Transcript to get the file - London Centre for Corporate Governance and Ethics

Developing high performing NHS boards
– the issue of board behaviour
Stuart Emslie
Prospective PhD candidate, Birkbeck, London University
Visiting professor of healthcare management and governance, Loughborough
University School of Business and Economics
Formerly Department of Health Head of Controls Assurance for the NHS in
England
The elephant in the [board]room
PhD dissertation....
• 21 NHS foundation trusts (one third sample)
• +another 6 NHS foundation trusts
• 5 detailed studies with NHS foundation
trusts and their board members (approx.
1.5-2 months/trust)
• Harvey and ICSA studies (2010/11)
• Thorough analysis of annual reports
(approx. 131 No. – 2011)
PhD dissertation......cont.
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•
•
•
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2006 – 2012, incl. (thoughts ‘brewing’ since 1998!)
Review of investigations and inquiries
Extensive literature review across sectors
Factors that influence board performance
Attributes of organisational performance
Relationship between board and
organisational performance
• Guidance on improving board performance
• BOOK!
Thought for the evening......
"I've never seen a distressed
organization that could not be traced
back to ineffective governance."
Larry Scanlan, President & COO,
The Hunter Group, USA
“The corporate governance challenge is about making
boards more effective and boards are a collection of
individuals with different experiences, skills and
perspectives which have to come together to make
decisions on a collective basis. At the core of the
challenge are questions about the decision-making and
behaviours of individuals and we all have to accept that
humans are imperfect.”
Paul Boyle, chief executive, Financial Reporting Council
“.....appropriate boardroom
behaviours are an essential
component of best practice
corporate governance; and
that the absence of guidance
on appropriate boardroom
behaviours represents a
structural weakness in the
current system.”
“The style of interaction can be another obstacle. Boards
tend to establish patterns of behavior; for example, seating
can become regularized, and some members may be
expected to say little. Moreover, most boards have a
default operating mode. Some place a premium on running
smoothly—no disagreements, no late papers, no fluffed
presentations, and no late finishes. Some are preoccupied
with the formal aspects of governance: process dominates
and content gets less attention. Some are financially
oriented, with board members peering at their
responsibilities through the numbers. But amidst all this
heterogeneity lies, in our experience, one simple theme—
there tends to be relatively little scope for genuine free
thinking or for any fundamental re-examination of the
premise of the company.”
McKinsey
“..….boards of directors
promise to be an area for
exciting research over the
next decade.”
Shaker A et al [in Huse (Ed.) 2009].
Boards of directors and corporate financial performance
“..….boards are notoriously
difficult to study.”
Leblanc and Gillies, 2005
Inside the boardroom
[Board effectiveness research] is characterised by complexity in
terms of the multiple locations of the evidence across different
disciplinary traditions, by weakness and ambiguity in terms of
association and causation (and direction of causation) and by the
influence of contextual factors on board characteristics,
performance and effectiveness. Given this complexity, a
conventional systematic review, with its emphasis on a hierarchy
of evidence and randomised controlled trials as the research
design of choice to address questions of effectiveness, would not
be appropriate. Indeed, a traditional systematic literature review
would almost certainly be unable to take account of the multiple
and inter-connected variables that influence boards and their
performance. A realist angle, on the other hand, emphasises the
contingent nature of the evidence and addresses questions about
what works in which settings, for whom, in what circumstances
and why.
Prof. Naomi Chambers, Manchester Business School, 2010
“Boards of directors (BOD) are
teams whose effectiveness can be
assessed through group dynamic
constructs in the organizational
behaviour literature. Further
research is needed to examine the
intricate dynamics that might
moderate or mediate the
relationship between board
characteristics and firm
performance.”
“There is growing acknowledgement in
the NHS that good corporate governance
and, particularly, the role of boards makes
a difference…... Too often, unfortunately,
such acknowledgement stems from
organisational failure, rather than
success……and the NHS has certainly
seen many instances of organisational
failure attributed in whole or in part to
ineffective corporate governance…...”
