The Board's Primary Categories of Responsibility
How shall a Board organize its work?
Organize with a view that all actions and policies fall in four categories:
Governance Protocol
- Policies that define the board's operations, its methods, organization, behavior, accountability and philosophy
Board-Executive Delegation
- Policies defining the methods of delegating to and monitoring the performance of the executive
Desired Outcomes
- Policies defining the owners' desired outcomes of the organization, what is to be achieved, for whom and at what financial impact or measure
Executive Limitations
- Policies communicating to the executive ethics and business practice standards and limitations representing the value commitment of the owners
If the organization is a partnership or a joint venture another category is often necessary.
Partnership Limitations
- Policies defining the partner's relationship to the organization and expected partner behavior limitation
When a board approaches its task of governance to develop policy in one of these categories, it will establish clarity of expectation for the CEO and provide itself clarity to measure performance in terms of outcomes and limitations. The Board's job is not to give the Executive approval of management proposals; approval transfers accountability and responsibility from the executive to the board. The focus of evaluation moves to the board approval away from clear measurement of desired outcomes within established limitations. The executive defends his position "The Board approved the plan presented and is therefore as equally responsible for the outcome as I am."
Experience demonstrates boards find the approval process a much less stressful task than writing good policy, therefore often default to this action. When desired outcomes or behavior to achieve the outcomes is not as the board envisioned, it finds itself as culpable as the executive. Blurring of responsibility and accountability leads to the corporate "they" blame shifting, and less than excellent long term outcomes.
The process of writing "great" policy is a much more challenging task than critiquing and approving the CEO's proposal. It is hard work. But the results of "great" policy is clarity of the executive's performance, and of the monitoring process measuring performance.
The board employs a CEO to provide the daily management of the organization to achieve desired outcomes within the boundaries of board established limitations.
Would you like to improve your board's performance? Clarity of your CEO's responsibility and accountability? How about a Board Development Seminar? Call me today! I have over twenty years experience as a CEO reporting to a Board.
John Shelford
Shelford Associates
239-293-4848
[email protected]