Board Concerns and Worries - Letting Go of the Wheel
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.
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.
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.