(First published in the March-April 2012 issue of Board Leadership, available to subscribers electronically at publication.)
I was recently asked why Policy Governance makes such a big deal about monitoring and seems to disparage approvals when, the questioner averred, these board actions are actually the same.
I answered that Policy Governance does not seem to disparage board approvals of staff proposals or reports; it actually does disparage them. Moreover, monitoring, as defined in Policy Governance, is very different from the approval method of control.
So what is the difference?
Typically, the approval process is initiated when the CEO finds that a decision has to be made and she or he does not have the authority to make it. The decision in question is then placed before the board so that the board can decide it. The staff works hard to compile convincing arguments so that the board will agree with the document it has to approve and render the approval speedily.
It is interesting to enumerate the various reasons why the CEO has not been given the authority to make decisions. Often, laws, regulations, or funding requirements demand that boards not delegate certain authority to the CEO, but rather keep it to themselves. Decision-making authority regarding matters such as the hiring of staff, grant submissions, or financial statements often fall into this category. Another reason why boards sometimes refuse to allow the CEO to make certain decisions is because the board believes it is better able to make those decisions.
For example, I have encountered boards that do not allow the CEO to make decisions about Human Resources if there is an HR expert on the board. I also have worked with a board that refused to allow the CEO to buy the furniture that was to be placed in a new office because there was a furniture salesman on the board. In such instances, athough the board rationalizes that the board will make the decision better than the CEO, it is normally not the board but a particular board member or group of board members that makes the decision.
Frequently, staffs actually do make a decision, but there is a need to pretend that the decision is not final until the board approves it. Consider the presentation of financial statements to the board; every decision reflected in these statements has already been made, often irrevocably. Yet boards consider their approval of these documents to be essential. They feel that such approval is a demonstration of their diligence even when there has never been an instance in the history of the board where the approval was withheld. When asked what would cause the board to withhold its approval, the board—as a board, not as individuals—is likely to be unable to respond. Approving something without knowing what would cause disapproval is a sham.
Documents needing board approval are submitted to the board, which may then embark upon a probing question-and-answer session with the CEO. The probing takes the form of some or most board members asking questions about the document and seeking satisfactory answers from the CEO. In this process, the CEO is implicitly expected to meet the criteria of individual board members, criteria that the CEO did not know in advance, and that the board members themselves may not have anticipated raising. Even if a board member’s question focuses on crucial issues, it is clear that the board is in a vulnerable spot if its focus on the crucial issue is dependent on a particular board member being present and raising a particular question. This is ad hoc behavior raised to an art form. Approvals, when made in this way, result in no clarification of the criteria for acceptability that the board would like the CEO to observe; there is no learning in the process—for the board or for the CEO.
Sadly, an effect of the approval process is that boards cannot delegate powerfully and are forced to require their organizations to be less agile, less responsive, less innovative, and less courageous than they would be if only CEO authority had been clarified and safely maximized in advance.
Policy Governance boards make their expectations of CEO performance explicit, using policies that define Ends to be accomplished and means to be avoided. The CEO is authorized to make any reasonable interpretation of these policies and is required to demonstrate that his or her reasonable interpretation was accomplished.
Monitoring is therefore a process that begins with the board’s criteria: indeed, without board criteria there is nothing to monitor. Further, no new criteria can be capriciously added by a single board member or even the board itself.
Signal features of the monitoring process used by Policy Governance boards include that only the words used by the board in its policies are to be used as criteria. This ensures that there is no ambiguity about what the board has required, will check, and will use as the sole basis for judging performance. The process ensures that the board can obtain information aimed precisely at the issues it chose to control without having to trawl through large and largely irrelevant documents hoping to separate the wheat from the chaff.
Effects of the monitoring process include the CEO’s ability to know in advance the criteria for performance upon which she or he will be judged, and the board’s ability to keep a clear focus on the features of organizational performance it has decided to control.
So is there a difference between approvals and monitoring? Yes indeed. The difference lies in the important presence of prestated, and therefore, knowable criteria for performance and its evaluation. To approve something is to
Accept with no
Evidence, which achieves little or nothing at all.
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