by David C. Hoffman

Health care organizations seldom reach their full potential without strong leadership at both the board and executive level. High-performing organizations not only have strong leadership in these key areas but also have significant synergy between the board and senior leadership in virtually all areas of their responsibilities. In essence, they function as well-practiced teams when it comes to competency and overall outcomes.

The exclusive domains of governance and management

Trustee educational programs stress that boards and CEOs must understand and respect the separate realms in which they each operate. The board operates in the arenas of policymaking, asset allocation (i.e., budget approval), fiscal oversight, and corporate vision. It also sets the limits of authority under which executive management can act.
 
While governance is about creating the “means” by which the organization operates(1), management is responsible for creating the “ends”—putting the team together and then translating policy, values, and vision into actions that get the results defined by the board. When the boundaries are crossed, confusion often reigns; CEOs are perceived as overstepping their bounds, while trustees can be seen as meddlers.

Here are four things that the board and CEO can do to build a more effective governance management team.

1. Develop a clear understanding of each other’s respective roles and responsibilities.
2. Capitalize on areas of overlap, and fill each other’s blind spots.
3. Foster a collegial two-way mentoring relationship between the board chair and CEO.
4. Treat the CEO like a nonvoting board member, and draw on the CEO’s experience and expertise as a health care professional.

Understand each other’s roles and responsibilities

The challenge for boards and CEOs is learning to respect the areas of exclusive responsibility for each while learning to optimize their efforts in the areas of overlap. Working the boundaries of the governance-management interface can be tricky, but success in doing so often results in strong board-CEO partnerships and better organizational decision making.

The table below provides examples of the divergence and overlap in board and CEO roles and responsibilities. While it is critical that boards do not become managers and managers do not become board members, the zone of overlapping roles and responsibilities creates an opportunity for synergy.

Capitalize on areas of board/management overlap

The goal of every board and CEO should be to use each other’s experience to effectively fulfill their individual roles and responsibilities. An experienced health care CEO will have more industry knowledge than most of the board members, so in most cases, the board will be looking to the CEO to help the board identify everything from key strategies to technical issues involving reimbursement, regulatory and legal issues, physician recruitment, clinical service-line development, areas for policy development, and so on.

High-performing boards form a tight collegial bond with their CEOs and draw liberally on their expertise to guide the board in the “governance realm.” For example, the board might actively involve the CEO and key senior administrative staff (1) to act as advisors in the strategic planning process, (2) to identify the key areas for HIPAA compliance, and/or (3) to provide recommendations for more effective quality improvement programming.

While a strong working relationship between the entire board and the senior management team is essential, the relationship between the CEO and the board chair is critical to building organizational synergy. This is especially true in smaller health care organizations where board governance experience and knowledge of the health care industry may be limited and where CEOs have limited staff resources to get things done.

Treat the CEO as a nonvoting board member

The question is often asked whether or not the hospital CEO should be a member of the board. The answer really depends on a variety of issues that include state statues, organizational culture, and individual board experiences and preferences. Strong cases can be made in either direction. The official status of CEOs on the board is not as important as ensuring that they are treated as de facto board members.

The board can facilitate its own learning curve by tapping the industry experience of the lead health care management professional in the organization to sharpen the board’s perspective on a variety of issues. While governance must remain the realm of the board, an experienced CEO needs to be at the boardroom table (with select senior administrative staff) to provide management’s perspective to the decision-making process.

Final thoughts

Governance and management are inexact activities—part theory, science, and art—made better by constant practice and experience. Putting the three together is a challenge that all boards and managers face. One way to develop the competencies of both boards and managers is to look for ways to create synergies between the two—especially ways to create a closer working relationship between the critical leadership components of the board and the CEO.

David C. Hoffman, Ph.D., is a partner in the Wipfli health care practice and frequent speaker on this topic. He can be contacted at 608.274.1980 or dhoffman@wipfli.com.

Footnotes
(1)  Carver, John, “A Theory of Corporate Governance Finding a New Balance for Boards and Their CEOs.” Canadian Journal Governance - Revue International, Vol. 2, no. 1, Spring 2000, pp. 100-108.