Policy Governance Sleep Facts

Sleep comes easily when someone else is managing things. Tonight we delve into Policy Governance, a model for running boards that assumes micromanagement is bad and accountability is somehow achievable. A soothing choice for bedtime stories about control.

Transcript

Welcome to the I Can't Sleep podcast,

Where I help you drift off one fact at a time.

I'm your host,

Benjamin Boster,

And today's episode is about policy governance.

Thank you to Rebecca Torpey for sponsoring today's episode.

Policy governance,

Informally known as the Carver model,

Is a system for organizational governance.

Policy governance defines and guides appropriate relationships between an organization's owners,

Also with non-legal moral owners,

Board of directors,

And chief executive.

The system is built on ten principles,

Three of which are especially distinctive for the system.

Firstly,

The clear distinction between policies that describe ends,

Long-term outcomes for the organization,

And that describe means,

All other aspects of governing and operations.

Secondly,

The importance of executive limitations to control risk.

And thirdly,

The board's obligation to engage with its moral owners,

The specific groups of stakeholders to whom the board wants to be accountable,

Apart from the formal owners.

The policy governance approach was first developed in the 1970s by John Carver,

Who has registered the term as a service mark in order to control accurate description of the model.

The model is available for all to use without royalties or license fees,

And has been adopted by commercial,

Non-profit,

And public sector organizations.

There are ten principles of policy governance.

One,

The trust in trusteeship.

Two,

The board speaks with one voice or not at all.

Three,

Board decisions should predominantly be policy decisions.

Four,

Board should formulate policy by determining the broadest values before progressing to more narrow ones.

Five,

A board should define and delegate rather than react and ratify.

Six,

Ends determination is the pivotal duty of governance.

Seven,

The board's best control over staff means is to limit,

Not prescribe.

Eight,

A board must explicitly design its own products and process.

Nine,

A board must forge a linkage with management that is both empowering and safe.

Ten,

Performance of the CEO must be monitored rigorously,

But only against policy criteria.

Principles one through three define an organization's ownership,

The board's responsibility to it,

And the board's authority.

Principles four through seven specify that the board defines in writing policies identifying the benefits that would come about from the organization,

How the board should conduct itself,

And how staff behavior is to be prescribed.

Principles eight through 10 deal with the board's delegation and monitoring.

In general,

If a board applies all of the principles of policy governance in its process and decision-making,

Then the board is likely practicing the model.

If a board applies fewer than all the principles,

It weakens or destroys the model's effectiveness as a system.

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.

According to the policy governance principles,

It is the board's responsibility to act as a trustee on behalf of the organization's owners by setting clear expectations for the outcomes of the organization ends,

Setting clear operational boundaries for the CEO executive limitations,

And ensuring accountability by monitoring the actions of the CEO against those boundaries systematically and rigorously.

From this definition,

Board governance enables the board to maintain accountability for everything without the need to be involved in daily operations and details.

Said another way,

The board's arms are wrapped around the entire organization,

But their fingers are not in the day-to-day details.

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 to find 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 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 and 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 value of the 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.

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.

Industry Canada and the primer for directors of not-for-profit corporations express concern about policy governance.

They argue that some models of board governance,

Notably originating in the United States,

Advocate that directors limit themselves to policy matters only and leave responsibility for administration and day-to-day matters with the executive staff of the corporation.

This limited role for directors does not reflect the obligations that are legally imposed upon directors.

Hugh Kelly QC of the Canadian legal firm Miller Thompson LLP responded directly to this criticism,

Including that the Board of Canadian Charitable Corporation that adopts policy governance has performed due diligence and fulfilled all legal obligations imposed upon its directors.

On a comparative basis,

Such boards and directors are far ahead of most corporations,

Even those in the world of commerce,

In observing their legal and moral obligations.

Others have expressed concern that the policy governance model may not be as universally applicable as suggested by Carver,

And that the model has a tendency to break down during times of crisis.

