Miriam Carver and I have regularly made the point that boards, in order to get the most out of an organization, should delegate as much authority as possible short of “giving away the shop.” What is meant, of course, is that the operating organization is the board’s instrument for attaining its desired Ends. That being the case, it is in the board’s best interest that the instrument be as powerful as possible, though bounded by ethics, prudence, and legality.
It is a pity that some boards think that delegating extensively is tantamount to relinquishing control. With proper governance, it is not. In fact, failing to delegate extensively constitutes board underachievement.
Boards are normally of that unfortunate persuasion because they fear that an organization will get away from them. They fear the risk involved in being accountable for of an abundantly empowered operational apparatus. So some boards resort to minimal empowerment and to keeping their fingers carefully placed on internal workings. There are three major ways they do that. The first is by constantly inserting themselves into operational decisions through their committees, individual board members, or the board as a whole.
The second is by construing the chair’s role as a link between the board and the ostensible CEO. This may be done, implicitly or explicitly, by authorizing the chair to supervise the ostensible CEO, or directing the ostensible CEO to gain chair approval for all but insignificant decisions. I use the word ostensible to underscore that under these circumstances the named CEO is a CEO in title only. In practice the board chair is acting as CEO in that he or she is the first operational authority below the board’s governing role. Therefore, the named CEO is working for the chair or the board plus the chair, rather than working unambiguously for the board.
The third way boards handicap operational effectiveness is by requiring all decisions of some stated level of importance to come before the board for approval. This method is so time-honored that it is rarely questioned and is, in fact, widely regarded as prudent governance. As implied above, boards do this primarily due to their fear of risk. What if the CEO’s choices are imprudent, precarious, or even perilous? What if the CEO or those who work for the CEO are converting organizational assets to their own enrichment? What if the owners see the board as being insufficiently protective of organizational wealth, productive capacity, or image?
Those are, of course, reasonable fears. A board would have to be thoroughly lackadaisical not to entertain such fears, unprincipled not to accept responsibility for protecting against them, and feckless not to resolutely overcome them. Policy Governance offers boards a carefully designed method to do just that, but I will not belabor those methods here. What I wish to do is present another side to the matter that boards seem not to consider when they flee to what I will call “semi-delegation” to bolster their comfort.
Semi-delegation is not a generally accepted term. I am not sure that we in Policy Governance have ever used it. So I will give it a definition for my purposes in this article: Semi-delegation is a type of authorization to subordinates that withholds vital elements of empowerment and prevents subordinates from assuming a whole job. By “whole job” I mean the right to control all the integral functions of a job, as well as to take a job from assignment to completion. In the parlance of some management writers, this wholeness constitutes subordinates’ “owning” their jobs.
The point of this article is that when a board resorts to semi-delegation as a risk-avoidance strategy, it fails to understand that semi-delegation is itself imbued with risks of its own. Below I set out some of the risks inherent in semi-delegation, risks that I believe boards overlook at their peril Although not all of them apply to every organization, one or more apply to every board that practices semi-delegation: to its CEO in order to assuage its fears of risk.
Risk 1: Boards are normally not as expert as their staffs in the business of the business. Semi-delegation substitutes a board’s less competent judgment for subordinates’ more competent judgment in those matters. Even if individual board members are more competent in some managerial area, a board’s depending on one or a few board members to guide the CEO forfeits the board’s fundamental holism and the critical unity of board-CEO delegation, so it would be unfair for the board to hold the CEO as accountable as a CEO should be.
Risk 2: Management costs for a decision that is only half made—awaiting board approval—can be substantial. Without the authority to move ahead with management’s best judgment, the wheels of organization stop until the board studies, inquires into, debates, and finally OKs or quashes the tentative decision.
Risk 3: Managers, cognizant of that process, tailor their submissions to the board so as to maximize the probability of board approval. That entails including extraneous elements or avoiding touchy elements in order to encounter minimal board member resistance. This means that what management submits to the board may well not be its best judgment but one that has been politicized. Boards tend to be blissfully unaware of this dynamic at play.
Risk 4: A CEO whose authority is only partial is not in a position to delegate powerfully to subordinates. You can’t delegate what you don’t have and you’d be unwise to delegate what you aren’t certain you have. Ambiguity breeds CEO waste and risk. This is particularly evident in governmental organizations and NGOs, where authority is doled out as stingily and piecemeal as possible as if there is virtue in minimizing authority within the ranks. When the wasted potential not only of the CEO, then, but also of everyone reporting to the CEO is considered, the cost can be enormous.
Risk 5: CEOs who have had to truncate an otherwise smooth process or to alter its character to gain board approval can hardly be held accountable for whether a plan actually works as desired. CEO judgment can be distorted enough so that the board’s capacity to hold him or her fully accountable is weakened.
