Boards using Policy Governance are often challenged to determine if a CEO’s interpretation meets the criteria for what is required in an interpretation. One of the tests that I use is to imagine someone else tasked with delivering a monitoring report using the CEO’s interpretation.
Allow me to explain. For a board using Policy Governance, the most common method of monitoring CEO performance is a report from the CEO. However, there are two alternative methods.
One alternative is that your board contracts with an external person or organization, preferably someone with background knowledge or experience in policy area to be monitored. Your contract specifies that the external party is to collect monitoring data and report their findings. This person or organization is chosen by and directly accountable to your board for the deliverables. The contracted party, like your financial auditor, is given access to relevant sources to collect the data.
The second alternative is for your board or a delegated board member or board committee to collect the data.
In both cases, the scope of data collection is defined by the CEO’s reasonable interpretation of the board’s policy. Why? Because only the CEO has the authority to further interpret the board’s Ends and Executive Limitations policies. Only the board has the authority to assess whether the interpretation is reasonable.
But what makes for a reasonable interpretation? We haven’t space here to unpack all that’s involved, but in brief, it includes a statement of: a) what will be measured, b) how it will be measured, and c) the level of that measure that needs to be achieved to demonstrate compliance.
As an example, if the board’s policy states:
The CEO shall not discriminate against staff for non-disruptive expression of dissent.
The CEO’s interpretation might state:
Compliance will be demonstrated when, in an anonymous survey, [here the CEO states a percentage] of staff agree or strongly agree that they are not aware of any times during the reporting period in which any staff were discriminated against because they dissented in a manner which was i) respectful, ii) not made public, and iii) in which they did not refuse to work or cause others not to work (unless there were unacceptable hazards). For this purpose, discrimination would include:
- firings
- demotions
- being held back from deserved advancements
- disciplinary proceedings
- assignment to less desirable jobs or hours
In the rationale, the CEO would justify what is being measured and why the level of measure to be achieved, if less than 100%, is reasonable.
If the board contracts an external HR specialist to monitor the above policy, the specialist uses the CEO’s interpretation to understand what data to collect. The specialist surveys the staff, asks the questions specified in the interpretation, compiles the responses, and reports to the board.
Based on a comparison of the findings in that report with the CEO’s reasonable interpretation, the board decides whether compliance has been achieved.
Contrast that with a CEO interpretation such as the following:
Compliance will be demonstrated when staff express their views openly.
With such a vague interpretation, what data would the HR specialist collect? Would they ask staff if they have been able to express their views openly? If so, which types of responses would they request? Strongly agree, Very strongly agree? Or “Always, Most of the time?” And what percentage of responses would they interpret as demonstrating compliance.
Or they might decide to look for situations in which staff were fired, demoted, disciplined, reassigned to other jobs and interview the affected staff-member to determine if the action was retaliatory.
In other words, given the vagueness of the interpretation, the HR specialist would use their own interpretation to collect data. Nature abhors a vacuum. Likewise, if CEO’s interpretation is lacking, someone else will fill it!
And the board might very well arrive at a different compliance decision, depending on what the specialist reports.
The same scenario could take place if the board or some part of the board was collecting the data based on a vague interpretation.
Too often we see monitoring reports from CEOs in which the evidence presented is a leap away from the interpretation. In other words, if the board chose someone else to collect data based on the CEO’s interpretation, they might collect something completely different than the CEO would collect.
As noted above, when using Policy Governance, boards should expect CEO interpretations to indicate what will be measured, how it will be measured, and the level of the measure that will demonstrate that compliance has been achieved. If a CEO interpretation meets those criteria, anyone using the CEO’s interpretation to provide a report will collect essentially the same data and the board will reach essentially the same assessment.
And that is the test I propose. If you are a board examining your CEO’s interpretation, would essentially the same data be collected and presented for monitoring regardless of which method you required? If so, likely the interpretation has the above required elements. (Rationale for those elements is also needed which is subject for another day.)
On the other hand, if you are a CEO writing a monitoring report, ask yourself, or better yet, a colleague, what data someone else might collect based on your interpretation. Would they collect essentially the same data? In other words, solely based on your interpretation would the findings be replicated? If so, you have included the above elements of a solid interpretation.
Would you like to learn more about Policy Governance or have questions?
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Introduction to Policy Governance for Individuals
- Course Orientation September 30 with live sessions October 14 and November 4
- Course Orientation November 4 with live sessions November 18 and December 9
Assessing Monitoring Reports for Individuals
- Course Orientation November 5 with live sessions November 19 and December 10
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