Transformational change is a difficult undertaking. It is a long war comprising many battles and ideally, minimal losses along the way.
Hospital leaders are perceived as drivers of change, because leadership is responsible for crafting a response to environmental transformation. Uncertainty about the outcome and the change process can create performance disruption and political unrest. For example, those health care professionals who perceive reform negatively may express their strong sense of loss and resentment as resistance to change. Meanwhile, new relationships and dynamics must be established in the transformed environment.
The CEO stands in the middle of this tumult. The leader of the hospital is expected to shape the vision of the newly integrated health care delivery system. He or she will need to present new, and often unpopular, ideas to multiple stakeholders in preparation for reform's impact. The CEO also will be a target for opponents of change. How safe is your CEO if he or she embarks on a campaign to achieve transformational change?
Many good CEOs have lost their jobs for taking risks. Conflicts with the medical staff or other stakeholders have caused boards to terminate CEOs, even when their hospitals were performing successfully. Often, these CEOs were pursuing new organizational visions, approved by their boards, which would change each organization from a hospital to an integrated delivery system. When conflict emerges, powerful forces often accuse the CEO of leading in the wrong direction and being insensitive to stakeholders' needs. Historically, boards have interpreted these situations as threatening the organization's viability and have asked the CEO to leave.
What happens when these stakeholders create problems that attract the attention of the board? Will trustees stand by the CEO, or will they view the problem as something he or she failed to address properly?
How Boards Let CEOs Down
Boards generally act in the background until there is a crisis. Then, trustees may remove the CEO. Although it may seem counterintuitive, boards gain stature when they address a problem and terminate a CEO. The trouble is, when a board fires a CEO in a situation like this, it means that the board has failed in its duties.
Research shows that CEOs lose their jobs when trustees blame them for unacceptable performance. But before firing the CEO, board members should work to understand the situation and its causes, assess the CEO's responsibility for the problem and determine whether he or she can remedy it. Unfortunately, research also shows that, more often than not, changing CEOs does not fix organizational performance problems. Why is that?
By the time a crisis occurs, it can be too late to analyze the situation objectively. In a crisis, the significance of data is distorted by political influence, which makes it hard for trustees to understand root causes. Additionally, there is little time for calm decision-making, requests for data or further study. As a result, the board doesn't really understand the problem.
Without a clear understanding of the situation, trustees struggle to determine whether a new CEO is the right person for the job. In addition, the problem may have grown beyond the point where it can be remedied by relatively painless solutions. These reasons contribute to why new CEOs so often fail to change organizational performance. The key is to address problems before they become crises.
Most people avoid conflict because it results in anger and pain, and often permanently ruptures a relationship. This type of conflict, called relationship conflict, is considered socially unacceptable and destructive. Engaged boards generate a different kind of conflict—cognitive conflict—when discussing strategically important matters with the CEO. Cognitive, or task, conflict is constructive because it leads to a better understanding of the situation. It arises because people have different educational backgrounds and experience resulting in different assumptions about and perspectives on the same problem or task. Cognitive conflict raises these differences in an effort to mediate the various points of view so that a more inclusive solution is developed.
When cognitive conflict is part of a meeting, trustees participate in discussion focused on understanding a problem or situation from management's point of view. The board discusses the problems or situations, their relationship to other issues, recommended solutions and alternative approaches that were considered. The conversation should focus on determining whether the CEO's perspective is based on assumptions (that is, based on experience) or on current, relevant data.
Effective cognitive conflict should create some degree of discomfort, because the CEO's assumptions are being examined and challenged. Still, when effective, the discussion is professional and respectful. Ultimately, the board will gain a clearer understanding of and more confidence in the agreed-upon plan of action. When it engages in cognitive conflict, the board becomes a full partner with the CEO in the hospital's strategy. As such, the board should acknowledge its role in setting the course and stand in partnership with the CEO when problems, whether anticipated or unforeseen, arise.
Boards can help their hospitals address the need for change by being more engaged in setting strategy and overseeing hospital strategic performance. Trustees make this contribution when they actively participate in analyzing management's strategic plans. The value of boards lies in the fact that board members have different experiences and education from hospital administrators. This difference generates diverse perspectives. When boards actively participate in an analysis of strategy, members cannot be afraid to generate conflict. When managed correctly, conflict leads to strategic clarity and organizational alignment. Instead of fearing conflict, CEOs and boards should embrace it as a way to fortify their partnership.
When boards and CEOs fully understand the implications of a strategic problem, they can agree on a course of action, even when it involves risk. With the board's backing based on a collaborative analysis of strategic situations, the CEO can engage others confidently in transformational change, even when it is disruptive. Strategic change can be a battle that requires time and considerable resources, and it can be won only when the CEO has the board's support.
Cary Gutbezahl, M.D. (firstname.lastname@example.org), is CEO of Compass Clinical Consulting, Cincinnati.