The following article was published by Caroline Oliver on the Charity Channel. Caroline has kindly given permission to reproduce the article here on Healthcare Governance Review.
They say that you get what you measure. At board level, measuring what matters is vital because setting the right direction is so much at the heart of the board’s responsibility. But, at the board level, it is also vital to measure only what matters be cause boards have so little time to govern so much. Both of these points I would suggest lie behind the typical board’s attraction to things like KPI’s (key performance indicators) and balanced score cards. It is surely every board’s dream to be able to look at a single piece of paper and see exactly where their organisation is on everything that matters. The question is, is it really just a dream?
I don’t believe having such a dashboard has to be just a dream but I do believe it has to be extremely carefully designed in order to avoid some critical pitfalls. Let us think of governing an organization as analogous to flying an airplane and think of the board’s information challenge as similar to that faced by a pilot. Airplane pilots have a dashboard upon which they can see exactly where they are on key measures to do with getting to their destination such as direction, and distance as well as internal and environmental measures to do with their safety along the way such as engine temperature and coming weather systems. What is critical for the dashboard to be effective is that it is designed from the pilot’s perspective because although the pilot is responsible for everything on the plane once it is in the air, he or she cannot view everything at once. Indeed the more information the pilot has the more likely it is that he or she will miss something vital.
For boards this means that it is essential that any dashboard that gets created is created from their perspective rather than from the perspective of managers. And what this means is that the board’s perspective about what matters must be clear by which I mean explicitly stated in the form of well-organized written expectations.
I say “well organized” for one of the ways that can make it easier for the board as pilot to comprehend its dashboard is if like things are grouped together. The most important expectations from the board’s perspective are those that define the organization’s destination. Notice that what matters here is not what the organization is doing – for then you will only end up measuring busyness. What matters here is defining whose lives should be different and how and with what cost-efficiency if the organization is to be deemed successful by the board. The next most important expectations I would suggest are those that govern the organization’s exposure to internal and external risks in terms of prudence and ethics. The final group of expectations would be those that govern the operation of the board itself which could be divided between those that govern the board’s role and conduct and those that govern how the board delegates to others and monitors the proper use of that delegated authority.
To sum up, continuing with the airplane analogy, a pilot’s dashboard display needs to be grouped around matters to do with progress towards the plane’s destination, matters to do with internal and external risks it might need to deal with along the way, and matters to do with the conduct of the pilot and his or her delegation to, and monitoring of, the crew.
The problem with many of the scorecards and KPI’s that boards use is that they are designed from the perspective of managers rather than governors. Thus, they display the information that managers think that boards should know rather than the information that boards have determined for themselves that they should know. Secondly they may not clearly distinguish between measures that track progress towards the organization’s destination and measures that track everything else – leading to the often seen problem of organizational airplanes busily flying round in circles. Thirdly, it can simply produce too much stuff so the board cannot clearly see what it has and has not got and therefore might just as well have no information at all.
Which brings me back to the issue of keeping the sheer amount of information down to a manageable level when you are accountable for everything. Having the board’s expectations appropriately grouped from a board rather than management perspective certainly helps but it doesn’t do the entire trick. There is another critical point about keeping the number of board expectations down to a number that a board can realistically track. Going back to our pilot…. let us take one indicator by way of example, engine temperature. An engine could overheat for all sorts of reasons, the vast majority of which the pilot would not be expected to fix directly. Overwhelming the pilot with indicators about all the potential causes of engines overheating, given that the pilot does not have the expertise to read those indicators and do anything with them does not make a lot of sense. What the pilot needs to know is whether the engine operating at the right temperature. Knowing more only becomes necessary if it is not and the pilot needs to call on expert help to get it fixed. Similarly the board does not need to know about all that goes into meeting their expectations – what they need to know is whether or not their expectations are being met and to get their Chief Executive on the case of fixing things if not.
Boards that use the Policy Governance® approach, the principles and practice of which form the basis for much of this article, have a further tool for keeping the number of their expectations to a reasonable number and thus their dashboard comprehensive but capable of being understood. That tool is the Policy Governance policy architecture that starts from the broadest level in each area of board concern and gets progressively more specific until the point at which the board is agreed that it can responsibly accept ‘any reasonable interpretation’ of what it has already said.
So, having a board dashboard does not have to be a dream, but it is no quick and easy thing to establish if you are going to be sure that you are measuring what matters. For, if want to be as certain as possible that you are measuring what matters you need to be sure that your dashboard:
- starts from a comprehensive set of well written and well organized board expectations.
- distinguishes matters to do with progress towards your destination from matters to do with what might happen along the way
- gives you what your board must know in order to know if its expectations are being met – and no more.
Note: Policy Governance® is the registered service mark of John Carver. Used with permission. The ® after Policy Governance is a symbol used to protect the integrity of the principles and practices that make up the Policy Governance model. Its use does not imply any financial obligation to the service mark owner. The authoritative website for the Policy Governance model can be found at www.carvergovernance.com
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