Tip #105 Clarify Roles of the Board and the Chief Executive
With this Tip for Effective Boards, we continue our re-presentation of the ten most popular Tips out of our first 100 Tips for Effective Boards. The following which was Tip 4 is our seventh most popular Tip. I have made minor modifications to the original Tip.
It seems to me that much of the inefficiency and discord experienced by boards of directors and their CEOs is grounded in the lack of clear differentiation between the roles of the board and the CEO. When roles are not clear we see boards micromanaging their CEO (being overly involved in day-to-day operations). We see boards rubberstamping CEO decisions (pretty much accepting whatever the CEO recommends). And we see boards unable to find the time to deal with the really important issues of organizational purpose and continued relevance. Some board governance theorists state that it’s not possible to provide a clear distinction of these roles in general (because every organization is different) and that each organization’s board and CEO need to define their respective roles and responsibilities.
However, the Policy Governance® system offers a clear alternative, a general template that defines the roles of the board and CEO thereby reducing potential inefficiency and discord. Certainly, the uniqueness of each organization is recognized and the content within the general roles is individualized to each organization. The Policy Governance® system defines the core board role as including the following three responsibilities: 1) defining the board’s expectations for the performance of the organization, 2) ensuring that the organization meets the board’s expectations for its performance, and 3) engaging in ongoing dialogue with key organizational stakeholders, that is, those persons on whose behalf the board governs and to whom the board is accountable. The Policy Governance® system refers to these key stakeholders as “owners.” They are the shareholders of a publicly traded corporation or those in a position equivalent to shareholders in non-profit or governmental organizations. Boards can add other roles to their job description with common roles being fundraising and advocacy. The board’s expectations are defined in its policies. Hence, the name Policy Governance®.
The job description of the CEO is a simple one that embraces two key functions: achieving the board’s expectations about results to be produced by the organization for defined beneficiaries (stated in the board’s Ends policies) and complying with the board’s expectations about avoiding activities and situations unacceptable to the board (defined in the board’s Executive Limitations policies). CEOs are empowered to make decisions within the boundaries so defined. Boards engage in thorough ongoing monitoring of CEO/organizational performance to ensure that performance meets their defined expectations.
Note: In Policy Governance®, CEO is the generic term used to refer to the top operations person who may have any one of numerous titles such as CEO, president, executive director, director, superintendent, administrator, etc.
To learn more about the Policy Governance® system, please click on https://www.BoardsOnCourse.com/policy-governance.