A complete operating system for boards.
What is Policy Governance?
Policy Governance is a model of governance created by Dr. John Carver. It is often referred to as “Carver governance” or the “Carver model.”
Policy Governance principles form a complete governance system which enables boards to provide strategic leadership in shaping the future for their organizations. Policy Governance provides the role clarity necessary to ensure accountability of the board to those on whose behalf it governs and of the CEO to the board. It also sets the stage for boards to use their time more effectively, allowing them to gather intelligence about alternative future possibilities. This information is crucial to ensuring two critical parts of their job: (1) ensuring organizational assets are protected, not just from current risks, but from potential future risks, and (2) the direction they are setting will shape a future that’s meaningful for those they serve. The Carver model is a complete operating system for boards, made up of a set of internally consistent principles, all of which are necessary in order for the model to work as designed
Policy Governance provides clear definition of where governance stops and management starts. This clarity frees the board from either “rubber-stamping” or “meddling.”
Empowerment with Rigorous Accountability
By clearly defining expected organizational results and setting parameters within which management has freedom, the board can unleash management creativity but still hold management rigorously accountable.
Policy Governance enables your board to exercise strategic foresight and provide strategic leadership – the board’s key responsibility – by clearly defining, on behalf of the owners, what needs are to be met, for whom, and at what worth.
Accountability to Owners
Policy Governance helps your board be accountable to its shareholders (in equity corporations) or “moral owners” (in public sector and not-for-profit organizations).
The Governance Coach™ can provide you with a qualified consultant to coach you in the implementation of the Policy Governance model. We are experts in the Carver Model. As Carver Governance consultants, we will work with you to enable your board to provide the strategic leadership needed for your organization to thrive in our complex, rapidly changing world.
The “policy circle” diagram is © John and Miriam Carver. Copying permitted for non-commercial purposes if attributed to John and Miriam Carver.
1. Ends – the benefits the organization is to produce, for which people, at what worth.
2. Executive Limitations – the boundaries of prudence and ethics within which the board allows the CEO to make further decisions about means.
3. Board–Management Delegation – the manner in which the board delegates authority to staff through the CEO and holds the CEO accountable.
4. Governance Process – the manner in which the board itself operates, including its philosophy, accountability, discipline, and its own job.
With these policies in place, the board can delegate the achievement of the Ends to the CEO, be assured that they are being achieved, and that the means used to achieve them are within the board’s boundaries of prudence and ethics. This assurance is based, not on trust, but on a carefully structured monitoring process.
The Governance Coach provides fully qualified Policy Governance consultants and coaches who are experts in the Carver Policy governance model.
We provide Carver governance training, coaching and consulting for all levels – from introductory Policy Governance seminars through to advanced training and coaching for boards who aspire to a mastery of the Policy Governance model.
New to Policy Governance FAQs
HOW DOES THE BOARD DELEGATE EFFECTIVELY TO THE CEO? I HEAR A LOT ABOUT “LIMITATIONS” – THAT SEEMS VERY NEGATIVE.
