Ten Best Practices for Measuring the Effectiveness of Nonprofit Healthcare Boards
Published by National Center of Healthcare Leadership December, 2006
The Baldrige Criteria require, in Item 1.2 Governance and Social Responsibility, a description of Organizational Governance, Legal and Ethical Behavior, and Societal Responsibilities. In addition, in Item 1.1 Senior Leadership, the criteria require a description of how "senior leaders promote an organizational environment that fosters, requires, and results in legal and ethical behavior."
Key thoughts from the article:
Two broad legal duties of a nonprofit director are loyalty and caring for the interests of the public. Previous legal challenges have seen board members use an "I know nothing" defense, which may be an indication of board members' lack of courage to ask each other tough questions about board and organization practices. Measurement of board effectiveness and continuous improvement of board performance are keys in setting organization direction, ensuring ethical and legal guidelines are followed, and assessing organizational performance.
Ten Best Practices for Nonprofit Healthcare Boards:
Why use these best practices?
- To assess the degree to which the board is performing well against each practice
- To identify opportunities for improvement to enhance board performance.
1. Adherence to legal requirements
Ensure that the board has access to the information that will help ensure appropriate decisions. The board, or a committee of the board, should be aware of outside organization's reports that evaluate the organization's performance against regulatory and accreditation requirements. They should also be aware of actions being taken by the organization to address findings.
Possible measure: Number of lawsuits, number of findings by regulatory and accreditation groups
2. Corporate Compliance Mentality
Boards must ask tough questions of senior leaders, medical staff, and others that helps determine whether improper behavior is occurring in the organization. A strong, well-deployed compliance program helps ensure that all stakeholders understand the compliance standards, and helps ensure a culture of compliance.
Possible measures: Number of identified compliance issues, use of corporate compliance hotline, number of employee/physician disciplinary actions
3. Governance Competency Development
A board must be comprised of members with backgrounds that can be of value to the organization. With constant change occurring, the board must also be educated to ensure knowledge of changes in the organization's operating environment. Systematic training and development of the entire board, not just new members, will help ensure that the board continues to develop their individual and group competency.
Possible measures: Hours of training provided to board members, hours of training provided to new board members, diversity of board member background
4. Use of Performance Dashboards
"Great boards develop and nurture a "culture of performance" in which the work of the boards, the CEO, and the executive team are all aligned and incented to drive toward the successful accomplishment of the organization's strategic mission and plan." Dashboards are able to summarize progress on key performance metrics in an objective manner. Boards need to ensure that they are viewing and addressing strategic issues, and not stooping to micro-manage the organization's tactical measures.
Possible measures: Performance against key strategic performance measures, measures of accomplishment of strategic plan (7.6a(1)
5. Board Agenda Management
Board members require effective meetings to accomplish their important role, recognizing the time constraints that board members face. An effective agenda planning process ensures the best use of board members time, as well as ensuring that
Possible measures: Board members satisfaction with effectiveness of board meetings, training and development, effectiveness in addressing agenda in time allocated
6. Avoidance of Conflict and Dualities of Interest
The board must hold itself accountable to ensuring that conflicts and dualities of interest are addressed appropriately. A written policy on conflicts and dualities of interest should be reinforced, and written disclosures should be signed periodically.
Possible measures: Conflicts and dualities addressed in board meeting minutes, frequency of written disclosures, breaches of conflict and duality of interest, board member turnover
7. Non-episodic Corporate Governance Effectiveness Committee
A board Governance Effectiveness Committee should be an ongoing internal assessment committee that regularly evaluates and provides methods to improve the effectiveness of the board.
Possible measures: Number of board improvements implemented
8. Voluntary Sarbanes-Oxley Compliance
The Sarbanes-Oxley Act (SOx) was implemented by Congress to increased accountability of publicly held organizations for independence of governance decisions. While SOx reporting is not required for nonprofit organizations, there are several governance practices that a non-profit should consider implementing as good governance practices.
Possible measures: Compliance with specific SOx requirements, % of requirements voluntarily adopted
9. CEO and Management Competency Development
Board involvement in succession planning for the CEO and other key senior management positions is key to the sustainability of an organization (1.1a(3)). A well-deployed CEO performance management system, aligned with an ongoing competency assessment for the executive team, can assist the board in developing and managing a proactive succession planning process.
Possible measures: Timeliness of CEO performance review, results of CEO performance review, number of senior leaders with succession plans, senior leadership team turnover, time to hire new member of senior leader team
10. Board Strategic Planning and Evaluation
A key board responsibility is active involvement in the organization's strategic planning process, which helps plan the overall future of the organization. In addition, assessment of the board's own effectiveness, both in retrospect and in considering the future, can help ensure the likelihood of future progress of the organization.
Possible measures: Board member assessment of overall board effectiveness, board member assessment of personal effectiveness, individual meeting evaluation, assessment of effectiveness of strategic planning process
Next steps
The article suggests two next steps:
- Enhanced investment in leadership development. This is especially important in healthcare because of the fact that many senior and other leaders have come up through the clinical ranks where they may or may not have developed skills in leading and managing a complex organization.
- Develop, implement, and refine performance standards for governance, specifically related to board member's fiduciary duties and strategic oversight responsibilities. Performance standards should be able to be measured to assess current performance and track improvement.
Conclusion
The effectiveness of a nonprofit healthcare organization's governance system can - and should - be measured. The measures implemented can focus on several areas: risk avoidance, organizational performance, strategic planning, and organizational sustainability, among others. Effective governance can help the organization position itself favorably in the community it serves.
