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The Primary Differences Between
Traditional Governance and Policy Governance

 

The quick version

Traditional Governance
The board tries to keep up with and to instruct management.
The board is often dilettante and is a follower of management.

Policy Governance
The board states what the organization must achieve
and holds management accountable.
The board must lead.

Abstract

Tradtional Governance: The board approves staff action plans and then exercises oversight by monitoring all aspects of the operation. This is usually done by receiving staff reports. A diligent traditional board tries to be aware of all aspects of the operation, and therefore its attention is focused on the work of management.

Policy Governance: The board articulates the required results of the work of the organization. Also the board describes what means will not be acceptable. Oversight is provided by rigorously monitoring only the required results and the means. The work of the board is focused on revising the desired results and means. Consequently its attention is given mainly to attending to the needs of the community served.

Full Article

Jump to the following section:
It is about leadership
The scenario for diligent traditional governance
Followship vs. leadership
Accountability
Does the board really know what the organization must achieve?
The authority of a fiduciary
Why bother with Policy Governance?
It is about leadership

Since Policy Governance (PG) is a complete model for managing the operation of a board, there are many features associated with this model. Usually when people discuss PG, they begin with listing those features that seem to make it attractive. Often I find that board members are well into the details of implementing PG without really understanding how it is fundamentally different from the work of most boards. PG is different, and it is not effective to attempt to use PG and still continue with the old style of board meetings.

The key difference is that PG moves the board from a position of followship to one of leadership without becoming part of management. With PG the board writes policy that says what the organization must accomplish and how it must be accomplished; and through monitoring the board holds the staff accountable for achieving it. With traditional governance (TG) the board is more focused on oversight. It relies on demanding and evaluating a variety of management reports to ensure that the staff is behaving appropriately. When there is a concern about how the staff is managing, TG boards often resort to edicts-of-instruction. These edicts often bring the board into the realm of management.

The scenario for diligent traditional governance

Here is a familiar scenario that is part of the planning process of many diligent boards using TG. Several months before the start of a fiscal year the board expects management to present a program plan and the associated budget for the coming year. The board reviews the plan and probably cherry picks the aspects of the plan that it likes and criticizes others. Over next couple of months, the staff and the board undergo an iterative process of changing the elements until the staff have a plan that they can implement and that the board can approve. The end of this process is that the board approves the plan. When the board does that, it becomes the plan of the board. It may seem as if the action is just a rubber stamping, but it means that the board has assumed ownership of the plan.

The board will want to ensure that its plan is being followed, so it will ask the staff to prepare monthly cash flow projections and other targets. The reports addressing these targets will become the board's monitoring tools. Since nothing really ever goes according to plan, at each board meeting the staff will discuss these indicators, which are probably compared with the plan and the situation for the same time last year, and if necessary with pro-forma calculations for the likely situation at the end of the year. The staff will explain any variances and discuss any needed course corrections. If these are radical, the board may be asked to approve the changes to the plan.

What is wrong with this? Actually it can provide for fairly diligent oversight on the part of the board. The main problem is that although the board adopts the staff's plan, it was really authored by the staff.

Who, then, is the architect of the vision and mission that drives this plan authored by the staff? Often it is tradition or in some cases the head-of-staff, but not the board. The board is usually satisfied when staff tries to do as well as, or better than, whatever happened in the past. If there is a need for a new direction, sometimes this is accomplished by strategic planning. This is a worthy process of management (I facilitate strategic planning). When it is truly strategic (that means the plan is timely, it ensures that the organization in tune with its mission, and it provides the capacity to cope with the forces within and without) it can strengthen the organization and provide insight into possible new directions. However, when the board is brought into strategic planning, it becomes only one of the many stakeholders with an interest in the organization. Likely, the board will embrace the strategic plan, and even take responsibility for it, but the board will not be the leader.

Followship vs. leadership

With the best of TG, the board demands sufficient reports to be sure that it is doing its diligence. From time to time the board will issue edicts. It has the authority to do that. Nevertheless, usually with TG, the board sees that its job is to review the work of staff. This is followship, not leadership. When the board is concerned that things are not going well, or the board mistrusts its staff, it will demand more and more reports. How else can it attend to its fiduciary responsibilities?

