From John Carver’s (Carver Governance Design) Website (www.carvergovernance.com) circa 1999
Policy Governance® Defined
By Dr. John Carver, PhD.
John Carver’s Policy Governance® model is the world’s only
complete, universal theory of governance—a conceptually coherent paradigm
of principles and concepts (not of structure). The model enables boards—as
"servant-leaders" of shareholders, public, members (or other "ownership"
equivalent)—to ensure that organizations achieve board-stated goals
and conduct themselves with probity.
• Because it is a complete theory, it informs board planning, mission,
committee work, agenda control, budgeting, reporting, CEO evaluation, management
relationships, fiduciary responsibility, and all other aspects of the board
job.
• Because it is universally applicable, it works for organizations that
are new or mature, large or small, profit or nonprofit (including government),
and troubled or successful.
• Because it is carefully crafted, it enables an efficient summing of
board wisdom capable of adequate control without micromanagement.
Policy Governance® in a Nutshell
Leadership is an important, yet elusive concept. It takes on different forms
in different settings. The intent of Policy Governance® is to give operational
definition to "leadership" as it applies in the specific context
of a governing board. It addresses the questions: "How can a group of
peers be a responsible owner-representative, exercising authority over activities
they will never completely see, toward goals they cannot fully measure, through
jobs and disciplines they will never master themselves? How can they fulfill
their own accountability while not, at the same time, infringing unnecessarily
on the creativity and prerogatives of management? How can they do so when
within themselves they disagree, there is a limited time for the task, and
there is an unending stream of organizational details demanding inspection?"
All fields of endeavor encounter their peculiar dilemmas and challenges. It is common in natural development of any pursuit for experience to yield helpful tips and shortcuts. To the extent a field continues to advance, frameworks or paradigms of thought develop in which the principles and concepts provide more effective guidance than tips ever can. Management as a social science has certainly seen such a growth over the centuries - most strikingly in the past few decades. Technologies of management from time-and-motion, to MBO, to CPM, to Total Quality have characterized the rapidly growing integrity of the management function.
But while the performing function (management) has undergone impressive growth
in this century, the purposing function (governance) has remained the least
developed element in enterprise, typically the orphan of management more than
its master. This is true in business, nonprofit and governmental bodies, though
the typical flaws differ some from one setting to the other. We regularly
accept a level of mediocrity in board process that would never be accepted
in management. Policy Governance is a departure from that primitive state
of conceptual development. It is a radical redesign of board leadership that
makes new sense of the board-staff relationship, planning, evaluation, and
all other aspects of the board job. Unlike virtually every other approach
to the board challenge, Policy Governance is a conceptually coherent model,
intended as a complete replacement of the deeply flawed traditional wisdom
about boards.
In light of the leadership opportunities made possible by Policy Governance,
governance as traditionally and widely practiced in all settings appears ill
conceived, ineffective, and wasteful. Watching a city council, school board,
social service board, or trade association board reveals varying degrees of
ritual, rework, trivia, and failure to act as a group. Watching a corporate
board reveals a CEO-driven charade in which directors are more advisors in
the CEO's service than governors in the service of stockholders. Our missions
and our own integrity demand that boards govern rather than either rubber
stamp or meddle. Our busy lives demand that time, energy and wisdom be well
used and that boards and managements should both be optimally empowered in
their work.
The message of Policy Governance is not that individual boards should work
harder toward what has long been held out as the ideal for board behavior,
but that the ideal itself is flawed. By far most literature currently available
to help boards is written within the patchwork ideas of the past. Books, articles,
course work, seminars, consultants, and associations teach outdated forms
of governance we should have discarded long ago. This is a primitive field,
indeed.
And it means that school boards, city councils, corporate boards, social service
boards, trade association boards and a host of others are wasting the bulk
of their potential leadership and wasting their operational staff resource
due to inadequate leadership(whether laissez faire or intrusive). It means
that virtually all sources to which they turn for help only assist in miring
them more deeply in outdated governance ideas. Thus it is that most board
training is merely teaching boards how to do the wrong things better than
they did them before.
