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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 FAQ on monitoring for more details.)  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 Governance Coach Online Virtual Workshop Introduction to Policy Governance, as well as our interactive REALBoard Self-Directed Learning Modules.
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:
  1. 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.
  2. 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.
  3. 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 Governance Coach Online Virtual Workshop Introduction to Policy Governance, as well as our interactive REALBoard Self-Directed Learning Modules.   Also see our videos on Monitoring and Evaluating Your CEO.
There are several suggested steps for a board to get started with Policy Governance®.
  1. Learn about what Policy Governance® is and how it works.
  2. Make a commitment that the board is prepared to change its processes to apply the principles of Policy Governance®.
  3. Develop an initial set of policies.
  4. 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.
  5. 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. A typical approach to getting started is to schedule an in person customized Introduction to Policy Governance workshop  or a virtual Introduction to Policy Governance. This is followed by further working sessions, either face to face or virtually,  to develop all of the policies necessary to begin using the model.  On completion of the initial policy development, we then enter into a “coaching” phase where we stay in close contact, answering questions as they arise, and reviewing your board agenda packages and minutes, with written feedback for staying on track and moving ahead to mastery of the system.
The board’s role in monitoring is not to provide evidence, but to assess evidence.  The CEO provides the evidence.  The board assesses two things:
  1. whether or not the CEO’s interpretation was “reasonable,” and
  2. whether there is sufficient evidence to determine compliance with that reasonable interpretation of the policy.
In the case of Executive Limitations, that means evidence that the CEO has not caused or allowed something that the board said should not occur; in the case of Ends it means that there is demonstrable evidence of achievement of a reasonable interpretation of the End.  This assessment should be done in advance of the board meeting as “homework” by each board member.  Board members should ask themselves, “Am I satisfied that a reasonable person could have made this interpretation?” and “Is there actual evidence provided to convince me that there has been compliance with the interpretation?” At the board meeting, the only reason for discussion would be if a majority of board members have concerns about either (1) or (2).  If the majority decision is that there is a concern, the board does not need to discuss how to “fix” it.  The board does need to make it clear if the situation is unacceptable, and when it expects compliance to be achieved.   In order to document the  board’s due care in assessing the monitoring reports, it is advisable to have a board motion, something like this:  “The board has read and assessed the monitoring report for policy X and found it provided evidence of compliance with a reasonable interpretation of the policy.”  Or,   “The board has read and assessed the monitoring report for policy X and found it provided evidence of compliance with a reasonable interpretation of the policy, except for item 3.  A follow-up report of compliance with that item is expected by [date].”  Remember that evaluation is not about “catching the CEO doing something wrong.”   While diligent assessment is part of fulfilling the board’s fiduciary responsibility, the most important purpose of monitoring is to make the future better, not to produce a report card. Additional details about monitoring are available in the Policy Governance Toolkit: Meaningful Monitoring.  You can also learn more about monitoring in our interactive Online Learning Modules.  Module 7 addresses monitoring. Additional references available on this subject are included in PGIQ™  and Introduction to Policy Governance® workshop.  Our Advanced Seminar provides more in-depth coverage of how to write and assess monitoring reports.
The CEO needs to provide the board with (a) an explicit reasonable interpretation of each statement in the board’s policy, including rationale for what that interpretation is reasonable, and (b) evidence of compliance with the reasonable interpretation.  The interpretation is not the CEO’s plan for complying with the policy, but rather what the CEO understands the policy to mean.  A good interpretation should include the measures that will demonstrate compliance, and supporting rationale for why the board should consider this interpretation “reasonable.” While developing this interpretation does take some time at the front end, interpreting the policy is an implicit part of determining how to fulfill it.  A simple example of an interpretation that provides a measurement or metric might be something like this:  Board policy says, “Do not allow untimely payment of debts.”  CEO’s interpretation might say, “Compliance will be demonstrated when a review of accounts payable confirms that all debts have been paid within 30 days or the vendor’s terms, whichever is greater, unless the amount is under dispute. This interpretation is reasonable because it is consistent with industry standards, and avoids interest charges on overdue amounts.” After the interpretation, the CEO then provides evidence of compliance with the policy. This should be something that can be verified; if an external agent were to look for compliance, what might they look at?  Following the above example, evidence might be: “An internal review of the accounts payable report from our accounting software for the fiscal period xxx, conducted on [date] by [position of person doing the internal review] confirmed that there was only one payable outstanding beyond 30 days, and that the vendor’s terms for this amount were 60 days.” Additional details about monitoring are available in the Policy Governance Toolkit: Meaningful Monitoring.  You can also learn more about monitoring in our interactive Online Learning Modules.  Module 7 addresses monitoring. Additional references available on this subject are included in PGIQ™  and Introduction to Policy Governance® workshop.  Our Advanced Seminar provides more in-depth coverage of how to write and assess monitoring reports.
