August 8, 2017

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Joseph Inskeep

Policies and Monitoring: More or Less

More policy is not necessarily better, and less may sometimes be more.  John Carver went so far as to headline his November 1997 Board Leadership article, “Honey, I Shrunk the Policies,” with the sentence “In Policymaking, More is Definitely Not Better.”

A board I’m familiar with recently downsized the number of Executive Limitations in its Governance Manual. There were several factors that contributed to the decision. First, after monitoring its Executive Limitation policies several times through, it realized that a number of the policies related to relatively insignificant aspects of past history.  The board now had a better grasp of specific risks it needed to regularly oversee. Second, this group had very high confidence in the CEO’s performance based on the monitoring reports it had received.  Because of this not only could the board decrease the number of limitations, but it could choose to monitor some less frequently.  These changes allowed the CEO to focus more on the future.  To this board, less unnecessary monitoring meant more future focus.

This same board only eight years earlier faced an organizational crisis compounded in  large part because its monitoring discipline had significantly declined.  The board probably would have faced the same growing financial challenges had it been monitoring its financial policies properly, but it could have noticed and taken action earlier. As it was, an embarrassing meeting with the membership gave them an opportunity to explain both the crisis and their lack of discipline.  This debacle led to a review of Executive Limitations and increased attention to monitoring what was really important.

The central premise in Policy Governance® is that the board should say all it must say in order to ensure its words can be reasonably interpreted.  Carver suggests the board make its decision not based on a guess about the incumbent CEO’s likely interpretation, but upon the board’s comfort with the entire range of interpretation allowed by its words, made by any CEO the organization the board might hire.

Once the board articulates its values to that level of comfort, monitoring the CEO interpretations (which include the metrics that would demonstrate compliance) and appropriately sourced data can protect the organization from a similar crisis of governance.

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