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You and Your Nonprofit:

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Boards that are new to Policy Governance will spend a lot of time thinking about their Ends and Executive Limitation policies because these contain the words used to delegate the work of their organization to the staff. However, when it comes to articulating the concepts in Governance Process and Board-CEO Delegation categories of policies, boards will often accept the recommendations of their consultant. Unfortunately this means that boards sometimes pay too little attention to the content of those words when in fact they may well cover issues that deserve the board’s attention.

Part of the reason for the content of these policies being ignored may be that much of what is covered in the Governance Process and Board-CEO Delegation categories is a restatement of the substance of Policy Governance itself. Yet it is important and here’s why. These are the policies that the board should be using to hold itself accountable. Now that the policies for your CEO are approved, here is where Policy Governance itself is integrated into your organization. Policy Governance is no longer just the words written by the author of the model, John Carver, or the teachings of your consultant. Policy Governance for you is now what you have articulated in your policies.

As you know, the board is accountable to its owners. In most organizations however there is no effective continuing mechanism for the ownership to hold its board accountable. Therefore, if the board is going to behave responsibly from meeting to meeting it will likely have to come up with some way to hold itself accountable for adhering to its own policies that describe how it intends to govern.

One idea adopted by most Policy Governance boards is that there be a brief self-evaluation report given at the end of every board meeting. Often, a different board member is selected at each meeting to provide that report which usually means filling out a form that becomes part of the minutes. Another idea that can be an alternative to meeting evaluation, or an addition to it, is to have a less frequent (say six-monthly or annual) assessment conducted by the whole board – again using some kind of standard form. Whatever procedure is used, it is my observation that there are a couple of activities that can erode the effectiveness of board evaluation.

First it is not helpful if meeting or board evaluators answer the evaluation questions on the form without recognizing that those questions are purely reminders of the policies themselves. The object is to ensure that the policies are being followed, not just to fill out a form. In all cases, in preparation for conducting board evaluation, the evaluators should first re-read all of the relevant policies so as to be sure they report with a fresh understanding of those words.

It is vital that board members are constantly reminded that their Governance Process and Board-CEO Delegation policies are their descriptions of how they intend to govern and it is therefore really helpful if all board evaluation reports are fully discussed by the whole board at the next available board meeting after they have been produced.

The second activity that can cause erosion of the effectiveness of board evaluation is the board changing Governance Process and Board-CEO Delegation policies without ensuring that the board fully understands the principles behind Policy Governance. In my observation, this often occurs after the board has acquired a number of new members. Without adequate orientation about the principles of Policy Governance it is all too easy for boards to end up adopting new or reworded policies that substantially undermine their effectiveness. The result is boards evaluating themselves against criteria that no longer add up to a coherent approach and, inevitably, finding that Policy Governance is no longer working for them.

To sum up, done properly, board evaluation is a great tool for ensuring that the policies that describe how your board governs are kept real, up-to-date and true to your governing intent. So, when did you last read yours?

As someone who believes that boards can and should lead, I find myself considering the relationship between leadership and compromise. Compromise too much and your board’s claim to leadership starts looking very weak. Compromise too little and you may well find yourselves becoming a contradiction in terms – a leadership body that has no followers.

Strong leadership requires a clear vision AND the ability to enrol others in that vision. For boards, creating a clear vision however is not about any one individual, or even themselves as a group, having a brilliant idea. For boards leadership is about the board as a group seeking to understand their owners’ intentions and translating those intentions into organisational success and safety.

Thus strong leadership in the board context is about collective power exercised within a democratic framework. By definition therefore, boards operate in the world of compromise. So what does that mean about their ability to lead?

For my answer, I want to distinguish between process and results. Boards are essentially leaders of a process – the process of translating owners’ intentions into reality. To be successful boards need to lead:

• Their owners in understanding that they are owners and the powerful expression of their intentions
• Themselves in defining and executing and monitoring their collective role as the link between their owners and their CEO
• Their CEO in fulfilling and monitoring the expectations which the board has created on behalf of their owners.

Board leadership is therefore about creating and sustaining the framework within which the CEO’s individual leadership can flourish. In creating this framework, boards must always be ready to make compromises between different owners’ perspectives and between the expectations they would ideally like to create and what can realistically be achieved but dealing with these conflicts, and finding the best way through, is surely the very essence of board leadership.

Does your board have a plan to meet your staff organization halfway? Are they empowered to do the work you want done? And have you clearly articulated what change you want to see in your community (whether it’s a geographic community or a community of members)?

