An overlooked source of risk: Culture

Directors and trustees serving health care organizations, whether investor-owned or nonprofit, bear responsibility for their organization’s corporate culture and, with that, enormous risk.

And most feel less than prepared, lacking the information they need. That’s the key finding from a focus group profiled in the July/August issue of The Corporate Board, a bimonthly advisory for directors of publicly traded companies.

Bad behavior 

The lead story — “Measuring Your Corporate Culture” — argues that there are three bad behaviors in organizations that can jeopardize or destroy them:

1. Corporate stress that leads people to take shortcuts.
2. Excessive focus on short-term financial targets.
3. A tolerance for breaches of the rules.

The article asserts that boards must take corporate culture seriously and argues that attention to culture is among a board's primary responsibilities.

I have served as a director of several nonprofit health care organizations as well as four investor-owned health care companies. I have worked for companies with a healthy culture and some known to be unhealthy.

This article hit home.

Raising questions

Good-news stories about companies and organizations frequently allude to their healthy culture but usually frame their successes around inspiring leadership, innovation and effective execution. By contrast, when bad-news stories surface, systemic flaws in the organization’s culture get attention, and rightly so. Because really, an organization’s culture is an asset or liability directly tied to its performance and reputation. An unhealthy culture correlates to high employee turnover, lower productivity and a dubious reputation in the cyber world, where former and current employees find outlets for tipping off outsiders. And a toxic culture is a prime reason an organization's healthier competitors can win business.

Here are some questions worth asking:

• Are boards in health care equipped to address cultural issues in organizations?
• Are valid and reliable measures available so board members can assess cultural health independently?
• Are codes of conduct words on a page or the core of how to evaluate and reward employees?

These questions are applicable to the boards that serve private insurers, drug and device manufacturers, technology suppliers, accountants, lawyers, consultants, and the array of professional services firms that comprise our industry. Most of these are investor-owned and subject to strict laws about financial disclosure (such as through the Sarbanes-Oxley Act of 2002). Most have a formal committee that addresses governance issues, but even on these boards, knowing the company’s culture and understanding the risks associated with an unhealthy workplace can be a challenge.

The same is true of hospital boards. Most operate as nonprofit, community-based organizations. Most appoint their board members, and most operate with bylaws that specify protections against director conflicts of interest and lay out their fiduciary responsibilities. But few specify that attention be paid to the hospital’s culture, nor do boards invest considerable time reviewing reports about an unhealthy workplace until a problem surfaces. Sometimes, that’s too late.

Public responsibility

What makes monitoring a hospital or health system’s culture particularly tricky for its board is tradition: Most hospital boards include community leaders and a few physicians. Most participate in strategic planning, financial reviews and evaluation of the hospital’s management. The tradition often has been to steer away from intrusion into a hospital’s operations and to avoid getting in the way. We tend to hire a CEO we trust, use consultants to help with strategy and bring in accountants to audit our books. As for culture? That’s rarely an agenda item. But times are changing.

Whistle-blower lawsuits are increasing. False Claims Act violations and breaches of private inurement are subject to public scrutiny and, in some cases, penalties. Physician misbehavior is receiving widespread media coverage. Prominent themes in business media — tolerance of leaders who are bullies, disrespectful behavior toward peers and subordinates, the climate for airing disagreements, and employee compensation and recognition — are equally relevant to hospitals. The public is curious about workplace issues, and health care organizations are fair game for scrutiny. 

So, health system boards bear responsibility for monitoring the culture in their hospitals and mitigating the risks associated with an unhealthy culture. The culture in our hospitals is vital to our effectiveness in caring for patients and key to the trust we desire in the communities we serve.

The culture in our hospitals also is perhaps the source of the organization’s biggest risk.

Paul H. Keckley, Ph.D. (pkeckley@paulkeckley.com), does independent health research and policy analysis and is managing editor of The Keckley Report. He is a member of Health Forum’s Speakers Express.