Boundary Management

An Extensive Policy GovernanceĀ® Resource for Boards of Directors

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Featured Question: Our monitoring focuses on past performance. How do we change monitoring so that it is more future-oriented?

Answer: I have two guidelines for Boards when trying to be more future-oriented. First, your Board should prioritize monitoring any conditions or actions it can't recover from. Second, resist trying to control the future by making the Limitations more constraining. Instead, your Board needs to ask for projections or forecasts of performance to assure that acceptable performance can be maintained.

You have to decide how far into the future and how often the monitoring will occur. For example, an annual financial forecast gives a Board a 12-month projection for the first month. However, that projection shrinks throughout the year until a new financial forecast is produced. In the last few months of the year, the Board's view becomes nearsighted. A better option would be to establish a monitoring policy that asks for 12-month projections that are updated quarterly.

Once you have addressed writing the policies for projections, your Board's willingness to enforce them will dictate how future-oriented monitoring will be. The policies guide the monitoring that occurs. If your Board policies ask for a future projection, but the Board does not receive it, the problem isn't with the policies; it is with the Board's willingness to enforce accountability.

This shift is as much a psychological one as one of practice. Boards and organizations have traditionally focused on current or past performance, with less attention on future results. Part of the dilemma is that future performance is conjecture. It is an interpretation of what will happen. The data are not hard and fast, leaving room for debate, fudging, and self-serving projections. However, most of this concern goes away with Policy Governance's reasonable interpretation concept. Projecting future performance doesn't have to be precise, but it needs to be a reasonable interpretation.

Nothing says that the projection has to be a specific point. Future performance monitoring might work better when a range of potential performance is provided than a singular prediction. If the range falls within the constraints or limitations, no action is necessary. If part of the range exceeds the limitations, a Board might ask for contingency action plans or provide more frequent projections. Some suggestions for what these monitoring reports might look like can be found in the Mastering Monitoring Board Guide.

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