Addressing the universality concern,

Proponents of policy governance argue that because the model is rooted in the generic purpose and nature of board authority rather than current practice of the specifics of any industry,

At the level of its fundamental principles,

Policy governance is indeed applicable to all governing boards.

Proponents also argue that at times of crisis,

Holding onto the precepts of policy governance is,

In fact,

Key to organizational survival,

And that rehearsing the use of the system in light of various scenarios can help build an organization's resilience to risk.

Two more widely accepted criticisms are that the model demands a level of precision that boards can find hard to achieve,

Even though it is usually no more than they demand of their staff,

And without care that the model's use can deteriorate over time and its protections fail to function.

Many proponents point to the challenges presented by board member turnover,

And the need,

As with any other professional discipline,

For boards to continuously invest in their own training and support.

Some authors and users of the model may misinterpret the distinction between ends and means,

To require a strict separation of responsibility between the board,

Which should focus exclusively on ends,

And management,

Which should focus on the means by which to achieve those ends.

This interpretation is not supported by a close reading of the policy governance model.

Carver states,

Because the board is accountable for everything,

It is accountable for means as well.

Accordingly,

It must exercise control over both ends and means,

So having the ends or means distinction does not in itself relieve boards from any responsibility.

Another related misinterpretation is a belief that boards following Carver's model should not involve themselves with detailed understanding and or monitoring of the organization's activities.

This belief is based on Carver's caution against excessive intrusion into the operational details.

However,

Carver is clear that boards remain accountable to their owners for all operational details,

And must therefore control them.

The question is,

How to make this practical?

As a way to avoid excessive intrusion,

He advises the use of nested sets of expectations in progressively more narrow policy language in order to define its meaning with greater precision,

Until at some point the board will have narrowed its words to the point that it can accept any reasonable interpretation of those words.

Now the board has reached the point of delegation.

Because a board has ultimate power over the organization to include all its operations,

Some critics point out that a board should not delegate any of its authority,

Because it ignores major areas of its responsibility if it hands over part of its power to the CEO.

This criticism points out that delegation,

The granting of authority to the CEO,

Can become an abdication of the board's responsibility to control all organizational actions.

Delegation can become an abdication if it occurs without adequate supervision.

Delegation,

Accompanied by careful monitoring to ensure it achieves the results intended,

Is an exercise of the due diligence expected of the board.

Further criticism relates to the failure of some boards to follow their own policies.

Following policies that guide the board in its own governance process and its relationship with the CEO is an act of self-discipline,

By which the board imposes checks and balances on its own power.

These self-limiting policies protect staff from board actions that might get in the way of successful organizational performance.

They also protect the CEO and the board itself from possible actions of individual board members.

A board may give a false sense that it is acting in the best interests of the organization while ignoring its own policies,

And therefore promotes a veil of legitimacy behind which it acts in capricious ways.

Such a board distracts itself from the real job boards should be doing,

Ultimately preventing whether a board remains true to its own policies as a matter for the board itself to determine.

Carver notes this concern when he acknowledges that policy governance will not make a bad board good.

Governance is the overall complex system or framework of processes,

Functions,

Structures,

Rules,

Laws,

And norms born out of the relationships,

Interactions,

Power dynamics,

And communication within an organized group of individuals.

It sets the boundaries of acceptable conduct and practices of different actors of the group and controls their decision-making processes through the creation and enforcement of rules and guidelines.

Furthermore,

It also manages,

Allocates,

And mobilizes relevant resources and capacities of different members and sets the overall direction of the group in order to effectively address its specific collective needs,

Problems,

And challenges.

The concept of governance can be applied to social,

Political,

Or economic entities,

Groups of individuals engaged in some purposeful activity,

Such as a state and its government,

Public administration,

A governed territory,

A society,

A community,

A social group like a tribe or a family,

A formal or informal organization,

A corporation,

A non-government organization,

A non-profit organization,

A project team,

A market,

A network,

Or even on the global stage.

Governance can also pertain to a specific sector of activities,

Such as land,

Environment,

Health,

Internet,

Security,

Etc.

