What else is there? - Other ways to govern (Biery, Stringham)

What Else is There? Dick Biery Richard Stringham

Session Outline Governance Paradigms and the Policy Governance® alignment Other Approaches to Governance: Approaches Reviewed

Review Contents

• Governance Excellence Model • Coherent Governance • CommunityEngagement Governance • Generative Governance

• Background • Key Issues the Approach seeks to address • Overview of the Governance Approach • Governance Paradigms behind the Approach • Strengths and Weaknesses of the Approach • How Policy Governance® addresses concerns which drove development of the approach

Lessons for Boards that use Policy Governance®

Limitations of this Presentation Not time to present all approaches Time only to present a synopsis of each selected approach Not experts in the approaches presented Policy Governance® bias

Governance Paradigms Agency Theory Stewardship Theory Resource Dependency Theory Stakeholder Theory Managerial Hegemony Democratic Perspective* Source: Chris Cornforth

How Does Policy Governance® Align with the Governance Paradigms The Purpose of Governance …on behalf of some ownership is to ensure that the organization achieves what it should and avoids what is unacceptable.” “…the job of the board – its irreducible value added – could just as aptly be phrased as ensuring proper agency.” John Carver

From Purpose to Job Description Three jobs that the board cannot delegate away a) Ownership linkage; b) Policy development and, when needed, revisions in four policy areas; c) Assurance of executive performance (i.e., monitoring). The board may also add non-governing jobs e.g., managing reserves, lobbying, links to donors Clear recognition that it is the board’s responsibility to do the job (i.e., not a half delegated responsibility) Never an advisor to the CEO as an official role of the board or of any board subset

Other Approaches to Governance

Governance Excellence Model (GEM)

GEM Background: Created by Jim Brown, STRIVE Concepts described in the book: The Imperfect Board Member (Discovering the Seven Disciplines of Governance Excellence)

Based upon traditional approach to governance with some influences from Policy Governance®

Key Issues it Seeks to Address Meddling boards and rubber-stamp boards Responses include: Secret Formula for Organizational Effectiveness™ (diagram of organizational authority and accountability)* Board hands the approved strategic plan to CEO and leaves CEO to implement the plan within limits Overlap of roles at hand-off point: E.g., board and management engaged in strategic planning (although the board has final formal approval of the plan): “…board and management will work together to develop the best strategy they can conceive between them. They will all understand it; they will all own it.” Ensuring that the board is fulfilling its duties without meddling in the CEO’s operations: “Noses in, fingers out”

7 Disciplines of Governance Excellence Direct Organizational Performance Protect Organizational Performance Respect Owner Expectations Reflect on Organizational Results Select your Prominent Leadership Expect great Board-Management Interaction Connect for Healthy Board Relations

GEM and Policy Governance® Principles Policy Governance® Principle

GEM Approach

Ownership: the Board’s authority and accountability is connected to those who correspond to the shareholders in an equity corporation.

Recognizes the board’s role to stand in for an ownership. Connection is seen as both reporting to and drawing input from ownership.

Board Holism: The board’s authority is a group authority rather than a summation of individual authorities.

Emphasizes board holism. (E.g., board committees providing alternatives and analyses, not recommendations; board as whole has authority over the CEO)


GEM Approach

Ends Policies: Intended (a) results, changes, or benefits for (b) recipients, beneficiaries, impacted groups, and (c) worth (cost-benefit or priority) of the effects.

No Ends Policies. The board’s role in setting direction is via strategic planning: “The board will be involved only in determining the organization’s vision, mission, core values, and key result areas, and their indicators of success.”

Executive Limitations Policies: The Board makes decisions re staff’s means decisions and actions only in a proscriptive way to (a) avoid prescribing means; while (b) putting off limits means that would be unacceptable even if they work.

“How the organization implements and achieves [the board determined vision, mission, core values, and key result areas, and their indicators of success] is the prerogative of management (within boundaries…).” However, the board approves the budget, so prescribing some significant decisions in staff means.


