A traditional way of creating strategy and of communicating it to management
is by means of a Board/Management annual retreat. Several years ago we stopped
doing this in favor of a more continuous process by adopting the Carver Policy
Governance Model. Our Board no longer goes on an annual or semi-annual strategy
planning session with management and a consultant. Rather, we now follow a governance
model by which the Board communicates policy to management and in turn receives
regular monitoring reports.
Our board governance model calls for the Board to govern the credit union through
four basic policy groups or categories. The first is the ends policy. This communicates
in broad terms why the credit union exists and what it means to accomplish for
members. The second is a listing of executive limitations, setting limitations
beyond which management may not go. The third maps the Board/Management relationship.
The fourth is a definition of how the Board governs itself. Naturally, all these
are interconnected and must be considered as a whole body of policies.
The third policy above – on the Board/Management relationship —
explains to the CEO (who is the Board’s only employee) that the Board
makes the ends policy but allows a reasonable interpretation thereof. The Board
says that it will accept reasonable interpretations but will also be the final
arbiter of interpretations. Accordingly, the Board is able to change policy
rapidly and retains a very high level of control of the credit union.
For the ends and limitations policies, the CEO is obliged to make regular reports
to the Board. Thus the Board is continually monitoring results. In effect, the
CEO first, interprets Board policy, second, develops a strategic plan to achieve
the ends aimed for in the policy, and third, reports results to the Board.
Other aspects of our method are as follows. The CEO controls the balanced scorecard
(BSC, a strategic implementation tool) but consults with his executive team
on the BSC’s initiatives, measures and targets. The executive team works
with the management team and CEO on BSC components, and the Management Team
implements strategy. The management team meets regularly about the BSC to check
goals, measurements and results. Their findings are factored into the report
the CEO makes to the Board, coming full circle.
No Annual Planning Session
There is no annual strategic planning session.
We see some advantages and disadvantages of this. I believe the best advantage
is flexibility and the ability to make changes as new circumstances arise. When
an annual planning session is paramount, too much thought and energy is put
off until the time of the meeting. This means that opportunities are lost. It
can also mean that so much is loaded onto the agenda of the weekend retreat
that it cannot all be addressed, that, in fact, everyone is set up for failure.
Under our method, policy is ever present, if somewhat out of constant view owing
to its lofty level, and everyone knows that it is subject to change without
the formality of an off-site retreat.
A disadvantage is that the Board does not have a “celebratory event,”
or formal off-site policy-setting meeting. But we have not yet found this to
be a problem. One reason is that the Board does occasionally travel together
off-site. This might be, say, to seminars or the GAC.
Here is an example of how the system has worked. Management recently decided
it could reinterpret our field of membership allowing the credit union to create
new FOM expansions opening eligibility to 60,000 new persons. Under a traditional
approach, such an expansion would require discussion, consensus and approval
at a Board attended strategy session. Rather, we advised the Board we were planning
to extend membership eligibility to this group and that our Regulators had expressed
no concerns. We merely included these developments in our regular reportings
to the Board.
We believe this governance model works well for us. The Board is in full control
but remains so at a very lofty level, setting high policy but not descending
to tactics and implementation. Management is allowed a reasonable interpretation
of these policies but well understands its limits and is continuously reporting
to the Board on results.