The degree of formality in governance depends on the internal rules of a given entity and its external interactions with similar entities.

As such,

Governance may take many forms,

Driven by many different motivations,

And with many different results.

Smaller groups may rely on informal leadership structures,

Whereas effective governance of a group typically relies on a well-functioning governing body,

Which is a specific group of people entrusted with the authority and responsibilities to make decisions about the rules,

Enforcing them,

And overseeing the smooth operation of the group within the broader framework of governance.

The most formal type of a governing body is a government,

Which has a responsibility and authority to make binding decisions for a specific geopolitical system,

Like a country,

Through established rules and guidelines.

A government may operate as a democracy,

Where citizens vote on who should govern towards the goal of public good.

Beyond governments,

Other entities can also have governing bodies.

These can be legal entities or organizations,

Such as corporations,

Companies,

Or non-profit organizations governed by small boards of directors pursuing more specific aims.

They can also be sociopolitical groups,

Including hierarchical political structures,

Tribes,

Religious subgroups,

Or even families.

In the case of a state,

Governance expresses a growing awareness of the ways in which diffuse forms of power and authority can secure order even in the absence of state activity.

A variety of external actors without decision-making power can influence a system of state governance.

These include lobbies,

Think tanks,

Political parties,

Non-government organizations,

Community,

And media.

Governance is also shaped by external factors such as globalization,

Social movements,

Or technological progress.

From a normative perspective,

Good,

Effective,

And fair governance involves a well-organized system that fairly represents stakeholders' interests and needs.

Such governance guides the formulation,

Implementation,

And evaluation of the group's objectives,

Policies,

And programs,

Ensuring smooth operation in various contexts.

It fosters trust by promoting transparency,

Responsibility,

And accountability,

And employs mechanisms to resolve disputes and conflicts for greater harmony.

It adapts to changing circumstances,

Keeping the group responsive and resilient.

By delivering on its promises and creating positive outcomes,

It fosters legitimacy and acceptance of the governing body,

Leading to rule compliance,

Shared responsibility,

Active cooperation,

And ultimately greater stability and long-term sustainability.

Many institutions of higher education such as the Balsillie School of International Affairs,

Munk School of Global Affairs,

Sciences Po Paris,

Graduate Institute Geneva,

Purdy School,

And the London School of Economics,

Among others,

Offer governance as an academic subject.

Many social scientists prefer to use the term governance when discussing the process of governing because it covers the whole range of institutions and involved relationships.

Governance encompasses the processes and structures by which decisions are made and enforced within an organization or society.

It involves the interplay of laws,

Social norms,

Power dynamics,

And communication,

Shaping the conduct and order of a social system.

Governance can be exercised by formal entities like governments,

Organizations,

Or informal groups.

It's a dynamic process adapting to changing circumstances and motivations.

Governance is essential for the smooth functioning of any entity,

Be it a nation,

A corporation,

Or a non-profit organization.

It provides a framework for accountability,

Transparency,

And the pursuit of shared goals.

The concept of governance is constantly evolving.

Reflecting the changing dynamics of power and the increasing complexity of global issues.

The World Bank defines governance as the manner in which power is exercised in the management of a country's economic and social resources for development.

The Worldwide Governance Indicators Project of the World Bank defines governance as the traditions and institutions by which authority in a country is exercised.

This considers the process by which governments are selected,

Monitored,

And replaced,

The capacity of the government to effectively formulate and implement sound policies,

And the respective citizens and the state of the institutions that govern economic and social interactions among them.

An alternate definition sees governance as the use of institutions,

Structures of authority,

And even collaboration to allocate resources and coordinate or control activity in society or the economy.

According to the United Nations Development Program's regional project on local governance for Latin America,

Governance has been defined as the rules of the political system to solve conflicts between actors and adopt decision legality.

It has also been used to describe the proper functioning of institutions and their acceptance by the public,

Legitimacy.

And it has been used to invoke the efficacy of government and the achievement of consensus by democratic means,

Participation.

