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Policy Governance

Also known as the Carver Model, Policy Governance® is a set of ten interlocking principles, that when used together, operate like a system, giving boards of directors, or any governing body, the ability to translate the wishes of legal or moral owners into organizational performance.[1]


What Policy Governance is NOT![2]
Policy Governance is not a specific board structure. It does not dictate board size, specific officers, or require a CEO. While it gives rise to principles for committees, it does not prohibit committees nor require specific committees.

  • Policy Governance is not a set of individual “best practices” or tips for piecemeal improvement.
  • Policy Governance does not dictate what a board should do or say about group dynamics, methods of needs assessment, basic problem solving, fund raising, managing change.
  • Policy Governance does not limit human interaction or stifle collective or individual thinking.


Basic Tenets of Policy Governance[3]
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.

  • 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.
  • 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).
  • 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.
  • 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.
  • 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 counter intuitive 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."


Board Decisions Are Predominantly Policy Decisions[4]
Policy is here defined as the value or perspective that underlies action. Board policies express the board's soul, embody the board's beliefs, commitments, values, and visions, and express its wisdom. Board policies should be generated by the board itself, not brought to it from other sources. Policies develop out of the board's struggle with values, from the stage of initial musing to crafting a written document. The board decides what to have policies about, and to what level of detail it will develop them. Its policies fit into four categories:

  • Ends — The board defines which human needs are to be met, for whom, and at what cost. Written with a long-term perspective, these mission-related policies embody the board's vision, and the organization's reason for being.
  • Executive Limitations — The board establishes the boundaries of acceptability within which staff methods and activities can responsibly be left to staff. These policies limit the means by which Ends shall be achieved.
  • Board/Staff Linkage — The board clarifies the manner in which it delegates authority and how it evaluates performance relative to ends and limitations.
  • Governance Process — The board determines its philosophy, its accountability, and the specifics of its own job.

Except for what belongs in bylaws, these categories of board policy contain everything the board has to say about values and perspectives that underlie all organizational decisions, activities, practices, budgets, and goals.


Policy Governance
source: Governance Coach


Principles of Policy Governance[5]
Policy Governance is a precision system that promises excellence in governance only if used with precision. These governance principles form a seamless paradigm or model. As with a clock, removing one wheel may not spoil its looks but will seriously damage its ability to tell time. So in Policy Governance, all the above pieces must be in place for Policy Governance to be effective. When all brought into play, they allow for a governing board to realize owner accountability. When they are not used completely, true owner accountability is not available. All other practices, documents, and disciplines must be consistent with these principles. For example, if an outside authority demands board actions inconsistent with Policy Governance, the board should use a 'required approvals agenda' or other device to be lawful without compromising governance.

  • 1. Ownership: The board connects its authority and accountability to those who morally if not legally own the organization—if such a class exists beyond the board itself—seeing its task as servant-leader to and for that group. “Owners,” as used in the Policy Governance model, are not all stakeholders, but only those who stand in a position corresponding to shareholders in an equity corporation. Therefore, staff and clients are not owners unless they independently qualify as such.
  • 2. Governance Position: With the ownership above it and operational matters below it, a governing board forms a distinct link in the chain of command or moral authority. Its role is commander, not advisor. It exists to exercise that authority and properly empower others rather than to be management’s consultant, ornament, or adversary. The board—not the staff—bears full and direct responsibility for the process and products of governance, just as it bears accountability for any authority and performance expectations delegated to others.
  • 3. Board Holism: The board makes authoritative decisions directed toward management and toward itself, its individual members, and committees only as a total group. That is, the board’s authority is a group authority rather than a summation of individual authorities.
  • 4. Ends Policies: The board defines in writing the (a) the results, changes, or benefits that should come about for (b) specified recipients, beneficiaries, or other targeted groups, and (c) at what cost or relative priority for the various benefits or various beneficiaries. These are not all the possible benefits that may occur, but are those that form the purpose of the organization, the achievement of which constitutes organizational success. Policy documents containing solely these decisions are categorized as Ends in the terminology of the Policy Governance model but can be called by whatever name a board chooses, as long as the concept is strictly preserved.
  • 5. Board Means Policies: The board defines in writing those behaviors, values, practices, disciplines, and conduct of the board itself and of the board’s delegation and accountability relationship with its own subcomponents and with the executive part of the organization. Because these are non-ends decisions, they are called board means to distinguish them from ends and staff means. All board behaviours, decisions and documents must be consistent with these pronouncements. In the terminology of the Policy Governance model, documents containing solely these decisions are categorized as Governance Process and Board-Management Delegation but can be called by whatever name a board chooses, as long as the concept is strictly preserved.
  • 6. Executive Limitations Policies: 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 theywork.

Policy documents containing solely these decisions are categorized as Executive Limitations in the Policy Governance terminology, but can be called by whatever name a board chooses, as long as the concept is strictly preserved.

  • 7. Policy “Sizes”: The board’s decisions in Ends, Governance Process, Board-Management Delegation, and Executive Limitations are made beginning at the broadest, most inclusive level and, if necessary, continuing into more detailed levels that narrow the interpretative range of higher levels, proceeding one articulated level at a time. These documents are exhaustive, replacing or obviating board expressions of mission, vision, philosophy, values, strategy, and budget. They are called policies in the terminology of the Policy Governance model but can be called by whatever name a board chooses, as long as the concept is strictly preserved.
  • 8. Delegation to Management: If the board chooses to delegate to management through a chief executive officer, it honors the exclusive authority and accountability of that role as the sole connector between governance and management. In any event, the board never delegates the same authority or responsibility to more than one point.
  • 9. Any Reasonable Interpretation: In delegating decisions beyond the ones recorded in board policies, the board grants the delegatee the right to use any reasonable interpretation of those policies. In the case of Ends and Executive Limitations when a CEO exists, that delegate is the CEO. In the case of Governance Process and Board-Management Delegation, that delegatee is the CGO (chief governance officer) except when the board has explicitly designated another board member or board committee.
  • 10. Monitoring: The board monitors organizational performance solely through fair but systematic assessment of whether a reasonable interpretation of its Ends policies is being achieved within the boundaries set by a reasonable interpretation of its Executive Limitations policies. If there is a CEO, this constitutes the CEO's evaluation.