Remember that the overall performance evaluation of the CEO is simply a summation of all of the monitoring done by the board throughout the year. The frequency of monitoring each individual policy is up to the board. How often does the board feel it is prudent to receive evidence of compliance with a particular policy? How much risk would be involved if there were non-compliance? What is necessary for due diligence? How often is it likely that monitoring information will change? All of these factors should be considered when determining the frequency of monitoring. There is no "rule" in Policy Governance® about how often Ends and Executive Limitations policies need to be monitored, but as an example, virtually all boards do choose to monitor each of the policies at least annually. Many boards choose to monitor the Financial Condition policy quarterly. Since preparing monitoring reports takes a considerable effort on the part of the CEO and staff to whom the CEO may delegate responsibilities, there is value to considering a routine monitoring calendar in which a few monitoring reports are provided for each meeting (or even between meetings) throughout the year. For some organizations, it makes sense to split up the monitoring of Ends. For others, it makes sense to do all the Ends reporting at once. If the board is doing a comprehensive review of the content of Ends policies in a specific timeframe, it can be valuable to have all of the Ends monitoring data at least relatively close to that date. Since the CEO may be in the best position to determine at what times of year particular monitoring data is most readily available, once the board has determined the frequency of monitoring for each policy, it is often a good idea to ask the CEO to produce a draft schedule, consistent with the frequency, for the board’s consideration. Then expect the CEO to provide those reports as part of the board package in advance of the appropriate meeting. Additional details about monitoring are available in the Policy Governance Toolkit: Meaningful Monitoring.  You can also learn more about monitoring in our interactive Online Learning Modules.  Module 7 addresses monitoring. Additional references available on this subject are included in PGIQ™  and Introduction to Policy Governance® workshop.  Our Advanced Seminar provides more in-depth coverage of how to write and assess monitoring reports.
Ends is a unique concept in Policy Governance®. It is not the same as a typical “mission statement.” A mission statement usually looks something like this: “We are the xxx organization, we look like this . . . and we do the following things: xxx, yyy.” Ends are statements about the purpose of an organization, why it exists, rather than what it does, or how it does things. Ends statements are about one or more of these three things (and ONLY these three):
  1. the benefit or results of an organization’s work,
  2. who the beneficiaries are, and
  3. what it’s worth to produce those benefits.
So, in contrast to a mission statement, an Ends statement might say, “Our organization exists so that xx people are able to do yyy for a cost zzz.” Here are a few examples of the highest level Ends statements for different kinds of organizations. These would of course be customized to identify the area, profession, industry, etc.
  • Our college exists so that people in our region have opportunities to improve their lives and communities at a cost that can be justified by the results.
  • Our school exists so that students become informed, contributing, fulfilled members of society at a cost that demonstrates responsible stewardship of resources.
  • Our credit union exists so that members have the knowledge and ability to be in control of their financial lives at a competitive cost.
  • Our voluntary agency exists so that individuals with disabilities in our service area will live secure, engaged, independent lives at a cost justified by the results.
  • Our health organization exists so that there are optimal health outcomes for people in our service area at an efficiency better than the average of peer organizations.
  • Our trade association exists so there will be conditions that promote member profitability in our industry for a justifiable investment of member resources.
  • Our professional regulatory organization exists so there will be competent, ethical practice of our profession for the people of our province/state.
Once the board has established this largest “purpose” statement for the organization, it then will develop more detailed statements of results. However, those statements will still meet at least one of the three components of (1), (2) or (3) above. They will never be statements of what the organization “does” – its activities, or statements of how the results are to be achieved. More information about Ends is available in our interactive Online Learning Modules.  Module 3 addresses Ends. Additional references available on this subject include PGIQ™  and Introduction to Policy Governance® workshop.
