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.
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:
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 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.
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.
Effective leadership policies are:
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:
Samples of these policies are available in the online resources.