Board Governance: Principles versus Models

You can’t just buy a board governance model off the shelf; it takes some principled work

By Linda Wood Edwards

Many of us – companies and not-for-profits – work with boards of directors. All of us, at one time or another, have been frustrated by a board that either was completely disengaged or was meddling in operations. So, it begs the question: How can we tap into a board’s knowledge, expertise, and wisdom but keep them out of the way of the management hired to run the enterprise? 

Many enterprises answer that question by saying, “We need a better governance model.” Well, I prefer to talk about the governance principles. The world of board governance is emergent and exciting, but some things have held true for me.

At the risk of over-simplifying, I think governance is a continuum. At one end I put the operational board with no staff (volunteers handle all roles), and at the other end I put the policy governance board with a strong CEO, a robust staff, and a board focused on giving direction through policy creation. Policy Governance (e.g., Carver) is my extreme, because in 30 years of board work, I have not found anything that goes further. 

Neither end of the governance continuum is perfect and neither end is broken. They are merely two extremes, both of which rely on people and, therefore, both of which can get screwed up.

Knowing the role

Boards govern, managers manage, staff implement. More specifically, governance is about vision/purpose/goals & translating those into policy, management is about making decisions (i.e., programs, projects, targets) needed to implement policy, and operations are about implementing managerial decisions (i.e., activity, performance).

Here is how those three functions play out. If you have an operational board, then the same people are doing all three things. If you have a policy governance board, then three different sets of people (one being the CEO) accomplish the same things. 

On an operational board, the same people need to wear different hats to ensure that all three things get done. However, they are often so darn busy they forget to change hats. The two most common scenarios are: 1) they exhaust themselves doing day-to-day stuff to survive but have no real direction; or 2) they create a direction, but no one has time to do the stuff to get them there.

On a pure policy governance board, the division of responsibilities between board and CEO is very clear on paper but it becomes such a major focus, that: 1) the board is afraid to ask questions of the CEO for fear of treading on toes; 2) the CEO feels isolated because the board isn’t providing feedback in a way that is easily understood; or 3) board members disengage because policy-writing and policy-thinking is not their go-to way of doing things. 

So, you see, both have their value, and both have their pitfalls. In my experience, boards move back and forth along the continuum looking for their sweet spot. That sweet spot can change as the players in both board and senior management change.

Figure out what’s important

To arrive at a “made by us, for us” governance solution, we need to identify what’s important (i.e., principles). Using the term “models” with respect to governance implies you can buy one off the rack, or that they are “plug and play.” This is simply not true. So instead of “models,” let’s talk “principles.” 

How a board governs has everything to do with its approach to the distribution of powers and authorities in the organization. In short, “it’s political,” says consultant Lyn McDonell. In a corporation, directors must oversee and be legally responsible for the organization no matter the politics. This tells us what the board needs to do, and next we determine how. How do we ensure the functions of governance (organizational direction, overseeing finance and risk, selecting/evaluating/compensating CEO, etc.) are performed well? How will we structure the board to carry out the core accountabilities? 

McDonell framed a series of questions to help boards explore culture, structure, information and decision flows, and the desired locus of expertise and leadership in an organization. I blended my favourites of hers with some of my own. After the first one, there is no special order. If you take the time to answer all the questions, or even just a few, you’ll already be better off with your board.

Models aren’t always models

Despite what I’ve just shared, you still want to search “governance models?” Really?! Okay, well, you’ll get 148,000,000 hits and only a bit of excellent information. Terms like “policy governance”, “results-based”, “knowledge-based”, “strategic”, “competency-based”, and “complementary” might lure you in, but let’s be clear: most of what turns up are not “models,” but rather descriptions of “things that boards should do” (i.e., principles). They are all variations on a theme. 

Carver may have trademarked “Policy Governance,” but policy governance is just a generic action that every board needs to do at least some of. We support the concepts in almost all the “models” that will turn up in a search, but we do not ascribe to the limited meanings that the proponents have attached to good words (traditional, policy, outcomes-based, competency-based, legislative, operational, …), to meet their own ends. They all have something to offer but each is insufficient in and of itself. 

