In recent weeks, high-profile companies like Wells Fargo, Uber, Equifax, The Weinstein Co., Fox News and many more have 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.
On Wednesday, Oct. 4, the National Association of Corporate Directors released a report from its 34-member commission outlining 10 recommendations that would 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. Their bottom line is this: Boards must understand how an organization achieves results, not just the results themselves. As The Wall Street Journal’s Joann Lublin wrote on Oct. 4: “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 behaviors and the dismissal of concerns about the culture. But the board’s concern was not evident. Many boards are now focusing on how their respective organizations achieve 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 volunteer their time and receive no compensation. But that’s no excuse. It’s not easy but 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 evaluating their boards. Complex issues like private inurement, the False Claims Act, HIPAA and many more require more than casual understanding by trustees. Is the board prepared to address the culture with an informed, objective view of the context, issues and challenges facing the organization and the industry?
Culture monitoring processes: Hospital boards must create a formal process for monitoring the culture in their hospitals. Most hospitals conduct employee surveys and share the results with the board. Many of these include comparisons to 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 schemes force change. Boards must examine the mechanisms whereby the workforce is managed, promotions awarded, 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 ways to interact with their leaders constructively. Is a thorough process 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 the 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. (firstname.lastname@example.org), 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.
The opinions expressed by the author do not necessarily reflect the policy of the American Hospital Association.