If you said “no” or “I don’t know” to either of these questions, you need to call one of the people on this website.

Is your board work based on assumptions that the board will be in both a governing role and semi-staff role, overseeing the management of the organization?

If you answered “yes” to this question, you need to call one of the professional governance consultants on this website.

Do it today. Don’t keep wishing and praying for things to get better! Remember that God helps those who help themselves.

Start by building your skills today.

As governance consultants we often see boards that are trying to cope by:

• managing their staff,
• advising their staff, or by
• commanding their staff

Since the board is the most senior box on the org-chart, everyone knows that the board has the absolute authority to manage, advise, or command. If the culture of the board is to approve staff plans, or to instruct (command) the staff, or merely to act as an advisory committee, then when we (consultants) show up saying that this is weak governance and the board should learn a whole new way to attend to its governing, there is great frustration.

If you see your job on a board in terms of that org-chart, it makes the board look like senior management. As consultants we are likely to say that your job isn’t any kind of management.

What is it that you govern? When I ask that question most people will say something like: “the organization,” or “the staff.” In people’s minds they are picturing any physical manifestation of the organization (e.g. a hospital, a museum, the office where the people work, the event that the organization runs, the benefits that the charity supports, etc.) The correct answer does include the staff and the infrastructure, but it is actually more obscure than that. You govern the legal entity that owns that organization and has that staff.

Oh yes, you kinda know that. The entity is the corporate thing that was formed with the articles of incorporation and has a membership (or shareholders); and then the members approved the bylaws that actually created the board. So what?

Since you cannot see the entity, it is often ignored. If you can get your head around the concept of this artificial entity, it may help you to see the real potential of your organization, and to better understand your role as a governor.

Over the years, in every jurisdiction, the power and potential of these artificial corporate entities has grown until now they have almost all of the rights of a real entity (a human). Your corporation can own any amount of equity (property), have bank accounts, have any amount of wealth, and be multinational in scope (there is even a suffrage movement to give corporations the right to vote). Unlike humans, these entities are immortal. Only the membership (or shareholders), and the board, has the right to command the entity.

If you, as a member of the board, think of your job as a form of management, you will be thinking of how to direct the existing infrastructure (people and facilities). If, instead, you think of your job as having authority over the entity and what it is capable of achieving, you are limited only by your understanding of the need for your organization, and by your vision of what is possible.

Your existing infrastructure is limited by its history and probably by the current culture. The potential capability of your entity is almost unlimited. Focus on the former, and you will be worrying about how to rearrange or fix the current organization. Focus on the latter, and you will be paying attention to your owners, seeing the real need in the community for your organization, and visualizing what will be achieved when that need is fully addressed.

What we can do is show you how to tap the power of your entity, hone your vision so that it addresses the real need — and then will be able attract the resources to produce the required results. This is the work of a board making a real difference in the community. If this sounds like an impossible dream, or seems to be the kind work that might make your time on the board more worthwhile, please talk to us.

© 2011 Robert J. Ballantyne

Are your policies “naked”? By which I mean, are your written statements of decisions that you need to convey to others dressed or not dressed in good governance principles? Policies that are not dressed in good principles can waste a lot of time, effort and resources in your organization. If you are interested in growth, sustainability, profit and progress, don’t ignore the power of policies — dressed in good principles — to fuel your company or organization.

Now at first you might think, what? Policies are just words on pages filling up a 2-inch binder on a shelf in the CEO’s office. What have they really got to do with profits? Growth? Productivity? Making a difference in the world?

If that’s your perception of board policies then I am willing to bet that your policies are naked and therefore largely ineffectual, and, quite possibly, doing your organization and its people more harm than good.

Policies that are dressed in sound governance principles meet three important criteria:

1. They’re oh-so-practical. Dressed policies are used by everyone in your organization, all the time. They are short. They are clear. They are relevant, understandable, consistent, organized, and cover every situation that could arise.
2. They let you do more with less. Dressed policies can really motivate people in their jobs, minimize internal red tape, focus people on results, maximize creativity and spur innovation.
3. They keep you out of trouble. Dressed policies allow boards to be truly accountable to the right people, enabling directors to protect the organization from risk as much and as easily as possible, without sacrificing results.

If you do not have practical, efficiency-boosting and risk-protecting board policies, then consider learning about a governance system that will dress your policies in sound principles and create a huge opportunity for growth in your company or organization. When everyone is seeking that competitive edge, trust me: dressing your policies in sound principles is well worth the effort.

To learn how to do it, contact me now at 1-877-847-4552.

