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April 29, 2020

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David Gray

Authority and Accountability

One of the features of the Policy Governance® system is its focus on accountability.  In my experience, this feature sometimes provokes a negative reaction from observers who are not completely familiar with the system.  I think this is unfortunate, and often reflects a lack of understanding of how governance actually works. 

There is a cycle of authority and accountability at work in every organisation.  The owners of an organisation have ultimate authority over the organisation (setting aside, for the moment, the role of government) in that they have the right to say why the organisation exists, to appoint and dismiss the board and, if necessary, to wind up the organisation.  The owners are typically accountable to one or more regulatory bodies, or to the general law, for exercising their authority lawfully and prudently. 

To enable the organisation to function, the owners delegate authority to a board to govern it, typically through a constitutional document such as articles of association or a trust deed, and require the board to be accountable to them for the exercise of the authority so delegated.   

The board, in turn, uses the authority delegated to it by the owners to spell out what the organisation is intended to achieve (Policy Governance practitioners call such statements ‘Ends policies’) and what must be avoided (‘Limitation policies’), based on the board’s understanding of the owners’ aspirations and expectations.  The board then delegates authority to the organisation’s CEO to achieve the Ends while complying with the Limitations, and requires the CEO to be accountable for the exercise of that authority. 

Lastly, the CEO uses the authority delegated to him or her to choose the means by which the Ends will be achieved, including delegating some of the authority to others within the organisation to enable them to carry out their roles and holding them accountable for the exercise of this authority. 

The existence of this cycle of authority and accountability is a brute fact in every organisation.  In most instances, it functions smoothly and largely invisibly.  On occasion, though, its necessity is challenged by outside observers.  Over the years, I have read articles criticising the cycle as excessively “hierarchical,” labelling it “anti-democratic” and arguing that it creates “neo-liberal distinctions between governance and management.”  Critics contend that approaches to governance which incorporate the cycle are “outdated” and “top-down” and result in “the disconnection of the board” from the rest of the organisation and from external stakeholders. 

I understand why some observers react this way.  At first glance, the cycle of authority and accountability does appear somewhat militaristic, a command-and-control system more suited to the armed forces than to civilian organisations.  However, I completely disagree with the conclusion these observers arrive at.  My response to them is threefold. 

Firstly, there is no escaping the fact that the cycle exists.  It’s an intrinsic feature of organisational life.  If the organisations we create to make a difference to our world are to be effective, then those who govern them must have the courage to ensure the correct use of authority and accountability within them.  The alternative is to tolerate unfocused, ineffective and unaccountable organisations that waste valuable resources and achieve very little. 

Secondly, when applied correctly, the cycle is actually deeply empowering of the CEO and staff.  The board recognises the role of the CEO as the professional and managerial leader of the organisation by delegating to him or her as much authority as is reasonable in the circumstances, consistent with the values of the owners, and takes care not to interfere in the management of the organisation. 

Finally, it is entirely up to the board to determine how and to what extent other stakeholders, including customers, are included in the governance of the organisation.  The board is completely at liberty to engage with stakeholders at any time and to whatever extent the board wishes; it can be as inclusive or as exclusive as it chooses.  However, a board which understands the cycle of authority and accountability will not make the mistake of confusing its stakeholders with its owners, and will be crystal clear about its primary accountability to the latter.  

So, a feature of organisational life which may appear at first glance to be somewhat harsh actually turns out on closer inspection to be integral to effective organisational performance. 

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