GEM Approach

Delegation to Management: If board delegates to CEO, it honours the exclusive authority/accountability as the sole connector between governance and management

Speaks to the importance of the board not jumping over the authority delegated to the CEO…except for hiring of the organization’s prominent leadership (including CFO and other senior executives).

Monitoring: Board monitors organizational performance through fair but systematic assessment of whether Ends and EL policies are being fulfilled, given any interpretation judged by the board as reasonable. If there is a CEO, this constitutes the CEO’s evaluation.

“Monitor progress of the organization against the plan”. CEO performance is considered synonymous with organizational performance. Performance is based upon the Board’s ratings of progress toward achievement of targets for each Key Result Area and compliance with operational limits.

Governance Paradigms behind GEM Agency Theory: Uses traditional governance approaches. Control is achieved by engaging in operations to the level of strategic planning and establishing Key Performance Indicators, and monitoring accordingly

Some Stewardship Theory E.g., board agreeing on professional development plans for the CEO

Governance Excellence Model Strengths

Weaknesses

Board holism (e.g., “decisions disguised as recommendations”) Recognition of the importance of lines of authority and accountability (albeit with the exception noted under Weaknesses).

Board’s primary focus is typically on internal results and operational issues (e.g., strategic planning, budgeting) even though at a “higher level”. Success in achieving results is measured by achievement of the strategic plan targets, not necessarily results beyond the organization. Board may appoint company officers who are below the CEO (which confounds the lines of authority)

How Policy Governance® addresses Concerns which drove development of Governance Excellence Model Meddling Boards Board-Management Delegation policies which speak to how the board delegates and holds the CEO accountable (i.e., Ends and EL policies only) CEO given authority for reasonable interpretation of Ends and EL policies

Rubber Stamp Boards Removing the board approvals processes Board job products that cannot be delegated away

Coherent Governance

Background Developed by Linda J. Dawson and Randy Quinn of Aspen Group International Their work with boards “ on the ground and in the trenches” led them to develop their own governing model variation [of Policy Governance®] in 2005. “We have taken Carver's theory and made it practical in the boardroom.”

Key Issues it Seeks to Address Role confusion: Board-CEO Individual board members distracting from board and CEO operations Too little time on important items; too much on internal details: “We have seen boards become enslaved to a rigid, inflexible system so confining that the board becomes a captive to its own self-imposed governing model” Governance practices which are in conflict with each other

Responses to Key Issues An effective operating system “User friendly…The language of Coherent Governance policies is clear, unambiguous, never leaving the board challenged to say: ‘What this language is trying to say is …’ ” www.aspengroup.org

Coherent Governance® Principles 1. 2. 3. 4. 5.

The board serves as trustee for the owners The board knows what its job is, and it is responsible for its own performance The board plans it own work and focuses on governance matters The board is active but not intrusive The board acts as a unit

Coherent Governance® Principles (cont.) 6. 7. 8. 9.

The board rigorously monitors both the organization’s and its own performance The board controls organizational operation through policy not through approvals The board owns the vision for the organization He who makes the decision is accountable for it

Coherent Governance® Principles (cont.) 10. The performance of the organization and the performance of the CEO are identical 11. The board delegates authority to the CEO to do the job, but within stated parameters 12. The CEO is accountable for decisions within the area of delegated authority Linda J. Dawson and Randy Quinn

Coherent Governance® and Policy Governance® Principles Policy Governance® Principle

Coherent Governance® Approach


…”think of the board as the owners’ proxy…the ownership…has empowered a small group of people to act on its behalf in leading and guiding the organization.”

Governance Position: The link between ownership above it and operational matters below it. Role is commander, not advisor. The board … bears full and direct responsibility for the process and products of governance.

Recognizes that the board is responsible for its governance and that the CEO’s role is distinct and servant to the board. Does not speak to whether or not the board plays an advisory role.



