The Six Ps of Good Governance for Private Companies

We have found that great private company governance can be organized and grounded in these principals: purpose, people, practice, procedures, policies, and processes. At CFAR, we call these the Six Ps of Good Governance.

If, at a glance, these concepts seem like nothing new, enacting them effectively, together, is the “make or break.” The work of crafting, building habits around, and sticking to them creates a routine practice that makes the difference. Each P alone can be better than nothing, but the real power lies in the interaction among them.

The First Four Ps

One way to begin advancing your governance is by constructing or revisiting your board Charter. It is critical to clarify the board’s purpose first, and then add further definition through reworked policies, processes, and procedures that pass this test: Will they actually improve the group’s taking up their board roles, aligned with their purpose to advise the enterprise consistent with values, strategy, and mission—including constructive disagreement?

1. Purpose cannot be generic (e.g., “provide oversight to strategy and management”). It should consider the value of the board now—in understanding and wrestling with current challenges and preparing the enterprise it oversees for an uncertain future. Board composition, committees, and leadership should all connect to purpose.

2. Policies[1] can be explicit or unstated, so long as they are broadly understood. Examples include:
   • Confidentiality agreements
   • Mandatory retirement age, term limits, etc.
   • Periodic board assessments

3. A process sets a standard and makes clear how something is expected to happen. Examples include:
   • How the board’s agenda is developed and disseminated
   • Whether and how post-mortem reviews are done
   • The role of the board vis-à-vis leadership in strategic planning
   • Expectations for talent reviews, succession, emergency contingencies, insurance and risk management

4. A procedure “is a series of actions conducted in a certain order or manner.” Examples include:
   • Having an executive session without the CEO to begin and/or end a meeting, or at one meeting per year
   • Requiring pre-read materials to be sent at least one week ahead of a meeting
   • Prior to an important vote, asking each board member to share their perspective

Whether something is a policy, process, or procedure is less important than having a way to put important guidance in place before it is needed. It is not the end-product as much as the process of crafting their contents that can make the difference.

The Fifth and Sixth Ps

People and practice become the glue for alignment across the first four, especially if the board crafts its own Charter. The absence of these final two Ps is often what undermines even the most well-intentioned boards.

5. By People we mean not just each unique board member, but also explicitly considering the board as a group with a dynamic of its own, where each and all can become more or less than the sum of their parts. This includes the expertise of each member, enabled by a social process to structure discussions, even sometimes with ground rules.
   • In integrating a board, being explicit about norms can counteract individual agendas that can undermine results. Board members who can be a “skeptical friend”[2] can further help set the tone not just of proper fiduciary inquiry, but of collaboration.

6. Finally, it is how this system works in practice that counts (and it all takes practice). Practice incorporates how purpose, policies, processes, and procedures are applied by people in the meeting-to-meeting work of a board. Examples of practices that are out of alignment include:
   • Circumventing mandatory retirement ages by creating “special case” emeritus positions
   • Avoiding succession planning
   • Going through the motions of a board assessment with no commitment to improvement
   • Avoiding tough conversations and not holding people accountable

These behaviors can be born of a concern about making things worse; not rocking the boat. When these honest conversations happen in ways that demonstrate care for the enterprise as well as the people leading it, the imagined worse-off result is rare.

It is important to remember how people and practice are connected: the onboarding of new members, their introduction to the specific six  Ps of your board, the contribution of their skills and perspectives can serve to accelerate the group’s effectiveness. 

Ultimately, each robust in its own right, the six Ps become truly powerful in their interactions with one another—building the real, lived-in fabric of the board as both a governing entity and a set of smart people. Boards do well to take on the work of harmonizing those interactions, ensuring that, as we say, “the words match the music.”

[1] Policy: “a course or principle of action adopted by a business or governing body” (all definitions from New Oxford American Dictionary).

[2] A CFAR idea, the “skeptical friend” builds on completed work and finds ways to make it better, asking good questions based on a combination of preparation and listening. Debate and discussion aim for an even better final outcome for the business; we contrast a “skeptical friend” with a board member who sees their job as finding what is missing and unproductively pointing it out.