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.

• 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 fundamentalcornerstone for the success of every NHSfoundation 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 developingthe effectiveness of the board of directorsthrough 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 non-executive 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?

Higher BSAQ scoresrelate to betterorganisational performance

NHS foundation trustBSAQ scores:

Contextual

Educational

Interpersonal

Analytical

Political

Strategic

Total Score (Mean)

NHS foundation trustperformanceindicators

Financial and related•Surplus•Surplus/Income ratio•Financial risk rating•Use of resources

Non-financial•Governance risk rating•Quality of services•Hospital standardisedmortality ratio (HSMR)

•Complaints•Complaints/Income ratio•National adult inpatientsurvey (various)

•Pre-operative bed days•Length of stay•Day case surgery rates•National staff survey(various)

BSAQ Strategic Score

1.0.9.8.7.6.5

Su

rplu

s (£

mill

ion

)

10

8

6

4

2

0

-2

-4

r=.73, p<.001

BSAQ Political Score

.9.8.7.6.5

Qu

alit

y o

f w

ork

-life

ba

lan

ce3.7

3.6

3.5

3.4

3.3

3.2

BSAQ Political Score

.9.8.7.6.5

Po

sitiv

e f

ee

ling

with

org

an

isa

tion

3.8

3.6

3.4

3.2

3.0

2.8

2.6

BSAQ Political Score

.9.8.7.6.5

Job

sa

tisfa

ctio

n

3.7

3.6

3.5

3.4

3.3

3.2

BSAQ Political Score

.9.8.7.6.5

Inte

ntio

n t

o le

ave

job

3.0

2.9

2.8

2.7

2.6

2.5

2.4

2.3

2.2

Quality of work-life balance (r=.52)

Job satisfaction (r=.53) Intention to leave job (r=.53)

Positive feeling with organisation (r=.62)

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

Compliance withrelevant legislation/

codes/standards/guidance

Board and sub-committees: observational

studies and analysis ofagendas and minutes

Triangulation of data to paint a reliable picture of effectiveness

of corporate governance

Board members’ accounts

Board Self-AssessmentQuestionnaire (BSAQ)

Semi-structured interviews

Owners’ and wider stakeholders’

accounts

Evaluating board effectiveness

ORGANISATIONALPERFORMANCE

A B C D E F G H J K0

2

4

6

8

10

12

14

Activity Analysis - 4 Nov 2008

Agreeing

Disagreeing/challenging etc

Giving information

Clarifying/questioning

Summarising

Giving opinion/experience

Suggesting action

Agenda Item (see Key)

Co

un

t

Interrelationship between board and director effectiveness(after Leblanc and Gillies)

BE = BS + BM + BP

DE = DI + DC + DB

StructureMembershipProcess

IndependenceCompetenceBehaviour

Board Effectiveness

Director Effectiveness

strategy

support

stretch

scrutiny

stewardship

The 5 modes of board behaviour – Julia Unwin

Challenges constructively

Understands organisations

Selflessness

I

ntegrity

Objecti

vity

Rec

eptiv

e to

feed

back

Hon

esty

Ope

nnes

s

Sel

f-aw

are

Ego

left

at th

e do

orSe

lf-co

nfid

ent

Listens f

irst

High in energy & passion

Adapts their style

Breadth of contribution

Isn’t a detail junkyUnderstands the business

Stays within role

Thinks strategically

Finance

Legal

Corporate

Clinical

Board Director Profile

© Bevington/Price Waterhouse Cooper 2008