Policy Governance - Dr. Richard Biery on Board Leadership

Governance and Leadership Newsletter

Nov. 30, 2004

What on earth is board leadership?

There has been a lot written recently exhorting boards to good leadership, which of course, is admirable. However, we can’t answer the question of good board leadership without knowing what the board is for. Is board leadership telling someone what to do? Advising? Inspiring? Encouraging? Inspecting? Ceremonial duties? Standby authority? Being a watchdog? (All are found in the literature.) Without the answer we cannot cogently define what constitutes board leadership, much less assess it. It is not self assessment, per se, although that may be an important component to assure that, however leadership is finally defined, the board does it well. But assessment against what criteria? Is it having an audit committee, or safeguarding related party transactions, or documenting CEO compensation? Same answer. One or more of the above do not, by themselves, constitute good governance but are necessary components for achieving excellence within the larger purpose of the board. In other words, a board doing all of the above may yet not be governing!

For 500 years a board has been Western Society’s device for enabling multiple owners to representationally control their organization so that it accomplishes what the ownership wants accomplished and prevents the organization from doing what the ownership doesn’t want, even inadvertently. That is board leadership in a nutshell. Governance, in fact, is the accountable conveying of ownership authority and accountability from a group (the board) to (usually) a single head who then runs the organization in conformance to the group’s expectations. Board leadership, (good or bad) is, by definition, governance, and therefore, good governance is good board leadership.

Unfortunately doing it successfully, much less well, is not easy. Furthermore, it raises several important questions. Who are the owners? What values should we bring to the governance process and why? What is the best form of control to see to it that something happens as desired by ownership and what shouldn’t happen doesn’t happen? These are important questions, because on one hand the organization and its managers must be sufficiently free to be energized and inspired to optimize creativity and motivation to find and use the best methods, in aggregate, to achieve ownership’s desired ends. But on the other hand, the organization and management must be sufficiently constrained to prevent happening what ownership does not want to occur. Good governance (board leadership) is consistently achieving that balancing act, inspiring and directing while constraining (and checking on it). John Carver calls it “controlling what you must, not what you can.” It essentially involves a conceptually high form of delegation (from a group to an individual). If we do not value or guard empowerment, we over-control and drive out good managers (or drive down productivity at the very least), and if we under-control, we do not get what we want or we encounter means or consequences that violate our values and are not justified by the ends. Policy Governance^® is the set of values and principles that enable a board to do that balancing act and delegate effectively on behalf of the ownership (moral and/or legal). The better the job of governance using these principles, the better the long term consequences for the organization, the owners, and the beneficiaries.

Under this framework of course the board should want to self-assess, assure that outside reviews (audits) are independent, that there are no damaging related party issues, etc. But these do not constitute governance; they enable it. To be effective in accomplishing this job of governance all the elements mentioned at the beginning are required, board auditing, CEO compensation management, preventing imprudent transactions, board self assessment, and many more. A coherent governance process will accomplish that. The answer to the others? Good governance, i.e., board leadership is, in fact, face it, a high form of supervision or directing (some would say stewarding), but via effective and inspiring delegation involving both organizational ends and means. Doing that well constitutes good leadership. Board members are not termed directors for nothing. The Latin for steering, gubernere, now our word govern, was applied (in noun form, and in the Greek, kubernao), to the ship’s officer who directed the helmsman; he did not run the mechanics of the ship; he set its direction. So too the board, for 500 years.

Richard M. Biery © 2004