Like government,

The word governance derives ultimately from the Greek word kubernetes,

Meaning to steer,

The metaphorical sense first being attested in Plato.

The occasional use in English to refer to the specific activity of ruling a country can be traced to early modern England,

Where the phrase governments of the realm appears in works by William Tyndale and in royal correspondence from James V of Scotland to Henry VIII of England.

The first usage in connection with institutional structures as distinct from individual rule appears in Charles Plummer's The Governance of England,

An 1885 translation from a 15th century Latin manuscript by John Fortescue.

Also known as the difference between an absolute and a limited monarchy.

This usage of governance to refer to the arrangements of governing became orthodox,

Including in Sidney Lowe's seminal text of the same title in 1904 and among some later British constitutional historians.

However,

The use of the term governance in its current broader sense,

Encompassing the activities of a wide range of public and private institutions,

Acquired general currency only as recently as the 1990s,

When it was re-minted by economists and political scientists and disseminated by institutions such as the UN,

The IMF,

And the World Bank.

Since then,

The term has gained increasing usage.

Governance often refers to a particular level of governance associated with a type of organization,

Including public governance,

Global governance,

Non-profit governance,

Corporate governance,

And project governance.

A particular field of governance associated with a type of activity or outcome,

Including environmental governance,

Internet governance,

And information technology governance,

Or a particular model of governance,

Often derived as an empirical or normative theory,

Including regulatory governance,

Participatory governance,

Multi-level governance,

Meta-governance,

And collaborative governance.

Governance can also define normative or practical agendas.

Normative concepts of fair governance or good governance are common among political,

Public sector,

Voluntary,

And private sector organizations.

In its most abstract sense,

Governance is a theoretical concept referring to the actions and processes by which stable practices and organizations arise and persist.

These actions and processes may operate in formal and informal organizations of any size,

And they may function for any purpose,

Good or evil,

For profit or not.

Conceiving of governance in this way,

One can apply the concept to states,

To corporations,

To non-profits,

To NGOs,

To partnerships and other associations,

To business relationships,

Especially complex outsourcing relationships,

To project teams,

And to any number of humans engaged in some purposeful activity.

Most theories of governance as process arose out of neoclassical economics.

These theories build deductive models based on the assumptions of modern economics to show how rational actors may come to establish and sustain formal organizations,

Including firms and states,

And informal organizations such as networks and practices for governing the commons.

Many of these theories draw on transaction cost economics.

When discussing governance in particular organizations,

The quality of governance within the organization is often compared to a standard of good governance.

In the case of a business or a non-profit organization,

For example,

Good governance relates to consistent management,

Cohesive policies,

Guidance,

Processes,

And decision rights for a given area of responsibility,

And proper oversight and accountability.

Good governance implies that mechanisms function in a way that allows the executives,

The agents,

To respect the rights and interests of the stakeholders,

The principles,

And a spirit of democracy.

Good governance is an indeterminate term used in international development literature to describe various normative accounts of how public institutions ought to conduct public affairs and manage public resources.

These normative accounts are often justified on the grounds that they are thought to be conducive to economic ends,

Such as the eradication of poverty and successful economic development.

Different organizations have defined governance and good governance differently.

The effectiveness of governance is not a straightforward and consistent type of governance.

Measurement and conceptualization of effectiveness is controversial and often used interchangeably with good governance.

However,

During the period of 1996 to 2018,

An effort was made by the World Bank to create a comparable measure of the performance of governance.

Worldwide Governance Indicators,

WGI.

The WGI is constituted by over 30 databases,

Which are rescaled and categorized into six categories.

Among these is government effectiveness.

According to this category,

Effective governance is composed by five aspects.

The quality of public services,

The quality of the civil service,

The degree of the government's independence and political pressures,

The quality of policy formulation and implementation,

And the credibility of the government's commitment to such policies.

In short,

Effective governance is about quality of service,

The independence of government,

And the quality of policies and implementation.

Adding to these components,

One might argue that responsiveness to citizens' needs is high in an effective government.

