Social media and publications are full of a wealth of really good ideas about business and social concepts. We are thankful that very smart people bring those concepts to our attention.
Far less often, someone comes along with a radical concept that turns conventional thinking on its head. John Carver, who passed away August 16, 2024 was such a person.
His creation of Policy Governance® caused just such a stir – among academics, consultants, and, most importantly, boards. Even those that have chosen not to work with the Policy Governance system recognize his work.
By his own admission , Carver’s incentive to create a governance model came about because he felt dumb when it came to his work as a board member, board chair, and even as a CEO reporting to a board. To make sense of governance, he did a thought experiment. He stripped away the board practices of the day to discover the fundamental principles of governance.
“Do boards need executive committees?” he asked himself. “No, they don’t.” So, they were not fundamental to governance.
Then he wondered, “Do boards need committees?” Again, “No,” so that was tossed as not being fundamental.
In time, he identified fundamental principles which applied to any governing board. To name a few:
- That the board stands in on behalf of an ownership, bringing the owners’ values into its decisions;
- The board is the highest authority in the organization…. not the board chair and not the CEO.
- The board operates as a whole, speaking with one voice.
These principles raised thorny issues. On behalf of the ownership, the board should ensure that the organization effectively and efficiently achieves intended results for intended recipients. It should also do so relatively safely.
Yet, the board meets quarterly or monthly at best. If, as the highest authority, the board must approve a decision, then only the board in meetings can change that decision. What if management sees the need for a change in the time between meetings?
The conventional approach was, and still is, to think of the board as “management one-step up”. (Richard recalls, with embarrassment, that he used to counsel boards accordingly, before he learned of Policy Governance.) If the board is the supreme management decision centre (or center for our US readers), then management needs to bring its proposals to the board for its blessing, revision, or denial.
In the more conventional approach, criteria for board decisions are often unclear leaving management to guess what will be acceptable. In short, it becomes a grown-up game of: “Mother, may I?”
But what if the board is “ownership one-step down” instead of “management one-step up?” To best serve the ownership, the board needs a proactive system to delegate to management. Doing so would enable the organization to effectively, efficiently, and safely achieve intended results.
Carver’s solution lay in further principles which enable delegation for both empowerment and rigorous accountability. The board does not tell the CEO what to do. Instead, the board creates Ends (not to be confused with strategic plans) and boundaries of what is unacceptable. These, along with the principle of any reasonable interpretation, made the reactive approvals process useless.
In total, Carver created 10 principles.
We often refer to these as first principles (pages 6-7). These are principles which once understood, enable the board to customize its practices for its unique needs. At the same time, the board benefits from the power of a model designed for owner accountability.
Carver not only referred to Policy Governance as a model; he also claimed that it was the only universal governance model. This drew the ire of some in the governance community. For some, a governance model can’t be one size fits all.” Others added, “it can’t be the only universal governance model.”
Critics didn’t recognize that Carver distinctly defined a model as being both universal and internally coherent. Instead of thinking of a model as a Ford F-150 or a Toyota Corolla, Carver thought of a model as a system such as an internal combustion engine. The engine sizes may differ, requiring some differences in design. But the fundamental principles of an internal combustion engine are the same regardless of size.
When creating Policy Governance principles, Carver ensured the principles could apply to any governing board. For example, the one voice principle is so often confused with a notion that, outside of the board room, board members don’t disclose what was said or how different board members voted. Yet, as a universal principle, one voice must also apply to boards that operate in full view of the public (e.g., public school boards, municipal governments). Carver defined the one-voice principle to work with any type of board.
As for the critique that Policy Governance cannot be the only universal model, consider what it means to be “internally consistent”. We’ve seen an approach to governance which states that the board has only one employee (i.e., the CEO). Yet, pages later the author explains the importance of the board’s relationship with the CFO! These types of inconsistencies, while well intended, reveal a tendency toward compiling best practices instead of fundamental principles.
In our work with Policy Governance, we constantly marvel at how the principles of Policy Governance work together as a system. Indeed, system is the more commonly used term these days rather than model. Of course, the components of true systems interact with one another so that the system is more than the sum of its parts.
Others tried to improve on Policy Governance, but in actuality were simply adding in conventional governance concepts which were more comfortable. It was a bit like taking fuel injection out of an internal combustion engine and replacing it with a good, old-fashioned carburetor.
Carver didn’t say that Policy Governance would forever by the only universal model. He expected that something new would come along at some point.
We have the same expectation and continue to scan for such innovation. We’ve just not seen it yet!