In prior blogs and newsletters, I have made the case that having a “3 legged stool of effective governance” (comprised of the strategic plan, sound policy and the right data for evaluation) is the secret to avoiding the dreaded micro-management that derails so many board-CEO relationships. What I hadn’t talked about before is how these tools work together synergistically to enable the board to build trust in management and, more importantly, move the board toward a more strategic or value-added role.
Strategic Plan – as we have talked about repeatedly, this is the tool that enables the board to take control of the future. Without it, you are at the effect of events rather than seeking to determine them. As well, you lose a valuable means of evaluating your CEO. How well does he/she assess the strategic environment? Does he/she execute on the “promises” inherent in the targets imbedded in the plan?
More than this, though, your plan is also vital for the board’s role in evaluation (one of its 10 key responsibilities). In the evaluation role, the board determines the effectiveness of all phases of the organization’s performance. However, until you lay out the course and strategy you will use to navigate that course, then test it in the crucible of the marketplace, you can’t truly evaluate the strategy on its effectiveness. Did the strategy determine the results you got or did something else? Without an explicit strategy that you execute, you won’t know and therefore, you can’t take corrective steps if and when necessary.
Metrics – if you’re a long term reader of our posts and newsletters, you know I advocate for defining measures that require frequent data gathering, with the easy availability of data, so as to be able to see trends rapidly. Without metrics on the projects in your strategic plan, the vital few measures on the condition of the organization and its progress toward the vision, you run the risk of committing one or both of what W. Edwards Deming defined as the two fatal errors in management, 1) making a change or adjustment when you shouldn’t or 2) not making an adjustment when you should.
Your metrics are the only true means of knowing whether the strategies in your plan are working. They enable the board to have an effective dialogue with management regarding what is influencing results. Without them, you can’t improve your plan, and you can’t define good policy.
Policy – this is the tool to document and disseminate what you have learned, the wisdom you have acquired. Using your plan and metrics, you can determine what is working for you and what is detracting from performance. Once you know that, then use policy (change in use of resources, change in plan, change in process, change in rules) to strengthen what is contributing positively and to eliminate what is not.
With these three tools, as a board member, you have the ability to:
- Direct the future of the organization
- Evaluate your CEO
- Evaluate the effectiveness of the chosen strategy and modify it as needed
- Assure that management is clear on the lessons learned, and that they will be used consistently instead of lost over time.
I have witnessed continually over the years that, when boards focus on putting these three tools in place, they foster:
- Trust in their CEO
- Long tenure of their CEO
- An end to board time spent reviewing what has already happened in the form of staff reports, etc.
- The ability to devote more time to strategy and evaluation, where the real fruits of governance lay.
In short, the impact of these three tools together is far greater than the simple sum of their individual impacts. If you are interested in implementing these 3 tools successfully with your board, becoming a value-added board, contact us to learn more.