What's Your Board's Culture?
By Lawrence Prybil
A survey shows that there is room for improvement
A survey shows that there is room for improvement
Effective boards understand their role and duties, are actively engaged in the work of governance, and accept accountability for their performance and the performance of the organization they govern. Over time, either deliberately or not, every board of directors creates a governance culture—a pattern of beliefs, traditions and practices that prevail when the board convenes to carry out their duties. Each board is responsible for shaping its own culture. As stated by JoAnn Reed:
“Good governance is hard work. Boards must develop a culture of accountability and engagement. Board leaders should pay strict attention to how much board time is spent passively listening to reports and how much time is spent discussing strategic issues and the duties of care and loyalty. Active and vigorous board discussion, debate and questioning is not only a sign of a good board, it is the sign of an engaged board. Board members should not allow a ‘don’t-ask-questions’ culture to thrive and become the norm. An open culture of cooperation and transparency is healthy and will attract skilled board members.”(1)
In too many cases, boards are insufficiently committed, the governance culture is passive, and the result is underperformance.(2) There is a growing belief that effective governance requires a proactive culture of commitment and engagement that drives both the board and the organization it governs toward high performance.(3)
In recognition of the importance of governance culture, the Health Research & Educational Trust Blue Ribbon Panel on Health Care Governance—composed of senior board leaders, chief executive officers (CEOs), governance consultants, and university faculty members with experience in governance research and service—recently examined board culture. Based on previous studies and their collective experience, the panel identified the features the members believe characterize an “effective board culture.”(4) The Panel selected 11 key characteristics. (See exhibit A.)
Elements of an Effective Culture
As part of a new study of governance in 123 not-for-profit community health systems, the CEOs were asked to indicate the extent to which their system’s board of directors demonstrate these characteristics.(5) Their opinions are presented in Exhibit A. There are no established benchmarks against which to assess the CEOs’ responses. However, the data show that a large majority of the CEOs (over 89 percent) believe their boards always demonstrate commitment to their community health system’s mission. On the other hand, less than half of all CEOs believe their boards always review core governance processes on a regular basis (43 percent), systematically define their needs for expertise and recruit new board talent to meet those needs (41 percent), recognize the importance of ongoing board education (45 percent), and hold board members to high standards of performance (46 percent). With respect to these and other characteristics, it is clear that there is plenty of room to improve governance culture within these community health systems.
The differences between the opinions expressed by CEOs who lead systems affiliated with larger parent organizations versus those who lead independent systems are not statistically significant. However, for eight of the 11 characteristics, the CEOs of systems that are part of parent organizations assess their boards’ culture more positively than the CEOs of independent systems. This finding may suggest a pattern that will be pursued in the next phase of this study, which will involve on-site interviews with board members in several community health systems regarding boardroom culture and other governance topics.
How Boards Make Decisions
The fiduciary role and responsibilities of governing boards require them to make many decisions that shape the organization and its direction. The manner in which a board approaches and conducts its decision-making processes is a fundamental component of its culture and has a major impact on the organization’s performance.(6) As one way to gauge this dimension of the community health systems’ board culture, the CEOs were asked to characterize their system’s approach to making decisions on important issues. Exhibit B presents their responses.
From the CEOs’ perspectives, 72 percent of these boards tend to be “actively engaged in discourse and decision-making” and most of the board members “ are willing to express their views and constructively challenge one another and the management team.” The balance (28 percent) view their board of directors to be either passive or inconsistent in their level of engagement in decision-making processes. To the extent that the assessment of these CEOs is correct, the performance of these boards in their decision-making role does not meet a fundamental benchmark of good governance.
How the Board Spends Its Time
Another indicator of governance culture is how a board allocates its meeting time. The time that board members devote to their governance duties is a valuable asset that is not always used well. As expressed by Sydney Finkelstein and Ann Mooney:
“If a board deems a matter important and strategic enough to require their involvement, they must make the effort to address that decision comprehensively. The problem is, however, that boards often tackle problems in a less than comprehensive manner; they often address decisions with little depth, avoid seeking help from experts, and limit their exploration of decision alternatives.”(7)
Exhibit C displays the CEOs’ estimate of how their boards have allocated their meeting time over the past 12 months. Perhaps the most striking feature of these data is the similarity of how boards that are part of larger parent organizations and boards that govern independent systems allocate their time. Their CEOs’ estimates of how the boards employ their time are, on the whole, very consistent between these two groups.
