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The Board has full accountability to the owners for every outcome that occurs in the organization. At the same time it can not expect to actually do the work of the organization so it usually hires a CEO and delegates most of the authority for 'getting it done' to that position. Even though they have delegated authority they retain full accountability.
This presents a dilemma. On the one hand, the Board would like to have “hands-on” control of operating decisions to ensure that the organizational performance it is accountable for is accomplished. On the other hand, by involving itself in operating decisions, often referred to as 'micro-managing', the Board overloads its own plate, interferes with the CEO's ability to get their job done, limits the ability of the CEO to exercise the professional knowledge they were hired for, limits operational and strategic flexibility by requiring board approval for most things, and relieves accountability of the CEO to the Board because the Board is “calling the shots”.
How can this pickle be resolved?
Carver Policy Governance? offers a system that includes the ability to
solve the dilemma. It consists of clearly defining what it is the organization
should achieve, covering the Board's concerns and worries in a manner
that allows CEO freedom, protecting the Board's accountability by making
sure that the CEO has clearly been delegated both authority and accountability,
and ensures CEO performance through a system of formal and scheduled monitoring
of organizational performance. And it does all of this in formal policy.
Stated Outcomes
The Board clearly states what outcomes it expects by defining in policy
what benefits the organization exists to produce, who should receive those
benefits, and what comparable value those benefits for those recipients
are worth. It includes any priorities it holds in terms of the benefits
themselves or different groups of recipients.
Executive Limitations
The Board's worries and concerns may be addressed in a set of policies
that tells the CEO what is not acceptable in terms of methods, events,
and organizational situations or conditions. All of those things that
it would find unacceptable, even if the desired outcomes were achieved,
are included. Areas often included are Financial Condition, Protection
of Assets, Treatment of Staff, and Treatment of Customers (to name a few).
Accountability of the CEO
With the outcomes and unacceptable conditions/methods defined, the CEO
is clearly charged with accomplishing the outcomes while avoiding the
unacceptable conditions/methods. That is it.
Control with Freedom
As a result of stating outcomes and listing the unacceptable, the CEO
knows exactly what the target is and exactly what to avoid. Other than
the unacceptable conditions/methods, the CEO is free to use their professional
knowledge and innovativeness to figure out how to achieve the outcomes.
Assurance of Performance
To make sure that the CEO actually is accomplishing the outcomes and avoiding
the unacceptable, the Board uses a formal process of monitoring each and
every policy. Taken as a whole, the policies spell out all of the outcomes
and all of the unacceptable conditions/methods. Each policy will be monitored
a minimum of once per year as determined by the Board. Only data that
show CEO compliance with the policies will be accepted. The only catch
is that the CEO is only accountable for a reasonable interpretation of
what has been formally passed by the Board and written into policy.
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 eric.craymer@PolicyGovPartners.com and Susan may be reached at susan.stratton@PolicyGovPartners.com.
The Partners in Policy Governance website is at www.PolicyGovPartners.com
