Characteristics of Effective Boards
By Lawrence D. Prybil
Throughout the nation, increasing attention is being devoted to the performance of governing boards in the health care field and other sectors. This is due not only to the inherent importance of governing boards’ fiduciary and moral responsibilities, but also to the visible consequences of inadequate governance in both investor-owned and nonprofit organizations; closer scrutiny by Congress, the Internal Revenue Service, and a growing number of state legislatures and attorneys general; and growing evidence that effective governance contributes positively to good organizational performance.
There are, of course, many factors beyond quality of governance that affect the performance of hospitals and other health care organizations; e.g., the caliber of clinical staff and executive leadership, the resources to acquire the best technology, the effectiveness of information systems, and so on. However, governmental agencies, bond rating agencies, donors and other stakeholders are recognizing that the quality of governance is important, and they are pressing for higher standards and better board performance.1
Key Characteristics
So what are the key characteristics of effective health care boards? Based on the work of numerous authorities, existing empirical evidence, and my own experience in working with and serving on boards over the past 35 years, key features and practices include:
1 A corporate philosophy and policies that support the governance structure and functions within the organization. Whether we are talking about a free-standing hospital or a large, multiunit health care system with facilities in several states, governing boards are unlikely to be effective without strong support by the corporate sponsor or parent body. This support is demonstrated by clear expectations, appropriate resources and thoughtful oversight.
2 A clear, consistent understanding by the board and CEO of the board’s role, responsibilities, authority and organizational relationships. Lack of clarity and/or misunderstanding of the board’s role and duties are major causes of governance problems and breakdowns. To have a productive board, it’s essential for the board members, management team, and medical staff to share a clear, common understanding of their respective responsibilities and authority.
3 The support and leadership of a CEO who is committed to building a strong governance structure and practices. The impact of CEO support and leadership in determining the board’s effectiveness is too often overlooked and too seldom discussed. The threshold questions are whether or not the CEO believes in the importance of governance and how strongly he or she is committed to board development. These factors will heavily influence the energy and institutional resources that are devoted to governance structure and functions. Trying to build a strong board without the CEO’s interest and commitment is akin to driving a car with the brakes on. Forward movement is possible, but it’s slower and more difficult than it should be. On the other hand, the pace of positive change can be accelerated greatly through the active engagement and support of the CEO.
4 Sustained organizational commitment to a solid board development program. The concept of “board development” is not defined consistently in the health care field or in other sectors. In general, however, a comprehensive board development program certainly should include the following:
- An on-going process for assessing the board’s changing needs for expertise
- An active recruitment effort to attract trustees who can meet those needs
- A well-planned orientation process (not a one-time, one-day event) for new board members
- A comprehensive, needs-based board education program
- An on-going board evaluation process with the twin goals of objective appraisal and continuous improvement
- Clearly assigned responsibility to oversee the board development program. This responsibility can be given to the board’s executive committee or to a designated “governance committee” for which planning and guiding the board development program is its principal, if not exclusive, function.
Additionally, every board development program must have a succession plan for board officers and committee leadership positions. To be effective, boards must have highly capable and committed persons in these leadership roles. An on-going process that focuses on identifying and preparing trustees for board and committee leadership responsibilities is absolutely critical.
There is agreement throughout the field that competent hospital and system governance has become increasingly complex due to economic, environmental, legal and technological changes. In this context, the argument for a solid board development program is clear and compelling. Boards that have development programs in place are much more likely to be effective than those that do not.
5 A sound structure and staff resources to assist the board and its committees. It is not possible for a governing board or its committees to function efficiently without staff and logistical support. Boards need and deserve good secretarial, technical, and consultative assistance. However, this support varies widely within hospitals and other health care organizations. In some instances, support still is largely limited to scheduling meetings, packaging and mailing meeting materials, and taking minutes. Minimalist models such as these are inadequate today. The quality of board performance and board member satisfaction are enhanced by top-notch staff support. For some board committees—such as those with oversight responsibility for audit and compensation functions—independent advice and counsel by persons or firms with direct responsibility to the committee is increasingly important. Board leaders and CEOs who want effective boards should review their existing infrastructure and be prepared to invest more resources to support the board and its committees; it is likely that relatively modest investments will produce valuable dividends in terms of board engagement and performance.