There are two categories of policies in Policy Governance® that provide direction to the CEO: (1) Ends, and (2) Executive Limitations. The Ends describe, to whatever level of detail the board determines is needed, the organizational results that the CEO is accountable to produce, the beneficiaries, and what it is worth to produce those results (the cost). These Ends policies are not in the negative. They are prescribed as expectations. The second category of policies that provide direction to the CEO is the Executive Limitations policies. A lot of people have difficulty understanding why limitations can be so effective, because the prevailing wisdom is that saying something negative must inherently be bad. In this case, the reality is exactly the opposite. While the board is ultimately accountable for everything about the organization, if there is a CEO, that person is “on the ground” and is the one who actually needs to get the job done. Giving the CEO as much authority as possible to determine how best to do that job is to the board’s advantage. But at the same time, the board should not give away so much authority that it abdicates its governance role. Think of a teeter totter – it works best when evenly balanced. Similarly, the balance between board and CEO needs to be such that the CEO has the authority to make decisions expeditiously, with as much freedom as possible for creative and innovative solutions, while the board still has authority and oversight sufficient to fulfill its fiduciary responsibilities. Policy Governance® provides an elegant solution for this balancing act. The board is always more powerful than the CEO, because the board sets the Ends (the results the organization is to produce, the beneficiaries, and what it is worth to produce those results), and the board sets parameters, or limitations, on the means that the CEO may use to achieve the results. The limitations set boundaries. The board allows the CEO to use any means, as long as they fall within a reasonable interpretation of the board’s limiting policies. In other words, “if we didn’t say no, it’s pre-approved.” This gives the CEO much more creative freedom than saying, “do it this way, and come back for approval if you want to do it any other way,” which is more typical of how many boards function. Executive Limitations policies should always be about prudence or ethics. What means to achieve the Ends would be unacceptable even if they worked, because they are imprudent or unethical? Once the board has specified these limitations, to whatever level of detail the board feels necessary, it can allow the CEO to determine the most appropriate means. Of course, the board then monitors to ensure that there is appropriate performance consistent with the policies. (That’s another question – please check the next FAQ for more details on monitoring.) A combination of well constructed Ends and Executive Limitations policies, and structured, rigorous monitoring provides the board with complete control of everything it needs to control in order to provide future-oriented direction and fiduciary oversight. More details about how Policy Governance® works are available in the Introduction to Policy Governance® Workshop, our NEW Virtual Introduction to Policy Governance, as well as our interactive REALBoard Self-Directed Learning Modules.
HOW DOES THE BOARD EVALUATE THE CEO’S PERFORMANCE IN POLICY GOVERNANCE®?
CEO evaluation begins with good policies. The Board delegates to the CEO by creating Ends policies and Executive Limitations policies. (Please read the FAQ “How does the board delegate effectively to the CEO?” for more detail about this.) Then the board holds the CEO accountable for achieving a reasonable interpretation of the Ends and complying with a reasonable interpretation of the limitations. This process is known as “monitoring.” There are three methods of monitoring:
- a written report from the CEO to the board, in which the CEO provides an “interpretation” of the policy – an operational definition that explains what measures would demonstrate compliance with the policy and why they are reasonable – along with actual evidence of compliance.
- an external report, from an independent third party, in which the board receives an opinion of whether the CEO’s interpretation is reasonable and whether there is evidence of compliance.
- a “direct inspection” in which the board itself, or an individual or group designated by the board, personally examines the evidence to see if there is compliance.
Using one or more of these methods, the board monitors every policy in the Ends and Executive Limitations categories. This monitoring, taken comprehensively, forms the CEO’s performance evaluation. More details about how Policy Governance® works are available in the Introduction to Policy Governance® Workshop, our NEW Virtual Introduction to Policy Governance, as well as our interactive REALBoard Self-Directed Learning Modules. Also see our videos on Monitoring and Evaluating Your CEO.
HOW CAN WE GET STARTED WITH POLICY GOVERNANCE®?
There are several suggested steps for a board to get started with Policy Governance®.
- Learn about what Policy Governance® is and how it works.
- Make a commitment that the board is prepared to learn how to apply the principles of Policy Governance®.
- Develop an initial set of policies.
- Review the draft policies against any legal requirements, and compare to existing policies to ensure that you have captured the key values of the board in the policies.
- Learn how to apply them in practice – this involves structuring your agendas to get the most benefit from the model, learning to monitor effectively, and developing a plan to deliberately gather input from your “owners.”
Because Policy Governance® is a significantly different approach to governing than most boards are used to, there is a learning curve, and there are usually some growing pains. Using a competent consultant, who has been trained in the principles and application of the model is advised. The benefits are well worth the investment. At The Governance Coach™, we have developed a complete system to help you move from exploring the implications of the model for your board to full implementation.
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