HomeMy WebLinkAbout2009/01/17 First Goals MeetingCity of Rosemount Page 1 of 1
City of Rosemount
Spirit of Pride and Progress
City Council goals, 2008 -09
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Since 2003 the Rosemount City Council has met annually in sessions dedicated to discussion of issues
of significance to the community, as well as devising strategies for addressing issues and setting a
vision. The discussion results in the adoption of explicit goals that guide the work of City staff and the
Council itself to prioritize work flow, budgeting decisions, and objectives.
The latest round of work began in January 2008. The resulting goals for 2008 -09 were adoped by the
Council at its March 18 meeting.
For 2008 -2009, the City Council has maintained from previous years many of the same goals and key
objectives. Below are the strategic focal points for the City Council in the coming year:
1. Maintaining the levels and quality of City services
2. Implementing reasonable tax management strategies
3. Accomplishing Downtown redevelopment
4. Achieving balanced growth
5. Pursuing amenities appropriate to Rosemount
6. Enhancing relationships with educational institutions in Rosemount
While focusing on the broader vision conveyed by the aforementioned goals, there are areas of
emphasis for 2008.
The Council identified economic development as a top priority, especially in support of the goal to
achieve balanced growth. Recognizing that housing starts are likely to remain at modest figures,
economic development strategies that focus on commercial retail, health care, and head -of- household
job industries will be vital to growing and strengthening the community tax base. Strategies will include
efforts aimed at business attraction, retention, and growth.
The Council also identified continuing revitalization efforts in Downtown as an important initiative. With
the first redevelopment project on Core Block East soon to be under way, efforts must shift to
redeveloping the former Genz -Ryan property that is owned by the Port Authority and evaluating
opportunities elsewhere in Downtown. Strategies supporting the goal of moving Downtown forward will
also focus on working with Downtown stakeholders, especially in the area known as Core Block West
and the American Legion block.
Amenities within the community will be better understood pending the outcome of the April 22
referendum to fund the outdoor recreational complex and renovations to the former St. Joseph Church.
In addition to these significant investments in amenities, Council has also identified senior programs and
services as being an area requiring more investigation in 2008.
Reasonable tax management strategies anticipate that current market trends may require some
adjustments to service and staffing levels in FY 2009. The budgeting process for the next couple of
years is going to be challenging, especially if the housing market continues its lackluster performance
and overall tax base figures remain relatively stagnant. Reasonable tax management strategies will
need to closely balance the level of services and costs to deliver those services with other priorities.
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2009 Goals
City Staff Proposals
St. Joe's plan and implementation
Umore planning, joint ballfields
Senior services
Maintain services/tax rate /fiscal stability
Parks Master Plan /future need for fields
City facilities staffing determine long term needs
Long range financial planning
Business Retention program site visits
Commercial landowners partnership
Waterford Commons
Port Authority goal setting
Rental licensing program- higher compliance
Zoning ordinance updates
Laserfiche implementation all depts.
City policy book
City lobbying
Citizen engagementivolunteer opportunities
Implement special assessment tracking system
CarteGraph- continued implementation
Public Works multi -media marketing
Enhance web page esp. public works
Recreation partnerships: 196, 917, St. Joe
Family Resource Center improvement/expansion (CDBG)
Increase Police Directed Enforcement efforts
Maintain /improve police case clearance (61
Seek cooperative partnerships liquor dealers
Increase community involvement of police officers
Economic Development readiness
Complete comprehensive plan
Performance management program
Note: bolded items had multiple staff nominations
Performance Evaluation
Plymouth City Manager
Evaluation of
Ecc. w+ p 1,-
For
46
Major Areas of Responsibility
Seven major areas of responsibility are identified. Performance rating is based on the
standards outlined after each area is defined. The rating should be based on the overall
performance of that area. Specific comments can identify areas of concern or areas
where performance is outstanding.
Rating Levels
Please use one of the three levels to describe overall performance.
E Exceed Expectations
Performance exceeds requirements for major accountabilities.
M Meets Expectations
Performance meets requirements. Results are satisfactory.
B Below Expectations
Performance needs improvement. Results are acceptable but not
satisfactory.
AREAS OF RESPONSIBILITY
I. Organizational Management
II. Fiscal/Business Management
III. Relationship with Mayor /Council
IV. Long Range Planning
V. Relationship with Public/Public Relations
VI. Intergovernmental Relations
VII. Professional/Personal Development
I. Organizational Management
Rating:
Exceeds
Meets
Below
Comments:
Selects, leads, directs, and develops staff that evidence flexibility and adaptability.
Directs the organization so that services are provided as established by past and
current decisions of the Council. Directs and organizes the work that achieves the
goals and policies adopted by Council and developed by staff Evaluates and
assigns appropriate staff to handle public requests, complaints or areas of concern
brought to the attention of staff by Council and staff. Evaluates best practices and
available technology for appropriate use by the organization.
Some examples of effective organizational management:
a. Employees at all levels are motivated, customer service oriented and well
managed.
b. Supervisors and managers are well trained.
c. Complaints and requests referred from City Council are handled
expeditiously and with full communication to the customer and follow up
with Council members.
d. The organization is in tune with best practices and constantly evaluates
new methodology and technology for cost effectiveness and customer
satisfaction.
e. Makes most effective use of available staff talent.
Suggestions for Improvement:
II. FiscalfBusiness Management
The annual budget is prepared and presented with appropriate documentation in a
manner that conforms to guidelines adopted by the Council and this is readily
understandable for citizens. Administers the adopted budget within approved
revenues and expenditures. Develops reports for Council that provide the most
up -to -date data available concerning expenditures and revenue. Directs the
organization to encourage the most economic utilization of personnel /material/
equipment. Directs the maintenance of City -owned facilities and equipment.
Rating:
Exceeds
Meets
Below
Comments:
Some examples of effective fiscal/business management:
a. Budget preparation and management are thorough and effective.
b. Cost effective measures are persistently pursued.
c. Financial reporting is timely and readily understandable.
d. Physical facilities management maintains the longest life and highest
quality use of resources.
e. Needs are communicated to the Mayor /Council.
Suggestions for Improvement:
III. Relationship with Mayor /Council
Rating:
Exceeds
Meets
Below
Comments:
Maintains effective communications with the Mayor and Councilmembers. Is
available to Council, either personally or through designated subordinates.
Establishes and maintains an effective system of reporting to Council current
plans and activities of the staff and happenings in the City. Plans and organizes
materials for presentation to the Council in the most concise, clear and
comprehensive manner possible.
Some examples of effective City Council communication:
a. Materials, reports, presentations, and recommendations are clear and
convincing.
b. Communications are timely, forthright, and open.
c. Responses to requests are made promptly and are complete.
d. Recommendations are thoroughly researched.
e. Adequate information is provided to Council to make decisions.
f. A system is in place to report to Council current plans, activities, and
events of the City.
g. The City Manager can be depended upon to follow through.
Suggestions for Improvement:
IV. Long -Range Planning
Rating:
Exceeds
Meets
Below
Comments:
Maintains an awareness of new technologies, systems and methods related to the
provision of City services. Keeps Council advised of new and impending
legislation and developments in the area of public policy. Plans and organizes a
process of program planning in anticipation of future needs and problems.
Establishes and maintains an awareness of developments occurring in other
jurisdictions that may have an impact on the City. Plans, organizes, and maintains
a process for establishing goals to be approved or adopted by Council. Maintains
effective system of monitoring and status reporting.
Some examples of effective strategic planning:
a. A well constructed long -range (strategic) plan is currently in operation.
b. Annual operational plans are carried out.
c. An on -going monitoring process is in operation to attain quality assurance
in program and project implementation.
d. Program evaluation and personnel evaluation are inter related with the
strategic planning process.
e. Legislative knowledge is current and complete.
f. Measurable outcomes (to the extent possible) are used to determine
success in program planning.
Suggestions for Improvement:
V. Relationship with Public/ Public Relations
Plans, organizes, and maintains training of employees in contact with the public
either by phone or in person. Ensures that an attitude of helpfulness, courtesy,
and sensitivity to public perception exists in employees coming in contact with
the public. Establishes and maintains an image of the City to the community that
represents service, vitality, and professionalism. Establishes and maintains a
liaison with private non governmental agencies, organizations and groups
involved in areas of concern that relate to services or activities of the City.
Rating:
Exceeds
Meets
Below
Comments:
Some examples of effective public relations:
a. Contacts with the media are timely and credible.
b. Publications are varied and consistently well- received by the citizens.
c. Feedback from the public and the community leadership is positive.
d. City has good image with comparable organizations.
e. Feedback from customers indicates timely, courteous service.
Suggestions for Improvement:
VI. Intergovernmental Relations
Rating:
Exceeds
Meets
Below
Comments:
Maintains awareness of developments and plans in other jurisdictions that may be
related to or affect City government. Establishes and maintains a liaison with
other governmental jurisdictions in those areas of service that improve or enhance
the City's programs. Maintains communications with governmental jurisdictions
with which the City is involved or interfaces.
Some examples of effective organizational management:
a. Effective interactions and relationships with municipal and professional
organizations.
b. Regarded as a leader by municipal officials.
c. Initiates good programs from other jurisdictions.
d. Positive relationship with surrounding cities.
e. Good cooperation with County and Stage agencies.
Suggestions for Improvement:
VII. Professional/Personal Development
Rating:
Exceeds
Meets
Below
Comments:
Is aware of and values broadening professional and personal development.
