power of owner-accountability also cultivate a more informed ownership and inspire future leaders.

Once a board has clearly determined who its legal or moral owners are, it can then turn its attention to owner service, a function that will be ongoing for as long as the organization exists. Five keys to fulfilling this role are:

Listening: Boards engage in conversations with owners to know what their values are, and in particular, explore owner values with respect to Ends as opposed to customer-level issues which are addressed by operational leaders. To unearth these values, the big challenge lies in designing questions that will stimulate thoughts and ideas about the difference in the world the organization exists to create rather than how the organization delivers programs, products, and services.

Getting smarter: All boards have a lot of collective wisdom ⏤ AND can benefit from getting even smarter. The key is in knowing what to get smarter about, and when it comes to owner service, that can mean understanding more about emerging political / economic / social / technological trends, legal matters, governance, the operational environment, etc.

Translating owner values into Ends: Once boards have engaged with owners ⏤ and therefore become a “little smarter” ⏤ their challenge is to ensure that board policies (especially Ends) actually reflect the values of owners, as well as the values of the board members themselves.

Monitoring Ends accomplishment: Of course, having relevant Ends policies is a very important thing; making sure those Ends have been reasonably interpreted and achieved is another. So boards must ensure that they monitor Ends achievement on a regular basis (usually once per year, perhaps more).

Communicating: While the first function of owner service is to listen, board service to owners also includes communication back to owners about key decisions made by the board and the progress the organization is making. Many boards fulfill this function at least annually via an annual general meeting/report. Boards also use ongoing communication via a website, newsletter, or other means.

And…the cycle repeats.

While boards using Policy Governance principles understand the importance and processes for owner service, they cannot usually expect all owners to fully appreciate the distinction between owner service and customer service. Ideally, by applying all Policy Governance principles, boards can ensure that customers or clients are being fairly and well-treated on the operational side of the organization, while board members focus their own efforts on being true and effective servant-leaders to the ownership interest.

One of the most unique features of the Policy Governance system is the Executive Limitations principle, which states:

“The board defines in writing its expectations about the means of the operational organization. However, rather than prescribing board-chosen means — which would enable the CEO to escape accountability for attaining Ends — these policies define limits on operational means, thereby placing boundaries on the authority granted to the CEO. In effect, the board describes those means that would be unacceptable even if they were to work. These are Executive Limitations policies.” (Carver, John, and Miriam Carver. A Carver Policy Governance Guide, the Policy Governance Model and the Role of the Board Member. John Wiley & Sons, 2009.)

This principle is often misunderstood or mischaracterized by people stating that the boundary-creating nature of Executive Limitations equates to being “negative,” when in fact the exact opposite is true. CEOs and staff people working with Policy Governance boards truly appreciate the freedom to operate inside clear boundaries, and often can’t imagine working in any other way.

The top five benefits of using Executive Limitations policies are:

5. Fewer policies are needed.

Because boards need only put off-limits those actions and situations that would be considered unacceptable even if they were effective in achieving the Ends — rather than prescribing all the steps or operational decisions the CEO and staff need to take — far fewer policies need to be created. Having fewer policies enables easier compliance, and allows more time and resources for achieving results. As we always like to say, “less is more”!

4. Board values are more clear.

Boardroom conversations about Executive Limitations policies lead to values-based decisions, and not the generation of long lists of operational tasks and ideas that might or might not be effective. Instead, the board expresses its values about ethics and the level of risk it is willing to tolerate while the Ends are being achieved, (a process also referred to as “Risk Governance”). Once these values are expressed in written policy, it is easier for staff to not only understand what actions and decisions are off-limits — including unforeseen situations — but also why.

3. Lines of accountability are preserved.

By putting certain means and situations off-limits, accountability for the outcomes of operational decisions more clearly rests with the CEO. Consider the situation if a board were to clearly prescribe or recommend multiple steps and actions the CEO must take. If those steps do not work in achieving the Ends, who is accountable? The board because it prescribed the steps in the first place, or the CEO for following the board’s instructions? Executive Limitations contribute to role clarity, and much less confusion or frustration around who is accountable for what.

2. Staff are empowered.

Working within clearly established boundaries instead of continually asking the board for approval (the “Mother-May-I?” approach) enables much more creative freedom and motivation for staff. Studies have shown that happy, empowered, and creative staff will perform at a much better level than those who are micromanaged or subject to constantly shifting expectations. (See: What Happens When You Empower Employees Rather Than Micromanage Them?).

1. Achieve more results, more quickly.

All of these advantages combined mean that organizations can be more efficient. Ends and Executive Limitations policies work hand-in-hand to ensure that the right results happen inside boundaries set by the board. Instead of having to choose between Results vs. Compliance, boards and organizations that use Policy Governance principles can have both, and save resources at the same time.