In Policy Governance® in order for the board to do its own job effectively, but not interfere in operational matters that it has delegated to the CEO, it is important to be able to differentiate among different types of information that the board receives. Therefore, a simple organizing strategy for agendas in Policy Governance is to clearly separate the three types of information: (1) information for decision-making; (2) monitoring information, and (3) nice-to-know or incidental information about internal operations. It is helpful to board effectiveness to place the decision items near the front of the agenda. Information for decisions may be of two types:
  1. Information necessary for a decision that is being made in the current meeting. This should be clearly identified as a background paper, briefing note, or by some designation that makes it clear the board must read it in preparation for the meeting.
  2. Background information – including things such as environmental scanning information, trends about the industry, articles related to Ends issues – that is not directly related to a decision at the current meeting, but that IS important to the board’s understanding and will form part of the knowledge base the board needs to develop sound policies. This information may be included as part of the “decision items” on the agenda – with a note that it is for future decisions. Or, if you prefer, add a separate category of “information necessary for future decisions.” In either case, the board should be aware that this is information that they DO need to read in order to discharge their governance responsibilities.
For optimal efficiency, each decision and monitoring item on the agenda should also be linked to the correct policy category and the specific policy to which the item relates. This allows the board to review what it has already said about the issue in question, and then when it makes a decision, to do so by amending the appropriate policy. Thus, all board decisions that will result in more than a single, one-time action, are captured in a policy that can be appropriately monitored. Incidental information includes:
  1. Information that the board has specifically requested be provided, even though it’s about internal operations. This requirement would normally be found in the Executive Limitation on Communication and Support to the Board.
  2. Any other nice to know information about internal matters that the CEO chooses to share.
Incidental information is best placed at the very end of the agenda, or even omitted entirely, and simply sent to the board members under separate cover. One reason for keeping incidental information items separate is so the board will not be tempted into making decisions about them, since these items have already been delegated to the CEO! This category of information should take up minimal board meeting time. And if board members are short of time, they should know that not reading this information in detail will not negatively impact their ability to govern, because this is not governance information. In order to provide future-oriented leadership to the organization, a board should strive to have the lion’s share of its meeting time related to discussion and activity that will inform its Ends work. This includes planning and implementing ownership linkage, and enriching the board’s understanding of the external environment in which the organization operates, and the future potential for benefits that it could produce. Additional details about board meeting agendas are available in the Policy Governance Toolkit Future Focused Agendas. You can also learn more about monitoring in our interactive Online Learning Modules.  Module 8 addresses board processes, including agendas. Additional references available on this subject are included in PGIQ™  and Introduction to Policy Governance® workshop.  Our Advanced Seminar provides more in-depth coverage of how to make your board agendas more “future-focused.”
If you are doing a good job of agenda planning, there should not be a need to add last-minute items to the agenda except in truly urgent situations.  To help keep your agendas focused, try to minimize last-minute additions.  They will tend to take you off track, as you may not take time to determine which agenda category they belong to.  At the same time, you do need a method for board members to bring to the board items that are appropriate. Try using a simple set of questions that board members must answer in order to get an item on the agenda, and empower the Board Chair to do the screening.   This could even be submitted by email if the Board Chair is willing.  An approach of this nature will result in a large majority of agenda items being pre-screened, and will allow for collection of appropriate background information in advance of the meeting, thus making the meeting more effective than if an issue were added at the last minute.  Some screening questions that the Board Chair might use include:
  • Is this an item that clearly belongs to the board to decide, or is it about something we’ve already delegated to the CEO?
  • In which category of policy does it fit? (If Executive Limitations, is this about prudence or ethics?)
  • To which specific policy does the issue relate? (Knowing this in advance will make the meeting more efficient, because you can check first on what you have already said.  Sometimes board members request agenda items because they are not familiar enough with their policies, and don’t realize the item has already been addressed!)
Additional details about board meeting agendas are available in the Policy Governance Toolkit Future Focused Agendas. You can also learn more about monitoring in our interactive Online Learning Modules.  Module 8 addresses board processes, including agendas. Additional references available on this subject are included in PGIQ™  and Introduction to Policy Governance® workshop.  Our Advanced Seminar provides more in-depth coverage of how to make your board agendas more “future-focused.”
