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CCP 06-24-2002
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CCP 06-24-2002
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<br />The Policy Governance@ Model <br /> <br />Page 9 of 16 <br /> <br />statement of a nonprofit board may be that persons without shelter should have adequate housing. <br />Another may be that families with school age children should have housing that allows children of . <br />different genders to sleep in separate rooms. It is easy to see that the second example is more <br />detailed. or "narrower," than the first. Notice that these two statements can be pictured as a set of <br />nested bowls, in that the first is a broader value that includes the second one within it. Even more <br />detailed choices exist within the second level, and so on to third. fourth. and more bowls until the <br />specificity reaches a level where Mr. Smith rather than Mr. Jones gets a particular amount of shelter <br />next week. <br /> <br />Now let's illustrate the "nested bowls" concept with an example of unacceptable means. One means <br />value of a nonprofit board may be that the CEO not allow anything imprudent, illegal or unethical. <br />Another may be that unbonded persons may not have access to material amounts of funds. The first <br />example is a broader prohibition than the second, but less specific. Even more detailed "bowls" <br />exist, of course, such as a further proscription against access to more than $5.000 on anyone <br />occasion or more than $8.000 cumulatively OVer a one year period. <br /> <br />Board values about ends and unacceptable means. as well as the board's own means, then, can be <br />stated broadly, or more narrowly. The advantage of stating values broadly is that such a statement <br />is inclusive of all smaller statements. The disadvantage, of course, is that the broader the statement, <br />the greater is the range of interpretation that can be given to it. To take advantage of the fact that <br />values or choices of any sort can be seen as nested sets, the Policy Governance board begins its <br />policy making in all four categories by making the broadest, most inclusive statement first. <br /> <br />The board then considers the range of interpretation that such a statement allows, and determines <br />whether it is comfortable with the statement being given any interpretation that is reasonable. If the <br />board would be uncomfortable delegating such a range. that is a signal that the board must define <br />its words more narrowly, moving into more detail one level at a time. At some point. the board will <br />have narrowed its words to the point that it can accept any reasonable interpretation of those words. <br />Now the board has reached the point of delegation. <br /> <br />. <br /> <br />As an example, consider an Executive Limitations policy in which the board is putting certain <br />financial conditions and activities "off limits." At the broadest level. the board might say: "With <br />respect to actual, ongoing financial condition and activities, the CEO shall not allow the development <br />of fiscal jeopardy or a material deviation of actual expenditures from board priorities established in <br />Ends policies." That covers the board's concerns about the organization's current financial condition <br />at anyone time, for there is likely nothing else to worry about that isn't included within this "large <br />bowl" proscription. <br /> <br />However, most boards would think such a broad statement leaves more to CEO interpretation- <br />eVen if reasonable interpretation-than the board wishes to delegate. Hence, the board might add <br />further details. such as saying the CEO shall not: (1) Expend more funds than have been received <br />in the fiscal year to date except through acceptable debt. (2) Indebt the organization in an amount <br />greater than can be repaid by certain, otherwise unencumbered revenues within 60 days, but in no <br />event more than $200,000. (3) Use any of the long term reserves. (4) Conduct interfund shifting in <br />amounts greater than can be restored to a condition of discrete fund balances by unencumbered <br />revenues within 30 days. (5) Fail to settle payroll and debts in a timely manner. (6) Allow tax <br />payments or other government ordered payments or filings to be overdue or inaccurately filed. (7) <br />Make a single purchase or commitment of greater than $100.000. with no splitting of orders to avoid <br />this limit. (8) Acquire, encumber or dispose of real property. And (9) Fail to aggressively pursue <br />receivables after a reasonable grace period. <br /> <br />A given board might go into less or more detail than in this example. But in any case, these <br />principles stay intact: The language moves from a broad level toward a lesser level (we showed two <br />levels in the example just given). The values that become policy are generated by the board's <br />deliberations, not approved from a staff recommendation. The board, not the staff, decides what to <br />say and where to stop. No matter where the board stops, the CEO is granted authority to use any <br />reasonable interpretation of the board's words. The board can shrink. expand. or change the content <br />of the policy at any time, as long as it does not judge performance retroactively. <br /> <br />e <br /> <br />http://www.carvergovernance.com/model.htm <br /> <br />6/12/2002 <br />
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