6 On-going access to important information coupled with well-constructed board and committee agendas that focus the members’ time and energy on key governance priorities. The evidence clearly shows that effective boards insist on receiving accurate and pertinent information (not excessive and/or unanalyzed data) in a timely manner. They also insist on board and committee agendas that are linked directly to key strategic issues and governance priorities. Unfortunately, a recently completed national study indicates that the proportion of board meeting time devoted to discussing strategy and setting policy has actually declined in recent years—from 38 percent in 2002 to 31 percent in 2005.2
Effective board meetings concentrate on matters that involve interactive discussions and deliberations, rather than passive listening to reports and presentations; they also employ “consent agendas” for routine items that require formal board action but no deliberation, and for which the necessary information can be read in advance of the meeting. Effective board meetings do not begin with a series of routine reports, a practice that tends to be mind-numbing and a waste of the board’s energy. They also minimize repetition of matters that can and should be handled at the committee level. Board committees can be empowered to perform certain functions on behalf of the board as long as delegation of responsibility and accountability are clearly defined.
7 Core governance processes that are well-designed and reviewed regularly to identify opportunities for improvement. Corporate experience and academic research has demonstrated that carefully designing and continually improving core processes and systems is essential to achieving excellence in complex organizations. It is increasingly clear that designing, monitoring, assessing and refining core processes cyclically is a fundamental key to effectiveness in every enterprise.
This principle applies directly to governing boards whose duties largely involve carrying out a defined set of processes—e.g., board evaluation, board development, CEO evaluation, and quality of care review. The simple truth is that boards that design their core processes carefully, implement them rigorously, and seek ways to improve them on a continuous basis are likely to be more effective than other boards.3
8 Substantial engagement of clinicians—chosen by virtue of their commitment and expertise—as members of governing boards and board committees. A host of recent reports by The Commonwealth Fund, the Institute of Medicine, and others have underscored the necessity of improving the quality of care in our nation’s hospitals, and health care governing boards have the ultimate responsibility for that improvement. As one strategy for strengthening their collective knowledge base and capability to carry out their quality-of-care duties, the National Quality Forum and other authorities have urged boards to improve their communication with clinical leaders—physicians and nurses—and expand their involvement on boards and board committees.4 To prove the point, a recent study found that boards of high-performing hospitals had a greater proportion of physician members than a matched group of hospitals whose performance was midrange.5
When clinicians serve on the governing boards of health care institutions where they are employed or affiliated, the potential for conflicts of interest must be recognized and addressed. However, in an era where improving the quality and safety of patient care is a national priority, clinician input into governance deliberations is vital. Board leaders and CEOs should review their board’s composition to ensure that clinician voices are heard.
9 A board culture that is characterized by proactive engagement of its members, a consistent pattern of constructive dialogue and debate, and enlivened decision-making processes. The Coalition for Nonprofit Health Care, the Conference Board Commission on Public Trust and Private Enterprise, the Panel on the Nonprofit Sector in its Final Report to Congress, and other authorities have urged boards to be more inquisitive and vigorous in carrying out their fiduciary responsibilities. The American Bar Association Task Force on Corporate Responsibility found that “many corporate boards have developed a culture of passivity” and that boards “must engage in active, independent, and informed oversight of the corporation’s business and affairs, including its senior management.”6
These organizations are addressing governance culture—the pattern of beliefs, traditions and practices that prevail when a board of directors convenes to carry out their fiduciary duties—and are advocating for a proactive culture. All boards have a culture that has developed over time and each culture has many elements, including those depicted in “Some Dimensions of Governance Culture” on page 22. Governance cultures vary greatly from organization to organization and honing and strengthening that culture is very important to improving board effectiveness. Studies in the health care field and other sectors have indicated that organizations whose boards are involved, interactive and proactive are more likely to perform better than similar organizations with less engaged boards.
Suggestions for Board Leaders and CEOs
Governing boards of the nation’s health care organizations vary widely in size, composition, structure, cultural features, and effectiveness. From many quarters, there is a growing cry for more accountability and better performance by these boards as well as those in other sectors. Board leaders and CEOs who share a commitment to improving the quality of governance in their organizations may wish to consider the following steps.
First, they are encouraged to initiate and complete a serious re-examination of their board, including how it is organized, what it does, and how it does it. To be useful, such a review should be close and thorough. This requires strong board chair and CEO leadership, the board’s willingness to look at itself objectively, and readiness to make changes. Without these ingredients, a review process is likely to be pro forma and minimally beneficial.
