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The Origins and Development of Policy Governance

Cover Story

By John CarverFebruary 7, 2013 | Print

International Policy Governance Association (IPGA) board members, John Bohley and Caroline Oliver are surely not alone in their curiosity about the evolution of Policy Governance and its relationship to other streams of thought. Here John Carver, the creator of Policy Governance, responds to their questions.

1. We understand that you were the executive director of the Harris County Behavioral Health Authority in Texas when you started working on the development of Policy Governance and had the opportunity to develop it further when you became executive director of a mental health clinic in Indiana. Can you tell us a bit more about the circumstances that motivated you to start work on your own approach to board governance?

The Harris County Commissioners, a five-member elected group, acted as the board of directors of the Mental Health and Mental Retardation Authority of Harris County. Political considerations outweighed most other matters and taught me a lot about how boards should not function. (Since then, an appointed board governs the new organization.) I discovered, however, that finding out how boards should function was far more difficult. The literature was quite sparse, conceptually fragmented, and not intellectually compelling. What I could find was more a collection of tips specific to one or another type of organization rather than a conceptual consideration of governance as a whole.

The word governance was hardly known. This may have been due to the widespread belief that board work was simply an arm’s-length version of management and, in the case of many nonprofits, that it was also about fundraising. The process of governance was seen to be unlike management only in that a group carried it out, but of course management also frequently worked in teams. So the need for governance to have its own dedicated technology was not so apparent; maybe it is not surprising that it also didn’t merit its own name.

A few years later, when I’d made a governance book proposal to a publisher, the response was that a book dealing specifically with boards was not needed. After all, I was told, there were already books on management and more on the way. Since boards just performed management at their level, a book on governance would be as unnecessary as one on, say, managing as the head of accounting or as the director of human resources.

At any rate, the beginnings of Policy Governance occurred as the Houston job ended, and during the interim, without employment to distract me for a few months, I was able to lay the foundations of Policy Governance. At that time I was hired as executive director of a mental health center in Indiana (then Quinco Consulting Center, now a division of Centerstone), where the board agreed to be a living laboratory of my emerging ideas. I owe quite a debt to that board.

What motivated me was discomfort with what I saw as a critically important function muddling along with no assistance from theory to guide it in developing judicious practices. Board work was conceptually ragged, a collection of bits and pieces that suffered from lack of system. Many of the bits and pieces were individually pretty wise, but to me, the situation cried out for conceptual organizing as much as a sink of dirty dishes demands our attention.

2. Did you set out to develop a comprehensive model of board governance, or did that goal arise later in your creative process?

I set out to develop as thorough and instructive a design for governance as I could. Although my direct work concerned governance of a public mental health organization, it seemed early on that any really meaningful concepts might have wider application. The challenge at first, though, was not as ambitious as universality but of achieving airtight logic for this one board. That was sufficient motivation at the time. I repeatedly tested the emerging ideas and naturally had to discard a number of them. The main test for principles was whether each principle under consideration (for example, one board voice, proscription of delegated means) would not only be applicable and useful, but would be necessary in every governance circumstance I could imagine. The main test for concepts, such as ownership and Ends, was whether they uniquely filled gaps among components that would constitute an integrated, internally consistent system.

I was not sure it would be as comprehensive or universal in its applicability as it turned out. But I did intentionally use thought experiment methods in order to chase what I then hoped would not prove to be an elusive dream. I gathered others’ views mostly through reading, but with regard to the actual conceptual development, I worked best alone.

3. What do you see as having been your main influences in having the courage and vision to develop a new model of governance?

I recall three major influences. One was a conviction that any important function can be improved by breaking it down into its components, then analyzing them in terms of the total system and, in the process, looking for improvements in the system itself. I see this as being similar to the history of figuring out the submicroscopic world in order to understand macroscopic matter and energy better.

Second, a lot of what I’d been studying about management methods seemed not to have been applied to governance at all or, if applied, seemed to end up duplicating what was already there, adding no unique value. I found, of course, that some management methods could be profitably applied and some could not. Finding out what caused the difference engaged me in figuring out what differentiated management from governance.

Third, I observed that boards either allowed their executives to control the board job or allowed themselves to get into executive jobs. This tendency for falling into the opposite dysfunctions of inversion or invasion was even more peculiar because boards could do both in the same meeting, suggesting a randomness enabled by a common flaw rather than two distinct defects.