Board Holism: The board’s authority is a group authority rather than a summation of individual authorities.

Principle 5: “ The board acts as a unit.” And sample policy: “The opinions and personal strengths of individual members will be used to the Board’s best advantage, but the Board faithfully will make decisions as a group, by formal vote.” Although the writings address committees interfering with the CEO’s work, they do not address how committee’s avoid interfering in the board’s decision making.



Ends Policies: Intended (a) results, Results policies speak to results for changes, or benefits for (b) specified beneficiaries. The worth recipients, beneficiaries, impacted component is not mentioned. groups, and (c) worth (cost-benefit or priority) of the effects. Executive Limitations Policies: The Board makes decisions re staff’s means decisions and actions only in a proscriptive way to (a) avoid prescribing means; while (b) putting off limits means that would be unacceptable even if they work.

“Operational Expectations” include both positive and negative statements. Rather than speaking only to means which are unacceptable even if they work, board members are expected to place limitations in accordance with their values (e.g., school calendar starts anytime after Memorial Day weekend)



Policy Sizes: Board’s decisions (Ends, ELs, GPs, and BMDs) made beginning at the broadest, most inclusive level and, if necessary, continuing into more detailed levels that narrow the range of higher levels, one articulated level at a time.

No reference to policy sizes within the books. The examples given of policies demonstrate some layering, but not consistently.



Any Reasonable Interpretation: Board grants delegatee right to use any reasonable interpretation for further decisions beyond those recorded in board policies (Ends and ELs to CEO; GPs and BMDs to CGO)

Neither reference to interpretations in the principles; nor in regards to who has which authority for interpretations. However, monitoring requires the CEO’s literal interpretation plus indicators ….no mention of rationale: “The challenge for the CEO is to state what he or she believes the board’s underlying value was when it wrote the policy directive”. Is this any reasonable interpretation or an interpretation preferred by the board?

Governance Paradigm behind Coherent Governance® Agency theory

Coherent Governance® Strengths Policy based Clarity of decision making between board and CEO. (Team work does not exclude clear decision making roles.) Clarity re board relationship with ownership

Weaknesses Without the concept of policy sizes, comprehensive coverage of the organization in each of 4 quadrants is at risk. Inconsistencies: E.g., “…the board owns the organization’s vision, mission, and goals (Results), while the staff owns the strategies and actions,” yet board is prescriptive regarding some means Interpretations appear to be more of what does the board intend rather than any reasonable alternative (backed by rationale) from among a range of possibilities

How Policy Governance® addresses concerns which drove development of Coherent Governance™ The principle and resulting policies of board holism speak to individual board members who try distracting the board or CEO from its job. Differentiation of board and CEO roles based upon board’s authority to determine Ends and EL policies and to assess interpretations as reasonable; versus CEO’s authority to determine and apply means toward reasonable achieve Ends within reasonable interpretation of the board’s policies. Providing an approach which enables a board to spend less time on administrative issues and more time looking forward and outward 10 principles, each of which is defendable on its own, yet all integrated into one congruent and proven system

Community Engagement Governance

Community-Engagement Governance™: Background Developed by a team of consultants, researchers, and other capacity-builders. Created specifically for nonprofits A framework not a model “The framework enables the use of “a variety of governance approaches based on organizational needs.”

See articles by Judy Freiwirth

Key Issues CommunityEngagement Governance™ Seeks to Address “Traditional governance models utilized by most nonprofits prevent them from being effective and diminish their connection and accountability to those they serve.” “Because nonprofit governance frameworks tend to replicate outdated, top-down structures, they often run counter to democratic values and impede an organization’s achievement of its mission. If those directly affected by a nonprofit’s actions are left out of decision-making processes, the resulting decisions can be incongruent with constituency needs, let alone organizational mission.” Judy Freiwirth

