(Originally published in Nasdaq’s MarketInsite, July 18, 2017, and written on behalf of iProtean, now part of Veralon by Karma Bass, Principal, Via Healthcare Consulting)
“I don’t care about having a high-performing board.” It’s hard to imagine any CEO or board leader uttering these words in today’s rapidly changing healthcare industry. The stakes are just too high. Yet, by their failure to engage in regular board assessment, many hospital and health system leaders may inadvertently be conveying that message and putting the continued viability of their mission in jeopardy.
Think about it: ‘high-performing’ implies performance that’s been measured and proven to be outstanding. You can’t have a high-performing board if you aren’t measuring performance in some manner. For hospital and health system boards, however, measuring performance is tricky, for several reasons. First, and perhaps most daunting, there’s the issue of appropriateness. Should a board comprised of community volunteers really be graded on its performance? Second, there’s the issue of evaluation. Who should assess the board’s performance? Lastly, there’s the issue of metrics. By which measures will or should the board be evaluated?
First, let’s consider the issue of appropriateness. It’s true that most U.S. hospitals and health systems are not-for-profit organizations with boards comprised of community members who provide their service as unpaid volunteers. But while board members may be volunteers, healthcare is simply too complex and important an industry to be governed by amateurs. So, yes, it is appropriate. A board’s performance should be regularly assessed in order to exploit areas of strength and identify areas where improvements can and should be made. As I travel around the country working with hospital and system boards, I find that most board leaders are eager to know how they are performing and how they could get better. As noted by Byron Loflin, CEO for the Center for Board Excellence (CBE), “Thoughtful and hardworking board members have commented to me that mediocrity is never a solution.”
Next, there’s the question of who should assess the board’s performance. Since ultimately the task of improving the board’s performance (should it be warranted) will fall to the board members themselves, most organizations begin by having the board assess itself. This makes sense, also, because improving board performance is often an exercise in change management.
Step one of Dr. John Kotter’s well-regarded eight-step process from his book, Leading Change (Harvard Business School Press, 1996, updated 2012), for change management is “Create Urgency,” described as “help the team see the need for change…” It’s much easier to convince a group of people of the need for change if they themselves have identified the reasons for it. Also, because boards are usually volunteers, it’s more palatable to ask them to assess their own performance and identify areas for improvement. If our goal is to have the board be continually improving its performance, it makes sense to have them identify the areas for improvement, while drawing on outside expertise for guidance. As Loflin advises, “Board assessment or evaluations should be conducted by a third-party whose focus is corporate governance excellence.”
Back to the trickiness of assessing board performance. The last issue was the question of metrics. How do you choose which measures to use in evaluating a board’s performance – high or otherwise? Many fine organizations around the country specialize in promulgating ‘best’ practices for board performance and while many are helpful, all fall short of being universally relevant. The fact of the matter is that excellence in board performance remains more an art than a science.
Many boards and leadership use this as a reason to throw their hands up. “If I can’t know what the absolutely, in-all-cases, best board practices are to measure my board against, why should I bother measuring their performance at all?” I reject this defeatist notion and would suggest that each board should begin where it is. Start by identifying the major ‘buckets’ of board work, and ask board members how they believe they’re performing against them.
Regardless of a board’s current state, it is important for the board to hold itself to a set of rigorous standards. Some board practices and some boards’ performance are better than others; and it may take some work to determine which best practices it makes sense for your board to follow and which metrics you should use to assess performance. While the details may differ, what all high performing boards have in common is they make a substantial contribution to their hospital’s success.
According to Gordon Clark, president and CEO of iProtean, now part of Veralon, hospital or health system boards’ work generally falls into these four areas: Finance Oversight, Quality Oversight, Mission/Strategy, and Governance. iProtean, now part of Veralon’s approach to assessment begins with a survey that asks each board member to rate his or knowledge and comfort level with specific board oversight responsibilities within these key areas. The idea is to go beyond asking “how well” the board as a whole is performing in a given area (too often an overly subjective unit of measure) and instead identify where individual board members need more knowledge in order to be effective contributors. Taken in aggregate, the results also show where the board’s strengths and blind spots are. Knowing where the gaps are in board members’ understanding will help guide a robust education plan. It can also assist in developing an action plan for board improvement through which board members will be motivated to participate.
It (hopefully) goes without saying that having a ‘high-performing’ board – however one chooses to measure and define it – is more of a journey than a destination. The boards that are truly ‘high-performing’ credibly and constructively challenge their own performance. They are always seeking ways to enhance their effectiveness, gain mission alignment with management and improve their ability to govern. It starts and ends, if you will, with the assessment.
Nasdaq’s Board and Leadership Solutions have a unique collaboration with iProtean, now part of Veralon, an e-learning company that provides online governance education and information to hospital directors. Bringing over 50 years of combined experience in healthcare governance information and education, the iProtean, now part of Veralon leadership team understands the specific needs of hospital and health system board members. The company is committed to helping directors make a meaningful difference in their communities.
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Check your library for the advanced Finance Course, Financial Risks & Strategic Implications of APMs, featuring Marian Jennings and Seth Edwards. In this course, Marian and Seth discuss the financial risks of ACOs and bundled payments, the strategic risks of not participating in an alternative payment model, clear trends and the characteristics of organizations that have successfully implemented one or more alternative payment models.
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