All three of those factors pointed me toward the missing element: an encompassing theory or conceptual framework for the board job of linking governance to some larger legitimacy base. What flows along that channel? How can direct responsibility be distinguished from accountability for authority passed on to others? How can proper behavior as well as proper outcomes be ensured without hands-on board involvement that risks cluttering the management process and burdening creativity?

The problems were so compelling that I don’t remember courage coming into it. I suppose there was a measure of audacity, for it seemed to me then that my impudence would lead to either a breakthrough or a career-damaging reputation for being misguided, if not harebrained.

4. What do you see as having been your main influences from the preexisting governance field in developing the theory and practice of the model?

Many wise beliefs about board behavior and mechanisms predated Policy Governance and, for that matter, continue to come out now. It has long been said that boards should deal with policy and big issues, think long term, mind their fiduciary responsibilities, and avoid micromanagement and rubber stamping. Policy Governance absorbed these wisdoms, though in most cases giving them more rigorous definitions and weaving them into a previously nonexistent whole. The greatest benefit of pursuing that wholeness is that it reveals further weaknesses not obvious without it. That is somewhat similar to the way new elements could be predicted once Mendeleev invented the periodic table of known elements. Like a scientific theory, then, a holistic conceptual model throws light on questions that may not have ever arisen before.

5. What do you see as having been your main influences from other fields in developing the theory and practice of the model?

Management, scientific theory development, and to a lesser extent political science significantly affected the beginnings of my inquiry.

In particular, I was greatly influenced by management insights about job description and delegation; these caused much exploration about what a “job” really is and how, both vertically and horizontally, different jobs should be linked together.

Also, my doctoral training in psychology and behavioral research was influential, though not in the way you would think. Its main effect was in engendering what became my obsession with assembling ideas into a conceptual whole rather than pieces. That’s what is needed in producing theory, and that is what I frequently refer to as conceptual coherence.

The third influence was political science—not so much with respect to governmental types or economic systems, but more as it deals with the transmission of the authority of a mass of people to a small group. The political science influence was what drew me into agency theory, social contract theory, and servant-leadership. Curiously, though, I was not sufficiently knowledgeable then to recognize the rich literature on these topics, and I did not know even to call these concepts by their rightful names.

6. How did Policy Governance get its name?

One option I considered was Values Governance. I was convinced early on that governance should be built on the recognition that governing by explicit values is more efficient and capable of being more exhaustive than governing by the multitude of decisions based on those values. (That’s not unlike parents instilling values rather than dictating their children’s individual choices.) However, figuring out which categories of values are governance relevant presented a hurdle because even choosing which font to use is based on values. So an early hurdle was to construct relevant value categories and search for the principles that might apply differently to each. The focus on organizational values was pertinent enough to justify Values Governance as a descriptor.

But Values Governance as an appellation didn’t last, largely because it would have saddled the newborn model with political baggage. During those years, public education in the United States was going through very public conflict about values education. I could foresee eventual consulting work with school boards, so entangling the model (and myself!) in so spirited a debate was a handicap I was loathe to assume. While the values education controversy was certainly an issue for boards, it was not an issue about boards.

One option I did not consider was Carver Model. Although I am flattered that the eponymous moniker became as widespread as it did, I neither used it myself nor encouraged others to. As to the use of the word model, it won out against system, design, and other candidates long forgotten, as well as just Policy Governance without the added noun. So “model” stuck. My attraction to the word was due to my having a strong personal connection to the scientific method, theory building, and the conceptual precision the word model implies in research. However, since the word doesn’t have that extreme level of coherence to everyone, in retrospect I’m not sure I made a good choice.

The use of the word governance is rarely questioned now, but it was not in common use when Policy Governance began in the mid-1970s. I appropriated the word to refer specifically to the board’s job rather than use a term like Policy Board Leadership or lengthier designations. I would like to think I helped governing technology in boards acquire a generic term of its own, governance, but frankly that development would likely have occurred anyway.

