The values of the owner(s), board members and organizational leaders determine, both directly and indirectly, the culture of the organization, which in turn is a major determinate of the success of the organization. In other words, successful values produce successful organizations, and visa versa. Organizational effectiveness and success begin in the board room, and can be measured — and affected — by the quality of board organization, interaction and operation.
While non-profit, public and corporate boards of directors are under increasing scrutiny, they are also suffering from an inability to adequately govern the organizations and businesses for which they are accountable. Two trends tend to dominate too many boardroom meetings:
- micromanagement, and
- abdication of board responsibilities to management.
Neither of these trends contributes to success. And both tend to result in various forms of manipulation for short range purposes and power struggles among those involved. Often the root problem is the dysfunction of proper authority.
Strengthening or improving either of these trends cannot provide assistance or increase the excellence of board governance that is needed to produce organizational success.
Policy Governance® is the registered trademark of John Carver’s board organization model that he has positioned to address and solve the various problems of board governance and accountability faced by non-profit, corporate and governmental organizations. Carver’s model requires not just a reorganization of board structure, but provides a holistic or conceptually complete analysis and redesign of the relationship between 1) company or organization owners, 2) boards of directors, and 3) management.
Carver notes that the lines of accountability and responsibility between and among these three aspects of businesses, organizations and governments (owners, directors and management) are usually confused and unclear, which results in confusion of accountability and responsibility throughout the organizational structures. This confusion then gives rise to various inefficiencies that management is constitutionally unable to address, and provides sufficient “wiggle room” to allow for accidental and intentional misrepresentations that increasingly subject boards of directors to various kinds of organizational, moral and legal difficulties.
The Policy Governance® Model
Carver suggests a complete redesign of the relationships and responsibilities of 1) owners, 2) boards and 3) management based upon Policy Governance® or governance through policy making by the board. At the heart of his model is the clear differentiation between management policies made by the board, and staff and employee policies and procedures made by management. Boards should not manage staff or employees, nor should management set its own governing policy.
The model is not difficult to understand, but because of established behaviors, human psychology, and political conflicts implementation is more difficult than it should be. In addition, the very people who most need to envision and adopt a better policy making model are often the least likely to be able to do so simply because they have adapted to the positions they currently occupy. Nonetheless, those who are willing to strive for excellence will rise to the challenge, not merely to implement Policy Governance®, but to improve it. We work to provide an improvement that avoids some of the complexity and confusion of Carver’s model, particularly for Christian ministries and non-profits. (See our white paper on Christian Governance for more information.)
- Significant advances in governance will occur only when people recognize that governance is not a subcategory or extension of management but a subcategory or extension of ownership. The nature of board work, then, is not management one step up but ownership one step down.
- A board must be an active, deciding, independent link in the chain of authority from owners to operators. Accountable boards, then, are commanders, not advisers.
- Assertive fulfillment of the board’s authority need not yield weak management. Proper delegation, then, must result in board control and management empowerment simultaneously.
- As long as governance is CEO-centric or chair-centric, excellence in representing owners will remain beyond reach. Responsible governance, then, must be board-centric and board controlled.
- The proper chair is not boss but first among equals as the board’s crucial servant-leader, responsible to the board for ensuring that it successfully governs. Tomorrow’s chair, then, is not top management but is best conceived as—and, even better, titled as—chief governance officer (CGO).
- Leading a group of equals to define and demand successful execution is an entirely different process from leading subordinates in achieving successful execution. Clear separation of the roles of chair and CEO, then, is critical even when the positions are combined in one person.
- Transparency with owners and with society is impeded when the board does not make its values explicit and available or allows the management of information or performance to be hidden. Transparency outside, then, is markedly dependent on transparency inside.
- Traditional practices, even best practices, though clearly a collection of wisdom, are limited in how much improvement they can offer because they are not derived from a conceptually sound whole. More mature governance, then, will be designed from a coherent paradigm instead of assembled from parts.
- Although structure, process, and practice matter, significant advances in governance will come about only from rethinking the very nature of the board job. Powerful governance, then, will derive from consideration of the value the board should add plus a design of the job rigorous enough to produce that value.
Corporate Boards that Create Value, John Carver and Caroline Oliver
Jossey-Bass, San Francisco, CA, 2002, p. xxii.