Demonstrates imaginative leadership initiatives. Builds a cohesive staff.
Maintains a collaborative working relationship with staff but is decisive in
leadership.
Some examples of effective professional and personal development:
a. Management techniques show evidence of innovation, imagination, and
decisiveness.
b. Synergetic techniques are fostered.
c. Personal growth and development are a way of life and staff emulates
these practices.
Suggestions for Improvement:
'AGUE of
INNESOTA
CITIES
Credit market value x 0.4%
145 UNIVERSITYAVE. WEST
S. PAUL, MN 55103 -2044
CONNEC'T'ING INNOVATING
SINCE 1913
Market Value Homestead Credit 101
This guide is intended to describe the basics of the Market Value Homestead Credit (MVHC) program. The
program was designed to provide state -paid property tax relief to owners of certain qualifying homestead
property. The MVHC program is closely tied to the property tax system, a detailed description of which
can be found in the "Property Taxation 101" guide.
Background
In the 2001 legislative session, state
lawmakers eliminated the Homestead and
Agricultural Credit Aid (HACA) program,
which had provided $200 million in state aid
to cities for property tax relief. Of.these
funds, $140 million were folded into the
Local Government Aid (LGA) program. The
2001 property tax reform bill eliminated the
general education property tax levy, bringing
tax relief to all property owners, including
homeowners, and replaced it with a new state
property tax on businesses. The Legislature
also created the Market Value Homestead
Credit (MVHC) program, giving most
homeowners additional tax relief.
How It works for homeowners:
`The credit'
The MVHC program reduces the property tax
owed on a homestead property by 0.4% of
the homestead's market value, up to a
maximum per property of $304.
The maximum credit of $304 occurs at a
market value of $76,000. For homesteads
with market values over $76,000, the credit is
reduced by 0.09% of the excess market value.
Credit $304 ((market value $76000) x 0.09%)
Homesteads with market value of $413,778
and higher do not receive any credit. The
table below shows some sample market
values and corresponding credit amounts.
Homestead
Market Value
$50,000
$76,000
$100,000
$200,000
$350,000
$413,778
Market Value
Homestead Credit
$200
$304
$282
$192
$57
$0
On each homeowner's property tax bill, the
market value homestead credit is allocated to
the local taxing districts (city, county, school,
special districts) according to the share of the
total tax rate that each taxing district
represents. For example, if the city tax rate is
30% and the total tax rate is 120 a fourth
of the market value credit is allocated to the
city portion of the homestead's property tax
bill.
�1
?HOME (631) 281-1200 PAL (651) 281 -1299
1n®LERE6 (900) 9254122 wm wwwuameow
How it works for cities:
"The reimbursement"
The MVHC reimbursement is not an aid; it
does not represent dollars in addition to what
the city has levied. The reimbursement
makes up part of a city's levy. Cities do not
budget for it. The credit to homeowners
reduces a city's property tax receipts by the
amount of the credit allocated to the city.
This means the city will receive less than its
certified tax levy from taxpayers. The state
makes up the difference by reimbursing the
city for the city portion of the credit received
by property owners. The combination of
after credit tax receipts and the MVHC
reimbursement should equal the city's
certified levy. For most cities, between five
and fifteen percent of the city's levy is paid
by the state through the MVHC
reimbursement.
An example helps to illustrate how the
program works. Assume a city certifies a
levy of $100. After taxpayers pay their tax
bills, $90 is generated for the city. The
difference between what is generated from
taxpayers ($90) and what the city certified
($100) is made up by the MVHC
reimbursement ($10). The city must still
Certify $100 for its levy in order to realize the
full $100 from the combination of taxpayer
payments and the reimbursement.
The 2003 legislature balanced a major state
deficit by cutting state aids and credits to
cities. Under the cuts, some cities that receive
little or no Local Government Aid
experienced a reduction in the MVHC
reimbursement. The 2005 legislature
extended the MVHC reimbursement cuts for
103 cities for 2005 and 2006. The funding
for the city portion of the MVHC
reimbursement was reduced from
approximately $82 million to $65 million for
Revised August 2008
these years. While property owners continued
to receive the benefit of the full credit, cities
were not reimbursed for the full amount of
those credits. These cities therefore did not
collect their total certified levy amount. In
other words, for these cities, the gap between
the certified levy and what the taxpayers pay
was not filled completely (or at all). The
MVHC reimbursements were restored for
taxes payable in 2007.
Cities receive their market value credit
reimbursement in two installments from the
state, in October and in December.
Information on the amount of each city's
credit is usually available in late summer
each year.
MVHC and Tax Increment Financing (TIF)
districts
TIF districts are eligible for the market value
credit when a property receiving the credit is
located within the TIF district. The portion
of the credit allocated to the TIF district is
based on the percentage of the parcel's value
that is captured in the TIF district. The
market value credits for a TIF district are sent
to the city in each December. Cities with TIF
districts can determine the amount of the
market value credit the districts will receive
by consulting the Department of Revenue.
Agricultural Market Value Credit
The 2001 legislature also created the
Agricultural Market Value Credit program,
which reduces the property tax of agricultural
homestead property up to $345, based upon a
percentage of market value. This credit
program, like the MVHC, results in a portion
of the city's certified levy paid by the state
instead of local taxpayers. Most cities receive
very little, if any, of this credit
reimbursement.
2005
436,558,200
2006
484,558,200
2007
484,558,200
2008
484, 148,487
2009*
526,148,487
2010*
536,671,457
2011*
558,138,315
Year
Total LGA $s
2000
394,846,199
2001
411,514,841
2002
565,338,952
2003 certified
586,848,950
2003 final
464,941,977
2004
437,466,461
LEAGUE OF
MINNESOTA
CITIES
Local Government Aid 101: 2009 Distribution Beyond
The first official LGA program was created in 1971 and provided funds to counties on a per capita
basis for allocation to cities in proportion to their property tax levy. Since its inception, LGA has
undergone many changes including modifications enacted in the 2008 session for payments made
in 2009 and beyond. LGA is distributed using a complex formula that compares a city's spending
needs with its ability to raise revenue. The 2008 reforms included the addition of a jobs base aid
and modified the small cities base aid. This 101 document is an update to one describing how aid
was distributed between 2003 and 2008. That document can be obtained by contacting the
League's Policy Analysis Staff.
Funding Level
Prior to 2003, the total LGA
appropriation was indexed for inflation
and automatically increased between 2.5
and 5 percent annually. In 2003, the
Legislature reduced funding for LGA by
25 percent, eliminated the inflation index
and implemented significant formula
changes. While some funding was
restored in 2005 and in 2008, the total
LGA appropriation for 2009 will still be
approximately 10 percent below the
original 2003 funding level. The total
LGA distribution is shown below for
2000 through 2011. The 2008 reforms
built in appropriation increases for 2010
and 2011; LGA funding will increase by
2 percent and 4 percent of the prior
year's appropriation for 2010 and 2011
respectively.
145 UNIVERSITY AVE. WEST
ST. PAUL, MN 55103 -2044
CONNECTING INNOVATING
SINCE 1913
*Projected amounts
Formula Basics
A city's share of the LGA distribution is
determined by a complex formula that
compares a city's expenditure need and
its ability to pay. Each city's
expenditure need is measured based on
several statistical variables. These
variables or factors attempt to identify
characteristics that cause differences in
the amount cities spend to provide the
same level of service. Calculated
expenditure need is then compared to the
city's ability to pay or revenue raising
capacity (i.e., property taxes). This
difference, or gap, is the city's unmet
need. A city's LGA payment is a
computed as a percentage of that gap
plus any applicable aid base for the city
(see the section on aid bases below for
more information). The percentage of
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TOLL FREE: (800) 92S -1122 WEB: WWW.LMC.ORG
the gap that is funded by LGA is based
on the total available appropriation for
the program.
Since 2003, the distribution of aid under
the formula has become more volatile
in part due to the elimination of the
formula grandfather. To address this
year -to -year volatility, all data used in
the 2009 payment calculations will be
based on the data used in calculating
aids payable in 2008. For aids payable
in 2010 and subsequent years a city's
formula aid will be the sum of its jobs
and small city aid bases and the average
of its unmet need for the most recent two
years to help minimize year to year
volatility.
Expenditure Need Variables
Prior to 2003, one set of variables was
used to estimate expenditure need for all
cities. As a result of the 2003 changes,
separate formulas are used to determine
need for cities above and below 2,500.
The formula for cities under 2,500
continues to use the variables that were
used for all cities prior to 2003. These
variables are:
pre -1940 housing percentage;
population decline over the past
ten years;
commercial/industrial property
market value percentage; and
population
The new formula for cities over 2,500 in
population, enacted in 2003, includes the
pre -1940 housing percentage and
population decline factors. It also
includes four additional variables:
traffic accidents per capita (three
year average);
average household size (not
including institutionalized
populations;
metro or non -metro location; and
adjusted net tax capacity (ANTC)
per capita (control variable)
More detailed information on each
variable can be obtained by calling the
League or by referring to other materials
about the LGA formula available on the
League website.
Calculating Unmet Need
To calculate a city's expenditure need,
the values for each variable are
multiplied by fixed coefficients. These
coefficients were determined by a
statistical process called multiple
regression. The coefficients weigh the
variables according to their relative
importance in explaining differences in
city spending need. The sum of these
products is a per capita dollar
expenditure need. The minimum per
capita need of a city over 2,500
population is $285. Multiplying the per
capita need by the population gives the
total expenditure need, which is then
compared to an individual city's ability
to pay.
