Policy leadership: the need for effective ‘policy’

Many organisations rely on their constitutions almost exclusively for guidance on governance responsibilities and processes. As was described in the Governance Concepts section, a constitution or rules define the components of the contract between the owners (Members) and the organisation. While the contents of a constitution might be regarded as policy inasmuch as they provide clear guidelines about certain organisational matters, they are not policy in the manner outlined in the Policy Governance model.

The constitution (or rules) is, nonetheless, an important starting point for the development of policy. Any constitution needs to be interpreted and made operational. It is this process, and taking into account the board’s legal and other responsibilities, that gives rise to the board’s policy-making function.

The board’s policy framework provides it with the means to exercise effective ‘remote control’ over the organisation and to ensure important matters are handled effectively without the board necessarily being directly involved in all decisions.

A policy is an agreed basis for action, made ahead of time.

Develop a board charter

Boards in all sectors private, public and not-for-profit – have adopted the process

of developing and using a Board Charter as the basis for defining their governance principles and practices. While some organisations develop a short and succinct charter addressing just the basic principles, others develop a comprehensive document that leaves no stone unturned in defining the board’s role, responsibilities and processes. It is not uncommon for listed companies to have a charter that is more than 100 pages. This resource does not advocate such an extensive document but it does recommend that a board charter be sufficiently comprehensive to make clear to all who might use it exactly what is required for good governance of the organisation.

The sample board charter and policies available in the online resources commence with a set of general principles relating to governance and the role of the board

and board members, and then offer a set of governance policies using the Policy Governance principles. The only examples missing are the Ends policies, which, unlike the others, cannot be offered as a generic set to be tailored. However, in Step 4 an example of a Statement of Strategic Direction for a sports organisation is offered. With a coherent policy framework it is possible for a board to govern based on pre- determined values and agreements rather than on the basis of ad hoc or reactive decisions.

The development and adoption of a board charter and/or explicit governance policies require a board to:

    • develop a sense of its values;
    • understand effective governance-level leadership;
    • establish expectations of its collective and individual performance;
    • focus on its unique contribution to the organisation’s success;
    • undertake regular evaluation;
    • plan for continuity, as board members change;
    • facilitate the induction of new members; and
    • ensure there is a productive relationship with the chief executive.

Organisations sometimes reject governance-level policy leadership out of the mistaken notion that governance policy would be an inappropriate restriction on what the board might be able to do. Others develop policies that are regarded as governance policies, but are actually operational policies that belong at the operational level under the authority of the chief executive.

It’s generally accepted that the role of any governing board is to determine and monitor policy. It’s management’s job to implement that policy.

What are policies and how are they made?

What many organisations think of as policy is really protocol and procedure. It’s useful to think of policies as a principles-based framework or set of guidelines within which action takes place. By comparison, protocols and procedures are usually prescriptions for how something should be done.

The policy making process should be proactive and conducted ahead of need. Unfortunately, in many organisations policy making is reactive. This is seldom as effective as policy made in advance.

When developing governance-level policy a board should start by identifying and defining the highest, broadest or most abstract level of an issue requiring policy direction. Policy making should start with an overarching policy statement. This becomes the umbrella policy under which its expectations can be spelled out in progressively greater detail.

All of the sample policies in the online resource follow this pattern.

The board shouldn’t conclude its policy making until it’s confident that whoever it is directed to (e.g. the board members or the chief executive) can interpret and implement it. The board’s objective must be to ensure the desired outcome is achieved. The board can then be certain it is willing to support its own or the chief executive’s actions arising from the policy.

Within the Policy Governance model the Ends policies or statement of strategic direction, the Governance Process policies and the Board-CEO Interrelationship policies are all written in prescriptive form – that is, they say what must be done or must be achieved. The CEO Delegation policies, however, are written as a proscription stating what must not be done. The reason for this will be explained in greater detail in Step 3 Employ and Support a Chief Executive.

Speaking with ‘one voice’

The policy development process gives all board members the opportunity to consider what is required to give effective direction and to express their point of view. The board’s policies embody the sum of its members’ values and perspectives.

It’s not always possible to reach unanimity. Governance is a collective decision-making process and a board must be able to make a decision and allow it to be implemented even when there has been disagreement on the decision taken. Provided a board’s decisions are properly taken it can speak with one voice, regardless of a dissenting minority.

Developing, adopting and reviewing governance policies

    • Governance policies can be initiated, altered or deleted by a board as required.
    • Committees or working parties may contribute but the board as a whole must adopt policy.
    • When using sample policies provided by a third party, ensure they are relevant to your organisation, the language is appropriate and the values reflect your organisation’s values.
    • The chief executive and key staff should participate in the policy-making process.
    • Policies must be realistic and achievable.
    • If the underlying principle of any policy is unclear, it shouldn’t be adopted.
    • All board members are bound by governance policies once they’re adopted.
    • Once a policy is made, it’s the board’s policy regardless of the views of individual members.
    • Review all governance policies regularly via a policy schedule which outlines when and how.

Make sure the policies are workable

Effective leadership policies are:

    1. Explicit and literal – everyone has a shared understanding of what the policy is.
    2. Brief – ‘too long’ and ‘too many’ are the enemies of good leadership.
    3. Rigorously followed – if a policy doesn’t work it must be either amended or deleted. Staff must believe the board is holding itself and them accountable for each and every policy.
    4. Developed with monitoring in mind – the wording should be written in results/outcome terminology so the board and staff can clearly recognise if the policy is not being followed.

Governance Process policies

In Step 1 the board’s internal operating policies are briefly explored. These define the scope of the board’s job and design its operating processes and practices. Governance Process policies may include:

    • Board Terms of Reference;
    • Board Code of Conduct;
    • The board’s role in setting the strategic direction, overseeing financial performance, overseeing risk management and the overall organisational performance;
    • Chairperson Role Description;
    • New Director Induction;
    • Management of conflicts of interest;
    • Meeting Protocols;
    • Board Committees; and
    • Cost of Governance.

Samples of these policies are available in the online resources.