What if board members want to give advice?

CEOs can always seek advice from anyone they like, including board members! The distinction that must be respected is the difference between advice and direction. A CEO is free to ignore advice from one or more board members, but they cannot ignore the direction set by the board as a whole.

Board members who only want to provide advice or to act as management consultants for the CEO (as opposed to governing the organization) could find much more satisfaction by resigning from the board and seeking an Advisory Board role or some other position that requires their managerial experience, skills, and expertise.

Lastly, Executive Limitations are just one of four categories of policy used by Policy Governance boards, and the only one with this boundary-setting or “proscriptive” feature. For more information about what Policy Governance principles are and how they work in practice, take the Board EXCELerator, our online board education program.

See also: How to Resolve Operational Concerns, Policy Governance Walkthrough: How to Write a Monitoring Report, Skills Needed for Effective Board Leadership, and Policy Examples.

To check out many of the policy examples quickly shown in this video, visit the Policy Examples page.

Note: Credit for developing examples of policies consistent with Policy Governance principles is due to John Carver and Miriam Carver, the co-Authoritative Sources for Policy Governance.

See also: Reinventing Your Board: A Step-By-Step Guide to Implementing Policy Governance. Co-authored with Miriam Carver. San Francisco: Jossey-Bass, 1997; 2nd edition, 2006.

For most of us, calling people out can be a little awkward, and something we’d really rather not do. Especially when those people are our colleagues, friends, or our boss.

Imagine, for example, you’re a CEO, and you witness one or more board members saying or doing something that is clearly wrong or at odds with board policy.

If you don’t have a good governance system in place, you’re in an awkward position. Do you say something, and risk being judged or even punished for calling out the board member? Or do you avoid saying anything and allow the behaviour to continue?

A huge advantage of Policy Governance is any time a course correction is needed, you can remain very matter-of-fact and avoid personal attacks. All you do is refer to the relevant board policy, and ask if behaviours need to change or if the policy itself needs to be amended or deleted.

Remember, policies express the values of the board, and can be changed at any time. They carry far more weight than just one person’s opinion, and the board as a whole is responsible for following its own rules. Whether you’re a CEO or a board member – or even an owner – drawing the board’s attention to the policies it has in place is not controversial; it’s doing everyone a favour.

For more information on how Policy Governance can transform your board, visit browndogconsulting.com and set up a call.

Learn more about Policy Governance by taking our online board education program, the Board EXCELerator.

Policy Governance boards hiring a new CEO must get a clear understanding from the outset about the candidates’ familiarity and experience with the Policy Governance system. Hiring a CEO who has provided the board with false assurances on this question could jeopardize not only all of the hard work and investment the board has put into this system, but the operational capacity of the organization as well.

If a board member were to ask a CEO candidate, “How familiar are you with the Policy Governance system?,” the CEO candidate’s answer would usually be either:

Answer #1: “I understand it very well,” or,

Answer #2: “I don’t know much (or anything) about it,” or, “I am not sure how much I know about it.”

If the CEO candidate provides Answer #2, the follow-up question is, “Are you committed to learning about what Policy Governance is, why, and how we use it?” Given that, to date, very few CEO candidates actually have real experience working within the Policy Governance system, the board should consider a willingness to learn as a favourable response.

If, however, the CEO replies that they understand Policy Governance very well, the board must check for evidence of that knowledge and/or experience.

Questions about Policy Governance Training/Theory

Checking on a candidate’s understanding of Policy Governance theory is quite simple. Questions could include:

1. Did they attend the Policy Governance Academy?
2. Did they attend the two-day Policy Governance workshop delivered by John and Miriam Carver? (Note: both the Policy Governance Academy and the two-day Carver workshops are no longer available).
3. Do they have the PGP certification via Govern from Impact (formerly the International Policy Governance Association)?
4. Have they taken another in-person workshop or online course delivered by a qualified Policy Governance Academy attendee or PGP certificate holder? What was the length of the course(s)? Did the course/workshop include knowledge testing?
5. Which Policy Governance books have they read?
6. How many Policy Governance conferences or face-to-face advanced Policy Governance forums have they attended? Which one(s), and when?
7. Would they be willing to take a 33-question multiple choice quiz on Policy Governance? (The PG360 Quiz)
8. Which Policy Governance principle(s) do they feel are most important for the CEO to apply well? Why?
9. If someone were to say, “Policy Governance gives too much power to the CEO,” would they agree or disagree with that statement, and why?
10. What would they say are the top three advantages for boards and organizations using Policy Governance?