Ability to pay is defined as a city's
capacity to raise revenue via property
taxes. This is calculated by applying the
statewide average city tax rate based on
the prior year's levy to the city's tax
base.
The difference between a city's total
expenditure need and its ability to pay is
its unmet need. The portion of unmet
need filled by LGA is adjusted so that
the total of all distributions equals the
current appropriation.
Aid Bases
Prior to the 2003 reforms, cities received
a grandfather distribution each year that
ensured that each city received at least as
much LGA as it did in 1993. While the
grandfather distribution was eliminated
in 2003, approximately $26 million was
still reserved for aid base for regional
centers and other cities that have faced
unique circumstances. In 2006, a new
aid base for small cities was created.
Cities under 5,000 in population
received base aid equal to $6 per capita.
The 2008 reforms resulted in several
other changes and additions to aid base.
Small city aid base is now equal to $8.50
per capita. For aids payable in 2010 and
subsequent years, the small city aid base
will be increased by the percent change
in the overall LGA appropriation. Cities
over 5,000 in population do not receive
any small city aid base.
The new jobs aid base is distributed to
cities over 5,000 based on the ratio of
jobs (public and private employment) in
the city to population in the city. Jobs
aid base is a proxy measure of service
overburden to a city. The number of
jobs per capita in a city is determined by
dividing the average annual number of
employees in the city by the city's
population for the same calendar year.
The average number of employees in a
city is obtained from the Quarterly
Census of Employment and Wages.
Cities have the opportunity to verify and
challenge employee estimates by filing
an objection with the Department of
Employment and Economic Data by
June 20, 2008.
Jobs aid base is equal to $25.20
multiplied by the city's population and
by the number of jobs per capita in the
3
city. The $25.20 will be adjusted
annually based on the Implicit Price
Deflator. The jobs base aid for a city
that receives regional center aid is
reduced by the lesser of 36 percent of its
regional center aid or $1.0 million. The
maximum jobs base aid a city may
receive is $4,725,000. Like the small
city base aid, jobs base aid will be
adjusted by the percent change in the
total appropriation for aids payable in
2010 and subsequent years.
Formula Aid
A city's formula aid is the sum of its
jobs base aid, small city base aid and a
percentage of its unmet need. Including
these aid bases in the formula aid
calculation weighs them against the
city's ability to pay.
Adjustments
A city's LGA distribution is the sum of
its formula aid and its city aid base, if
any. This amount is then adjusted to fall
within minimum and maximum
amounts. Miniunum and maximum rules
are designed to phase in formula changes
by limiting the amount a city's LGA can
change in a single year.
The limits on LGA increases are as
follows:
For aids payable in 2009 only, a
city's total aid cannot increase by
more than 35% of its net levy for
the prior year.
For aids payable in 2010 and
beyond, a city's LGA
distribution cannot increase by
more than 10% of its net levy for
the prior year.
Aid minimums vary based on
population:
For aids payable in 2009 only, a
small city (under 2,500
population) cannot receive less
than its 2008 distribution. There
is one exception to this. If a
city's entire 2008 payment was
small city base aid ($6 per
capita), its 2009 minimum is
zero.
For aids payable in 2010 and
beyond, a small city cannot
receive less than its certified aid
for the prior year minus the lesser
of $10 per capita or 5 percent of
its 2003 certified aid amount.
For aids payable in 2009 and
subsequent years, a large city
(population 2,500 and above)
cannot receive less than its
certified aid for the prior year
minus the lesser of $10 per capita
or 10 percent of its prior year net
levy.
A city cannot lose more than $300,000
in aid in any year in which the total
appropriation for that year is greater than
that for the previous year. This cap does
not apply if the city's net tax capacity
changed due to decertification of one or
more TIF districts.
Timing
The Department of Revenue notifies
cities of their LGA amounts for the
following year by July 31 Cities
receive aid in two equal payments—the
first in mid -July and the second in late
December.
Policy Issues
Several of the 2003 changes resulted in a
much more volatile program. The
elimination of both the grandfather
provision and the automatic inflationary
increase in the LGA appropriation meant
4
that some cities experienced actual
decreases from year to year instead of
progressively smaller increases. The
elimination of the caps on aid increases
for Minneapolis, St. Paul and Duluth
meant that their distributions could
consume a larger (and less predicable)
portion of the allocation, decreasing aid
available to other cities.
The mix of factors in the 2003 formula
also added to the volatility. The formula
for large cities no longer
includes two traditionally stable
variables population and
commercial/industrial market value
percentage and does include a
potentially highly variable factor
automobile accidents per capita.
The 2008 changes are intended to
eliminate some of this volatility. For
example volatility in 2009 will be
reduced by using 2008 data in
calculating a city's LGA payment. In
2010 and thereafter a city's formula aid
will include the average need for the
previous two years.
The efficacy of certain formula factors
as indicators of need is often questioned
in reform efforts. For example, is the
percentage of pre -1940 housing units the
best measure of infrastructure age?
Also, this factor can be drastically
changed due to natural disasters or other
unforeseen events. The use of traffic
accident data has been questioned
because of potential unevenness in
reporting accidents.
The Legislature included a provision in
the 2008 bill requiring a study of LGA
that will consider these questions. The
study group will also consider existing
disparities in the LGA distribution,
current law and alternative need and
capacity factors, analytical methods for
determining need, the small cities
formula and volatility. The group must
make recommendations to the
Legislature by December 15, 2010.
Resources
League of Minnesota Cities
www. lmc. org/ ReseachAnalysis /AnalysisByTopic.cfm
LMC In -Depth Policy Analysis: LGA Volatility
LMC In -Depth Policy Analysis: 2003 Local Government Aid Reform
House Research: Basic Information on State Aids
http: /www. house. leg.state.inn.us /hrd/issinfo /tx aids.htm
Additional information on the LGA formula and aid distributions can be obtained by
contacting LMC Policy Analysis staff.
5
Page 1 of 15
The Authoritative Web
POL1CYGOVERNANCE.COM for the
Carver Policy Governance® Model
The Policy Governance® Model
ome I the model 1 publications events services faq contact us
Carver's Policy Governance® Model in
Nonprofit Organizations
by John Carver and Miriam Carver
[This article was originally published as "Le modele Policy Governance et les organismes sans but lucratif' in
the Canadian journal Gouvernance revue internationale, Vol. 2, nos. 1, Winter 2001, pp. 30 -48. Republication
here is by permission of the original publisher.]
Over the last decade or two, there has been increasing interest in the composition, conduct, and
decision- making of nonprofit governing boards. The board -staff relationship has been at the center of
the discussion, but trustee characteristics, board role in planning and evaluation, committee
involvement, fiduciary responsibility, legal liability, and other topics have received their share of
attention. Nonprofit boards are not alone, for spirited debate about the nature of business boards has
been growing as well. Whatever the reasons for this intense interest in governance, the Policy
Governance model for board leadership, created by the senior author, is frequently a primary focus
of debate.
The Nature of Governance and the Need for Theory
The Policy Governance model is, at the same time, the most well -known modern theory of
governance worldwide and in many cases the least understood. It applies to governing boards of all
types nonprofit, governmental, and business —and in all settings, for it is assembled from universal
principles of governance. In this article, we will focus exclusively on its use in nonprofit boards,
though many descriptions of its application in business (for example, Carver, 2000a, 2000c) and
government (for example, Carver, 1996a, 1997d, 2000b, 2001; Carver and Oliver, 2002) are
available elsewhere.
Governing boards have been known in one form or another for centuries. Yet throughout those many
years there has been a baffling failure to develop a coherent or universally applicable understanding
of just what a board is for. While comparatively little thought has been given to developing
governance theory and models, we have seen management of nonprofit organizations transform
itself over and over again. Managers have moved through PERT, CPM, MBO, TQM, and many more
approaches in a continual effort to improve effectiveness. Embarrassingly, however, boards do
largely what they have always done.
We do not intend to demean the intent, energy, and commitment of board members. There are today
many large and well known organizations that exist only because a dedicated group of activists
served as both board and staff when the organization was a "kitchen table" enterprise. Board
members are usually intelligent and experienced persons as individuals. Yet boards, as groups, are
mediocre. "Effective governance by a board of trustees is a relatively rare and unnatural act
trustees are often little more than high powered, well- intentioned people engaged in low -level
activities" (Chait, Holland, and Taylor, 1996, p. 1). "There is one thing all boards have in common
They do not function" (Drucker, 1974, p. 628). "Ninety-five percent (of boards) are not fully doing
what they are legally, morally, and ethically supposed to do" (Geneen, 1984, p.28). "Boards have
been largely irrelevant throughout most of the twentieth century" (Gillies, 1992, p. 3). Boards tend to
be, in fact, incompetent groups of competent individuals.
An extraterrestrial observer of board behavior could be forgiven for concluding that boards exist for
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several questionable reasons. They seem to exist to help the staff, to lend their prestige to
organizations, to rubber stamp management desires, to give board members an opportunity to be
unappointed department heads, to be sure staffs get the funds they want, to micromanage
organizations, to protect lower staff from management, and sometimes even to gain some advantage
for board members as special customers of their organizations, or to give board members a
prestigious addition to their resumes.
But these observations— accurate though they frequently are simply underscore the disclarity of the
board's rightful job. Despite the confusion of past and current board practices, we begin in this article
with the assertion that there is one central reason to have a board: Simply put, the board exists
(usually on someone else's behalf) to be accountable that its organization works. The board is where
all authority resides until some is given away (delegated) to others. This simple total authority -total
accountability (within the law or other external authorities) is true of all boards that truly have
governing authority.