Key Issues CommunityEngagement Governance™ Seeks to Address “Governance is about power, control, authority, and influence. The key question is, do we want to perpetuate organizations that are embedded in practices of ‘power over others’ or do we want to establish structures and processes that promote ‘power with others’?” Judy Freiwirth and Maria Elena Letona

Key Issues CommunityEngagement Governance™ Seeks to Address “In a System-Wide Governance model, the board is comprised of members of the community/constituency. It assumes that the people the organization serves possess the ‘lived’ experience and passion to best move the organization forward. This is in contrast to the prevailing trend of professionalizing nonprofit boards despite the lack of research demonstrating that professional or wealthy board members improve board performance. System-Wide Governance creates boards that reflect and ‘live’ the organization’s mission.” Judy Freiwirth and Maria Elena Letona

Principles of Community-Engagement Governance™ Participatory democracy, Self-determination , Genuine partnership, and Community-level decision-making.

Design Principles for Community Engagement Governance Framework A results-oriented approach…”situates the desired community impact at its core.” Shared authority among 3 layers of stakeholders: 1. 2. 3.

Constituents served by the nonprofit Organizational board, staff, and volunteers Secondary stakeholders (funders, legislators, other nonfprofits, networks)

Open systems: ready access to decision making information at every level

Design Principles for Community Engagement Governance (cont.) Redistributed decision making: functions of planning, advocacy , evaluation, and fiduciary care are shared by different groups of participant-stakeholders Competencies: individual and organizational competencies include: strategic thinking, mutual accountability, shared facilitative leadership, and organizational learning

Other Notes about the Framework Boards may hold legal and fiduciary responsibilities but must be transparent “Other organizational components, in partnership with the board, will be accountable for the organization’s major strategic, policy, or other issues.” Teams to carry out governance functions are each led by a board member with either a staff or a constituent partner

Community-Engagement Governance™ and Policy Governance® Principles Policy Governance® Principle

Community-Engagement Governance™ Approach


Board’s accountability is to groups of stakeholders representing differing levels of priority. No reference to an ownership or ownership equivalent.

Governance Position: The link between ownership above it and operational matters below it. Role is commander, not advisor. The board … bears full and direct responsibility for the process and products of governance.

Governance is considered a shared responsibility. The board may hold the fiduciary and legal responsibilities, but most of the others are distributed throughout the stakeholder groups.



Ends Policies: Intended (a) results, changes, or benefits for (b) recipients, beneficiaries, impacted groups, and (c) worth (cost-benefit or priority) of the effects.

“In contrast to traditional governance models, in which the primary focus is the effectiveness of the organization, the framework situates the desired community impact at its core. This reprioritizes results over institution, and also makes the desired impact overwhelmingly the most important focus of nonprofit governance.” No mention of worth of results.



Board Means Policies: The board defines in writing behaviours, valuesadded practices, disciplines, and conduct of the board itself and the board’s delegation/accountability relationship with its own subcomponents and with the executive part of the organization.

“An organization determines, along a continuum, which layers of the organization currently make governance decisions, which participants should be involved in future decision making, and how decisions will be made”.

Monitoring: Board monitors organizational performance through fair but systematic assessment of whether Ends and EL policies are being fulfilled, given any interpretation judged by the board as reasonable. If there is a CEO, this constitutes the CEO’s evaluation.

“Evaluation functions range from shared participation in design and implementation and lending resources and expertise to feedback on quality.”

Governance Paradigm behind Community-Engagement Governance™ Stakeholder Theory with the stakeholders taking a participatory role in the organization’s governance

Community-Engagement Governance™ Strengths Engagement of beneficiaries (constituents) who often could be the equivalent to owners. Focus on outcomes beyond the organization (i.e., results for the community)

Weaknesses Lack of distinction between owners and beneficiaries has the potential to confuse accountability. Turns management issues (e.g., strategic planning, advocacy) into governance issues Disempowerment for board and staff by creating a reactive approvals process

How a board using Policy Governance® could address concerns which drove development of Community-Engagement Governance™ a)

b)

Determining a moral ownership to whom the board is accountable. (This could be the constituents.) Develop a meaningful linkage with the ownership and bring their values into Ends and EL policy decisions. Determining if it would be imprudent or unethical to develop strategic plans, programs and other initiatives without meaningful participation of constituents. If so, develop limitations policies accordingly.

