Wednesday, March 26, 2008

The Importance of Strong Health Care Governance

As we look at the core competencies of health care leaders in general, and future health care leaders within CHRISTUS Health, one area which is often not developed to the degree necessary, is the knowledge surrounding the governance process. In addition, the importance of governance is often not well articulated by CEOs, and therefore future leaders are often not coached and mentored appropriately in this important aspect of health care.

Let us pause briefly to determine why these observations are the reality today. First and foremost, the past history of governance depicts it as a very unimportant part of health care’s critical success factors. If one took a snapshot of the governance practices in most hospitals 20-25 years ago, one would see that this was a meeting of prominent community leaders who got together, usually once a month, to rubber stamp recommendations from management and then conclude with a large meal, often accompanied by alcoholic beverages.

The governance board of directors often were appointed for life, or had “open-ended terms,” which permitted them to succeed themselves as often as possible. The chair of the board was most likely chosen by popular vote, rather than by his or her talents in managing an excellent committee meeting and cultivating a mutually beneficial relationship with the CEO.

Trying to change this picture has been a daunting task for CEOs. Another factor in the development of successful governance is the concern many CEOs had in permitting governance to become too strong in its review and approval processes, which could create the potential for management decisions to be overridden. Another roadblock has been the tendency of some CEOs to not permit their leadership teams to attend governance board and committee meetings for fear that they might relate something that either the CEO was not aware of, or would place the CEO in a less-than-positive light.

Consequently, the learning experience for many up-and-coming leadership team members for governance training has been avoided. Because we believe in CHRISTUS Health that excellent governance is a critical factor in achieving our goals on our Journey to Excellence, we have removed all the barriers that facilitate poor governance and rather have supported the 10 dimensions of outstanding governance as promulgated by the Governance Institute and have implemented them throughout our international ministry. Those 10 dimensions and their application in CHRISTUS are:

Dimension 1: Independence
Measure: The CEO is the only employee who could be a director and the board char is an independent director, not the CEO
Indicators: • CEO is the only INSIDE director allowed.
• CEO is not the board chair.

Dimension 2: The Interests of the Whole are Represented
Measure: Board should have diversity of gender, ethnicity and talent which represents the mission of the organization
Indicators: Ability of board to reach consensus on most issues with policies that are effective

Dimension 3: A Streamlined Structure
Measure: The system board consists of 15 or fewer members and has a streamlined committee structure with six or fewer committees
Indicators: • System board consists of 15 or fewer members.
• System board has 6 or fewer committees.

Dimension 4: High Ethical Standards
Measure: Board has explicit conflict-of-interest policies and procedures
Indicators: • A written conflict-of-interest policy that applies to system board members is in place.
• The board reviews the conflict-of-interest statements annually.

Dimension 5: Mission Policy & Strategy Focus
Measure: Board spends most of its time ensuring adherence to mission, policy, strategic issues and fiduciary adversity
Indicators: • The board utilizes a constant agenda at system meetings.
• The board devotes 40% or more of its time to strategic issues at board meetings.
• The board uses the organization’s Mission as a “test” for all decisions and policies.

Dimension 6: Effective Size and Configuration
Measure: The board periodically reviews its size and structure to ensure that it is configured for current and future effectiveness
Indicators: The system board has engaged in a comprehensive assessment of its governance arrangements at least every two years.

Dimension 7: Commitment to Continuing Education
Measure: The board is committed to board education and development activities
Indicators: System board members engaged in a set number of hours or more for formal education relevant to their director roles.

Dimension 8: Effective Management Oversight
Measure: The board establishes CEO performance criteria and links performance evaluation to compensation
Indicators: • A formal process for evaluating the performance of the health system CEO exists and is based on predetermined objectives or criteria.
• The CEO’s compensation is linked to his/her evaluation.

Dimension 9: Self-Renewal
Measure: The board has term limits to board membership
Indicators: The board imposes a limit of 3 consecutive three-year terms for system board service. Extension is only made on rare occasions where specific talent is needed, and with the support of the nominating committee and board

Dimension 10: Self-Evaluation
Measure: The board establishes performance criteria for itself and for individual directors
Indicators: • The board uses annual goals or other explicitly-defined criteria to evaluate its own performance.
• The board has written expectations and requirements for board member service.
• The board evaluates itself as a whole and as individual directors against these written expectations.

In addition to adhering to these 10 principles, we have also created a job description for the chair and vice-chair of our board of directors, and have clearly written charters including roles and responsibilities for each of our governance committees. Because term limits for committee and board members are essential to bring new and highly energized people into the governance process on a continuous basis, CHRISTUS Health has also committed time, energy and money to orienting all new board members and committee members both from the regions and business units as well as a the system level on an annual basis.

This new board orientation is staffed by several members of the senior team, including the CEO, and includes presentations on the following areas:
• Mission, vision and values
• Our Journey to Excellence with its four directions
• The CHRISTUS Health planning process, including the three-year rolling strategic plan, as well as the futures task force planning process
• The role of the board in overseeing both the performance and the compensation of the CEO
• A discussion of the clarity between the role of the board and management
• A clear description of the board and committees responsibilities to make sure that quality and patient satisfaction is given a high priority

Next year, it will include also an update on the matrix planning process, which is now being piloted within CHRISTUS Health and will be reviewed in an upcoming blog post.

In summary, the governance process is critical to reaching excellence because it is imperative, on a regular basis, to bring another set of eyes in to review what leadership has determined are the best directions for CHRISTUS Health. Because leadership is “living in the forest” every day, it is important for each of the “trees of the future” to be scrutinized for one final time by these outside people who have the opportunity of asking any additional questions which many not have been answered in both the written and verbal presentation materials provided to them prior to and during the board and committee meetings. The excellent governance processes which have been established throughout CHRISTUS Health’s international system have reaffirmed in most instances that management’s directions and recommendations were most appropriate, and on a rare occasion, suggested (also appropriately) that a recommended strategy would not be undertaken or would be delayed.

1 comment:

Anonymous said...

Your blog keeps getting better and better! Your older articles are not as good as newer ones you have a lot more creativity and originality now keep it up!