Policy governance. It sounds stuffy. Boring. And probably complicated.
It’s actually none of those. Granted, it may not be everyone’s cup of tea, depending on what an individual expects his or her board experience to be. Policy Governance® sets clear boundaries between operations and board work. It keeps board members from micromanaging. That is its purpose and its strength.
The board of directors has only one employee—the Co-op’s general manager (GM). The GM has been hired because of his or her ability to run a $78 million retail cooperative. The GM bears full responsibility for meeting the board’s—and, hence, the membership’s—expectations for what the co-op shall provide and how it shall be provided.
By keeping board members focused on their governance role, Policy Governance® facilitates creation of clear instructions for the GM with no ambiguity. The board speaks with one voice, writes down its expectations, and then consistently monitors how well the GM is meeting those expectations. Individual board members are not allowed to tinker or to suggest how something should be done. If they were, the board could no longer hold the GM solely accountable for results.
Using Policy Governance®, the board writes two types of policies that provide instruction to the GM. One type (Ends) answers the question “What is the Co-op for?” Not what does it do, but why does it exist? What difference shall the Co-op make in the lives of its members? What difference shall it make in the world? Ends state expected results and nothing more.
The second type of board-written policy that provides instruction to the GM is known as an Executive Limitation or EL. Executive Limitations are exactly what they sound like. They tell the GM, in clear language, what conditions, processes, or outcomes will not be tolerated by the board. They purposely do not tell the GM what to do or how to do it. That’s the GM’s area of expertise. Instead, they set boundaries within which the GM must work.
For instance, an EL regarding employee welfare may state that the GM must not allow employees to be exposed to unreasonably hazardous conditions. The policy does not delineate all possible conditions or what the GM must do to avoid exposure to each one. That’s up to the GM and staff to figure out and implement. But when the GM reports to the board about employee welfare, the GM must explain how employees are protected and what the outcomes have been, providing data to convince the board that employees have not been and currently are not exposed to any unreasonably hazardous conditions.
The GM’s performance evaluation and continued employment rest upon his or her reasonable interpretation of, and demonstrated compliance with, all of the Ends and EL policies written by the board.
In a membership organization such as the Co-op, one of the board’s most important jobs is to know what the Co-op’s member-owners want their co-op to be. What should that Ends policy say? What difference should the Co-op be making in the lives of its members? The board can’t know the answers unless it actively engages with its member-owners.
On-going member linkage is a primary duty of a co-op’s board and also one of its greatest challenges.