Developing high performing NHS boards – the issue of board behaviour

1. 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

2. The elephant in the [board]room

3. 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)

4. 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!

5. 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

6. “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

7. “.....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.”

8. “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

9. “..….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

10. [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

11. “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.”

12. “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

13. “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.”

15. Research questions...... • What are the factors that measure the performance of boards of directors of NHS foundation trusts? • 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? • Is there an association between board and organisational performance? • What are the development needs of boards to enhance board and organisational performance?

18. r=.73, p<.001

19. Quality of work-life balance (r=.52) Positive feeling with organisation (r=.62) Job satisfaction (r=.53) Intention to leave job (r=.53)

20. 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

21. Evaluating board effectiveness Board and sub- committees: observational studies and analysis of agendas and minutes Compliance with relevant legislation/ codes/standards/ guidance Triangulation of data to paint a reliable picture of effectiveness of corporate governance ORGANISATIONAL PERFORMANCE Board Self-Assessment Questionnaire (BSAQ) Board members’ accounts Owners’ and wider stakeholders’ accounts Semi-structured interviews

24. Interrelationship between board and director effectiveness(after Leblanc and Gillies) Structure Membership Process BE = BS + BM + BP Board Effectiveness Independence Competence Behaviour DE = DI + DC + DB Director Effectiveness

28. The 5 modes of board behaviour – Julia Unwin

29. Clinical Self-aware Ego left at the door Corporate Self-confident Listens first Legal High in energy & passion Board Director Profile Finance Adapts their style Breadth of contribution Selflessness Isn’t a detail junky Integrity Understands the business Objectivity Stays within role Receptive to feedback Thinks strategically Honesty Openness Challenges constructively Understands organisations ©Bevington/Price Waterhouse Cooper 2008