As a board, you are entrusted with the stewardship of an organization or company on behalf of someone else – your shareholders or, if you are a not-for-profit, your “moral ownership.”  That places a moral as well as a fiduciary obligation on you to ensure that the resources of that organization are used most effectively to produce appropriate results.  Traditional activities such as “approving” financial statements do not fulfill this stewardship.  Rather, the board needs to be able to show accountability for the organization as a whole.  Is the organization or company achieving what it ought to achieve?  The board sets the direction for the organization.  If the board is not doing its job effectively, the whole organization suffers. The board is responsible for its own development, job design, self-discipline and performance.  These are not areas that can be delegated to the CEO.  The board itself is accountable for the quality of governance. Self-evaluation is a way to assure yourselves and your owners that you take accountability seriously. John Carver suggests that evaluation of board conduct is important for three reasons:
  1. because the board is a group of individuals, there is a need for clarity about group conduct;
  2. because the board is group of peers, it “must learn to govern itself before presuming to govern others”; and
  3. because other people depend on the board’s style of operating, there is a need for predictability and stability.
It is well a known adage that “what does not get measured does not happen.”  Board self-evaluation is crucial to the ongoing improvement of your capacity to govern.  If you do not measure yourself against the bar set by your policies, you will not improve. Additional details about and tools for board self-evaluation are available in the Policy Governance Toolkit: Board Self-Evaluation.  You can also learn more about board self-evaluation in our interactive REALBoard Self-Directed Learning Modules.   Module 9 covers Board Evaluation and improvement. Templates for self-evaluation consistent with Policy Governance® principles are available from The Governance Coach™.
There are many ways for a board to evaluate its own performance. Board self-monitoring (or self-evaluation) involves the board’s assessing its own behaviour in comparison to the policies it has written which describe the commitments it has made.  If you are using Policy GovernanceÒ these policies are usually called Governance Process (GP), and Board-Management Delegation (BMD) (or Board-CEO Relationship). There is no one prescribed method for conducting a self-evaluation, but there are a number of methods that we have found to be effective.  We generally recommend that you consider two elements for self-evaluation:  (1) a brief self-evaluation at the end of each board meeting; and (2) a systematic approach to self-evaluation of the board’s compliance with each of its own policies in the two categories that describe the board’s commitments (GP and BMD).  Here are some simple suggestions to get started:
  1. Meeting self-evaluation:  Many boards use a meeting self-evaluation, but too often the content is focused on whether the board members enjoyed the meeting, or felt it was a good meeting, without comparing the meeting to some pre-stated criteria.  If you have a policy that describes what kind of a “style” your board is committed to, then comparing what happened at the meeting to the key elements of that style is a great way to begin.  For example, if your style policy says that the board will focus more on expected results than on administrative means, then your self-evaluation can reflect on how well the board maintained that focus.  If the policy commits the board to spending more time on a future focus to set direction than on present and past issues, how well did you do that?  This reflection can be done by the group as a whole or by an individual assigned the task at the beginning of the meeting, who then reports at the end of the meeting.  It can be done verbally, or in writing.  Several tools and templates are available from The Governance Coach™ to assist in this process.  An important step for continuous improvement is to agree on one thing that you will work on to improve in the next meeting.
  2. A systematic approach to self-evaluation of the board’s compliance with each of the GP and BMD policies:  There is no one “right” way to do this kind of self-evaluation, but you might begin with a simple template that causes the board to reflect on its actual behaviour with respect to a specific policy  [See the section below for templates available from The Governance Coach™.] You might (a)  assign an individual board member to do a report on a particular GP policy, in advance.  The report would be part of the meeting package.  At the meeting, the board would focus on a few questions, identifying a specific area for improvement. (b) ask all board members to complete a worksheet on a particular policy and submit in advance; have the results tabulated for discussion (this is more work administratively than the first alternative) (c) use the template as a guide for a round table discussion on a particular policy during a meeting.  The first option tends to be most useful for most boards, as well as being efficient.
  Additional details about and tools for board self-evaluation are available in the Policy Governance Toolkit: Board Self-Evaluation.  You can also learn more about board self-evaluation in our interactive Online Learning Modules.   Module 9 covers Board Evaluation and improvement. Templates for self-evaluation consistent with Policy Governance® principles are available from The Governance Coach™.