With PG it is the responsibility of the board to describe, through clearly articulated policies, all that the staff must achieve. With regard to means, it says only what the staff must not do in order to achieve those results.

All of the board's instructions to staff are contained in those policies. Writing and re-writing those policies is the primary work of the board. Since PG boards are absolutely clear about what must be achieved, and about how the staff must behave in order to reach these goals, the board is in a true leadership position.

Accountability

PG boards know the only way to ensure that the staff is accountable for its policies is to rigorously and regularly monitor all of its policies. This process of articulating policy, and then monitoring those policies, is very different from the TG process of demanding to see lots of reports about staff activities.

Does the board really know what the organization must achieve?

Since the board is obliged to say what must be achieved, and monitor then monitor the results, the board must first know what it wants the organization to achieve. Knowing and articulating exactly what must be achieved is true leadership, and the real power of PG. For those accustomed to TG, this is the most difficult aspect. How many board members really know why their worthy organization exists? For instance, is it enough that there is good attendance at the museum, or is it more important that the local population understand the history and heritage of the region? Is it enough that high school graduates can pass the usual pedagogical tests, or must they also be able to make necessary career decisions and understand ethics? Is the number of beds in a hospital the issue, or is it the remediation of illness in the community? The board must clarify these issues, and the words of the board's policies will make a big difference in the resulting action plans of the staff.

The authority of a fiduciary

As a consultant, I hear board members who are new to PG complain, "That is not what I want to do as a board member." Board members who expect that their role is to help with wise managerial advice, or who are good at spotting problems in financial sheets, or are accustomed to offering volunteer services, will find little application for their skills on a PG board. Board members have to leave their personal wants and visions for the organization at the door. What they discover is that their authority to lead and to govern comes from those whom they, as board members, represent. This is the essence of being a fiduciary. As fiduciaries their responsibility is to understand and to attend to the needs of their community, not to assist management. In every case, when there is any doubt as to what must be said in policy, the board asks itself, what would those whom we represent have us say?

PG requires the board to articulate what must be achieved by the organization, and then it holds the staff accountable for that. This is not demanded with TG. Since the words of the board are going to result in a real change to the community, the vague poetry of mission statements and vision statements is not adequate. TG boards can make do saying, "We expect attendance to be up by 10% next year," or, "reduce expenditures by 12%," or, "meet these educational objectives." The PG board must be absolutely clear about why the organization exists, and know all of the results it must produce - and say it clearly for everyone to see. This is hard work.

Why bother with Policy Governance?

Why bother?

When the board can say exactly what the staff must accomplish, everyone's energy becomes focused on that. Clarity of purpose produces real benefits for the community. PG Board policies are usually widely circulated so, as a result, the work of the board becomes transparent.

The TG board must see everything possible about what the staff is doing in order to decide if what has happened was appropriate. When things are not going well, these boards ask for more and more reports. Most of the TG board's time is spent attending to the past activities of staff.

The PG board has said what must be achieved, and what constraints are applicable, so all of the PG board's monitoring is focused on how well the staff is adhering to the board's policies. The monitoring reports and the supporting data are supplied in writing before the meeting, so unless something is amiss, there is almost no discussion of those matters. Since the board knows that its instructions are being carried out, the usual staff show-and-tell sessions that take up much of the time of most boards are gone. The PG board should be spending its time deliberating the needs of the community it serves, and not on the operation of the organization. This is culturally very different from TG.

For board members who want to spend their time on the affairs of how the organization should be managed, PG will be a difficult or impossible philosophy to embrace. With PG the effective role for people who want to help with running the organization is to offer to volunteer their services. A volunteer is accountable to the staff member who chooses to accept such services.

If your board is considering PG, first understand the model, and agree that your group is prepared to govern by its policies. If the time arrives when you don't like what your organization is doing, your choice will be to change your policies, or to decide that your policies are correct and the person(s) responsible cannot do the job. What is no longer appropriate is having the board assume the role of a CEO and then try to fix the organization or the person.

Policy Governance requires that the board understands the model and has the discipline to use it.

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