August 2010 Issue 4
BoardWorks International
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What’s So Hard About Saying ‘No’? Revisiting Limitation Policies

Boardworks InternationalOver the last 20 years my colleagues and I have assisted many clients to develop delegation frameworks based on what are often referred to as 'limitation' policies.  Rather than traditional prescriptive policies that tell chief executives what they can or, more often, what they should do, limitation policies are proscriptive.  They say what the chief executive can't do.  For example:

The Chief Executive shall not permit the Board to be uninformed or unsupported in its work. Therefore the Chief Executive shall not:

1. Neglect to submit data in a timely, accurate and understandable fashion addressing the governance level issues to be monitored by the Board.

These, and their ilk, are very powerful formulations that increase board control and empower the chief executive at the same time.  The result is that accountability for chief executive performance is greatly enhanced. It is frustrating, therefore, to find that many of those organisations, over the years, have attempted to rewrite their limitation policies in a prescriptive format.  As boards and chief executives in those organisations have come and gone it would appear that the original understanding and appreciation of the value of proscriptive policy-making has been lost. Indeed, in many cases it seems that the concept has been actively rejected. So what is so hard about saying ‘no’?

Typically, boards seem to have rejected the idea of proscriptive (or negatively expressed) policies because they say that:

‘We did not feel right using the negative language – we wanted to be positive’

‘The negative wording was awkward’

‘Telling the chief executive what she can’t do is ‘disempowering’

Let's take each of those in turn. 

Of course, boards should be positive in the way they approach the relationship with their chief executive.  But that doesn't preclude them (on the contrary) from setting clear boundaries within which they expect their chief executives to operate.  Making the chief executive's autonomous decision-making space clear from day one is surely a positive move.

Negative wording, awkward?  Yes, it often is.  Writing proscriptive policies often requires the use of double negatives and other comparatively ungainly expressions.  We believe, however, a little awkwardness is a price worth paying for clarity of expectations and increased accountability.

Disempowering?  Absolutely not!  Chief executives introduced to the concept of limitation policies are invariably excited about the benefits it offers to them.  Why is this?  Many chief executives continuously experience the sense that their boards are interfering in ‘operational’ decision making.  In a way this is not surprising - it is what actually happens operationally that is of concern (or interest) to board members personally or to their constituencies.  It is also true that about what goes on operationally is often where board members have the greatest confidence in their own knowledge and understanding. 

The challenge, therefore, is to enable a board to have influence over what its chief executive and staff do (or do not do) without interfering in operational decision making. The board is responsible for good stewardship and the reality is that some operational means, though effective, would be unacceptable.  The board and staff alike must be conscious that ‘the ends do not always justify the means!’ For that reason a board must always be able to answer the question ‘what is not okay even if it works?’ 

It is this consideration that should determine the board's relationship with the way staff do things.  The board does not try to prescribe the way staff should do something. Instead it considers the justification for any prohibition, constraint or limitation on staff freedoms to take any actions they think might achieve the desired result.  Should the board (collectively) consider some form of constraint is necessary it naturally follows that it would state these proscriptively (i.e. negatively). By establishing limitation policies the board, in effect, publishes a ‘don't do’ list.  In this way limitation policies can be used to control any staff ‘means’: i.e. actions, activities, methods, technologies, practices, etc without telling them how to do their job.

To the person unaccustomed to these concepts it is not surprising that this style of approach seems negative, even disempowering.  In reality, however, the result is quite the opposite.  For the chief executive and other staff, it means that anything the board has not prohibited is, by definition, okay.  This removes uncertainty.  Staff no longer, for example, need to wonder whether or not one or more board members will dislike some action they have planned and try to interfere either before or after the fact.  It also removes the obligation for them to continually seek board approval not knowing whether the board is likely to bless the proposal or withhold its approval on the basis of criteria it has never stated.

In the process of defining the necessary boundaries of acceptability, either the board puts something off-limits or it doesn't.  Even if limitations are only broadly stated initially the board must define a policy framework within which its delegation to the chief executive - to take any actions at all - can be made. If the board has not done so it is setting its chief executive up to fail.  It has said, in effect, ‘Just keep going until we tell you that you have done something wrong!’  Nothing is potentially more demoralising and disempowering.

In considering the limitations approach another consideration that may also be persuasive.  Chief executives commonly jump at the opportunity to operate under a limitations regime.  What they quickly come to appreciate, however, is that it is far more demanding than a prescriptive approach. Limitations policies force them to find effective and innovative ways of achieving desired outcomes.  A lot more thinking is required than when someone else has already told you what you should do and even how you must do it. 

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