Second, trustees need to reflect on their review findings and decide what kind of board they want to have and what it will take to achieve that vision. If the re-examination has been thoughtful, it is unlikely that the status quo will seem satisfactory. Even the finest governing boards in the health care field have plenty of room for improvement.
Third, boards and CEOs should set clear priorities and timetables for strengthening their governance, including fuller engagement of physician and nurse clinical leaders as voting board members, and a sequenced assessment of core governance processes. The priorities and timetable for these changes should be pragmatic; revamping governance processes takes time and effort, and everything cannot be done at once. Responsibilities and expectations should be clearly defined, with specific target dates for progress reports and formal recommendations.
Fourth, the board chair should assign long-term responsibility for building (or refining) a board development program to a standing committee. The overall re-examination outlined above will yield valuable insights and produce some important building blocks that can be acted upon promptly. However, board development should be viewed as an on-going process and become the permanent responsibility of a board committee.
For all of these steps, strong leadership by board officers and firm support from the CEO and his or her management team are essential. Effective governance is rewarding in many ways, but it is hard work and requires sustained leadership and organizational support. Boards that embrace a real commitment to continuous improvement and that invest the necessary effort will increase their ability to provide effective governance for their organization. Their communities will receive the benefits.
Notes
1. See, for example, J. Green and D. Griesinger: “Board Performance and Organizational Effectiveness in Nonprofit Social Service Agencies,” Nonprofit Management and Leadership, Summer 1996; I. Millstein and P. MacAvoy, “Active Board of Directors and Performance of the Large, Publicly Traded Corporation,” Columbia Law Review, Vol. 98, 1998; A. Adams, “Quality of Board Governance in Nonprofit Healthcare Organizations,” Journal of Healthcare Administration, Vol. 2, 2003; and Governance of Not-for Profit Healthcare Organizations, Moody’s Investors Service, June 2005.
2. Raising the Bar: Increased Accountability, Transparency, and Board Performance (San Diego, Calif.: The Governance Institute, 2005), p. 8.
3. See, for example, L. Prybil, R. Peterson, J. Price, S. Levey, D. Kruempel, and P. Brezinski, Governance in High-Performing Organizations: A Comparative Study of Governing Boards in Not-For-Profit Hospitals (Chicago: Health Research and Educational Trust, 2005).
4. See, for example, J. Meyer, et al., Hospital Quality: Ingredients for Success—Overview and Lessons Learned (The Commonwealth Fund, July 2004); Taking a Strong Stance on Quality Oversight (Boardroom Press, October 2005); and D. Nash and N. Goldfarb, eds., The Quality Solution: The Stakeholder’s Guide to Improving Health Care (Sudbury, Mass.: Jones and Bartlett Publishers, 2006).
5. The study found that medical staff members are a more prominent component of high-performing hospital boards (30.3 percent) as compared with hospital boards whose performance is midrange (20.8 percent). In five of seven high-performing hospitals, medical staff members comprised 25 percent or more of the board’s voting members; this was true in only one midrange performing hospital. Prybil et al., op. cit., p. 4 and pp. 16-19.
6. “Report of the ABA Task Force on Corporate Responsibility, “ The Business Lawyer, November 2003, pp. 159-160.
Lawrence D. Prybil, Ph.D., is professor and senior advisor to the dean at the College of Public Health, University of Iowa, Iowa City, and vice chair of the board of directors at Sisters of Charity of Leavenworth Health System, Kansas City, Kan. This paper is based on a presentation given at the National Symposium on Governing and Leading Healthcare Organizations sponsored by the AHA Center for Healthcare Governance, Chicago. Mr. Prybil can be reached at (319) 384-5484 or at lawrence-prybil@uiowa.edu.
Some Dimensions of Governance Culture*
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Low-Functioning Board
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High-Functioning Board
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Passive and Reactive
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Highly Interested and Engaged
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Unclear Priorities
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Sharp Focus on Well-Defined Governance Priorities
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Spotty Attendance with Low Energy Level
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High Attendance and Enthusiasm
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A Lot of Listening and Little Discourse
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Extensive Questions, Dialogue and Deliberation
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Challenges and Disagreements Are Squelched
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Constructive Dissent and Debate Are Welcomed
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Decision-Making is Pro Forma
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Decision-Making is Enlivened
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*The author wishes to extend appreciation to Dennis D. Pointer, Ph.D., for the presentation and discussions that provided the foundation for this model.
This article 1st appeared in the December 2099 issue of Trustee Magazine.
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