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  • Writer's pictureSimon Canning

The Operations Trap

When directors ask how they make sure to stay out of operations, a good place to start is to examine their understanding of ‘policy’ versus ‘procedure’.

My experience has been that many times the executive leader of an organization whether that is a CEO, an Executive Director, or a Registrar use the words ‘policy’ and ‘procedure’ interchangeably.

I think this is a mistake.

The board needs to be operating with policies for the organization that are of the highest level thinking. How those policies are put into action are the procedures. They should be in separate folders. The policies are the ‘why’ and the procedures are ‘how’. Boards should be monitoring and validating whether the policies are being complied with, but not checking whether the step by step procedures are being followed. That is the executive leader’s responsibility.

For example, think about the finance policies in your organization.

Does the board have a policy for how to use its finances? And maybe in a for profit enterprise the story is a straightforward one. The board looks to the CEO for quarterly financials, compares progress against the annual business plan targets, and asks questions to explain the variances.

The policy is to safeguard the shareholders interests and generate a return. The procedures are everything that happens afterwards in generating that return.

A NFP has an extra complication. The monies in the organization may be granted, donated, etc and the supporters expect it to be used to further the organization's raison d’etre. This will almost certainly be different from turning a profit, might even be to make sure it does not earn one!

In either case the finance policy is the highest level thinking needs to be a statement of ‘why’.

In the Carver methodology this is captured in the global ends policy and again in the executive limitations as it relates to the boundaries for the executive’s use of the finances to achieve those ends. The actual processes for acquiring, banking, and distributing the monies are the procedures and come after ‘why’ we have the finances anyway.

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