Developing Governance Policies – How Effective Boards Work


Developing Governance Policies – How Effective Boards Work

I worked recently with the Board of Directors of a large public power company. They needed stronger governance systems. I talked about how effective boards work. I detailed our approach.

“With our framework,” I told them, “the board expresses exactly what it wants the organization to achieve in the form of policies. By defining what it expects in writing, and by regularly monitoring those policies, the Board can do its job, staff can do its job, and the organization can achieve high levels of performance.”

“But we already have policies,” one board member said.

“You do have policies,” I said. “But those policies are not the board’s policies. They are a mixture of state and federal policy, with a lot of your staff’s policy thrown in for good measure. I’m talking about a separate set of policies that express only what the Board wants the organization to achieve.”

“Why would we need that?” said another board member. “Our policies seem fine to me.”
“Because it would enable the board to communicate as a board,” I said. “Right now, you communicate as individual board members. But the board of directors is a single entity, and the board needs to say what it wants. Otherwise, your staff has to guess. And that leads to all sorts of mischief and mayhem.”

“Maybe we like it that way,” said one board member. “We can then tell them to do what we want.”
“Is that really how you want to communicate?” I asked. “What if you had 20 bosses, all telling you different things? How long would you last in that organization?”

I let that sink in. “Look, the best boards in the country use this framework. I’ve seen the results. It enables the organization to be clear about its priorities, clear about its measures of success, and clear on how it’s going to evaluate the general manager or CEO. That’s good governance. All boards should aspire to it.”

“Well,” said one board member. “Maybe we just like doing it our way.”
At least that’s honest, I thought to myself. Out loud, I asked, “How many of you would like to move toward this framework? How many of you would like to try this?”

A few hands went up, and then a few more. I looked at the one board member who was most vocally resistant. Slowly his hand went up, too. I looked around. All the board members were raising their hands.

“All right,” I said. “It looks like you have made a decision. Let’s figure out what you want to do next.”

LRI helps Boards and other governing bodies develop clarity about their role and that of management – and achieve higher levels of performance: https://leading-resources.com/consulting/governance/

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