It is a common misunderstanding that boards using the Policy Governance® model should not have any committees.  In fact, there are times when board committees can be very helpful in the board’s work.  The key principle to keep in mind is that board committees should only help the BOARD do its own work.  Secondly, no board committee should be permitted to take over the board’s role in being accountable for all governance decisions.  Therefore, committees that are made up of or include board members, appointed by the board, should never be created to “help” or advise the CEO in operational areas that the board has already delegated to the CEO.  If a board committee advises or directs the CEO regarding means to achieving the Ends, it is no longer possible to have a clear line of accountability from the Board as a whole directly to the CEO.  If the means advocated by the board committee isn’t effective, the CEO can’t be truly held accountable.  So a Finance Committee which advises the CEO on financial matters is inappropriate, while an Audit Committee to assist the board in its function of monitoring CEO performance against board-stated policy criteria is fine. A Programs Committee would be inappropriate if its job is to assist or advise the CEO or staff at any level, because programs are means for which the CEO is accountable.  Appropriate board committees might assist the board with its job of connecting to owners, researching information for policy development at the board level, or creating an on-going development plan for the board itself. An Executive Committee, while not inappropriate just because of its title, needs carefully stated authority to prevent it becoming the de facto board, with the rest of board members being simply rubber stamps to decisions the Executive Committee has already made.  No committee should interfere with the accountability of the board as a whole to govern.  In many boards, an Executive Committee is not needed at all.  Some boards operate under legislation that requires them to have an Executive Committee.   If this applies to you, severely restrict its powers, limiting it to making decisions on behalf of the board only in urgent situations when it is impossible to convene a quorum of the board.  With the use of technology that is available now, such situations should be extremely rare.  Another way to use this committee, if you are required to have it, is as a standing committee that is available for specific ad hoc tasks designated by the board.  The important principles here are not to allow the Executive Committee any authority other than that authorized by the board as a whole, not to let it have any kind of instructional power over the CEO, and not to let it interfere with the wholeness of board function. Additional details about board committees are discussed in Introduction to Policy Governance® workshop.  You can also learn more about committees in our interactive REALBoard Self-Directed Learning Modules.   Module 5 on Board Holism and Delegation addresses the use of committees.
[Please read first the answer to the question, “Should the board have committees” as background for understanding this answer.]  The most important principle to remember here is that for the board to be able to hold the CEO accountable for results, the CEO must be able to have complete control of operational committees.  The CEO must have authority to appoint the members of a committee, dismiss them, create or terminate the committee, and determine what the committee’s job is. If the CEO has this authority (which the CEO may choose to delegate to someone reporting to the CEO), then having a board member on such a committee is acceptable.   Such a board member would be there as a volunteer, not as a board member.   The board member in this situation is there because the CEO has chosen to ask him or her to be there to lend specific expertise. The board member is not there representing the board’s perspective in any way, and it is not that board member’s role to “report back” to the board about this operational committee. The board member has no more authority than any other member of the committee, and in fact, is accountable to the CEO in this situation.  The CEO should be cautious about using board members this way, because there must be complete clarity about accountability – the board member must be very clear what “hat” he or she is wearing.  Provided that clarity is in place, and is understood, not just by the board member, but by everyone else on the committee, there is no problem.  However, maintaining this clarity in practice is easier said than done, so it is wise to limit the use of board members on operational committees to times when the board members are truly the only or best people with the expertise needed. Additional details about board committees are discussed in Introduction to Policy Governance® workshop.  You can also learn more about committees in our interactive Online Learning Modules.   Module 5 on Board Holism and Delegation addresses the use of committees.
In a for-profit corporation, the owners are obviously shareholders. In not-for-profit organizations, there are no shareholders as such, so Policy Governance® uses the term “owners” or “moral owners” to mean the equivalent of shareholders.  The owners are the people on whose behalf the board determines what benefits should be produced by the organization, who the beneficiaries are, and what it is worth to produce those benefits (this is called the “Ends” in Policy Governance® terminology). This is the group to whom the board owes moral accountability. The moral owners may or may not always be the legal owners of an organization.  And stakeholders are not necessarily owners.  Stakeholders include all individuals and groups who have an interest in the organization, including employees, customers or clients, vendors, donors and funders, and other organizations. Certainly the board has some responsibilities to each of these groups – for instance, to be sure that employees are treated fairly, that clients receive high quality service or products, that vendors are paid on time, and so on.  However, there is one major difference:  boards are not accountable to the stakeholders for deciding what benefits the organization is to produce.  For that most important decision boards are accountable only to the “owners” as a whole.   While the board may well wish to obtain the perspectives of various stakeholders as part of its overall knowledge before making Ends decisions, in the final analysis, the decisions must be made on behalf of the owners.  So, all owners are stakeholders, but not all stakeholders are owners. Each board needs to carefully consider who its moral owners are.  Sometimes the owners are also clients or customers, such as in some membership organizations. That means the board will need to carefully sort out when it is hearing “owner” information, and when it is hearing “customer” information, which should be given to the CEO who is accountable to the board for operational matters such as customer or client service. * Additional details about Ownership Linkage are available in our interactive Online Learning Modules.   Module 1 addresses Ownership Linkage.  Additional references available on this subject: Connect! A Guide to Ownership Linkage toolkit.
