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How Boards Accumulate Wisdom

The Relationship Model
How Boards Accumulate Wisdom

Imagine that your board is having a discussion about an issue that has come up once before some years ago. Several of the board members remember it, but they can’t quite remember what was decided. They want to follow whatever precedent was set back then. Someone suggests a search of the minutes, but no one can remember the year. It’s just too cumbersome to find the minutes of that meeting. The board decides to make a new decision as best as it can.

This is an example of a managing board struggling to become a governing board. It illustrates the most significant single difference between the two types of boards. Governing boards store principles in policies. That’s how they accumulate wisdom.

Managing boards tend to make managing decisions over and over by reinventing the wheel. Every management decision is dealt with using the wisdom that is assembled around the table at the time. That’s why some important decisions could come out a different way depending on who was able to attend the meeting at which the decision was made. There is no flywheel of accumulated wisdom.

Governing boards, on the other hand, mature over time. Each successive board adds new policies, deletes obsolete ones and modifies and refines policies on an ongoing basis. Each time they take action on policies, they are storing additional wisdom that will benefit boards that follow them.

There are many other differences between managing boards and governing boards, but this one stands out. In fact, if you want to know if your board is a managing or a governing board, ask yourself this simple question, “Do we have an up-to-date handbook of policies that we use regularly?” If the answer to that question is “No” for any reason, you cannot say that you are a governing board. It is simply impossible to be an effective governing board without recorded policies to guide the core processes of the board: decision-making, planning, delegating authority, monitoring/measuring and conflict resolution.

Governing policies add value to the work of boards in several important ways.

1. Current policies are a storehouse of wisdom, enhanced by the experience of past boards. They allow the present board to benefit from the wisdom of their predecessors in addition to their own. In addition, they can pass on their own wisdom to their successors.

2. Policies bring stability to the planning and decision-making of the board. They
prevent sudden reversals that result from not remembering precedents or
from lacking the wisdom that was present in a previous board.

3. Policies give future direction to the Chief Executive Office. They also provide limitations to the CEO’s authority. In doing so, the CEO has a much larger and clearer circle of freedom in which to lead the organization into a future directed by the board.

4. Policies give assurance to the staff and other stakeholders that the board is
mature and wise in dealing with an ever-changing environment and the crises that arise.

5. Policies help to ensure efficiency and effectiveness by having specific means of
monitoring performance and measuring results.

6. Policies provide a “firewall” against the abuse of power from a chair or from a
small group within the board and a buffer against the incompetence of weak
board members.

Boards that want to govern more effectively are well advised to begin creating a Board Policy Handbook or Board Governance Manual or to bring their existing manual up to date.

Where no handbook or manual exists or where it is obsolete, the board may appoint a person to search through past years of minutes to lift out all management decisions that have implications for future decision. These “discoveries” can then be used as the basis for policy development.

Policies fall into four main categories:

1. Policies that define the structure and process of governance.

2. Policies that define the elements of the strategic plan: values, services, target groups, vision, mission, priorities and strategic goals

3. Policies that deal with the delegation of authority and responsibility to the CEO

4. Policies that deal with monitoring and measuring the strategic outcomes and the tactical outputs of the board, its members and the CEO.

Les Stahlke, President/CEO
GovernanceMatters.com Inc.