Policy Governance myth-busting

Lots of food co-ops, and other cooperatives as well, are using the "Policy Governance" rubric to guide their board's activities.  And well they should!  The governance model developed by Atlanta consultants John and Miriam Carver is noteworthy for how effectively it points boards in the direction of what matters and away from things that are a waste of time.

But Policy Governance can be difficult to understand, especially for those with no direct experience of the model.  And as a result, certain myths about Policy Governance proliferate.  A great example is the comment made by a concerned employee at a recent board meeting of the Hanover Consumer Cooperative Society.

Annoyed with the board for allegedly interfering in store personnel decisions, this employee urged the board to butt out because “the only job the Board has a say in is General Manager.”

The first problem with a comment like this is the notion that the board of a cooperative is somehow precluded as a matter of law from involving itself in certain aspects of the co-op the board oversees.  This is almost 180 degrees from the truth.  In reality, the Board is ultimately responsible for everything that happens at the Co-op -- its authority most certainly does not end with the hiring, firing and supervision of the chief executive officer (commonly referred to at co-ops as the general manager).

The second problem is that even assuming (as I did) that the principle being argued by the employee comes from Policy Governance, it actually reflects a misunderstanding of how Policy Governance works.  Critics of Policy Governance, including some lawyers, claim that the model is inconsistent with board-member fiduciary obligations.  There is a pervasive myth out there that a realm exists -- typically called "operations" -- that is simply off-limits to the board.  In fact, nothing is off-limits to the body that constitutes the co-op's ultimate decisionmaker.  If a board wants to get down and dirty with operational details -- What color are the napkins in the cafe?, How many different types of imported champagne vinegar are on the shelves?, How many warnings should an employee receive before being fired? -- there is nothing about Policy Governance that precludes it.

What Policy Governance does is require the board to be disciplined about how far into the details it goes.  A fundamental tenet of Policy Governance is that boards should, to the fullest extent possible, defer to the professional judgment of the person the board has hired to run the organization on a day-to-day basis.  This makes eminent good sense:  At a food co-op, who is gonna know more about actually running a grocery store:  the earnest cooperators on the board, who come from all walks of life in the community, or the professional grocer they've hired to run the store(s)?  So, Policy Governance boards fashion so-called "executive limitation" policies to tell the general manager what's outside the discretion granted to her in the exercise of her professional judgment.  Examples of such limitations?  Don't do anything illegal.  Don't let the co-op become insolvent. Don't be unfair to employees.  Under Policy Governance, the discipline is to start with the general and progress, as necessary, to the specific.  Sure, you can say the general manager must make sure there are eight brands of mayonnaise on the shelves, but why not tell her she must not fail to provide shoppers with options when selecting products?  Then it's up to her and her merchandising staffs to figure out what plausible alternatives to Hellman's are actually available.

The flip side under Policy Governance of maximizing management discretion is management accountability.  It's not that the board doesn't have the authority to oversee what other employees are doing, or inquire into specific personnel decisions but, rather, that the board holds the general manager accountable for everything . . . and, if the co-op is not meeting the Board's expectations, she's the person who gets sanctioned to the point, in extreme circumstances of being fired.

A great example I observed recently happened not at a co-op but at a meeting I attended of the board of a nonprofit summer camp.  A board member was concerned about decisions by the staff to remove references to God from certain traditional camp songs.  Another board member spoke right up to silence his colleague, arguing that her question was something the board must absolutely leave to the discretion of the camp director.

On one level, the board member silencing his colleague was absolutely right.  The board of a nonprofit summer camp has more important things to do than parsing the lyrics of what gets sung in the rec hall.  But if the subject is framed as an inquiry into how nonsectarian the camp should be, then suddenly the conversation seems a lot more relevant to the board and the governance realm.  In Policy Governance terms, the camp's commitment to a nonsectarian experience for campers and their families would make a great executive limitation policy.  (Alas, this is one board that has not yet embraced Policy Governance.)

Of course the employee who addressed his co-op's board in Hanover was right about something important -- something that should apply to a board regardless of whether it uses Policy Governance.  It is improvident for a board to cast itself in the role of appellate personnel tribunal.  Boards lack the relevant expertise and, more importantly, reserving the right to override the general manager on personnel decisions makes it less rather than more possible to hold the general manager accountable for everything that happens at the co-op.  This is not to say that a Policy Governance board should never inquire into personnel decisions if there are signs of trouble.  But the remedy when something goes wrong is to sanction the general manager rather than overriding her decision.  This of course requires a clear executive limitation policy that spells out what kinds of staff treatment are out of bounds.

There's a lot of misinformation out there about Policy Governance -- and a lot of stuff that, while not wrong, is too glib or confusing.  If you really want to understand the model, read the book the model's creators intend as the fundamental and comprehensive guide to Policy Governance.  It's called Boards that Make a Difference, and be sure to get the third edition as it is vastly superior to its predecessors.