Rethinking Healthcare Boards in Radical Uncertainty
Swimming in a Glass Half Full
In late 2017, Richard Branson posted a statement useful as a foundational thought to our topic of healthcare governance:
“Those swimming in a glass half empty are more likely to drown than those swimming in a glass half full.”
The same principle is true in organizations as well as larger society. Perspective matters and is directly linked to results. Improving one’s view to improve the future requires an acknowledgement of what worked in history as well as confirmation and acknowledgment of what can be better. We are the creators of our personal, corporate, and societal realities; whether that reality is stagnation or growth.
Though improving the future requires a certain letting go of the past, improving the future in no way diminishes the past. Turntables and vinyl records were an amazing innovation. iTunes is also an amazing innovation. Both are true. Creating iTunes does not diminish the innovation of vinyl records.
And though the past of healthcare governance is filled with a legacy of progress and leadership innovation, today’s model requires a certain letting go. If we are to ensure sustainable healthcare organizations for our future, healthcare governance must be improved.
Resilience in governance is critical for healthcare organizational success
The Future of Healthcare Governance: Meeting Board Challenges in Unforgiving Times was presented at the 2017 American College of Healthcare Executive annual congress. The session highlighted several sobering facts:
- Though Board and CEO succession planning is a critical board responsibility, less than 20% of hospitals and health systems have a workable succession plan in place.
- CEO turnover is at an all time industry high (at 20%) with nearly 1 in 4 hospitals having 3 or 4 CEO’s in the past five years.
- 40% of new CEO’s transition out of their role within 18 months.
According to the American College of Healthcare Executives, the level of CEO turnover registered in 2016 has held steady and is among the highest rates calculated over the past two decades. The trend held true in 2017.
Given the radical nature of uncertainty and disruptive change facing healthcare organizations, it is critical that focused attention be given to building resilience and adaptability in governance. A well informed, diverse, and competent governance body owns the responsibility of establishing vision and ensuring CEO performance (and succession when performance is lacking).
However, many healthcare organizations continue to pursue a legacy model of Board membership and development that may be hindering true organizational transformation.
Lest one think this is an overstatement, in the November 9, 2017 issue of Becker’s Hospital CFO Report 43 states receive an “F” for healthcare price transparency. The healthcare customer base demands more and we are not responding. Healthcare organizations are not changing fast enough to meet customer and societal expectations.
Now, more than ever, a Board’s ability to combine and integrate diverse forms and sources of knowledge is critical to organizational transformation and success. Often, the diverse insight and knowledge necessary to navigate transformational change extends well beyond a specific hospital, health system, local community, or even geographic region.
The capability to engage a diverse set of actors who are truly independent, informed, and influential in their unique sphere of expertise (and highly networked beyond geography) has become a crucial governance competency.
Data reflecting our current industry reality suggest that healthcare provider organizations are increasingly facing distress. Our organizational capacity to anticipate and adapt to uncertainties is being tested at a scale and cadence not seen for decades. Margins are declining, access to capital is becoming difficult, and competition is evolving from sectors and sources not previously experienced.
Within this environment, many healthcare organizations are wrestling with entropy; most alarmingly, entropy in governance. The definition of the term entropy relates to laws of thermodynamics and is a measure of the energy that is not available for work during a critical process. The definition goes on to assert a closed system evolves toward a state of maximum entropy.
Industry trends suggest healthcare organizations are experiencing a deficit of energy and competencies not available for critical and transformational change. In some cases, legacy approaches are so deep seated the entrenched closed system actually diminishes value to the organization. Though committed and well-meaning, it is an unfortunate reality that many healthcare boards lack both competencies and structures to build organizational resilience in disruptive change.
Jamie Orlikoff, a well known healthcare industry expert on governance, presented Whither the Soul of Trusteeship? Effective Governance in a Time of Challenge and Changeat the 2017 American Hospital Association annual membership meeting in Washington D.C. Whither the soul; to what place or state are we headed?
Mr. Orlikoff made a similar presentation, well worth a detailed review, also in 2017 at the Texas Care Alliance Trustee CEO Conference. The over-riding theme of both presentations: To be a truly effective board of a 21st century system requires an impatience with and unwillingness to be bound by the inefficiencies of the governance models and mentalities of the past.
“The quality of governance that was sufficient to get your organization where it is today will be insufficient to get it where it needs to be tomorrow” — Jamie Orlikoff -
Finding a Better View
It is good to return often to Richard Branson’s thoughtful statement above.
Finding a positive perspective and view from which to improve the future remains difficult work. Though not without challenge or potential conflict, here are a few proposed beginning actions (and Board discussion topics) to move toward a governance glass that is half full. Each is written from the perspective of Board self-assessment with hopes of triggering meaningful conversation and debate.
In the words of one of my favorite authors, Seth Godin: “If the work is easy, you should worry.”
- Develop a deep understanding among board members of how a board actually creates or diminishes value in today’s (and tomorrow’s) healthcare industry.Board Discussion: Under our watch, we are either creating value or diminishing value in our organization: how do we know and what data confirms or dispels our opinion? How will we as a board need to change in the next 2 to 3 years?
- Debate the pros and cons of seeking outside board members with specific expertise and competencies. Board Discussion: Who on the board is fluent and connected in the Internet of Things (IoT), Digital Transformation, Artificial Intelligence/Machine Learning, Augmented Reality, and healthcare Consumer Experience (CX) Design? If no one, how can we become fluent and connected?
- Debate the pros and cons of compensating board members. Board Discussion: How do we move away from the deeply imbedded tradition of the volunteer board member of the not-for-profit-health system? What industry forces might be driving this change? How might we attract the most competent and connected board members?
- Seek a higher level of board independence and self-awareness. BoardDiscussion: Are we inappropriately influenced by individual interests, opinions of stakeholders with personal agendas, or perhaps limited by closed social networks? How do we know? Beyond cursory annual statements required for signature by board members, how are we ensuring a posture that is above reproach and self-dealing? What data tells us we are getting it right (or perhaps wrong)?
- Pursue a truly diverse board composition (age, gender, ethnicity, geography, industry background, etc.). Board Discussion: Who is responsible for board composition and ensuring diversity? Who on our board sees through the eyes of a Millennial? Who is connected with, and fluent in, evolving healthcare start-up and innovation landscapes both nationally and internationally? Are these and other perspectives and connections important? Why or why not?
- Debate and adopt a model of continuous innovation embedded within governance functions, structures, and systems. Board Discussion: How might we as a board adopt a proven model (Blue Ocean Strategies/Blue Ocean Shift — or other models) as potential templates for hard-wiring continuous innovation into limited governance time and governance oversight? Is our vision appropriately expansive as well as systematically focused to ensure both a sustainable future tomorrow and meaningful execution today? Are we as a Board maintaining or transforming?
- Foster a passionate commitment to constructive conflict, self-assessment, and ongoing governance development. Board Discussion: Are we improving in our ability to add value to the organization? How do we know? Is our evaluation of board members, board structures, and board functions meaningful and actionable? What data supports our answer?
To ensure our governance glass is half full, what did I miss? What other questions should be asked? What trends are you seeing? Send a comment.