Questions about PG Experience/Implementation

Questions and scenarios to use to gauge a candidate’s practical experience using Policy Governance could include:

1. Have you previously worked within an organization that used Policy Governance? Which one(s)?
2. (If “Yes” to Question 1) What was your role, and what did you learn about PG principles in action?
3. Have you ever written or contributed to a monitoring report for submission to a PG board? If “yes,” for which policy(ies), and what was that process like?
4. Have you ever worked with a qualified PG coach or facilitator? Who was it, and how would you describe that experience?
5. If you ever had a challenging time working with a Policy Governance board, what would you do?
6. Here is an example of one of our Executive Limitations policies. Just brainstorming here, what might be elements that would go into your interpretation of this policy?
7. Here is an example of a monitoring report. What do you notice? Do the interpretations look reasonable to you? Why or why not?
8. If at any time one or more board members were calling you and repeatedly making requests that would take your time away from other work, what would you do?
9. If you ever witnessed one or more board members behaving unethically in some way, what would you do?
10. Are there any PG principles that you would want to apply at the staff/operational level as well? Which ones, and how?

To ensure your board and staff understand Policy Governance principles, take the Board EXCELerator, our online board education program, or contact us for more information about workshops and coaching.

A client recently shared with us that his organization has grown over 1200% in the past several years and this growth would not have been possible without Policy Governance.

We’ve heard a similar refrain from many others, including board members and CEOs saying they would never again serve on or for a board that is not using Policy Governance. Life is too short for governance dysfunction!

Pulling the Plug on Policy Governance

That said, we have witnessed some organizations inexplicably decide to pull the plug, which — unless legally bound to use Policy Governance — is every board’s right to do.

In almost 25 years we’ve never heard any sound rationale for giving up on these principles from someone who actually understood what Policy Governance is. In the absence of logical reasons for ditching the system, what other factors might be at play? We speculate as follows:

Money: A board member or CEO wants the unfettered ability to steer jobs and contracts to friends, or to pursue a hidden agenda or use the organization for personal benefit. See also: Spurious Influences Derail Delegation.

Laziness or apathy: Good governance doesn’t happen by accident; it takes learning, time, energy, and people taking personal responsibility for their commitments. Sometimes board members have a change of priorities in their lives, or simply stop caring, but then continue to linger instead of resigning from the board.

Ego, Power, and Fear: A dominating or aggressive personality takes over, and people are bullied or become afraid to speak up or to refer to the policies and values meant to underlie all decisions. (See also: Money.) Principled people and rule followers are Kryptonite to bullies, but sometimes these good people give up in search of peace.

In any case, let’s say your board has a new set of board members and/or a new CEO, and despite not knowing what Policy Governance actually is or how it works, they are determined to remove the board’s governance system and to replace it with their own ideas, the S.A.D. Governance Model, or myriad practices proposed by a law firm or traditional governance consulting company. Here are five steps the board could take.

Five Steps to Uninstall Policy Governance

Step One: Pass a board resolution to formally cease the application of Policy Governance principles. For example, “John moves, seconded by Paul, that the board will no longer govern using the Policy Governance system.”

Step Two: Pass a board resolution to declare that all board policies (including all Ends, Executive Limitations, Board-Management Delegation, and Governance Process policies) are no longer in effect. These policies — if developed consistently with Policy Governance principles — have many Policy Governance concepts baked into them, e.g., monitoring, accountability, ownership linkage, clarity of delegation, etc.

While they will no longer be in effect, be sure to archive these policies in case a future board wants to return to using Policy Governance and needs a starting point for developing its new board policy manual. If the board still wants some policies on the books, or hires an outside firm to create a traditional “Policies & Procedures Manual,” it can now start fresh without any confusion around whether the board is still using Policy Governance and its old policies, or not.

Step Three: Speaking of confusion, it is critical that all references to using Policy Governance be removed from the organization’s website or any publicly available documents. It would be highly deceptive to legal/moral owners, the media, regulators and governmental agencies, other stakeholders, and to Policy Governance consultants, students, writers, and researchers, if an organization claims it uses Policy Governance but, in fact, does not. Further, the board should be transparent about wanting to try something completely different.

Step Four: Ensure the board and organization have legal counsel.

Step Five: Buckle Up! Interesting times await.

In Case it Needs Mentioning…

Brown Dog Consulting does not recommend uninstalling Policy Governance. It is far easier, less costly, and better for results-oriented organizations to get qualified training on how this system works, and to access advice, coaching, tools, and resources that help with implementation. Policy Governance is a set of principles, not practices or specific rules, and so boards have a lot of flexibility in how they apply the principles.

As we often say, one thing guaranteed to be more challenging than good governance … is bad governance.

See also: Board Education, The Benefits of Policy Governance, The Board EXCELerator