The Policy Governance model begins with this assertion, then proceeds to develop other universally
applicable principles. The model does not propose a particular structure. A board's composition,
history, and peculiar circumstances will dictate different structural arrangements even when using
the same principles. Policy Governance is a system of such principles, designed to be internally
consistent, externally applicable, and —to the great relief of those concerned with governance
integrity logical. Logical and consistent principles demand major changes in governance as we
know it, because these principles are applied to subject matter that has for many years been
characterized by a hodgepodge of practices, whims of individuals, and capricious decision making.
Such a change is a paradigm shift, not merely a set of incremental improvements to the status quo.
Paradigm shifts are difficult to cope with, since they often render previous experience unhelpful; they
demand a significant level of discipline to be put into effect. But if there is sufficient discipline to use
the Policy Governance model in its entirety, board leadership and the accountability of organizations
can be transformed.
It is important that we underscore this point. Using parts of a system can result in inadequate or even
undesirable performance. It is rather like removing a few components from a watch, yet expecting it
still to keep accurate time. Unlike the traditional practices to which boards have become
accustomed, the Policy Governance model introduces an integrated system of governance (Carver
and Carver, 1996; Carver, 1997).
Greater effectiveness in the governing role requires board members first to understand governance
in a new way, then to be disciplined enough to behave in a new way. Boards cannot excel if they
maintain only the discipline of the past any more than managers of this new century can excel if they
are only as competent as those of the past. Does this ask too much of boards? Perhaps it does ask
too much of many of today's board members. Yet there are other board members —or potential
board members who thus far have refused to engage in either the rubber stamping or the
micromanaging they see on boards —who would rejoice in greater board discipline.
The Policy Governance model requires that boards become far more enlightened and more
competent as groups than they have been. If that means losing some board members as the
composition of boards goes through change, then the world will be the better for it. The Policy
Governance model is not designed to please today's board members or today's managers. It is
designed to give organizations' true owners competent servant- leaders to govern on their behalf.
Board as Owner Representative and Servant- Leader
in the business sector, we can easily see that a board of directors is the voice of the owners
(shareholders) of the corporation. It is not always apparent that nonprofit organizations also have
owners. Certain nonprofits, such as trade associations or professional societies, are clearly owned
by their members. Beyond such obvious cases of ownership, however, it is useful to conceive that
community -based agencies in the social services, health, education, and other fields are "owned" by
their communities. In neither trade associations nor community agencies is there is a legal equivalent
of shareholders, but there is a moral equivalent that we will refer to as the "ownership." Looking at
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ownership in this very basic way, it is hard to conceive of any organization that isn't owned by
someone or some population, at least in this moral sense.
The Policy Governance model conceives of the governing board as being the on -site voice of that
ownership. Just as the corporate board exists to speak for the shareholders, the nonprofit board
exists to represent and to speak for the interests of the owners.
A board that is committed to representing the interests of the owners will not allow itself to make
decisions based on the best interests of those who are not the owners. Hence, boards with a sense
of their legitimate ownership relationship can no longer act as if their job is to represent staff, or other
agencies, or even today's consumers (we will use that word to describe clients, students, patients, or
any group to be impacted). It possible that these groups are not part of the ownership at all, but if
they are, it is very likely they constitute only a small percentage of the total ownership.
We are not saying that current consumers are unimportant, nor that staff are unimportant. They are
critically important, just as suppliers, customers, and personnel are for a business. It is simply that
those roles do not qualify them as owners. They are due their appropriate treatment. To help in their
service to the ownership, Policy Governance boards must learn to distinguish between owners and
customers, for the interests of each are different. It is on behalf of owners that the board chooses
what groups will be the customers of the future. The responsible board does not make that choice on
behalf of staff, today's customers, or even its own special interests.
Who are the owners of a nonprofit organization? For a membership organization, its members are
the owners. For an advocacy organization, persons of similar political, religious, or philosophical
conviction are the owners. There are many variations. But for purposes of this paper, we will assume
a community organization, such as a hospital, mental health or family service agency, for which we
can confidently say that the community as a whole is the legitimate ownership. In this case, it is clear
that in a community organization, the board must be in a position to understand the various views
held in the community about the purpose of the organization. In short, if the community owns the
organization, what does the community want the organization for?
Traditionally, boards have developed their relationships largely inside the organization —that is, with
staff. Policy Governance demands that boards' primary relationships be outside the organization
that is, with owners. This parallels the concept of servant leadership developed by Greenleaf (1977,
1991), in that the board is first servant, before it is leader. It must lead the organization subject to its
discoveries about and judgments of the values of the ownership.
We have thus far referred repeatedly to the board and very little to board members; that is
intentional. Since we are now establishing the starting point for governance thinking, it is important
that we start with the body charged with authority and accountability —the board as a group, not
individual board members. It is the board as a body that speaks for the ownership, not each board
member except as he or she contributes to the final board product. So while we might derive roles
and responsibilities for individual board members, we must derive them from the roles and
responsibilities of the board as a group, not the other way around. Hence, board practices must
recognize that it is the board, not board members, who have authority.
The board speaks authoritatively when it passes an official motion at a properly constituted meeting.
Statements by board members have no authority. In other words, the board speaks with one voice or
not at all. The "one voice" principle makes it possible to know what the board has said, and what it
has not said. This is important when the board gives instructions to one or more subordinates. "One
voice" does not require unanimous votes. But it does require all board members, even those who lost
the vote, to respect the decision that was made. Board decisions can be changed by the board, but
never by board members.
The Necessity for Systematic Delegation
On behalf of the ownership, the board has total authority over the organization and total
accountability for the organization. But the board is almost always forced to rely on others to carry
out the work, that is, to exercise most of the authority and to fulfill most of the accountability. This
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dependence on others requires the board to give careful attention to the principles of sound
delegation.
Since the board is accountable that the organization works, and since the actual running of the
organization is substantially in the hands of management, then it is important to the board that
management be successful. The board must therefore increase the likelihood that management will
be successful, while making it possible to recognize whether or not it really is successful. This calls
upon the board to be very clear about its expectations, to personalize the assignment of those
expectations, and then to check whether the expectations have been met. Only in this way is
everyone concerned clear about what constitutes success and who has what role in achieving it.
At this point, we wish to introduce the chief executive (CEO) role. (Policy Governance works in the
absence of a CEO role, but the governing job is more difficult than with a CEO.) We are not
concerned whether the CEO is called executive director, director general, president, general
manager, superintendent, or any other title. We are, however, concerned how the role is defined and
we will use the term "CEO" to reflect the role definition we recommend.
We recommend that the board use a single point of delegation and hold this position accountable for
meeting all the board's expectations for organizational performance. Naturally, it is essential that the
board delegate to this position all the authority that such extensive accountability deserves. The use
of a CEO position considerably simplifies the board's job. Using a CEO, the board can express its
expectations for the entire organization without having to work out any of the internal, often complex,
divisions of labor. Therefore, all the authority granted by the board to the organization is actually
granted personally to the CEO. All the accountability of the organization to meet board expectations
is charged personally to the CEO. The board, in effect, has one employee.
It is important that boards maintain a sense of cause and effect with respect to their CEOs. The
board creates the CEO; the CEO does not create the board. As the board contemplates its
accountability to the ownership, it decides that creating a CEO role will be a key method in fulfilling
that accountability. It is true that a founding father or mother will sometimes be the inspiration for a
new organization, so that the board then created occurs after rather than before the founder. If the
founder becomes the new CEO, it will seem that the CEO is parent to the board. Boards established
in this way make a grave error when they mistake an accident of history for a proper view of their
accountability. The CEO role, as such, is even in these cases created and governed by the board
(see Carver, 1992).
Consequently, in every case, the board is totally accountable for the organization and has, therefore,
total authority over it— including over the CEO. We can say that the board is accountable for what
the CEO's job is and that the CEO do the job well. But we cannot say the CEO is accountable for
what the board's job is and that the board do its job well. Unfortunately, much of current nonprofit
practice supports this board -staff inversion. CEOs are expected to tell their boards what to talk about
(provide agendas), to pull their boards together when there is dissension, and to orient new board
members to their job. Nowhere else in an organization are subordinates responsible for the conduct
of the superiors. Yet virtually all nonprofit literature on governance falls into this fallacy of CEO
centrism. "Thus, we argue, the board's performance becomes the executive's responsibility," say
Herman and Heimovics (1991, p. xiii), a position we contend excuses and prolongs board
irresponsibility.
We have said being accountable in leadership of the organization requires the board (1) to be
definite about its performance expectations, (2) to assign these expectations clearly, and then (3) to
check to see that the expectations are being met. Traditional governance practices lead boards to
fail in most or all of these three key steps.
Board expectations —which are instructions —when they are stated at all, tend to be unclear,
incomplete, or a mixture of whole board and individual board member expressions. Board members
form judgments of staff performance on criteria the board (as a whole body) has never stated.
Regular financial reports report against few or no criteria. Staff members can be seen taking notes of
what individual board members say, as if it matters and as if they work for the board members rather
than the CEO. Boards decide whether CEO's budgets merit approval when they have never stated
the grounds for approval and disapproval. Virtually every board meeting —other than in Policy
Governance boards —is testimony to carelessness of delegation and role clarity.