Emslie, Oliver and Bruce, 2006
“Effective corporate governance is a fundamental
cornerstone for the success of every NHS
foundation trust.”
“Every NHS foundation trust should be
headed by an effective board of directors,
since the board is collectively responsible for
the exercise of the powers and the
performance of the NHS foundation trust.”
“......an emphasis on actively developing
the effectiveness of the board of directors
through performance evaluation of the board,
its committees and individual directors.”
Research questions......
1. What are the factors that measure the
performance of boards of directors of NHS
foundation trusts?
2. Given the unitary nature of foundation trust boards
of directors, is there a difference in perception of
board performance between executive and nonexecutive directors?
3. Is there an association between board and
organisational performance?
4. What are the development needs of boards to
enhance board and organisational performance?
NHS foundation trust
performance
indicators
NHS foundation trust
BSAQ scores:
Financial and related
Contextual
Educational
Interpersonal
Analytical
Political
Strategic
Total Score (Mean)
Higher BSAQ scores
relate to better
organisational
performance
•Surplus
•Surplus/Income ratio
•Financial risk rating
•Use of resources
Non-financial
•Governance risk rating
•Quality of services
•Hospital standardised
mortality ratio (HSMR)
•Complaints
•Complaints/Income ratio
•National adult inpatient
survey (various)
•Pre-operative bed days
•Length of stay
•Day case surgery rates
•National staff survey
(various)
10
8
6
4
2
0
-2
r=.73, p<.001
-4
.5
.6
BSAQ Strategic Score
.7
.8
.9
1.0
3.7
3.8
3.6
Positive feeling with organisation
3.6
3.5
3.4
3.3
3.2
.5
.6
.7
3.4
3.2
3.0
2.8
2.6
.8
.9
.5
BSAQ Political Score
.6
.7
.8
.9
BSAQ Political Score
Quality of work-life balance (r=.52)
Positive feeling with organisation (r=.62)
3.0
3.7
2.9
3.6
2.8
2.7
3.5
Intention to leave job
2.6
3.4
3.3
3.2
.5
.6
.7
.8
BSAQ Political Score
Job satisfaction (r=.53)
2.5
2.4
2.3
2.2
.9
.5
.6
.7
.8
BSAQ Political Score
Intention to leave job (r=.53)
.9
Findings
• Higher performing boards are associated
with better organisational performance
• Little difference between executive and
non-executive directors
• BSAQ instrument is, potentially, an
excellent board development tool
• If all boards operating at same level then
approx. £126m instead of £53.3m – i.e.
almost 2.5 times greater surplus
Evaluating board effectiveness
Compliance with
relevant legislation/
codes/standards/
guidance
Board and subcommittees: observational
studies and analysis of
agendas and minutes
Triangulation of data to paint
a reliable picture of effectiveness
of corporate governance
Owners’ and wider
stakeholders’
accounts
Board members’
accounts
ORGANISATIONAL
PERFORMANCE
Board Self-Assessment
Questionnaire (BSAQ)
Semi-structured
interviews
Activity Analysis - 4
Nov 2008
14
12
10
Agreeing
8
Count
Disagreeing/challenging etc
Giving information
Clarifying/questioning
6
Summarising
Giving opinion/experience
Suggesting action
4
2
0
A
B
C
D
E
F
Agenda Item (see Key)
G
H
J
K
Interrelationship between board
and director effectiveness
(after Leblanc and Gillies)
Board Effectiveness
Director Effectiveness
BE = BS + BM + BP
Structure
Membership
Process
DE = DI + DC + DB
Independence
Competence
Behaviour
The 5 modes of board
behaviour – Julia Unwin
support
stewardship
strategy
scrutiny
stretch
Clinical
Corporate
Legal
Finance
Selflessness
Board
Director
Profile
© Bevington/Price Waterhouse Cooper 2008