Culture: The Elusive Component of Great Governance

(This post is edited from my commentary on board culture in Governance Structure and Practices, The Governance Institute’s 2009 Biennial Survey of Hospitals and Healthcare Systems, just published this month.)

Perhaps the most critical aspect of governance is also the most elusive to define, measure, and create. It is culture, variously defined as “the way we do things around here” or “the way people behave when no one is looking.” Organizational culture is a mix of an organization’s formal rules and rituals, its espoused values (behaviors it professes), and its values in practice (behaviors it demonstrates and rewards).

Like their organizations, governing boards have a culture too. The pivotal importance of culture in distinguishing the effective from the ineffectual board has been apparent at least since the downfall of the Enron Corporation. Observers attributed Enron’s collapse in part to a passive, management-driven board of directors. Despite talented members and a well-defined structure, directors failed to ask hard questions or display the independence needed to detect egregious accounting irregularities and unethical conduct by senior executives.

“What distinguishes exemplary boards is that they are robust, effective social systems,” wrote professor Jeffrey A. Sonnenfeld in Harvard Business Review. He describes the culture of great boards as “strong, high-functioning work groups whose members trust and challenge one another and engage directly with senior managers on critical issues facing corporations.”

Lawrence D. Prybil, a University of Iowa professor and healthcare governance expert, compared governance structures, practices, and aspects of culture in high- and low-performing health systems. Prybil found that boards in high-performing systems exhibit “three dimensions of board culture” and nine specific behaviors under these dimensions:

Robust engagement

• Board meetings are characterized by high enthusiasm.
• Constructive deliberation is encouraged at board meetings.
• Respectful disagreement and dissent are welcome at board meetings.
• The board consistently is actively engaged in discourse and decision-making processes. Most board members are willing to express their views and constructively challenge each other in the management team.

Mutual trust and willingness to take action

• The board’s actions demonstrate commitment to our organization’s mission.
• The board tracks our organization’s performance (financial and clinical) and actions are taken when performance does not meet our targets.
• There is an atmosphere of mutual trust among the board members.

Commitment to high standards

• The board systematically defines its needs for expertise and recruits new members to meet these needs.
• Board leadership holds board members to high standards of performance.

Evaluating Your Board’s Culture: Taking a New Trustee’s Perspective

Board culture is inherently difficult to evaluate. Current members and management are likely to have a positive bias about the culture they have created.

A more objective approach is to assume the perspective of a new trustee. How would a newly minted board member describe his or her first impressions of the board? A new board member is likely to have a number of questions in mind as they begin their board service:

• What is my role?

• Who is really in charge here? Does management drive this board, or does the board dominate management—or is there a healthy balance in place, with respect for mutual roles and responsibilities?

• Do the leaders truly want my advice and opinions, or do they prefer that I “go with the flow?’” If I offer dissenting views, will I be thanked — or punished?

• If my input is genuinely desired, what’s the best way to make my voice heard in order to influence policies and decisions? In other words, how does the board’s decision-making process really work?

• What are the real values of the board, and are the same values reflected in the organization’s behavior?
Are mission and quality just nice words or real drivers of organizational behavior?

To see how your new trustee might answer these questions, consider the following “first impressions:”

• New trustee orientation:
Is the new trustee required to participate in orientation? Does the orientation process have the attention of top management and board leadership? Is the program well designed, and is it made clear that board members are expected to be actively engaged in candid questioning and discussion?

• First meetings: What messages are sent at the new director’s first committee and board meetings? Do the chairs welcome discussion or frown on comments that slow things down? Who delivers reports: committee chairs (implying board leadership is engaged) or senior management responsible for reporting to the board in various areas of oversight? How much time does the agenda allocate for open discussion as opposed to listening to and approving reports and recommendations?

• Attendance: What messages are sent about attendance expectations? Are meetings fully attended or are a lot of empty chairs scattered around the table? Do some members come late and leave early? Are interruptions from pagers and Blackberry-type devices common or rare?

• Access to board chair and CEO: What impressions does the new director get of what his or her relationship with the board chair and CEO will be? Do these individuals have a one-on-one meeting with all new directors to hear first-hand their interests and aspirations for board service? Are the leaders open to further dialogue?

• Team environment: What impressions does the director get about the board’s interest in developing trust and teamwork? Is a picture book of directors and senior management given to board members? Do other directors and senior management introduce themselves?

• Information packet:
What impressions does the new director draw from the information packet provided to the board and board committees? Does the information facilitate easy review of the issues and trends critical to governance responsibility? Conversely, is the board packet a thick and incomprehensible stack of papers, or alternatively, a collection of summaries so general and rosy that directors cannot exercise reasonable oversight?

• Education: Does the board have an active continuing education program tailored to the board’s most important responsibilities? Is there an annual retreat at which directors are actively engaged? Are directors encouraged to gain first-hand information about the organization through directors’ rounds, patient safety rounds, and similar activities?

• Board self-assessment:
What impressions does the new director draw from his or her first board self-assessment process? Does the process appear routine or thorough?

Assessing and improving a board’s culture is not nearly as straightforward as making changes to board size, committee structure, written policies, or meeting frequency, but without a commitment to the development of an active and responsible governance culture, changes in the rules and rituals of governance are likely to have a minimal effect on board performance.

On the other hand, talking about the kind of culture the board wants to create and then designing structures, policies, and practices that will facilitate development of that culture can be a much more effective way for a board to continually improve itself.

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One Response

  1. I agree that culture can be elusive to measure. However, in my white paper, Ethics and the Board (The Governance Institute, Winter 2008) I do offer a board diagnostic that assesses many of the elements discussed in this important posting, and that I hope will be valuable to this conversation for boards.

    Jack Gilbert
    jack.gilbert@asu.edu

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