Acting according to these needs,

Effectiveness is achieved by transparent,

Decentralized,

And neutral structures,

And are consistent and disciplined.

Therefore,

Efficient financial management,

High quality and committed personnel,

And formalized and standardized ways of processes is needed.

For the latter,

Governments became much more efficient with the arise of bureaucracies.

Nevertheless,

Governments in a rapidly changing environment need to be able to adapt quickly,

So being bound by rigid structures of functioning could work as a detriment.

Since the conceptualization of effective governance is not one-fold,

More components that might constitute it are suggested.

It should be small in extent with limited intervention in the economy,

A clear vision and processes,

Committed quality personnel that can formulate and implement policies and projects,

Comprehensive participation with the public,

Efficient financial management,

Responsive,

Transparent,

And decentralized structures and political stability.

The components of effective governance described above all have a domestic character within the boundaries of the national territory,

National policies,

And about the inhabitants of a country.

This is the internal aspect of effective governance,

Which mainly focuses on national services and policies.

The external aspects of effective governance,

On the other hand,

Exclusively focuses on the international domain of politics.

It entails the state's capacity to exercise its rights and fulfill its duties in alignment with the international law,

The representation of its people in the international political landscape,

And its participation in international relations.

The purpose of effective governance in the internal aspect is to be the sovereign within its national territory,

And the external aspect to wield sovereignty over the international relations.

For this reason,

It is a necessary characteristic of a state to have unrestricted capacity to act without any form of dependence in both state and international law.

This independency is the core of statehood.

In an attempt to identify predictors of effective government,

A study was conducted to investigate what characteristics of the state are more deeply established by effective governance.

The most striking conclusion was that effective governance has a big share in the economic growth and developing,

Although on the long term.

However,

This is a bidirectional relationship.

Economic growth does lead to more effective governance as well.

Moreover,

Effective governance does have a positive influence on reducing corruption,

Strengthening political stability,

Contribution to improved rule of law,

And improved government spending and accountability.

As is the case with economic development,

It is plausible to argue that effective governance and the named predictors are a positive feedback cycle.

They reinforce each other,

And so indirectly themselves.

When a state fails to govern effectively,

This does not simply imply the absence of characteristics of effective governance.

First of all,

The absence of effective governance is lack of capacity of the state to supply its inhabitants with political goods,

Such as rights and freedoms.

Zartman describes how absence of effective governance comes about as the disintegration of state structure,

Authority,

Legitimate power,

Law,

And political order.

Five main characteristics are to be differentiated in the absence of effective governance.

Disorganizing of the structure of the processes in the state,

Violent conflicts,

Violations of human rights,

And social fragmentation,

All of which have an endogenous character.

Since the early years of the 2000s decade,

Efforts have been conducted in the surge and international development community to assess and measure the quality of governance of countries all around the world.

Measuring governance is inherently a controversial and somewhat political exercise.

A distinction is therefore made between external assessments,

Peer assessments,

And self-assessments.

Examples of external assessments are donor assessments or comparative indices produced by international non-governmental organizations.

An example of a peer assessment is the African Peer Review Mechanism.

Examples of self-assessments are country-led assessments that can be led by government,

Civil society,

Researchers,

And or other stakeholders at the national level.

One of these efforts to create an internationally comparable measure of governance and an example of an external assessment is the Worldwide Governance Indicators Project,

Developed by the members of the World Bank and the World Bank Institute.

The project reports aggregate and individual indicators for more than 200 countries for six dimensions of governance,

Voice and accountability,

Political stability and lack of violence,

Government effectiveness,

Regulatory quality,

Rule of law,

Control of corruption.

To complement the macro-level cross-country world governance indicators,

The World Bank Institute developed the World Bank Governance Surveys,

Which are country-level governance assessment tools that operate at the micro or sub-national level and use information gathered from a country's own citizens,

Business people,

And public sector workers to diagnose governance vulnerabilities and suggest concrete approaches for fighting corruption.

Reviews

In terms of boring, this was one of the best. I still have no idea what it is about! Thanks another great night of sleep 😴