In both our for-profit corporations and non-profit associations, the role of the board is often unclear to both board members and to staff. On one hand, everyone knows the board has the ultimate authority and accountability for the whole company; on the other, it often seems to be a group of strangers who show up occasionally to review staff reports, and perhaps to approve some staff plans and give some directives, and then resume being invisible until the next meeting. The professional staff often views this group of well-meaning and powerful volunteers as dilettantes.

In many organizations, the board seems to be truly necessary only when there is a crisis or when it is time to hire a new head-of-staff (CEO). No wonder some board members, who value their time, ask themselves, “Why am I bothering to do this?”

Part of the problem is that in the corporate world, the assumption is that if the board hires a great CEO, all that is left for the board to do is to support the CEO by providing some wisdom and community perspective; and also to perform its due diligence of inspecting the plans, financial statements and other performance indicators. For years I both worked for boards that did this, and participated on boards that behaved this way. Unlike a number of Policy Governance proponents, I think it is possible to govern competently in this manner. I have written about it here. However, what I have learned is that although this is often the norm for board behavior, it amounts to an abdication to the CEO of the true power, contribution, and available wisdom of the board.

I came to really understand this in the early days of my teaching Policy Governance. A board had been listening to its owners and had come to the conclusion that the Ends policies (the external results desired by the board) it had created over a year ago needed some substantial changes. So, at a meeting where I was present, they were about to approve new Ends wording. There was some staff present, participating as advisors, including the CEO. One of them suddenly piped up and said,

“Wait a minute! These new Ends are quite different from what you wrote last year and to accomplish which we [the staff] have undertaken considerable planning and resource allocation. You [the board] are about to move the goal posts! You are not being consistent.”

I explained to the staffers that, as a result of feedback from the owners, the wisdom of the board was now better informed than it was a year ago, and the new Ends reflect that wisdom. In fact, the board now had no choice but to amend its Ends. I added, “The board is in the goal-post moving business.”

On reflection, I thought about that last statement of mine in relation to my own CEO experience. When I had been a CEO, any real change in my organization was a formidable process. As a CEO, people expected me to be consistent. If I saw the need for substantial change, I would use processes like strategic planning, or some other course of widespread consultation and communication in order to achieve buy-in from staff and others. Terms like restructuring, turnaround, or rationalizing staff strike terror into the hearts of employees and other stakeholders (including the board). Taking an organization through such changes is a huge challenge. As someone helpfully explained to me, “the CEO does not get paid the big bucks for the easy times.” Change from within the organization is usually a difficult process.

The one place in the organization’s hierarchy where necessary change is actually easy to accomplish is at the board level. If the board’s processes are reasonably open and transparent, and if it is widely known what the owners would expect of their board, then it becomes obvious to everyone what Ends are likely to be required. When the board has done its due diligence (in this case, with its owners), all that is left to do is to articulate the new Ends. This process concludes with the passage of a motion in a board meeting adopting the new Ends.

Since the new Ends are described in words, this new expression of the wisdom of the board can be almost instantly communicated to everyone who will be affected by this change in direction.

While change is always uncomfortable for the people who are affected, I have found that this kind of informed board-mandated shift in direction results in surprisingly little pushback. Since it arises from the ownership’s desire to have the organization respond to real community needs, there is usually quick recognition by the staff of the validity of the change. Also, since the resulting action plan (the interpretation of the new Ends) is left entirely to the CEO (and by extension, the staff), those accountable for implementing the change will usually have lots of scope for expressing their creativity in addressing the new Ends.

It is interesting that while many people will accept the concept that the reason for a non-profit organization to be incorporated is to create a result or benefit or change in our community; when the time comes to demand that change, many boards flinch from the responsibility of making that demand. A Policy Governance board understands that this is its primary job.

Last Sunday millions of people watched the Super Bowl, the crown jewel of American Football competition. This day reminds me of a useful analogy that has resonated with hundreds of the board members I have trained and I would like to share it with you.

To govern well, boards must learn how to guide an organization effectively and efficiently. Effectively, because a board delegates significant decision-making authority to the CEO but is still ultimately accountable, and efficiently, because boards have precious little time to accomplish their work and must assure each minute is well-spent.

How does the football analogy work?

Imagine a football field (yes, soccer fans, that field also works!). Now think of how Policy Governance boards use two of their four policy quadrants to communicate expectations to the CEO. Ends policies define the precise results they expect the organization to achieve. This is much like the end zone. Executive Limitation policies define the situation or conditions to be avoided (because they are imprudent or unethical) and can be thought of as the field’s side lines or out of bounds area. Put together, a playing field perfect for guiding an organization is created.