Criticism of the Policy Governance Model[6]
Industry Canada in the Primer For Directors of Not-For–Profit Corporations expressed concern about Policy Governance. They argue that “Some models of board governance — notably originating in the United States — advocate that directors limit themselves to policy matters only and leave responsibility for administration and day-to-day matters with the executive staff of the corporation. This limited role for directors does not reflect the obligations that are legally imposed upon directors.” Hugh Kelly QC of the Canadian legal firm Miller Thomson LLP responded directly to this criticism concluding that: “The board of a Canadian charitable corporation that adopts Policy Governance has performed 'due diligence', and fulfilled all legal obligations imposed upon its directors. On a comparative basis, such boards and directors are far ahead of most corporations, even those in the world of commerce, in observing their legal and moral obligations.” Others have expressed concern that the Policy Governance model may not be as universally applicable as suggested by Carver and that the model has a tendency to break down during times of crisis. Addressing the universality concern, proponents of Policy Governance argue that, because the model is rooted in the generic purpose and nature of board authority rather than current practice of the specifics of any industry, at the level of its fundamental principles Policy Governance is indeed applicable to all governing boards. Proponents also argue that at times of crisis, holding onto the precepts of Policy Governance is in fact key to organizational survival and that rehearsing the use of the system in light of various scenarios can help build an organization's resilience to risk. Two more widely accepted criticisms are that the model demands a level of precision that boards can find hard to achieve — even though it is usually no more than they demand of their staff — and without care, that the model's use can deteriorate over time and its protections fail to function. Many proponents point to the challenges presented by board member turnover and the need, as with any other professional discipline, for boards to continuously invest in their own training and support. Some authors and users of the model may misinterpret the distinction between 'ends' and 'means' to require a strict separation of responsibility between the board, which should focus exclusively on 'ends', and management, which should focus on the 'means' by which to achieve those ends. This interpretation is not supported by a close reading of the Policy Governance model. Carver states: "because the board is accountable for everything, it is accountable for means as well. Accordingly, it must exercise control over both ends and means, so having the ends/means distinction does not in itself relieve boards from any responsibility". Another, related, misinterpretation is a belief that boards following Carver's model should not involve themselves with detailed understanding and/or monitoring of the organization's activities. This belief is based on Carver's caution against excessive intrusion into the operational details. However, Carver is clear that boards remain accountable to their owners for all operational details and must therefore control them—the question is how to make this practical. As a way to avoid excessive intrusion, he advises the use of 'nested sets' of expectations, in progressively more narrow policy language, in order to define its meaning with greater precision until: "At some point, the board will have narrowed its words to the point that it can accept any reasonable interpretation of those words. Now the board has reached the point of delegation". Because a board has ultimate power over the organization, to include all its operations, some critics point out that a board should not delegate any of its authority, because it ignores major areas of its responsibility if it "hands over" part of its power to the CEO. This criticism points out that delegation, the granting of authority to the CEO, can become an "abdication" of the board's responsibility to control all organizational actions. Delegation can become an abdication if it occurs without adequate supervision. Delegation accompanied by careful monitoring to ensure it achieves the results intended is an exercise of the "due diligence" expected of the board. Further criticism relates to the failure of some boards to follow their own policies. Following policies that guide the board in its own governance process, and its relationship with the CEO, is an act of self-discipline by which the board imposes checks and balances on its own power. These self-limiting policies protect staff from board actions that might get in the way of successful organizational performance. They also protect the CEO, and the board itself, from possible actions of individual board members. A board may give a false sense that it is acting in the best interests of the organization while ignoring its own policies, and therefore promotes a "veil" of legitimacy behind which it acts in capricious ways. Such a board distracts itself from the real job boards should be doing. Ultimately, whether a board remains true to its own policies is a matter for the board itself to determine. Carver notes this concern when he acknowledges that Policy Governance will not make "a bad board good."


See Also

IT Governance
Corporate Governance
Information Governance (IG)
Information Security Governance
Social Media Governance
Data Governance
eGovernance
Compliance
Risk Management
Risk IT Framework
Enterprise Risk Management (ERM)
Information Management (IM)
Resource Management
Records Management (RM)
Content Management (CM)
Enterprise Content Management (ECM)
Enterprise Data Integration (EDI)
Enterprise Information Integration (EII)
Enterprise Information Management (EIM)
Board of Directors
Staggered Board of Directors


References

  1. Defining Policy Governance BDC
  2. What Policy Governance is NOT! GovernanceCoach
  3. What are the Basic Tenets of Policy Governance? PGC
  4. Board Decisions Are Predominantly Policy Decisions UAA.org
  5. What are the Principles of Policy Governance? policygovernanceassociation.org
  6. Criticism of the Policy Governance Model Wikipedia


Further Reading

  • The Primary Differences Between Traditional Governance and Policy Governance Governing.ca
  • Policy Governance® in a Nutshell John Carver
  • Strategic Planning with Policy Governance® Eric Craymer
  • Policy Governance: A New Look CGN