‘Policy Governance’ is Carver’s method for actually doing governance (more than just the theory) by use of proscriptive and prescriptive policies. The policies are the instructions from the owner’s representative (the board) to the CEO. This method is designed to keep the CEO accountable, continually improve policy, and allows the board to think strategically by focusing on the “Ends” policy. Of course that relies on a proper agenda, good facilitation, and directors who are able to use policies wisely. It takes practice.

For example, many times boards default to conversations that ask the CEO about the nuts and bolts of the business instead of the outcomes and what happens next. These might be OK as long as there is also a clear understanding and use of policies as ‘instructions’, and the CEO cannot be confused with multiple or mixed messages.

Examples of nuts and bolts questions and messages:

  • In your financial projections, show me where you account for the one time adjustment we made last year.
  • On page 5 you show that we have accrued an amount here but it looks like the same amount on page 7. Talk to me about how you got that number.
  • Tell me what the entry for $1500 on line 5 of the budget refers to.

How should the CEO interpret this line of questioning? What message does this send?

Rather, consider if the board chair could lead this kind of conversation:

What information do we need to make better strategic decisions? What do we need to do to stay focused on the future oriented outcomes or Ends? What go we need (to ask, to know, etc) to govern better in the next 12 to 24 months?

Now consider conversations that ask the CEO about the outcomes and what happens next instead of the nuts and bolts. These are examples of governance behaviours that use policy monitoring reports to gauge the organization’s performance.

  1. CEO, you reported against 2 policies today, thank you.
    • One was that the key financial metric we use is in the acceptable range;
    • The other was that the auditors report is satisfactory.
  2. Over the next 6 months Mr. CEO, what do you see as the biggest challenge facing the operation? Do you foresee any new risks or any old risks reappearing? Our risk tolerance policy allows for XYZ, lets look at that. Does that policy need amending?
  3. Given our renewed focus on <our new initiative>, how will we know when we are doing a good job or a poor job? When will we know? Our policy states ABC, lets consider amending that by adding in a nested policy so we can drive a monitoring report for Q4.
  4. What does our policy say about how often we refresh our customer survey data? How do we know if there have been any changes in what our members expect from us? Mr. CEO – lets get an early monitoring report for the policy that says: ‘CEO will not let 24 months pass without a survey that does ABC’.

How should the CEO interpret this line of questioning? What message does this send?