Policy Governance - Claims For The Model

Claims For The Model

Authors of the Policy Governance model say it is a paradigm shift from the traditional practice of governance and that it provides a clear differentiation between governance and management responsibilities in organizations.

Policy Governance begins with a definition of governance as "Seeing to it that the organization achieves what it should and avoids unacceptable situations." From this definition, board governance is at an arm's length from operations.

The board's primary relationship is with the organization's 'ownership'. As a result, governance is a downward extension of ownership rather than an upward extension of management. In this space, the board, as a single entity, assumes a governance position that is the link between ownership and the operational organization. That governance position is a commanding authority. The board exists to exercise that commanding authority and to properly empower others. "Proper empowerment" means to define the results to be achieved by the organization (Ends), and define what would be considered unacceptable in terms of ethics and prudence (Executive Limitations). The board delegates the job of achieving its Ends within the parameters defined in policy to the CEO. To complete the delegation, the board rigorously monitors performance to policy to uphold accountability of the CEO.

In Policy Governance, the board has three primary jobs: Ownership Linkage - connecting with owners to learn their values about ends that are desired and means that would be unacceptable; Policy Development - writing those values as guidance for organization and for the board itself; and Assurance of Organizational Performance - monitoring to ensure the organization demonstrates reasonable progress toward desired ends and reasonable compliance with policy guiding means. The board's focus is at the broadest level of policy informed by the ownership's values. When writing policy, the board only goes into as much detail as needed, and stops making policy when it can accept any reasonable interpretation of its policy language.

Experts in the model argue boards should govern with an emphasis on (a) outward vision rather than an internal preoccupation, (b) encouragement of diversity in viewpoints, (c) strategic leadership more than administrative detail, (d) clear distinction of board and chief executive roles, (e) collective rather than individual decisions, (f) future rather than past or present, and (g) proactivity rather than reactivity.

Templates of policies are provided in the literature and by those trained in the model in order to illustrate what model-consistent policies might look like. However these templates are not themselves the model and their use does not substitute for a board developing its own policies using the model’s principles. Each policy that a board adopts should be an organizational value statement that reflects the shared values of that organization's ownership.

Many people confuse modification of policy language so that it fits their organization with changing the model itself. Model-consistent practice is assessed by considering whether board performance aligns with the model's principles, not by reviewing the policy language that is adopted.