How Policy Governance® could address Concerns which drove development of Community-Engagement Governance™ (cont.) c)

Establish and monitor limitations policies which proscribe inappropriate treatment of stakeholders, particularly consumers and constituents: “…shall not allow decisions, conditions, or services which are disrespectful, disempowering…”

Generative Governance

Generative Governance Background Concepts described in the book: Governance as Leadership: Reframing the Work of Nonprofit Boards

Created by: Richard P. Chait William P. Ryan Barbara E. Taylor

Key Issues it Seeks to Address Getting boards to move past fiduciary and strategic governance contributions Board members feeling disengaged, irrelevant Response: Challenge boards to add more value by enabling them to collectively engage in generative thinking

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Fid uc iar y

3 Mental Maps for Boards

Generative

Basic Concepts and Rationale Fiduciary: ensuring that the organization is “faithful to mission, accountable for performance, and compliant with relevant laws and regulations.” Strategic: “strategic work that enables boards (and management) to set the organization’s course, and to deploy resources accordingly.”

“Boards that only oversee assets and monitor strategy do work that is necessary but not sufficient to maximize the value of governance”.

Basic Concepts and Rationale (cont.) Generative: “sense-making” or “problem-framing” of complex and ambiguous situations and opportunities. Commonly practiced by board members outside of their board roles (e.g., “managers, professionals, or leaders of organizations”); however, not commonly practiced by boards Boards may oversee generative work or initiate generative work Boards usually spend most time on Fiduciary and least time (or none) on Generative thinking

Example of Generative Governance Opportunity for a museum “to purchase a prized (and expensive) work of art.” Board considered cost, “strategic priorities for the collections and competitive consequences of foregoing the purchase.” Generative question: “whether the museum’s primary objective was to own or display art”

Same Example from a Policy Governance® Perspective Board would have spoken to the issue via Ends and EL policies: Examples of Potential Ends statements: Citizens of Acme have opportunities for viewing artwork representing masters of different eras at a worth of … Or Impressionists paintings are preserved for future generations of art enthusiasts at a worth of…

Governance Paradigms Behind Generative Governance Agency-theory – Uses traditional governance approaches. (e.g., the board approves and may be engaged directly in development of strategic plans): “where boards create strategic partnership with management” Stewardship theory – The board has skills that can be brought to upper management decisions. The board reviews, approves, and improves management decisions – Recognizes that normally management uses generative thinking and typically brings ideas generated to the board for approval. – With its collection of managers, professionals, and organization leaders, contends that the board has much potential to offer generative thinking in partnership with management. “Generative work demands a fusion of thinking, not a division of labour.”

Generative Governance Strengths Encourages boards to step away from standard meeting processes and challenge their thinking by creating provocative questions.

Weaknesses Does little to unleash the power of focusing on results beyond the organization. Continues to focus boards primarily on the organization’s operations.

The Systems Issue

What about Best Practices? Why not just put best practices together to create the best governance? What systems principle does it violate

Lessons for boards that use Policy Governance®

What can boards using Policy Governance® learn? Focus more time on those parts of the model that deserve greater attention (e.g., linking with owners, focusing on Ends) Employ processes for improving group interaction and for pushing collective thought processes beyond the usual. Encourage better questions for group consideration in policy development and ownership linkages. While recognizing the owner – beneficiary distinction, engage non-owner beneficiaries to better understand their needs and interests for consideration in policy development

Questions, comments, experiences?

Richard M. Biery, MD The BroadBaker Group, Ltd. [email protected] www.broadbaker.com Richard Stringham The Governance Coach [email protected] www.governancecoach.com