A second finding is that the community health system boards, on a combined basis, have devoted 23 percent of their meeting time to patient care quality and safety issues during the past year. The Institute for Healthcare Improvement and others have urged hospital and health system boards to spend 25 percent or more of their meeting time on quality and safety issues, so these boards are fairly close to this benchmark.(8)
According to their CEOs, community system boards currently are allocating about a quarter of their meeting time respectively to strategic planning issues, quality and safety issues, and financial issues. Therefore, these three subjects—all vitally important—collectively consume at least 75 percent of community health system board meeting time.
Future studies should examine more fully the reasons why these boards choose to allocate meeting time as they do and how it reflects governance culture in these organizations.
Examining and trying to understand the culture of any organization or group is difficult terrain. This survey of community health system CEOs tried to gain some initial insight into their boards’ cultures and compare them to emerging benchmarks. All governing boards, even the very finest, have ample opportunities for improvement. As a basic component of board self-assessment and development processes, board leaders and CEOs are encouraged to examine their board’s culture as well as its structure, composition and basic practices. It is possible that an objective look at boardroom culture—and a real commitment to make changes as a result—can be a key to improving the board’s overall effectiveness.
Lawrence D. Prybil, Ph.D., FACHE, is professor and senior advisor to the dean at the College of Public Health, University of Iowa, Iowa City, Iowa, and a member of the National Board of Advisors, Center for Healthcare Governance, Chicago. He can be reached at (319) 384-5484 or at lawrence-prybil@uiowa.edu.
Notes:
(1) J.S. Reed, “Ethics and the Not-for-Profit Board,” Boardroom Press, December 2003, p. 7.
(2) Based on extensive work with many boards over a long period of time, William Ryan, Richard Chait, and Barbara Taylor recently concluded in part that “the board is widely regarded as a problematic institution” and “too many board members are disengaged. They don’t know what’s going on in their organizations, nor do they demonstrate much desire to find out.” W. Ryan, R. Chait, and B. Taylor, “Problem Boards or Board Problems?” The Nonprofit Quarterly, Winter 2005, p. 80.
(3) See, for example, “Ten Best Practices for Measuring the Effectiveness of Nonprofit Healthcare Boards,” op. cit., p. 16; and David Nadler, “Engaging the Board in Corporate Strategy,” in D. Nadler, B. Behan, and M. Nadler, Building Better Boards: A Blueprint for Effective Governance (San Francisco: Jossey-Bass, 2006), pp. 129-148.
(4) D. Wegmiller, et al., Building An Exceptional Board: Effective Practices for Health Care Governance (Chicago: Center for Healthcare Governance, 2007), pp. 12-14.
(5) For this study, “community health systems” are defined as “Nonprofit health care organizations that (1) operate two or more general-acute and/or critical access hospitals and other health care programs in a single contiguous geographic area and (2) have a chief executive officer and a system-level board of directors who provide governance oversight over all of these institutions and programs.” This article is excerpted from the initial report on this study. See L. Prybil, S. Levey, R. Peterson, D. Heinrich, P. Brezinski, J. Price, G. Zamba, and W. Roach, Governance in Nonprofit Community Health Systems (Chicago: Grant Thornton LLP, 2008), esp. pp. 23-26.
(6) See, for example, W. Useem, “How Well-Run Boards Make Decisions,” Harvard Business Review, November 2006, pp. 130-138; and D. Nadler, “Building Better Boards,” Harvard Business Review, May 2004.
(7) S. Finklestein and A. Mooney, “Not the Usual Suspects: How to Make Boards Better,” Academy of Management Executive, Vol. 17, No. 2 (2003), p. 106.
(8) “Getting Started Kit: Governance Leadership How-To Guide,” Institute for Healthcare Improvement, Dec. 12, 2006, p. 3. Also see T. Vaughn, et al., “Engagement of Leadership in Quality Improvement Initiatives: Executive Quality Improvement Survey Results,” Journal of Patient Safety, March 2006, pp. 2-9.
The survey of chief executive officers was supported by a grant from Grant Thornton LLP, which supplemented the principal project funding provided by the W.K. Kellogg Foundation.
