Policy Governance is a
better approach because it provides a better definition of fiscal
responsibility and it provides a mechanism to enact that definition.
It is important to understand the definitions of fiscal responsibility,
and in particular the word responsibility.
These definitions are important, not just as a matter of
words but as a recognition that how someone uses the word reflects how
think about and carry out responsibility and accountability.
There are two uses of the
word responsibility that need to be
clarified. The first definition is who has the responsibility
for an action or result and the second is whether someone is acting
responsibly by assuring that the actions or
results are achieved. Often these definitions are combined as if they were
same, but they are not. Someone may have the responsibility
for an action but not be responsible
in accomplishing it or its intended result. They have the
responsibility but are acting
For the most part, when
boards discuss fiscal responsibility, they are using the first definition:
who has the responsibility to carry out the actions or results that
create fiscal responsibility. With this definition, it would be
difficult for any board to not approve, if not carry out, any task or
decision that would appear to be of a fiscal nature. Unfortunately,
even a board that might accept all the fiscal tasks, thereby having one
hundred percent of the responsibility for the tasks, can not be assured
that they are acting fiscally
responsible. For example, it would be difficult to show that by
having the board approve the budget the board is acting
more fiscally responsible.
One of the reasons that
Policy Governance works is that it successfully separates these two
aspects of responsibility. A board should first define the
difference between fiscal responsibility and fiscal irresponsibility.
The best way to do this is through the logic of establishing limitations.
In this case, it is important to recognize that these limits or boundaries
not only apply to the executive but to the board as well. For the
board to allow the executive to not comply with the boundaries,
essentially says that not only is the executive being fiscally
irresponsible but so is the board. It is only with the definitions
of the boundaries and the assurance that the organization is in compliance
with them can a board say that it is being fiscally responsible.
This is the mechanism that assures fiscal responsibility.
As most students of
Policy Governance know, traditional board practices are all about the
first definition of fiscal responsibility and have little to do with the
second definition. Traditional practices work to better leverage the
board's time so that they can accomplish all the tasks, rather than
clarifying and assuring compliance with the boundaries. Policy
Governance is not just a better approach, but one could argue that in
traditional board governance fiscal responsibility is not well defined and
therefore difficult to assure.
Lynn A. Walker, Ph.D.
Boundary Management Consulting
12411 McKelvey Road
St. Louis MO 63146-2929
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