Board Policies: Firm or Flexible?
Are board policies firm rules or flexible guidelines? I have worked with some boards who enforce their policies consistently and with other boards who permit exceptions to their policies under various circumstances. What is the impact of each approach?
At a recent board development workshop for directors of cooperatives they shared some examples of the merits of the board sticking to its policies, even when enforcing them is difficult. Imagine a marketing cooperative that negotiates delivery contracts and prices for its members. The coop has promised various processors so many tons of quality product at a certain price. A member grower who has signed a large contract to supply the cooperative gets an independent premium price offer at harvest time, so only delivers 10% of his harvest through the cooperative. This leaves the cooperative unable to fulfill its contracts and the fallout with buyers leaves the coop members at risk of not being able to jointly market in the future.
Directors from two different coops indicated that how they handled such a situation brought quiet members out of the woodwork with accolades. In both cases, the board notified the offending coop member of his contract violation and the decision to hold him to the contract. The member wasn’t concerned because he hadn’t seen coop boards stick to their policies in the past. However, in both cases the court ruled that the contract could be enforced. One director indicated that the farm product that had already been delivered outside of the contract was retrieved and delivered through the cooperative’s contract channels.
In both cases, the cooperative’s customers were able to in turn fulfill their customer obligations and were looking forward to continuing relationships with their reliable supplier. Many cooperative members contacted board members and thanked them for taking action. They indicated that lots of people in the community knew that these violations were taking place but other experiences with leaders not being willing to hold others accountable in difficult situations had led them to believe there was no point in reporting it. The members’ confidence in the future of the cooperative increased and their appreciation of its leadership was strengthened.
At Strive! we say that good policies are firm yet flexible. We encourage directors to firmly enforce their current policies, and when the policies no longer serve the best interests of the organization and its owners to exercise flexibility by revising the policy to be relevant to their changed situation. I suggest that policy-based governance works best when the board maintains a set of meaningful policies that are consistently enforced. What do you think?