Needing a consistent name for the model I’d produced was obvious, but relying on others to safeguard its meaning also became obvious. Professional courtesy for name identification and proper attribution proved too weak a protection, plus users would drift into sacrificing the model’s systemic integrity. It was evident that Policy Governance would soon mean whatever anyone wanted it to mean. So I sought further protection by registering the term as a service mark (comparable to trademark) in the United States. During the last decade, registered service mark protection was acquired in Canada and the European Union, as well as continuing in the United States.

Just to clear up a misconception about the service mark: seeking legal protection of the term Policy Governance (with capital P and G) was not done for pecuniary reasons; there has never been any charge, royalty, or licensing for using Policy Governance. The reason is to enable my control over just what is meant by Policy Governance. That effort is by no means 100 percent effective, but it has undoubtedly been helpful in preserving the model as a name-identified design for precision in board leadership.

7. What do you see as being the core contributions of the Policy Governance model to the history of board governance theory and practice?

Unique contributions of Policy Governance include the differentiation of what I decided to call Ends and means along with their dissimilar treatment, cascading of decisions by breadth, a rigid one-voice rule for expression of board authority, performance measurement exclusively against prestated criteria, and the ownership concept.

The core contribution, however, might be that governance is a distinct function in the transfer between owners and operators that is sufficiently unique and critical to be capable and deserving of being conceived in universally applicable theory.

8. What are your expectations and hopes for the future of Policy Governance?

Although Policy Governance enables a massive improvement in a rather disorderly and inadequately theorized function, it requires far more precision and discipline than has been familiar. Its paradigmatic shift from time-honored practices appears complicated only because it brings counterintuitive new rules that must be followed meticulously. Moreover, fulfilling group accountability and exercising group authority do not come naturally; excellence in governance allows no escape from that hurdle. Yet many, if not most, board members already work in fields that require mastery of far more complexity and scrupulous attention than does Policy Governance.

Governance in its present state does not exist in isolation. It is surrounded by and immersed in power relationships and interests that have grown up under the old methods, ones that naturally resist even the most compelling of transformational ideas. CEOs who control boards—and we know there are many ways of doing that—and board members who dominate the process are likely to see changes in terms of their current roles. Funders, accreditors, and other authorities have moved little from governance ideas of decades ago. Laws and regulations were not devised by those on the leading edge of the past, much less the future. Political figures and the press speak of governance with little attention to the care it deserves, thereby spreading poor ideas even further.

I don’t recite these realities in order to make Policy Governance or any equally coherent models that succeed it seem impossible. I say these things in recognition of how challenging a task it is to spread an enormous conceptual shift under obdurate conditions. After all, keep in mind how long it took surgeons to start washing their hands even though washing required neither new skills nor money. Furthermore, there is no reason to expect advances of Policy Governance to be a straight line with no setbacks along the way. Even physicians’ hand washing has come and gone (and, in fact, it is a problem in hospitals even today). The future, as Alvin Toffler suggested in his book Future Shock, invades the present at a staggered pace.1

The success of Policy Governance so far should be for us a source of encouragement and excitement. The fact that Policy Governance has advanced in the world as far as it has in only three decades is far more remarkable than that it’s not yet ubiquitous worldwide.

My hopes for Policy Governance are long run, and since they are long run, they deal more with effective governance generally than with Policy Governance specifically. My intent before developing Policy Governance was that groups holding the trust of others optimally govern the achievement and behavior of organizations that belong to those others, whether in business, nongovernmental organizations, government, or any other of the somewhat artificial categories into which we divide life. That aspiration led to Policy Governance, but was not replaced by Policy Governance. This is not to say that Policy Governance isn’t the best existing resolution of that desire today; I believe that it is. But no matter how well a tool is designed, the tool should never outrank the vision it was meant to address.

* * *

Note

1. Toffler, A. Future Shock. New York: Random House Publishing Group, 1984.

CONSIDER THIS …

“The reality is that corporate governance in hedge funds … leaves much to be desired. According to a survey of 2,315 Cayman domiciled funds carried out by Sound Fund Advisors in February, 31 percent of funds have no external directors. The most popular ‘professional’ directors sit on hundreds of boards, with the top 40 sitting on more than 100 each and the top three sitting on more than 500 apiece. How can they fulfill their fiduciary obligations on that basis?”

John Plender, “The Last Word: A Call to Fix Hedge Fund Governance,”

Financial Times, May 6, 2012.


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