A boards duty: Ensure a healthy culture
High-profile companies like Wells Fargo, Uber, Equifax, The Weinstein Co., Fox News and many more have recently garnered media attention for their leadership and corporate cultures. And the boards of companies including Whirlpool, CACI International and Citigroup have formed culture committees to surveil the climate in their respective organizations.
In October, the National Association of Corporate Directors released a report from its 34-member commission outlining 10 recommendations to encourage boards to be more proactive in attending to corporate culture. They include the formal measurement of culture, the inclusion of culture considerations in performance reviews of top managers, changes to incentives in short- and long-term compensation and others. Bottom line: Boards must understand how an organization achieves results, not just the results themselves. As The Wall Street Journal’s Joann Lublin wrote: “Corporate culture counts. But bad culture can damage a company’s reputation, results and recruitment.”
I have served on several investor-owned boards where attention to risks associated with regulatory compliance, cybersecurity, sexual harassment and ethical business practices get significant and growing attention. The CEO’s performance is scrutinized in the context of organizational goals and targeted results, and the chief legal officer plays an active role in directing the board’s attentiveness. I have also worked in organizations where financial results justify the acceptance of narcissistic behavior and the dismissal of concerns about the culture. Often, the board’s concern was not evident. But many boards now are focusing on how their organization achieves results.
Can hospital boards, especially community boards that provide fiduciary oversight to nonprofit hospitals and health systems, be expected to know the corporate culture in their hospitals? Can they be held accountable for lapses? The answer to both questions is yes.
Nonprofit-hospital boards represent the interests of their community. Most members volunteer their time and receive no compensation. But that’s no excuse for inaction. It’s not easy to address culture, but it is nonetheless imperative. To start, two considerations are worth discussion.
Board education
Hospital boards need education about the complex issues and challenges that face their organizations. Public-company directors spend 200 hours annually doing their work through committees and board meetings. But these directors are also encouraged to study issues on their own, and formal evaluations of board member independence and competence are included in outside assessments of the company’s performance by their investors and organizations like Institutional Shareholder Services.
Nonprofit boards underinvest in board education, and many are lax in self-evaluation. Complex issues like private inurement, the False Claims Act, HIPAA and many more require more than casual understanding by trustees. The question is, are boards prepared to address the problem of culture with an informed, objective view of the context, issues and challenges facing the organization and the field?
Keeping an eye on culture
Hospital boards must create a formal process for monitoring the culture in their organization. Most hospitals conduct employee surveys and share the results with their board. Many of these include comparisons with other organizations and best-practice recommendations.
But in the future, boards must go deeper. The work climate in most hospitals is stressful. The workforce is expected to do more with less and alter work habits as clinical innovations and payment systems force change. Boards must examine the mechanisms whereby the workforce is managed, promotions awarded, and recognition and compensation given. While not interfering in day-to-day operations, boards must create mechanisms for obtaining the views of current and former employees and developing constructive ways to interact with their leaders. They must ask whether a thorough process is in place to equip the board to gauge the culture in the hospital.
Times are tough for hospitals. Straddling the fence between fee-for-service and value-based incentives is complicated. Managing compliance risks with ever-expanding rules and regulations is a daunting task. Reducing costs and doing more with less is a relentless pressure.
A hospital’s culture defines how the organization responds to these challenges. A healthy culture is not a guarantee of success, but an unhealthy culture is a guarantee of failure. It’s the board’s role to make sure it’s healthy.
Paul H. Keckley, Ph.D. (pkeckley@paulkeckley.com), does independent health research and policy analysis and is managing editor of The Keckley Report (www.paulkeckley.com). He is also a member of Speakers Express. For speaking opportunities, please contact Laura Woodburn.