There are several principles in Policy Governance® that when used as a system permit very effective delegation to the CEO:
  1. The board delegates with “one voice” using written policies. Individual board members do not have authority.
  2. The board delegates operational matters ONLY to the CEO (assuming there is such a position in the organization)
  3. The board makes a distinction between Ends policies, which identify organizational benefits to be produced, the beneficiaries and the worth of producing the benefits, and the organizational means used to achieve the Ends.
  4. Organizational means are treated differently – instead of prescribing how to achieve the Ends, the board only places limits on means that may be used, to place off-limits any means that the board considers would be imprudent or unethical.
  5. The CEO is allowed to make “any reasonable interpretation” of the Ends and Limitations policies, but must be able to substantiate to the board’s satisfaction why the interpretation is reasonable.
  6. The board rigorously monitors the CEO’s performance against the criteria in the Ends and the limiting policies.
Thus, there are two categories of policies in Policy Governance® that provide direction to the CEO: (1) Ends, and (2) 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. The limitations are written in the negative because 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.” 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 FAQ on monitoring for more details.) There is a difference between prescribing the means to achieve Ends (which the board should not do) and proscribing, or limiting, a means for reasons of prudence or ethics, regardless of whether or not it would work to achieve the Ends, because the board considers it imprudent or unethical. A "prescriptive" and therefore inappropriate Executive Limitation would be one that tries to tell the CEO what would be an effective way of achieving Ends (according to the board's perspective). It's about preference. For example: "Don't fail to hire qualified staff." The board might say this because in their opinion an appropriate means to achieve the Ends is to hire qualified staff. . Now, if you think about this example, the CEO has to achieve – and demonstrate achievement of – the Ends via monitoring reports. He doesn't need to be told "how to" achieve those Ends, for example by hiring qualified staff. The proof of whether the means he chose worked or not will show up in whether or not the Ends are achieved, and that's what he's accountable for. You wouldn't say "don't fail to hire qualified staff, even if it works to achieve Ends." That statement makes no sense. An appropriate Executive Limitation always has to do with prudence or ethics. These are Limitations about the means used to achieve an End that would be unacceptable even if they worked, because they are imprudent or unethical. Whether or not a policy is prescriptive (and therefore inappropriate) often depends on the reason for the board writing it. Here is one more example to cement this idea. A board might write a policy regarding treatment of staff that says, "Don't fail to provide professional development for staff." The reason for writing the policy is because the board thinks this is necessary in order for the staff to do a good job. In other words, the board is trying to prescribe for the CEO one of the means it thinks is appropriate to achieve the End. In effect, the board is saying, "don't fail to provide professional development for staff, even if it works to achieve the End." [In fact, the CEO might choose to hire people who are at such a level that they don't require PD for a couple of years – this is just one possible alternative means scenario that the CEO could use. The point it, the choice of what means are most appropriate to achieve the Ends should be left to the CEO.] On the other hand, a board might have a deeply held value (ethics) about how staff should be treated, that includes a belief that, regardless of whether or not it will help get the job done better, all staff should be provided with opportunities for continued education or professional development. This board might write a policy that looks very similar to the last one, but for a completely different reason: "Don't allow staff to be without opportunities for personal or professional development." In this case, saying "Don't allow staff to be without opportunities for personal or professional development, [even if it works to achieve Ends]" makes sense, because the reason for writing the limitation has nothing to do with the board thinking it's a good means – it has everything to do with the board's belief that no staff member should be without opportunity to develop, because of their values about how employees should be treated. More details about how Policy Governance® provides for effective delegation are available in the Introduction to Policy Governance® Workshop, as well as our interactive Online Learning Modules.