Build the foundation

For a solid foundation, I recommend reading Governance as Leadership by Richard Chait. His three-pronged approach to board responsibilities (control, direction, sense making) makes sense for any board. 

Control: Legal/fiduciary responsibilities of the board in guiding the organization

Direction: Strategic responsibility to set the direction and decide on the use of resources, programs, and services

Sense Making: Generative conversations to develop new ideas in line with the organization’s core values

Over the course of a year the board should ensure its agendas have about 1/3 dedicated to the oversight (fiduciary) responsibility, 1/3 to the strategic responsibility, and 1/3 on generative work. Currently most boards spend most of their time on oversight; a smaller number also have strategic plans – fewer still monitor those plans; and very few exercise their generative muscles in support of the enterprise. 

In doing those three things, using the principles you have agreed upon by asking the questions, we are confident that your people will do the jobs they are intended to do, your board will add value, and you will drive your organization forward. 

Linda Wood Edwards, owner of LUE-42 Enterprises, is a Certified Association Executive and a Fellow of the Chartered Governance Institute of Canada (CGIC). She holds a Bachelor of Administration degree, a certificate in human resources management, and the Accredited Director designation. Linda consults on board governance to organizations across Canada, serving as Corporate Secretary to several. She is CGIC’s Chief Examiner for Corporate Governance and a facilitator in the Directors Education and Accreditation Program. 

McDonell / Wood Edwards Questions for the Board

• What is required by legislation and our current by-laws? Are there limitations in these documents, or do we have room to manoeuvre?

• How do we ensure that the board is making decisions in the best interest of the entire organization and not constituent parts? 

• What kind of board do we need now and in the future?

• What must the board focus on and what can be handled by the CEO and staff?

• How much leeway or authority in getting the job done do we want to give our CEO?

• How nimble do we need our decision-making to be? 

• How do we help dialogue between the board and CEO to be fluid and respectful? 

• The CEO is obligated to share significant operational matters with the Board. The board brings knowledge, skills, and expertise to the governance table that are likely not present in the organization’s staffing complement. The CEO should tap into those. 
• By the same token, the CEO works in a realm that will not be familiar to all directors. It is reasonable to expect that directors will have questions of the CEO that relate to operations.
• Both the board and the CEO should be able to ask and answer questions without fear. When one or the other oversteps, the matter must be handled promptly, with tact and grace, on the understanding that correcting the “infraction” is in the best interests of the organization.

• How can we make the board table a safe place to disagree? 

• Thoughtful discussion is essential to good governance. An opinion can only change through robust discussion.
• It is the board’s job to contribute (provide an opinion) and in doing so, the board will bump up to the line of how far it can go. The CEO will tell the board/director where the line is. It will not be personal. 

• Does our decision-making model reflect the culture we want? 

• Do we require the formality of Robert’s Rules/Parliamentary procedure or might a consensus-based model (recommend, discuss, consensus) work?

• Do we get the right people at the board table?

• The knowledge, skills, and attributes of each director should help you reach your organizational objectives. Be intentional with recruiting. 
• Avoid “constituents”, “representatives”, and “honorary directors” on the board. Every director is equal in responsibility and liability and governs in the interests of the organization.

• Is the board’s agenda aligned to the strategic plan (or is it based on how we’ve always run meetings)?

• Do the board’s committees only do the board’s work?

• Board committees (typically only three) must align with the governance function, not operations.

• Governance (or Governance/Nominations)

• Audit (or Finance/Risk Management/Audit); 

• CEO Review Committee (which includes contracting, performance    management, compensation). 

• The CEO can also establish committees to help achieve operational outcomes. If a board member serves on an operational committee, that director is just another volunteer.
• Avoid an Executive Committee. It is dangerous to have a board-within-a-board. Every director needs the same information and has the same responsibility in deciding. 

• Do we evaluate everything (board, committees, CEO, staff, programs, etc.) and then access developmental opportunities to make ourselves even stronger?