It has long been said that boards should stick to making policy and leave
administration to managers. But conceptual development of principles and rules
for policy making has been scant, consisting mostly of ideas inappropriately
borrowed from internal management rather than crafted for the specialized
role of governance. Policy Governance, as its name implies, is about governing
by policy, but it is policy of a more sophisticated nature than policy as
we have heretofore loosely defined it. It has also long been said that boards
should be (a) more involved and (b) more arm's-length. The truth is that boards
should be more involved in some things and less involved in others. Only a
creditable model - not anecdotal wisdom - can reliably and powerfully help
a board and its CEO know which is which.
The model is a thorough working theory of board leadership that cannot be
fully presented in a brief exposure. Nevertheless, here are a few of its basic
tenets. Let's begin with the purpose of any governing board's job:
The purpose of [1] the board job is, [2] on behalf of some ownership, [3]
to see to it that the organization[4] achieves what it should and [5] avoids
what is unacceptable.
1. The board job. It is the board's responsibility to govern; the board has
a commensurate authority to govern. Individual board members do not. That
is, whatever authority is legitimately wielded by a board is wielded by the
board as a group. Hence, a CEO is bound by what the board says, but never
by what any board member says. A board should pledge to its CEO that it will
never hold him or her accountable for keeping board members happy as individuals
and will never hold him or her accountable for any criteria except those expressed
officially by the full board. In other words, the board as a body is obligated
to protect its staff from the board as individuals.
For nonprofit and governmental organizations, the "one voice" aspect
of governance is regularly lost by having a host of board committees running
about involving themselves in issues ostensibly delegated to staff. Staff
members end up taking direction from segments of the board. Common committee
roles do grave damage to the integrity of CEO delegation. Personnel, finance,
program, publicity, and other such committees are the prime offenders. The
board should not have committees either to help or instruct staff. Board members
can serve on staff committees if asked (removing their board hats in the process),
but foisting board help and advice, at best, makes a mockery of the board-CEO
relationship and, at worst, renders the CEO no longer a CEO.
The suggestion here, also, is that the board has a specific job to do, a specific
set of "values added" that justify its position. This differs from
having a job that is essentially looking over everyone else's shoulders, reacting,
and largely being steered around by whatever staff have been doing (the show-and-tell
board meeting of staff reports) or are thinking about doing (reviewing and
approving detailed plans). That a board has its own job to do means, if the
board is responsible for getting its own job done, that board agendas should
be the board's agendas, not the CEO's agenda for the board. Yet most board
agendas are products of those who work for the board - a practice that would
rarely occur anywhere else in an organization.
2. On behalf of some ownership. Boards rarely "own" an organization
themselves. They ordinarily are a microcosm of a larger ownership. The owners
may be legal owners (stockholders for an equity corporation) or more a "moral"
ownership(the whole community in the case of a local social service organization).But
in any event, the board speaks on their behalf, a task that requires (a) knowing
who the owners are and what their desires are, (b) being able to distinguish
owners from customers (clients, students, patients) and other stakeholder
groups. Finding ways to link with owners even more than with management is
a major challenge to any board. Most nonprofit and governmental attempts to
do so deteriorate into linkage with disgruntled customers instead(watch any
city council or school board meeting).
3. To see to it. Seeing to it implies a commitment to assure, not simply to
hope that things come out right. Seeing to it that things come out right requires
three steps: First, the board must describe "right" - that is, the
criteria that would signify success. These are noted below. Second, the board
must hold someone accountable for reaching these criteria. This is most easily
done by using the CEO function, for that role allows the focusing of performance
in one individual even though actual performance occurs due to many individuals.
Proper use of the CEO role has been hard to achieve in business and in some
nonprofits and government in that boards abdicate to their CEOs until disaster
is full blown. Proper use has been hard to achieve in many nonprofits and
government (though not so much in business) in that boards interfere with
their CEOs, not cleanly delegating sufficient authority to them. Third, the
board must systematically and rigorously check to see if criteria are being
met, that is, the board must monitor performance regularly.
