Don’t Let it Happen to your Organization
By Eric Craymer and Susan Stratton

While the current report of embezzlement at Eaton Rapids Housing Development Authority reported in the April 6, 2004 Lansing State Journal is sad, it is not an isolated event. It is becoming more and more common to read similar reports in the daily news. Each story is slightly different, but at the same time hauntingly familiar. It goes something like this (for each set of parenthesis, pick one of the words within them):

The (charitable organization, private company, public company) is (missing funds, being investigated, conducting an audit) because (it cannot account for funds, fears the accuracy of its numbers, has allegedly mis-spent appropriated funds). The potential source of the problem is the very trusted (clerk, CFO, CEO, Executive Director, board, Treasurer, management team, General Manager). As a result, and in order to fix the problem, the (CEO, board, government) is requiring (outside directors, a change in management, a new audit firm, additional financial controls).

Unfortunately, the solutions generally offer only incremental improvements to a small piece of the problem. The real problem is one of governance.

Who is supposed to represent the interests of the owners, be they shareholders, taxpayers, or a community? Who is supposed to assure that the right things happen and that bad things do not? That would be the board.

The blame for failure at the board level to accomplish these two tasks is not as often the people as it is the system. For some time, our organizations have functioned under a misunderstanding as to the board’s role and its effective functioning.

Board work is often believed to be playing either support to or watchdog of management. It has a poorly defined process for getting its work done, beginning with the definition of the work itself and continuing on to the structures and processes with which it conducts it. As a result of this:

As a result, bad things happen, and the boards, and the public, are totally surprised.

The underlying systemic problem will not be solved by addressing the mechanics of how the board operates within the current system. Rather, it will be solved by changing how boards see their role in the organization and by providing them with a system of governance that offers the structures and processes to support them in that role. The new role is that of organizational leadership, representing the ownership whose interest they theoretically are there to stand for.

There are many governance processes available that can improve how the board does its work. There is only one known system of governance that addresses the role of the board, principles for governing, structures for healthy relationships, and processes to assist appropriate behavior in an integrated and complete package.

This governance system was invented by Dr. John Carver out of his own frustrations as a CEO of community mental health organizations and it is called Carver Policy Governance?. In Policy Governance, the nature of board work and the relationship between the CEO and the board are designed to overcome the flaws that lead to disaster and wasted resources. Among these new principles and processes are:

About Eric Craymer and Susan Stratton

Susan and Eric have independent consulting companies but have joined forces to create Partners in Policy Governance® which is dedicated to assisting boards in becoming more accountable and effective in their governance. Eric may be reached at [email protected] and Susan may be reached at [email protected].

Steps for the Board to Improve Accountability and Safety

Based on the Principles of Carver Policy Governance®