Risk 6: The best CEOs and CEO candidates would be insulted, offended, and, in the end, repelled by semi-delegation, as if the board wants a head clerk or well-paid gopher more than a CEO. Most competent CEOs accept that the board is by rights the superior party; but exercising that superiority using semi-delegation thwarts any chance of optimizing the CEO role no matter how competent the office-holder.
Risk 7: In considering whether to move toward a more powerful delegation strategy, a board may fear that its current CEO, having not been truly treated as a CEO, is not capable of performing well if given greater responsibility. Apprehension about the current CEO’s capability can lead, ipso facto, to continuation of semi-delegation, thereby perpetuating the problem. Such a situation is a remarkable comment on the board’s willingness to be limited by its employee. Board ignorance of whether its ostensible CEO can actually perform as a CEO is almost as troublesome as board certainty that he or she cannot.
Risk 8: Since it is too awkward for an entire board to coach or advise the ostensible CEO on an ongoing basis, the board might well decide to assign its various members to specific areas in which they each advise or coach on specific topics. It is obvious that such an arrangement rapidly leads to a situation of multiple bosses wherein the CEO must please the several would-be supervisors rather than a board acting as a body. The all-important characteristic of board holism is thereby lost and the risk is increased that specific board members acquire disproportionate authority simply due to their more forceful “advice.” The confusion of whether advising board members intend advice rather than instruction adds further complexity; even if they don’t, a CEO would consider it wise to take no chances.
Risk 9: An ostensible CEO treated as a CEO-in-training either does not develop important CEO boldness and sense of personal accountability or, at best, develops these qualities more slowly. This point may seem like the old adage that swimming is learned best by jumping into the water rather than by entering it in timid steps. The comforting difference however—since no board wants to risk the organization by CEO on-the-job training errors—is that Policy Governance enables the board to control the degree of risk by more restrictive limitations or by adjusting monitoring frequencies.
Risk 10: A board that semi-delegates will involve itself, at least in part, in a CEO’s world rather than its own. Consequently, it will almost certainly be caught up in matters of shorter term and narrower scope than would be appropriate at the board level of decision-making. Although theoretically a board could deal with both ends of those continua, it is highly unlikely that it can do so without short-changing the attention given to the longer/broader issues. That will diminish the board’s focus on high level policy creation including long range Ends and boundaries on risk.
These risks go largely unexamined by boards, especially those convinced that involvement in managerial decisions is the most direct way to address their concern. To the contrary, theirs is inadvertently a judgment that intuitive governance trumps more precise and coherent oversight, much as an inexperienced pilot might choose seat-of-the-pants piloting over good instruments. Trusting a more precise and studied—and I’d say less risky—oversight requires boards to be the beginning authority rather than the final authority. By that I mean instead of waiting to see what management wants to do, then sitting in judgment of it, instead of assigning to a CEO a role more like executive assistant, instead of making approval judgments after-the-fact on costly proposals . . . . . instead of those common albeit flawed board mechanisms, the board would first engage in determining the values which it will impose upon the CEO, then monitoring the applicable performance rigorously.
If confined to using only the normal governance tools available outside Policy Governance, a board seeking to engage in such front-end value clarification would find itself in either (a) an impossible impasse due to its lack of a governance-relevant classification system for values or (b) an all-too-familiar word game in which the board brainstorms a list of values and beliefs that go nowhere except on plaques or PR documents. In order for a board to debate and create forceful value guideposts, an effective value framework like Policy Governance is indispensable.
Boards unfamiliar with the Policy Governance value framework and its use will swear that it is impossible actually to govern by board values. They’d think it certain that a values focus would be akin to the empty but appealing word games I just mentioned: a feel-good flurry of distracting window dressing when there is real work to be done! Given the ubiquitous “final authority” counterfeit of leadership, these fears are reasonable. But Policy Governance makes possible the expression of board values in a front-of-the-parade manner, enabling a board to establish criteria in a form which exercises improved control over CEO plans and actions, but without the tediousness, unpredictability, and often personality-loaded practice of board approval. It is not just a side benefit but a core advantage that the CEO is then empowered fully within those limits, can delegate internally with assurance, and can be judged on performance both rigorously and fairly.
It is also no small matter that a board taking on this sort of focused value clarification will find doing so an exceptionally rich and motivating experience. Moreover, boards that do so invariably find that the values that previously guided their approval/disapproval tasks were not nearly so coherently and confidently expressed as they assumed.
Of course, those schooled in Policy Governance know the path to board excellence includes the disciplined distinction of Ends and means, the non-prescriptive control of subordinates’ means, and a few other aspects of the Policy Governance methodology. They know that Policy Governance enables a board to avoid the approval gauntlet with its constipated version of delegation and its inherent meddling, enabling a responsible escape from the fear of CEO incompetence, carelessness, or treachery. So extensive delegation need not be a sign of weak governance, but can be the most potent tool in a board’s arsenal for transforming owners’ wishes into organizational performance. Although it is an understandable and natural temptation, semi-delegation by a board is a costly, risky, even cowardly flight from its ethical duty to powerfully manifest owners’ interests.
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