Exhibit A
CEOs’ Opinion on the Extent to Which Their Boards Demonstrate the HRET Blue Ribbon Panel’s Characteristics of Effective Board Culture*
| Systems That Are Part of Parent Organizations (n = 44) |
Independent Systems (n = 79) |
All Systems (n = 123) |
||||
| Always | Sometimes | Always | Sometimes | Always | Sometimes | |
| (a) The board’s actions demonstrate commitment to our organization’s mission. | 90.9% | 9.1% | 88.6% | 11.4% | 89.4% | 10.6% |
| (b) The board’s core governance processes (e.g., ongoing oversight of financial performance, CEO evaluation, etc.) are reviewed regularly to identify ways to improve them. | 50% | 50% | 39.2% | 60.8% | 43.1% | 56.9% |
| (c) The board systematically defines its needs for expertise and recruits new board members to meet these needs. | 50% | 50% | 35.4% | 64.6% | 40.7% | 59.3% |
| (d) The organization’s performance (financial and clinical) is tracked closely by the board and actions are taken when performance does not meet our targets. | 79.5% | 20.5% | 69.6% | 30.4% | 73.2% | 26.8% |
| (e) The board places a high priority on addressing long-range strategic issues that confront its organization. | 61.4% | 38.6% | 67.1% | 32.9% | 65% | 35% |
| (f) Board meetings are characterized by high enthusiasm. | 52.3% | 47.7% | 50.6% | 49.4% | 51.2% | 48.8% |
| (g) There is an atmosphere of mutual trust among board members. | 72.7% | 27.3% | 70.9% | 29.1% | 71.5% | 28.5% |
| (h) Board members clearly recognize the importance of ongoing board education. | 52.3% | 47.7% | 40.5% | 59.5% | 44.7% | 55.3% |
| (i) Board leadership holds board members to high standards of performance. | 52.3% | 47.7% | 41.8% | 58.2% | 45.5% | 54.5% |
| (j) Constructive deliberation is encouraged at board meetings. | 63.6% | 36.4% | 72.2% | 27.8% | 69.1% | 30.9% |
| (k) Respectful disagreement and dissent are welcomed at board meetings. | 52.3% | 47.7% | 58.2% | 41.8% | 56.1% | 43.9% |
*For each characteristic, the figures in bold type indicate which group of CEOs (those who lead community health systems that are part of larger parent organizations or those who lead independent systems) rated their boards higher. The differences in their responses were not statistically significant. The 11 characteristics, with some abbreviations, were adopted from Building an Exceptional Board: Effective Practices for Health Care Governance, op. cit., p. 14. |
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Exhibit B
“Over the Past 12 Months, How Would You Characterize Your System Board’s Approach to Making Decisions on Important Issues?”
| Systems That Are Part of Parent Organizations (n = 44) |
Independent Systems (n = 79) |
All Systems (n = 123) |
|
| The board tends to be passive and reactive in its approach to decision-making. We need to find ways to get the board much more engaged | 0% | 1.3% | 0.8% |
| The board is involved in some issues, but its level of engagement is inconsistent. The board’s decision-making process would benefit from more dialog and debate. | 22.7% | 29.1% | 26.8% |
| The board tends to be actively engaged in discourse and decision-making processes. Most board members are willing to express their views and constructively challenge one another and the management team. | 77.3% | 69.6% | 72.4% |
| 100% | 100% | 100% |
Exhibit C
“Over the Past 12 Months, What is Your Best Estimate of How the Meeting Time of Your Community Health System’s Board (Not Board Committees) Has Been Allocated Among the Following Subjects?”
| Systems That Are Part of Parent Organizations (n = 44) |
Independent Systems (n = 79) |
All Systems (n = 123) |
|
| Strategic planning (including updating the system’s strategic plan, reviewing progress reports, etc.) | 26.5% | 27.6% | 27.2% |
| Oversight of patient care quality | 24.1% | 22.3% | 23% |
| Oversight of financial performance | 23.9% | 25.9% | 25.2% |
| Oversight of community benefit program | 7.7% | 6.9% | 7.2% |
| Monitoring the CEO’s performance in relation to established expectations | 7.6% | 6.6% | 6.9% |
| Board development (including board succession planning, recruitment, education, performance evaluation, etc.) | 10.2% | 10.7% | 10.5% |
| 100% | 100% | 100% |