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Traditional governance allows boards to instruct staff by the act of approving staff plans, such as
budgets and program designs. When the board has approved a staff recommendation, doesn't the
resulting approved document become a clear board instruction? Actually, it does not. For example,
when a board approves the CEO's personnel policies or budget, does it really mean as an instruction
every tiny segment of that document? Does every budget line and the smallest issues of a program
plan become a criterion on which the CEO will be judged? Certainly not. Even the most
micromanaging board does not go that far. But to what level of detail should the CEO treat the
approved document as being a board instruction, therefore a criterion for evaluation? The tradition
blessed habit of board approvals is a poor substitute for setting criteria, then checking that they have
been met. Board approvals are not proper governance, but commonplace examples of boards not
doing their jobs.
What about the clear assignment of expectations to a person or persons? In conventional practice,
boards' delegation to a CEO is frequently compromised by delegating the same responsibilities more
than once or by delegating to around the CEO to sub -CEO staff. An example of the former is when a
board charges the CEO and a board finance committee for financial decisions. Delegating around
the CEO occurs either when a board gives instructions to the financial officer or other person who
reports to the CEO or when a board itself judges the performance of sub -CEO staff.
Finally, in the absence of clear instructions or clear assignment, evaluating performance is an
exercise in futility. Yet boards receive volumes of information that purports to monitor organizational
performance. The sheer amount of information masks the fact that proper monitoring is still not
occurring. Because monitoring performance is the systematic disclosure of whether board
expectations have been met, monitoring that is fair and incisive can only occur after clearly stated
and clearly assigned board expectations.
Using the Ends /Means Distinction
The point was made earlier in this paper that the board is accountable that the organization works.
Clearly, the word "works" must be defined; defining it establishes the board's expectations for the
organizations, the performance that will constitute success. The board need not control everything,
but it must control the definition of success. It is possible to control too much, just as it is possible to
control too little. It is possible to think you are in control when you are not. The zeal of a
conscientious board can lead to micromanagement. The confidence of a trusting board can lead to
rubber stamping. Defining success is a matter of controlling for success, not for everything. How can
a board control all it must, rather than all it can?
Boards have had a very hard time knowing what to control and how to control it. Policy Governance
provides a key conceptual distinction that enables the board to resolve this quandary. The task is to
demand organizational achievement in a way that empowers the staff, leaving to their creativity and
innovation as much latitude as possible. This is a question of what and how to control, but it is
equally a question of how much authority can be safely given away. We argue that the best guide for
the board is to give away as much as possible, short of jeopardizing its own accountability for the
total.
What is there to control? In any organization, there are uncountable numbers of issues, practices,
and circumstances being decided daily by someone. The Policy Governance model posits that all of
these decisions can be classified as those that define organizational purpose, and those that don't.
But the model calls for a very narrow and careful definition of purpose: it consists of what (1) results
for which (2) recipients at what (3) worth.
Let us define these more fully: Some decisions directly describe the intended consumer results of the
organization, for example, reading skills, family harmony, knowledge, or shelter from the elements.
Some decisions directly describe the intended recipients of such results, such as adolescents,
persons with severe burns, or low income families. Some describe the worth of the intended results,
such as in dollar cost or priority against other results.
In Policy Governance, this triad of decisions is called "ends." Ends are always about the changes for
persons to be made outside the organization, along with their cost or priority. Ends never describe
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the organization itself or its activities. For example, the professional and technical activities in which
the organization engages are not ends. In a school, for example, which students should acquire what
knowledge at what cost are ends issues. Ends are about the organization's impact on the world
(much like cost benefit) that justify its existence.
Any decision that is not an ends decision is a "means" decision. In that same school, the choice of
reading program, teachers' credentials, and classroom arrangement are means issues. Most
decisions in an organization are means decisions; some are very important means. But even if a
decision is extremely important, even if it is required by law, even if it is critical to survival, unless it
passes the ends test (designation of consumer results, which consumers, or the worth of consumer
results), it is not an ends decision. Hence, means include personnel matters, financial planning,
purchasing, programs, services and curricula, and even governance itself. No organization was ever
formed so it could be well governed, have good personnel policies, a fine budget, sound purchasing
practices, or even nicely planned services, programs or curricula.
The ends /means distinction is critical. Many boards claiming to use the model routinely confuse the
Policy Governance meaning of ends and means, thereby sacrificing much of the benefit the model
can give. For example, means is not synonymous with "administration" as some have misinterpreted
(Herman and Heimovics, 1991, p. 44). Ends is not synonymous with "strategic plan," as others have
misinterpreted (Murray, 1994). The ends /means distinction is not comparable to any other distinction
used in management or governance; it is not parallel to policies /procedures, strategies /tactics,
policy /administration, or goals /objectives. Indeed, ends may include very small and specific decisions
about a single consumer, while means may include very important programmatic decisions as well
as how a board constructs its committees. The ends /means distinction is exclusively peculiar to
Policy Governance (with the possible exception of Argenti, 1993) and, therefore, is governed by
Policy Governance principles. In Policy Governance,means are means simply because they are not
ends.
Are ends the same as mission? Unfortunately, the answer is usually "no," because mission
statements have not traditionally had to conform to the definition we have given ends. Consider the
following mission statement of a mental health center: "The mission of the XYZ Center is to be a
responsible employer, providing quality mental health services in a cost efficient manner." This
statement —quite acceptable in traditional governance —is entirely means, no ends. This organization
can fulfill its mission even if consumers' lives are not any better. In contrast, consider this broad
statement of ends: "The XYZ Center exists so that people with major mental illness live productive
lives in an accepting community at a cost comparable to other providers." In the latter, unless the
targeted group are benefited in the required way, the organization is not successful, no matter how
good an employer it is and no matter how much "quality" its services have. Notice that the cost
component in the first statement is the cost of staff activity (services), while in the second statement
it is the cost of consumer results.
No matter how central ends are to the organization's existence, however, because the board is
accountable for everything, it is accountable for means as well. Accordingly, it must exercise control
over both ends and means, so having the ends /means distinction does not in itself relieve boards
from any responsibility. The ends /means distinction does, however, make possible two entirely
different ways of exercising control, ways that —taken together —allow the board to have its arms
responsibly around the organization without its fingers irresponsibly in it, ways that for the staff
maximize accountability and freedom simultaneously. The board simply makes decisions about ends
and means —that is, it controls the organization's ends and means —in different ways, as follows:
a. Using input from the owners, staff, experts and anyone in a position to increase the board's
wisdom, the board makes ends decisions in a proactive, positive, prescriptive way. We will
call the board documents thus produced "Ends policies."
b. Using input from whoever can increase board wisdom about governance, servant leadership,
visioning, or other skills of governance and delegation, the board makes means decision
about its own job in a proactive, positive, prescriptive way. We will call the board documents
thus produced "Governance Process policies" (about the board's own job) and "Board -Staff
Linkage policies" (about the relationship between governance and management). Both of
these categories are means, but they concern means of the board, not the staff.
c. Using input from whoever can increase its sense of what can jeopardize the prudent and
ethical conduct of the organization, the board makes decisions about the staff's means in a
proactive, but negative and boundary- setting way. Because these policies set forth the limits
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of acceptable staff behavior, that is, the unacceptable means, we will call the board
documents thus produced "Executive Limitations policies."
At this point in our argument, we have used the ends /means concept to introduce new categories of
board policies. These categories of board policies are exhaustive, that is, no other board documents
are needed to govern except bylaws. (Articles of incorporation or letters patent are required to
establish the nonprofit as a legal entity, but these are documents of the government, not the board.)
We will not discuss bylaws here, except to say they are necessary to place real human beings
(board members) into a hollow legal concept (the corporate "artificial person (Carver, 1995).
However, so that we might continue to discuss the concepts represented by the words "ends" and
"means," yet distinguish the titles of policy categories, we will capitalize Ends, Executive Limitations,
Governance Process, and Board -Staff Linkage.
The negative policies about operational means requires further discussion. Here is the logic: If the
board has established Ends and has determined through monitoring that those Ends are actually
accomplished, it can be argued that the staff means must have worked. In other words, the means
by which Ends were accomplished, though interesting, is of little importance to the board. This logic
is largely accurate, but there is an important problem with it. Some means can be unacceptable even
if they do work. Means that are effective, but still "unacceptable" are ones that are improper
treatment of people or assets, that is, means that are imprudent or unethical. Consequently, although
there is no reason for a board to control staff means decisions for reasons of effectiveness, there is
reason to control staff means for reasons of prudence and ethics.
Whoever is directly responsible for producing ends must decide which means to use. That is, one
must be prescriptive about one's own means. But the board is not charged with producing ends, only
with defining them. It is to the board's advantage to allow the staff maximum range of decision
making about means, for skill to do so is exactly why staff were employed. If the board determines
the means of its staff, it can no longer hold the staff fully accountable for whether ends are achieved,
it will not take advantage of the range of staff skills, and it will make its own job more difficult.
Happily, it is not necessary for the board to tell the staff what means to use. In Policy Governance
the board tells the staff or —more accurately —the CEO what means not to use!
Therefore, it is the board's job to examine its values to determine those means which it does not
want in its organization, then to name them. The board can then tell its CEO that as long as the Ends
are accomplished and the unacceptable means do not occur, the CEO can make all further decisions
in the organization that he or she deems wise. It is in this way that extensive, albeit explicitly
circumscribed, authority is granted to the CEO. Effectiveness demands a strong CEO; prudence and
accountability to the board demand that the CEO's power be bounded.
