Policy Oversight

Principles¹

• Organizations exist to meet specified ends (purposes).
• Ends (purposes) and means (policies) are different.
• Board means and staff means are different.
• Means delegation policy is best described by identifying what to avoid rather than what to do.
• Accountability is assured through monitoring.

Policy Oversight Model:

• Ownership identification is essential.
• Boards link owner(s) and organization.
• As owner representatives, boards define the ends to be accomplished.
• Boards maintain the separation between ends and means, and board means and staff means by establishing four types of written policies:
  • Ends Determination
  • Executive Limitations
  • Policy Oversight Process
  • Board/Executive Relationship
• Organizational monitoring

There are no unwritten Board policies. The only policies, decisions, authorizations, or limitations in effect at the board level are those explicitly stated as written policies after a vote of adoption. And these policies are given to the CEO, who has exclusive authority over his/her staff. Board members do not advise staff members.

The Policy Oversight model is based on the Carver model of Policy Governance® and involves four essential elements of owner or board policies that must be in place to govern the behavior of a business or organization. Policy Oversight must specify:

• the ends to be achieved by the organization.
• unacceptable means to those ends, or means limitation.
• the authority of and powers of delegation to the CEO.
• ongoing monitoring and directive development.

The first thing that is radically different in the Board Directive model is that the board of directors do not manage the organization or its staff. Rather, they manage the CEO through policy setting and development. This clarification of responsibility immediately solves the problems of authority confusion and micromanagement, which haunt so many organizations.

The clarification of authority is the first order. At the top are the owners who direct the board. The board then carries out the wishes, will and desires of the owners. The owners direct the board, the board directs the CEO, and the CEO directs the organization. Non-profit boards may have some difficulty determining their owner(s), and may find our white paper on Christian Governance to be helpful. It is the job of the CEO to manage the company or organization, and the board should not usurp or otherwise confuse the authority of the CEO to do so.

Three of these four elements can be (and should be) applied by the CEO in the management of the organization. The ends to be achieved by the organization should be communicated to the staff and employees in order to focus them on the achievement of those ends. Such ends are not determined by the CEO, but only communicated by him or her to various organizational stake holders. In addition, the CEO must determine the ends to be achieved by each staff person and/or employee in order to create job clarity.

Unacceptable means for the achievement of the organization’s ends can also be communicated to stake holders, but the proscription of means is primarily directed to the CEO. Any means not proscribed are automatically authorized by the board as a method of providing maximum freedom and creativity for the CEO to accomplish the stated ends. The means determination is, then, the responsibility of the CEO, who must develop various policies and procedures for staff and employees that will be different from, but not in conflict with the means proscription developed by the board.

Note that the development of policies and procedures of the organization are delegated to the CEO. Again, the board manages the CEO, not the organization. Obviously, if policies and/or procedures developed by the CEO are in conflict with the board’s policies, the board must engage the CEO to rectify the conflict.

The CEO is charged with the development of specific policies and procedures related to the job of each and every staff person and/or employee—and of the whole organization—in order to provide job clarity.

The ideal throughout this process is management by policy. The board develops management policies for the CEO. And the CEO develops management policies and procedures for the staff and employees. The result is clear lines of authority and delegation.

The CEO is also responsible for the development and maintenance of relationships within the organization. The purpose of this responsibility is to provide and enforce the powers of authority and delegation throughout the organization. Every staff person and employee should be responsible to someone in such a way that the CEO is ultimately responsible for the entire organization.

In this way the board evaluates and monitors the CEO by evaluating and monitoring the organization. There is no difference from the board’s perspective between the performance of the organization and the performance of the CEO.

Similarities

Advances in modern management methods have been made with two essential insights. Successful management requires 1) clear lines of authority and delegation, and 2) policy development and enforcement. The same things can be said of Policy Oversight. Just as managers must manage staff, so board members must manage the CEO. And the lines of communication and delegation between boards members and the CEO must be in place. Board policies must also be in continual development and enforcement.

Policy Oversight is the practice of management one level up. Policy Oversight is the activity of CEO management. Carver’s essential insight that the board of directors, on behalf of the owner(s), should direct all policies — and indeed, all communication — through one central individual (CEO) who has complete control of the management of the organization is very valid and useful. Indeed, the board members must speak with one voice, following discussion, vote and written policies, to one person, the CEO. To do otherwise is to confuse lines of authority and delegation, and will undermine the ability of the CEO to manage the company or organization. Applying this insight alone will clear up at least half of all organizational difficulties, whether or not anything else is changed.

Authority and delegation are critical for business and organizational success. Proper and clear authority and delegation must flow from the owners and/or board of directors to the manager (CEO), and from the CEO to staff and employees. The chain of command turns the wheels of progress in any organization.

Most business and/or organizational problems stem from a lack of clarity and/or enforcement regarding the chain of command, or clear lines of authority and delegation. One of Carver’s insights is that policies regarding authority and delegation must be developed and enforced, first by the owners and/or board of directors and secondly by the CEO. Note that the board does not develop management policies for the business or organization, but only for the CEO. It is the responsibility of the CEO to manage the staff and employees, not the board’s. The CEO then develops management policies and procedures for staff and employees.

If the board insists on managing the organization, they don’t need a CEO. And yet they will find that they cannot succeed without someone who functions as a CEO. Micromanagement and the abdication of board authority are the inevitable result of the failure of the board to develop sufficient policies for the CEO—and abide by them themselves. In other words, micromanagement and the abdication of board responsibility are symptoms of the failure of the owners and/or board of directors to set and/or honor board policies for effective management of the CEO.