Tuesday, 9 August 2011

How does the board ensure its policies are carried out?

I started an online discussion on this topic on a forum for governance professionals and was startled by the responses. They read as if they resulted from quoting a particularly unimaginative textbook, referring to committees, escalation procedures, frameworks, second and third lines of defence, a performance management dashboard; oh, and before I forget, reminding each board member of their duties.

Now the forum members are meant to be people who work in the area of governance, probably many are company secretaries or internal auditors - and not a clue. Not just no clue about the answers - which are difficult - but actually no clue about the questions either: they just did not understand the problem. There are two distinct sets of issues connected with making sure that board policies are actually being implemented. The first is where the board policies are communicated but at some point in the process, by the time they get to the operational front-line they are changed or blocked or just not carried out. The executive directors probably believe the policies are being observed but there is a disconnection in the line of command and they are not. The second issue is where the problem starts at board level. Different executive directors may be in conflict and battling for resources and influence or there may be disagreement about the policy - in the latter case it is communicated and implemented with a lack of enthusiasm, which prevents it from working - in the former case there is deliberate obstruction. In any event the problem is not rules, procedures, mechanisms, frameworks etcetera: it is behaviours.

Even in traditional command-and-control organisations it was a myth that the leader would give an instruction and that it would be passed accurately down the chain of command and carried out diligently and immediately at the operational level. There were endless opportunities to obstruct or reinterpret direct instructions. In more modern, more flexible organisations there are infinitely more ways to delay or ignore and, perhaps counter-intuitively it is the network of frameworks and procedures that helps those who want to obstruct. Whenever there is a precise regulation there is an opportunity to misinterpret it. I believe that the answer to the problem I set lies in working to change behaviours. One respondent to the governance forum did come up with a solution that showed understanding of the problem. He proposed making executive board members accountable for particular board policies and having this tied to their remuneration. So if X is tasked with carrying out a policy and it can be shown that has not been done effectively then X is paid less. This could apply not just to one person but to a management team.

Unfortunately this is only half of the solution because it may influence those at the top but does not address the disconnection that can exist between policy makers and operational management. Merely punishing those at the top for not making something happen does not actually do anything directly to make it happen. It may sound a little vague, but the key to good management and effective governance is shared vision, shared values and shared understanding across the organisation. When the board makes sure that their vision and values are clearly communicated and that their goals and strategies are too, then that is a critical first step to ensuring that all policies are carried out. The next step is to make sure they are shared as well - so that you don't need to bombard people with detailed instructions because they will use their initiative within prescribed boundaries and it is clear to them what they should do and they are committed to doing it. You do this through excellent communication and through the reward system and through development of line managers to do what line managers are meant to do: to direct and develop their staff and to communicate effectively with them and to feed information back up the line. So the result is that good governance is not a system that is bolted on to an organisation like an external skeleton - if it is to work it must be part of the DNA of the organisation.

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