This unique delegation technique has a number of advantages. First, it recognizes that board
interference in operational means makes ends harder and more expensive to produce. Therefore,
delegation which minimizes such interference is in the board's interest. Second, it accords to the
CEO as much authority as the board can responsibly grant. Therefore, there is maximum
empowerment inside the organization to harness for ends achievement. Third, it gives room for
managerial flexibility, creativity and timeliness. Therefore, the organization can be agile, able to
respond quickly to emergent opportunities or threats. Fourth, it dispels the assumption that the board
knows better than the staff what means to use. Therefore, the board does not have to choose
between overwork and being amateurs supervising professionals. Fifth, in this system all means that
are not prohibited are, in effect, pre- approved. Therefore, the board is relieved from meticulous and
repetitive approval of staff plans. Sixth, and perhaps most importantly, by staying out of means
decisions, except to prohibit unacceptable means, the board retains its ability to hold the CEO
accountable for the decisions that take place in the system.
Thus, when we say a board is responsible that its organization works, we simply mean that the
organization (1) accomplishes the intended results for the intended people at the intended cost or
priority— expressed in the board's Ends policies; and that it (2) avoids unacceptable methods,
conduct, activities, and circumstances unacceptable means expressed in the board's Executive
Limitations policies.
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Expressing Expectations in Nested Sets
We have established that Policy Governance boards express their expectations for themselves and
for their organizations in four categories of board policies: Ends, Executive Limitations (the
unacceptable means), Governance Process, and Board -Staff Linkage (the latter two are board
means divided into two parts). The separation of organizational values into these categories is a
major organizing principle for governing boards. These four categories completely embrace all
possible organizational values (except those more pertinent to articles of incorporation /letters patent
and bylaws) —no other policies or documents are needed. But another feature must be added to
enable the board to address its desired level of specificity within these categories.
To ensure precision as well as completeness in policy- making, Policy Governance provides an
additional principle, one which recognizes the varying sizes of issues and values. One Ends
statement of a nonprofit board may be that persons without shelter should have adequate housing.
Another may be that families with school age children should have housing that allows children of
different genders to sleep in separate rooms. It is easy to see that the second example is more
detailed, or "narrower," than the first. Notice that these two statements can be pictured as a set of
nested bowls, in that the first is a broader value that includes the second one within it. Even more
detailed choices exist within the second level, and so on to third, fourth, and more bowls until the
specificity reaches a level where Mr. Smith rather than Mr. Jones gets a particular amount of shelter
next week.
Now let's illustrate the "nested bowls" concept with an example of unacceptable means, One means
value of a nonprofit board may be that the CEO not allow anything imprudent, illegal or unethical.
Another may be that unbonded persons may not have access to material amounts of funds. The first
example is a broader prohibition than the second, but less specific. Even more detailed "bowls" exist,
of course, such as a further proscription against access to more than $5,000 on any one occasion or
more than $8,000 cumulatively over a one year period.
Board values about ends and unacceptable means, as well as the board's own means, then, can be
stated broadly, or more narrowly. The advantage of stating values broadly is that such a statement is
inclusive of all smaller statements. The disadvantage, of course, is that the broader the statement,
the greater is the range of interpretation that can be given to it. To take advantage of the fact that
values or choices of any sort can be seen as nested sets, the Policy Governance board begins its
policy making in all four categories by making the broadest, most inclusive statement first.
The board then considers the range of interpretation that such a statement allows, and determines
whether it is comfortable with the statement being given any interpretation that is reasonable. If the
board would be uncomfortable delegating such a range, that is a signak that the board must define its
words more narrowly, moving into more detail one level at a time. At some point, the board will have
narrowed its words to the point that it can accept any reasonable interpretation of those words. Now
the board has reached the point of delegation.
As an example, consider an Executive Limitations policy in which the board is putting certain
financial conditions and activities "off limits." At the broadest level, the board might say: "With respect
to actual, ongoing financial condition and activities, the CEO shall not allow the development of fiscal
jeopardy or a material deviation of actual expenditures from board priorities established in Ends
policies." That covers the board's concerns about the organization's current financial condition at any
one time, for there is likely nothing else to worry about that isn't included within this "large bowl"
proscription.
However, most boards would think such a broad statement leaves more to CEO interpretation —even
if reasonable interpretation —than the board wishes to delegate. Hence, the board might add further
details, such as saying the CEO shall not: (1) Expend more funds than have been received in the
fiscal year to date except through acceptable debt. (2) Indebt the organization in an amount greater
than can be repaid by certain, otherwise unencumbered revenues within 60 days, but in no event
more than $200,000. (3) Use any of the long term reserves. (4) Conduct interfund shifting in amounts
greater than can be restored to a condition of discrete fund balances by unencumbered revenues
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within 30 days. (5) Fail to settle payroll and debts in a timely manner. (6) Allow tax payments or other
government ordered payments or filings to be overdue or inaccurately filed. (7) Make a single
purchase or commitment of greater than $100,000, with no splitting of orders to avoid this limit. (8)
Acquire, encumber or dispose of real property. And (9) Fail to aggressively pursue receivables after
a reasonable grace period.
A given board might go into less or more detail than in this example. But in any case, these
principles stay intact: The language moves from a broad level toward a lesser level (we showed two
levels in the example just given). The values that become policy are generated by the board's
deliberations, not approved from a staff recommendation. The board, not the staff, decides what to
say and where to stop. No matter where the board stops, the CEO is granted authority to use any
reasonable interpretation of the board's words. The board can shrink, expand, or change the content
of the policy at any time, as long as it does not judge performance retroactively.
This view of organizational issues —as values that can be specified moving methodically from the
broadest to more narrow levels allows the board to manage the amount delegated. The board is
always clear about the authority being given away. The recipient of the board's delegation is always
clear about the amount of accountability expected in return. There is a continuum of sizes of issues
upon which, in Policy Governance, the board owns the broadest level, then successively smaller
levels until it decides to delegate, after which it is safe to allow the remaining decisions to be made
by others.
It is often observed by other governance authors that the distinction between what is board work and
what is executive work is a naive distinction. There is no universal rule, they contend, to mark where
board policy stops and administration begins. Indeed, they are right as far as traditional governance
is concerned, for the conventional approach to the board job is unable to make a policy
administration distinction that holds up in the real world. Policy Governance, however, introduces
entirely different, more powerful conceptual tools— rigorous "one voice" clarity of delegation using
descending levels of board control within the ends /means context. Even though there is still no
predetermined or fixed point where board work automatically becomes executive work, each board
using the principles we are describing can establish and, when necessary change, a distinct point of
delegation applicable to its own organization. It is at that point, by the values of that board, for that
organization, for that time, that governance stops and "sub- governance" begins.
To summarize the policy development sequence, Policy Governance boards develop policies which
describe their values about Ends, Executive Limitations, Governance Process, and Board -Staff
Linkage. Each policy type is developed from the broadest, most inclusive level to more defined
levels, continuing into more detail until the board reaches the point at which it can accept any
reasonable interpretation of its words from its delegatee. A step -by -step guide to such development
of policy documents is available (Carver and Carver, 1997). Ends and Executive Limitations are
delegated to the CEO, who is held accountable by the board for accomplishing any reasonable
interpretation of the boards expectations in these areas. Governance Process and Board -Staff
Linkage policies are delegated to the board Chair, who is given the authority to ensure that the board
governs in accordance with its own expectations of itself, using any reasonable interpretation of the
policy language.
Board Discipline, Mechanics, and Structure
It is clear that the Policy Governance model requires a board to govern in an organized, planned and
highly disciplined manner. Boards which are accustomed to talking about issues simply because
they interest individual board members will find agenda discipline to be a major challenge, as will
boards that rely on their staffs to supply their agendas. Not everything is appropriate for board
discussion just because it is interesting or even because the staff wants the board to make the
decision. Matters that have been delegated to the CEO should not be decided by the board or by
board committees, for in making such decisions, the board renders itself unable to hold the CEO
accountable.
Policy Governance boards know that their job must result in the production of three deliverables. (1)
The first deliverable is a systematic linkage between the organization and the ownership. This is not
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public relations. The board connects with the ownership in order to ascertain the range of ownership
values about the purpose of the organization. If the board is to make Ends decisions on behalf of the
owners, it must know what the owners in all their diversity think. (2) The second deliverable is written
governing policies in the four areas, using the principles we have described. (3) The third deliverable
is the assurance of organizational performance, that is, performance which can be shown to be a
reasonable interpretation of the board's Ends and Executive Limitations policies.
We use "deliverables" to mean job products, outputs, or values- added. Since these summarize the
purpose for the board's job, producing these deliverables is what board meetings are for. In fact, the
list of job outputs can be considered to be a perpetual job description, for every agenda is an
instance of the board's working to perform its job. A board can decide how much, in what detail, and
at what level of excellence it will pursue its perpetual agenda in the ensuing year. By doing so, it
takes control of its own agenda, rather than allowing its agenda to be staff- driven. Establishing its
own job description and the longterm or midterm agenda is recorded as one of the board's
Governance Process policies. As we shall shortly point out, if the board sketches its annual agenda
only broadly, the specifics will be filled in by the board Chair, who is charged with taking care of
Governance Process details.
Accordingly, the board must plan meetings that enable and guarantee the production of these
deliverables. Being entertained or intrigued by staff jobs is no substitute for the board's
accomplishment of its own job. While the board is entitled to any information it wants, it must be
aware that collecting information about staff activities and even conscientiously listening to many
staff reports does not substitute for governance. Let us again reiterate that the board, not the staff, is
responsible that a board's meetings fulfill its governance responsibilities.
