Not all monitoring has to be future oriented,
and some can't be, such as most monitoring of limitations on executive personal
conduct. However, for monitoring that can and should be future
oriented, there are two
rules of thumb. For conditions or actions from which it is difficult
to recover, the more future oriented the board should be. The second
rule of thumb is to not be tempted to make the Limitations more
constraining, instead you will establish pseudo-boundaries between what is
acceptable and what is not.
There are two aspects to making this
change towards the future. One is technical and the other is psychological. The
technical part is easy. The policies, and the board's willingness to
enforce them, will dictate how future oriented monitoring will be.
Monitoring policies guide the monitoring that occurs. If board
policies ask for a future orientation, but they are not receiving it, the
problem isn't with the policies, it is with the board's willingness to
The board will have to decide how far
into the future and how often the monitoring will have to occur. For
example, an annual financial forecast gives the board a 12 month projection
the first month, but that projection is continually reduced as each month
passes, until shortly before the end of the year a new financial forecast is
produced. The last few months, the board's view is pretty nearsighted.
A better option would be to establish a monitoring policy that asks for 12 month projection that is update monthly or quarterly.
This shift is as much a psychological
one as one of practice. Boards have traditionally been focused on
current or past performance, with less attention on future results.
Part of this dilemma is that future performance is conjecture. It is
an interpretation of what will happen. The data is not hard and fast,
leaving room for debate or worse: fudging, and self-serving
projections. However, most of this concern goes away with Policy
Governance's reasonable interpretation concept. The monitoring of
future performance doesn't have to be precise, but it does need to be a
reasonable interpretation. In fact with monitoring future performance
it might be better to ask for a range within which performance will likely
fall. If the range falls within the constraints or limitations, no
action is necessary. If part or a predetermined amount of the range
exceeds the limitations, then the board might ask for contingency action
plans or provide for closer monitoring. Some suggestions for what
these monitoring reports might look like can be found in the
Monitoring Board Guide.
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