Having carefully thought through what external results to achieve and what situations to avoid, the board can confidently turn the playing field over to the CEO who is then free to control the plays on the field without board interference as long as she or he stays on the field and scores sufficient points! The CEO doesn’t have to ask the board’s permission to run certain plays (adjust programming, staffing, budget shifting, etc.) because the board has already said what to avoid and what to achieve. The CEO and his or her staff are free to be as creative and nimble as they can be – just what these challenging times call for in an organization.

This arrangement frees up the board to scout the future terrain and make adjustments to the playing field as they feel necessary by adjusting policy language. By carefully monitoring the organization’s compliance with the Ends and Executive Limitation policies, the board receives valuable compliance data and other signals that also indicate when playing field perimeters need to be adjusted.

With this analogy in mind, is your organization ready to play ball?

Contact me for more ways to clarify and simplify Policy Governance: stacy (at) outofthewoodsconsulting.com

Struggles are common with small and medium companies. Resource constraints, time pressures, internal controls and keeping up with external changes are a constant reality for many of these types of organizations.

Ultimately, the whole burden lies with the board (who in many cases are owners). It is much like having a pyramid turned upside down with full pressure on the tip down below which is the board. There are traps everywhere. If you are successful, the pressures of keeping up are immense. If you have failures and constant cash flow problems, you end up in a very stressful situation. Even if you have a knowledgeable team doing a highly commendable job, challenges are all over the company.

The purpose of this article is to help such organizations ease the burden and pressures, yet perform to their maximum potential. There is a better way to function at the top level. In fact a better way is an understatement as this is an excellent way to build wealth and manage risks. I will give a practical example in which you may recognize your own or other company operations.

When I was auditing a steel company a few years back, I realised that a governance structure did not exist. The reasons were that there was far less awareness of the need for board governance back then and that the owner was the CEO who called all the shots. The buzz words back then were corporate strategy, management reports, budgets as well as cash flows. Actually, these looked and were important in many instances. But these were simply activities without a resultant outcome. These activities are simply means to an end. The company was very busy but the direction was unclear.

Under the model of governance to which I want to introduce you, Policy Governance, decisions on the company’s Ends are segregated clearly from everything else. This distinction clarifies final outcome from activities. If the Steel Company’s board had separated their management meetings from their governance meetings, and firmly focused their governance meetings on determining the company’s Ends, all the operations involved in running the business could have taken a different, and far more aligned, turn.

Board policies which clearly translate owners’ best interests into statements of the company’s true values, principles and performance expectations can be readily permeated through all levels of management and provide a strong backbone for the company as a whole. At this steel company there was no such structure present, which meant that the CEO was always under constant pressure to answer management as well as governance issues with no proper guidance. The stress levels were always high and frustrations were evident with the way he treated his staff and other stakeholders. The difficulties kept rising as the level of growth was extremely fast.

Companies globally look for long term sustainability. But in the real world, board members change, the executive team changes, as well as a myriad of other processes keep changing. The core question is how can companies cope with these changes in a competitive landscape, have workable revenue generating and growth strategies, as well as meet up with innumerable regulatory changes? The answer is to have up to date articles or bylaws in which the owners empower the board, and, up to date board policies that guide and discipline the organization on owners’ behalf.

The Policy Governance model offers a holistic approach for those acting as custodians to a company that allows them to develop simple yet clear and comprehensive policy controls that express their core values and principles in order to instil the right discipline.

Having attended many seminars on governance and ethical issues, I realise that behaviours and cultural issues play a crucial role in an organization’s performance. It is true that matters such as remuneration, health and safety, risk management are equally important, but behavioural and cultural patterns take centre stage in many discussions. Companies applying the Policy Governance model have a well designed structure and system in place for boards to align their company’s behaviour and culture with their owners’ values in terms of their Ends as well as their standards of ethics and prudence.

We must not also forget that the cause of reserves being obliterated is mainly due to the wrong choices which company directors have made. Wrong, often because the board and management were too busy with day to day fire fighting to consider what was required for their long-term success.

In summary, small and medium organizations can add leverage and take advantage of opportunities using the Policy Governance model. Whilst your competitors will be busy looking at the ins and outs of day-to-day means related issues, you will be firmly focused on defining and tracking the outcomes your owners want, taking you further and faster ahead.

The wisdom of Policy Governance comes to the surface through experience, trial and error, and much reflection. There is a better way!