Three Themes for Board Effectiveness
In preparation for a workshop on board effectiveness in health care, we interviewed fourteen health care executives from the Upper Mid-West region, asking them to define their primary concerns about the effectiveness of their boards and the challenges they see in developing effective boards in the future.
A number of themes have emerged from the interviews. I would like to touch on three of them.
The first is the boundary between governance and management. Those interviewed made comments such as: “it is important to highlight the distinction between board governance and management”; “boards tend to be more engaged operationally when they are not comfortable that management is aware of or addressing the important issues”; “in the past we have given the board too much financial data which invited too much involvement”. These and other similar comments question the proper role of the board in management issues. David A. Nadler (Harvard Business Review, May 2004) urges that boards decide how engaged they want to be in influencing management’s decision and the organization’s direction. He offers a continuum of board involvement ranging from passivity to operational control. He states that selecting a level of engagement provides the philosophical framework for everything that follows. The true message is to decide and agree upon a level of engagement rather than letting it emerge in an ad hoc fashion when it can only lead to tensions in the future.
The second theme is the board’s intellectual contribution. Respondents are concerned with how board members who are not from the health care professions communication their expertise to the provider community. Comments included the following: “sometimes the board gives us simplistic solutions to complex problems”; "business experience can be a weakness if they want to bring their ‘model’ and it doesn’t fit”; “local boards have a lot of people that aren’t very familiar with health care and it is a challenge to get them up to speed on the language of the industry”. It should be noted that board members from other professions can usually bring to the table only generic knowledge of business principles. Many physician and administrative board members can bring a richer knowledge of the complexities of the health care industry. A few older-timers or astute observers of life within a particular health care setting can comment of what is organizational unique to that setting. For me, the intellectually complete board would consist of a blend of business generic, industry specific, and organizationally unique insights and know-how. Selecting the right people with the appropriate know-how can add significantly to the effectiveness of a board.
The third theme is board evaluation. Comments included: “it never hurts to remind the board what their responsibilities are and where they draw the line; “one of our challenges is to evaluate board effectiveness and hold the board accountable for effectiveness”; “sense of personal accountability has increased as the board continues to get larger”. The National Association of Corporate Directors (NACD) released Board Evaluation: Improving Director Effectiveness in 2006. This comprehensive study stresses that strategic goals are the basis against which any board evaluations would take shape. The NACD model is systemic and addresses people, culture, issues, information, processes, and follow-through. The study offers a number of feedback tools to assist boards in the self-assessment process. NACD believes that board assessment is cirticial to board effectiveness.
Board effective can be driven by a number of factors but paying attention to the three themes mentioned above can significantly help a board function at an optimum level.