In taking responsibility for its own performance, the board confronts the difficulty of acting
responsibly as a group of equals. Since the board is by definition a group of peers, no one has
authority over anyone else. The first action of a group of peers is to create a position of
Chairperson —a first among equals —to help it stay on task. Although it is important that each board
member continue to take responsibility for the board's group behavior, the board grants the Chair
extra authority required to make rulings that keep the board on track. To stay consistent with the
superior role of the board as a group, however, in Policy Governance the Chair only has authority
that is within a reasonable interpretation of the board's policies on Governance Process and Board
Staff Linkage. Hence, the Chair is truly the servant- leader of the board (Carver, 1999).
It is usual for nonprofit boards to expect the Chair to supervise the CEO, but in Policy Governance
there is no need for the Chair to have authority over the CEO. Only the board has authority over staff
operations, and it exercises that authority through carefully crafted policies. It is not only
unnecessary, but harmful for the Chair to tell the CEO what the board wants, for the board speaks
for itself. Consequently, both the Chair and the CEO work for the board as a whole, but their roles do
not overlap because they are given authority in different domains. The Chair's job is to see to it that
the board gets its job done —as described in Governance Process and Board -Staff Linkage policies.
The CEO's job is to see to it that the staff organization gets its job done —as described in Ends and
Executive Limitations policies.
Board Treasurers, as commonly used, threaten CEO accountability as well as the one voice
principle. Treasurers are typically expected to exercise individual judgment about the financial
dealings of the organization. But Policy Governance boards do not allow Treasurers to exercise
authority over staff. (Rendering an official judgment of performance against one's own individual
criteria has the same effect as exercising authority.) By creating a role with supervisory authority
over the CEO with respect to financial management, the board cannot then hold the CEO
accountable for that topic. The board should accept responsibility for financial governance (setting
policy, then comparing performance) and require the CEO to be accountable for managing finances
so that performance compares favorably to policy. The typical use of a Treasurer, when a Policy
Governance board is required by law to have one, is to assist the board in making financial policy,
never to judge CEO compliance against the Treasurer's own expectations. For more thorough
treatment of the board's role in financial oversight, including commentary on the Treasurer and
finance committee, see Carver (1991, 1996b).
In keeping with the "one voice principle, the board can allow no structures or practices in which
board members or board committees exercise authority over staff, any function of staff, or any
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department of staff. Typical nonprofit boards have a myriad of traditions that violate the one voice
principle, such as placing the Chair between the board and the CEO. So it is common for boards to
underestimate the amount of board member interference in operations. Such interference, even
when well- intended, undermines the board's ability to hold the CEO accountable, for the CEO can
argue that his or her actions were taken in compliance with a board member instruction.
Advice is a concept often carelessly used in nonprofit boards. This seemingly innocuous and well
intended practice can have the same deleterious effect as direct instruction by individuals or
committees. It is common for the board, board committees, or individual board members to give
advice to staff. But advice, if it is really advice, can be rejected. If staff has any doubt that advice
given by the board or one of its components cannot safely be turned down, the clarity of board -to-
staff delegation will be undermined. Policy Governance boards refrain from giving advice or allowing
their members to give advice unless advice is requested. This protects the board's ability to hold the
CEO accountable for his or her own decisions. The CEO and any of the staff can request advice if
they need it, and they can request it from wherever they wish.
Traditional boards frequently create committees to assist or advise the CEO or staff, such as
committees on personnel, finance, program, property maintenance, and other such staff means
issues. In Policy Governance, such committees are illegitimate. They constitute interference in the
CEO's sphere of authority and accountability, and damage the board's ability to hold the CEO
accountable.
If, for example, the staff wishes to have an advisory committee, it is perfectly free to create one, then
to use the advice or not as it deems wise. If, however, the board controls the mechanism of advice, a
very different relationship between advisors and advisees is established. The wisest route is for the
board to govern and leave advice and advisory mechanisms to the staffs own initiative. This way the
staff gets all the advice it needs, role clarity and accountability are maintained, and board members
are frequently spared unnecessary work.
Policy Governance boards use committees only to help the board to do its own job. Hence, a
committee which explores methods of ownership consultation about Ends options is legitimate, as is
a committee that studies possible sources of fiscal jeopardy that the board might address in an
Executive Limitations policy. But a human resources committee that advises on or intervenes in
personnel issus is not. To request advice or assistance with one's own job is acceptable and does
not compromise accountability, but to foist help or advice on subordinates is not only unnecessary
but destructive of accountability as well.
Policy Governance takes seriously the normally rhetorical assertion that boards be visionary and
provide long term leadership. The discipline required for this challenge cannot be overstated. In fact,
Policy Governance has been criticized as a "heroic board" model that is romantically idealistic! Yet
boards do, in fact, have a critical job to do; no amount of helping staff can substitute for getting its
own job done. Boards must persevere with the arduous, complex task of describing purpose and
ethics /prudence boundaries. Forming those values into clear policies is far harder than telling the
staff how to do its job. Speaking proactively for the ownership requires strong commitment not to
take reactive refuge in rituals, reports, and approvals.
This requires board member expertise relevant to governance, not management. Board members
should no longer be recruited based on their having skills that mirror the skills of staff. Governance
excellence requires members who can think conceptually and with a long term perspective, able to
welcome a diversity of opinions but abide by group decisions. They must be able to speak on behalf
of the ownership rather than merely from their own or some splinter group perspective. They must
place organizational accountability above personal gratification. They must be able to view the
board's task of assuring performance at arm's length— through setting expectations (using the
ends /means principle and values viewed as descending "bowls"), delegating pointedly (to a CEO if
possible), and monitoring. And it is to the function of monitoring or evaluation that we turn now.
Evaluation
Evaluation of performance is not extraneous to the board's job. It is as integral to the board's job as it
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is to any manager's. But, as we have shown, proper evaluation is impossible unless the board has
first stated its expectations and assigned them to a specific delegatee. That is, evaluation of staff
performance cannot occur appropriately unless the board has done its job first.
Moreover, if the board has a CEO, the results of proper evaluation of organizational success is the
only fair evaluation of CEO performance. Since the CEO's job is to see to it that the organization
meets the board's expectations, there is nothing more and nothing less to evaluate when assessing
the CEO. Thus, the board's evaluation of organizational performance is the same as board
evaluation of CEO performance (Carver, 1997a). Monitoring the evaluative data, as we shall see, is
an ongoing activity perhaps as frequently as monthly —and the board may wish to have a formal
evaluation of the CEO once each year. However, the CEO's formal evaluation is only a summary of
the accumulated monitoring data, not something in addition.
But let us consider the monitoring or evaluative information itself. Not all information is useful in
monitoring performance. There are two types of information that are useful for other purposes, but
not for monitoring: one is information for board decisions, the other is information simply to satisfy
board members' casual interest. To examine evaluation or monitoring, we must first separate out
these two types of information, for they do not qualify as monitoring against pre established criteria.
First, information for board decisions is needed in order for the board to make wise policy in the first
place. To create policies that are both realistic and demanding, boards require information from a
variety of sources. These sources include staff, owners, experts, associations to which the board
may belong, and others. This information is required for the board's own decision making and does
not judge staff accomplishment. Boards should invest a great deal of energy in gathering wisdom,
spending perhaps half their time in becoming educated. So information for board decisions is
essential for board performance, but not for monitoring staff performance.
Second, information for board interest is information about the organization or its environment that is
not useful for board decision making, but is of political, social, or technical interest to board
members. This information does not include data that directly measure the degree of staff
performance on board expectations, for that would qualify it to be called true monitoring information.
This kind of information is incidental to the board's job of monitoring, but comprises most of what
most traditional boards receive. There is nothing wrong with boards getting all the incidental
information they want, but there is something very wrong with the delusion that they are at that time
doing their job. In traditional governance, most staff reports, including most financial reports and
reports that purport to be "evaluation" are incidental information simply because they are not data
compared with previously stated board criteria.
Monitoring or evaluative information must speak directly to whether board expectations are being
fulfilled. Consequently, it is always related to expectations set by the board in its Ends and Executive
Limitations policies. This discipline not only makes it unnecessary for the board to trudge through the
mountains of data staff are able to assemble, but it keeps evaluation fair. After all, it is only right that
the CEO should know ahead of time the criteria on which he or she will be judged. Since monitoring
information is only that information that describes actual performance compared to expected
performance, it is evident that most reports collected, examined and approved by traditional boards
constitute interesting information, but cannot be said to be effective monitoring reports. For example,
boards that gravely approve (or accept) financial statements thinking they have thereby exercised
fiduciary responsibility are simply engaging in a meaningless ritual, for without criteria they don't
even know what in those reports would have been disapprovable.
When monitoring is defined as we have done here, reports tend to be straightforward and
transparent. Each board member can follow the link from board criteria to management data, for the
report is not cluttered with incidental information. Monitoring is not nearly as difficult or time
consuming when boards know what performance they are expecting to see proven. Monitoring is
thus more exact and, simultaneously, requires negligible board meeting time. In fact, we recommend
that monitoring data be mailed to board members, thereby preserving valuable meeting time for
board education and deliberation. Getting monitoring largely out of board meetings allows those
meetings to focus on creating the future rather than reviewing the past, because inspection of the
past is now safely routinized. For each Ends and each Executive Limitations policy, the board will
have set a frequency and a method of monitoring, after which the process runs automatically. The
choice of method will be a report from the CEO, judgment by a disinterested party (for example, an
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auditor), or —less frequently— direct board inspection of organizational practices or circumstances. It
turns out to be rare that monitoring needs to be discussed in the board meeting, except for board
members to affirm that they have received and read the mailed reports.