Traditional board operation fails in all three areas, especially in the first
and third. Outcome expectations (what difference is to be made in recipients'
lives) are rarely or incompletely stated. Acceptability of practices and methods
is rarely clarified. Hence, when a board tries to monitor, it has no criteria
against which to do so. The result is not monitoring, but foraging about.
Observe any board approving a financial statement or a budget: the board has
no idea what it would disapprove, for it has given the CEO no criteria to
be met. Traditional board "development" will help a board to follow
this path with more ability to read financial statements, but does nothing
to help the board find a more effective way to use its time.
4. Achieves what it should. What should any organization achieve? This is
the most important aspect of instructing the CEO. The only achievement that
justifies organizational existence is that which causes sufficient benefits
for the right recipients to be worth the cost. What good is this organizations
to accomplish, for whom, at what cost or relative worth? (I refer to these
ways of describing achievement as "ends" as opposed to means.)Traditional
approaches to governance have allowed boards to sidestep this crucial determination.
We have focused far more on what activities the organization will be engaged
in, not the consumer results to be achieved.
Consequently, boards give their CEOs credit for programs, services, and curricula
rather than demanding data (even crude data arebetter than none) on whether
the right recipients received theright results at the right cost. In order
to lead, boards mustlearn that services, programs and curricula have no value
exceptas they produce the desired ends. Therefore, boards are well-advisedto
look past these operational means and on to the ends that reallymatter.
5. Avoids what is unacceptable. Putting the board's emphasis on ends is a
powerful tactic for board leadership, but the board cannot forget that it
is also accountable for the means as well. "Means" include not only
practices and methods, but situations and conduct as well - in other words,
all aspects of the organization that are not ends (given the definition above).Concerning
itself with means, however, is ordinarily an opening for boards to become
entangled in operational details. This is where micro-management and meddling
are born. It is a dilemma: on the one hand, boards are accountable for staff
practices and situations, yet dealing with them directly trivializes the board
job. Policy Governance offers a safer way for boards to deal with this dilemma:
The board can simply state the means that are unacceptable, then get out of
the way except to demand data (monitor) that the boundaries thus set are being
observed.
As counterintuitive as this approach sounds, it works magically. The board
can succinctly enumerate the situations, circumstances, practices, activities,
conduct, and methods that are off-limits, that is, outside the authority granted
to the CEO. For most boards, this can be done in a half-dozen pages dealing
with staff treatment, financial management, compensation, asset protection,
and a few other areas of legitimate board concern. These proscriptions avoid
telling the CEO how to manage, but do tell him or her how not to manage. Although
verbally phrased in an intentionally negative or limiting way (to avoid the
board's tendency to slip back into prescribing means), this approach is psychologically
quite positive. The message to the CEO is, with regard to operational means,
"if the board has not said you can't, you can."
To fulfill board leadership in this more effective way, the board produces
four categories of policies in Policy Governance: (1) policies about ends,
specifying the results, recipients and costs of results intended, (2) policies
that limit CEO authority about methods, practices, situations, and conduct,
(3) policies that prescribe how the board itself will operate, and (4) policies
that delineate the manner in which governance is linked to management. These
are exhaustive policy categories; except for bylaws, there is nothing else
for the board to decide. Moreover, they are policy categories designed for
the job of governing, not for the job of managing as are traditional categories
used for board policy-making.
There is a great deal more to the Policy Governance® model - some critical
principles have been omitted from this brief summary - but these comments
provide a glimpse of the wide differences between conventional practice and
the Policy Governance redesign of board leadership. The implication is no
less than an assertion that what most boards do most of the time is a waste
of time and inimical to good governance and good management. It is a hopeful
model, in that it asserts that the process is more the problem than the people.
(Good managers on boards, by the way, are caught up in almost the same errors
as non-managers.) No matter how dedicated or intelligent, people cannot be
all they can be in a poor system - and that is exactly what boards have been
handicapped with. Policy Governance provides an advanced framework for strategic
and visionary board leadership.
(Policy Governance is a registered trademark of Carver Governance Design)