To illustrate the nature of what is reported in a Policy Governance monitoring report, we will use two
items from an Executive Limitations policy already shown. In that policy, among other unacceptable
means, the CEO was told he or she cannot (1) expend more funds than have been received in the
fiscal year to date except through acceptable debt and (2) indebt the organization in an amount
greater than can be repaid by certain, otherwise unencumbered revenues within 60 days, but in no
event more than $200,000. Here is what the monitoring data might look like for these two provisions:
Item 1: Through the end of May, $3,694,800 has been expended. Receipts in the same period were
$3,654,728. The shortfall of $40,072 was offset by a $60,000 short term loan. Item 2: Total debt is a
45 day working capital loan for $60,000 incurred on May 25. Revenues of $75,000 from our
foundation grant, guaranteed by letter of May 5, are not otherwise encumbered and will be used, in
part, to retire the debt prior to due date.
Notice that the data are rather bare bones, only enough to answer the question, unobscured by
incidental information. Board members should adopt a "prove it to me" attitude, so if the information
submitted is insufficient to convince them, then more detaii can be added. But the detail must be
such that directly address the criteria. For example, what data prove the "not otherwise encumbered"
statement? Obviously, the complexities of some organizations will cause the monitoring data to have
more facets than in our simple example. Even then, however, the reported data should be as brief as
possible and maintain a razor -sharp connection to the policy -based criteria being monitored. If more
interesting, explanatory information, other than that directly addressing the criteria, is desired by the
board or offered by the CEO, it should not clutter the monitoring report, but be distributed separately.
Board members can know anything they wish, but they should never be in doubt about what is
disclosure of performance on the board's criteria and what is not.
Using similar criterion focused reasoning, when the board seeks to evaluate itself, it compares its
actual behavior and accomplishment with the behavior and accomplishment it committed to in its
Governance Process and Board -Staff Linkage policies (Carver, 1997b). Policy Governance boards
tend to self evaluate on a frequent basis —we recommend every meeting— because a more
sophisticated system requires continual tending.
Board Meetings
Because in Policy Governance the board is in charge of its own job, board meetings become the
board's meetings rather than management's meetings for the board. Board meetings occur because
of the need for board members to learn together, to contemplate and deliberate together, and to
decide together. Board meetings are not for reviewing the past, being entertained by staff, helping
staff do its work, or performing ritual approvals of staff plans. As a result, many board meetings may
not look like traditional board meetings at all, but learning and studying sessions or joint meetings
with other boards, particularly in communities where boards rarely talk with each other.
The CEO is always present, but is not the central figure. Other staff might be present when they
have valuable input on matters the board is to decide. For community boards, with rare exceptions
meetings would be open —not to please the law, but because a board commitment to transparency.
The board is not merely a body to confirm committee decisions, but the body that makes the
decisions. Board committees might be used to increase the board's understanding of factors and
options, but never to assume board prerogatives or remove difficult choices from the board table. In
contrast to the old bromide that "the real works takes place in committees," in Policy Governance the
real work takes place in the board meeting.
Board meetings should thus be more about the long term future than the present or short term
future more about ends than means more about a few thoroughly considered large decisions
than many small ones. And by their very character, meetings should demonstrate that the board's
primary relationship is with owners, not with staff.
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Summary
The Policy Governance model recognizes that any governing board is obligated to fulfill a crucial link
in the "chain of command" between owners whether legal or moral in nature —and operators. The
board does not exist to help staff, but to give the ownership the controlling voice. The board's owner
representative authority is best employed by operating as an undivided unit, prescribing
organizational ends, but only limiting staff means, making all its decisions using the principle of
policies descending in size. The model enables extensive empowerment to staff while preserving
controls necessary for accountability. It provides a values -based foundation for discipline, a
framework for precision delegation, and a long term focus on what the organization is for more than
what it does.
The Policy Governance model provides an alternative for boards unhappy with reactivity, trivia, and
hollow ritual— boards seeking to be truly accountable. But attaining this level of excellence requires
the board to break with a long tradition of disastrous governance habits. And it offers a challenge for
visionary groups determined to make a real difference in tomorrow's world.
For boards unhappy with reactivity, trivia, and hollow ritual— boards determined to be accountable for
making a real difference in tomorrow's world Policy Governance offers a visionary challenge. But
transforming today's reality into tomorrow's possibility requires a radical break from a long tradition of
comfortable, but disastrous governance habits.
References
Argenti, John. Your Organization: What Is It For? London: McGraw -Hill Europe, 1993.
Carver, John. "Redefining the Board's Role in Fiscal Planning." Nonprofit Management and
Leadership, 1991, 2 (2), 177 -192.
"The Founding Parent Syndrome: Governing in the CEO's Shadow. "Nonprofit World, 1992,
10 (5), 14 -16.
"Shaping Up Your Bylaws." Board Leadership, July -Aug 1995, No. 20, 4-6.
"Policy Governance Model Views Citizens as Owners." Nation's Cities Weekly, January 29,
1996a, 5.
Three Steps to Fiduciary Responsibility. The CarverGuide Series on Effective Board
Governance, No. 3. San Francisco: Jossey -Bass, 1996b.
Board Assessment of the CEO. The CarverGuide Series on Effective Board Governance,
No. 7. San Francisco: Jossey -Bass, 1997a.
Board Self Assessment. The CarverGuide Series on Effective Board Governance. No. 8.
San Francisco: Jossey -Bass, 1997b.
Boards That Make a Difference, 2nd edition. San Francisco: Jossey -Bass, 1997c.
"Reinventing the Governance in Government: The Next Frontier for City Councils." Nation's
Cities Weekly, January 27, 1997d, 10.
The Unique Double Servant Leadership Role of the Board Chairperson. Voices of Servant
Leadership Series, No. 2. Indianapolis: The Robert K. Greenleaf Center for Servant
Leadership, 1999.
"The Opportunity for Re- inventing Corporate Governance in Joint Venture Companies,"
Corporate Governance An International Review, 8 (1), January 2000a, 75 80.
"Remaking Governance: The Creator of 'Policy Governance' Challenges School Boards to
Change," American School Board Journal, 187 (3), March 2000b, 26 -30.
"Un nouveau paradigme de gouvernance: un nouvel oquilibre entre le conseil
d'administration et le chef de la direction Gouvernance: Revue intemationale, 1 (1),
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Printemps 2000c, 100 -108.
"A Theory of Governing the Public's Business Public Management, 3 (1), March 2001, 53-
72.
Carver, John, and Miriam Carver. Basic Principles of Policy Governance. The CarverGuide Series on
Effective Board Governance, No. 1. San Francisco: Jossey -Bass, 1996.
Reinventing Your Board. San Francisco: Jossey -Bass, 1997.
Carver, John, with Caroline Oliver. Corporate Boards That Create Value: Governing Company
Performance from the Boardroom. San Francisco: Jossey -Bass, 2002.
Chait, Richard P., Holland, Thomas P., and Taylor, Barbara E. Improving the Performance of
Governing Boards. Phoenix: American Council on Education and The Oryx Press, 1996.
Drucker, Peter F. Management: Tasks, Responsibilities, Practices. New York: HarperCollins, 1974.
Geneen, Harold S. "Why Directors Can't Protect the Shareholders." Fortune, 1984, 110, 28 -29.
Gillies, James. Boardroom Renaissance. Toronto: McGraw -Hill Ryerson and The National Centre for
Management Research and Development, 1992.
Greenleaf, Robert K. Servant Leadership. New York: Paulist Press, 1977.
The Servant as Leader. Indianapolis: The Robert K. Greenleaf Center, 1991.
Herman, Robert D., and Heimovics, Richard D. Executive Leadership in Nonprofit Organizations.
San Francisco: Jossey -Bass, 1991.
Murray, Vic. "Is Carver's Model Really the One Best Way Front Centre, Sept. 1994, 11.
E mail: info @carvergovernance.com
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Copyright John and Miriam Carver, 2009
Policy Governance is a registered service mark of John Carver.
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Economic Development Outline
1. Understand our market
a. Community demographics
population projections
household incomes
labor force availability
education levels of workforce
b. Transportation
major highways
access
proposed highway improvements
current and future ADT's
rail lines, airport, water.
c. Utilities and Taxes (capacities, rates)
water
sewer
electric
gas
telephone,
tax burden comparisons
d. What do we want? Refer to Comp Plan, Citizen Survey, Council
e. Inventory commercial and industrial lots of various sizes and Pre -Plan
major sites with possible problems.
2. Get to know the commercial/industrial brokers
3. Evaluate community strengths, weaknesses, opportunities, threats
4. Marketing ourselves.
a. Marketing materials, brochures, get profiles up to date
b. Groups: International Association of Shopping Centers, etc.
c. Twin City opportunities
d. Partnerships: Chamber, DCTC, Dakota County, UMore
e. Meet with targeted businesses
f. Brochures; dedicated web site pages; direct mail
g. State "shovel ready" program
h. Develop staff capacity: contract? Economic development specialist?
5. Public Involvement: web site, comp plan, newsletter
6. Coordinate with schools, County
7. Align planning and zoning regulations toward "what we want"
8. Identify what we DO NOT WANT. Saying "No."
9. Speedy review process for applications that comply with zoning.
10. Business retention program