1. The board's relationship to organisational performance and strategies for improving board effectiveness - from anecdote to evidence-based corporate governance Stuart Emslie Director, Healthcare Governance Limited Assistant Director, London Centre for Corporate Governance and Ethics, Birkbeck, London University Visiting Fellow, Healthcare Governance and Risk, Loughborough University Business School Formerly Department of Health Head of Controls Assurance for the NHS in England www.healthcaregovernance.com HEALTHCARE GOVERNANCE LIMITED

2. Thought for the day #1 "I've never seen a distressed organization that could not be traced back to ineffective governance." Larry Scanlan, President & COO, The Hunter Group, USA

3. ‘Governance’ in healthcare Board Care Clinical Commissioning Community Converged Corporate Direct Educational Enterprise Environmental External Financial Governance between organisations Health and Social Care Health Healthcare Hospital Indirect Information Integrated Internal Local Medicines Mental health Modern Mutual Network New Organisational Partnership Policy Governance ® Professional Project Public Public health Research Resource Self Service Shared Staff Transitional Whole system

4. www.HealthcareGovernanceReview.com

5. Governance is a function of ownership, not management. Governance is the key link in the chain between ownership and management (i.e. the board). The job of the board (i.e. ‘governance’) is to define organisational purpose through ownership connection; set the values for the organisation; and hold management to account (assurance). John Carver on governance #1

6. What is the ultimate test of board effectiveness? The organisation achieves its purpose From ‘What is corporate governance’ by J L Colley et al. McGraw Hill. 2005

7. What is your organisation’s purpose? From: Emslie et al (2006). Getting Governance right at board level. The Policy Governance® approach to Building better NHS boards. Clinician in Management (2006) 14: 69-77

8. ORGANISATIONAL PERFORMANCE 1.OWNERS (legal and moral – can also be customers) 2. ‘CUSTOMERS’ (patients, users, etc. - can also be owners) Board of governors Board of directors Management Front line staff (clinicians, etc.) 3. OTHER STAKEHOLDERS (i.e. excl. Owners & Customers) NHS foundation trust Members Internal context – Law, ethics and prudence External context – Political, economic, social, etc. Link?

9. “ Does good governance actually link to better organizational performance?” Question for the day……

10. Thought for the day #2 "[Good] governance is a little bit like porn," says Robert Daines.……….co-director of Stanford's Rock Center for Corporate Governance, referring to Supreme Court Justice Potter Stewart's famous comment about recognizing obscenity. “I can spot it when I see it, but it is hard to say what it is." http://money.cnn.com/2008/06/26/news/companies/watching_the_watchdogs.fortune/

11. Principle A.1 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. [emphasis added]

12. “A carefully crafted, conceptually rigorous purpose of governance….. …..forms the heart of board effectiveness.” Dr John Carver, ‘Boards That Make a Difference’,2006 John Carver on governance #2

13. “The role of boards is to govern, not to manage. It is about setting overall direction, establishing boundaries and controls, recruiting and motivating talented executives and overseeing their operation of the business.” FTSE et al. ‘Rewarding Virtue’ FTSE et al on governance…. www.ftse.com/Indices/FTSE4Good_Index_Series/Downloads/rewardingvirtue.pdf

14. “ Does good governance actually link to better organizational performance?” Question for the day……

16. 5.7%!

17. Richard Chait, Thomas Holland and Barbara Taylor (1993)

18. Board Self-Assessment Questionnaire (BSAQ) Contextual Educational Interpersonal Analytical Political Strategic ** Evidence-based & behavioural **

23. SmallModerateLargeVery large 1.3% 58.2% 21.5% 19.0% N/n = 21/79

25. r=.73, p<.001

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

27. 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

28. No relationship found between board effectiveness and ‘clinical’ measures of performance…..but… “Perhaps that will change as better financial management generates surpluses for re- investment and as improved staff morale benefits service quality.” Bob Deed, 2008 http://deed-consulting.blogspot.com/2008/07/good-governance-improves-performance.html

29. Findings cont….. Boards really can make a difference Need improvements in methods for evaluating board effectiveness Benchmarking is an important driver in board performance improvement Boards need a governance ‘operating system’ – “It’s easier to change a board’s behaviour through system and process changes that enable board members to act differently, than through exhortation.” (Chait, Holland and Taylor).

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

31. “It’s easier to change a board’s behaviour through system and process changes that enable board members to act differently, than through exhortation.” (Chait, Holland and Taylor).

32. “We have waited long for a book which analyses the role of boards from first principles. The Policy Governance model fills that bill and thereby makes a fundamental contribution. For the first time, we are offered a fully integrated and coherent system of governance, a significant advance in management thinking, as near a universal theory of governance as we at present have." Sir Adrian Cadbury Commendation

33. Paul Stanton is “influenced by the work of John Carver whose Policy Governance model is admirably clear……” CHRE………”we looked at available key publications on governance and on the guidance specific to health. Having done so, we felt that John Carver’s Boards that Make a Difference (Third Edition 2006) offered the most relevant and sensible advice, focussed on the public/not for profit sector, and widely respected.”

35. 1.The board should determine the purpose and values of the organisation, and review these regularly 2.assessing the environment, engaging with the outside world, and setting strategy 3.The board should determine the desired outcomes and outputs of the organisation in support of its purpose and values 4.For each of its desired outcomes and outputs, the board should decide the level of detail to which it wishes to set the organisation’s policy 5.Any greater level of detail of policy formulation should then be a matter for the determination of the chief executive and staff 6.The means by which the outcomes and outputs of the organisation are achieved should be a matter for the chief executive and staff; the board should not distract itself with the operational matters 7.The chief executive should be accountable to the board for the achievement of the organisation’s outcomes and outputs 8.In assessing the extent to which the outcomes and outputs have been achieved, the board must have pre-determined criteria which are known to the chief executive and staff 9.The board should engage with its ownership regularly and be confident that it understands its ownership’s views and priorities 10.The membership of the board should be capable and skilled to represent the interests of the ownership; this should not be done in a tokenistic way 11.Information received and considered by the board should support one of two goals – to enable decision making, or to fulfil control and monitoring processes 12.The board must govern itself well, with clear role descriptions for itself, its chair, and its members, with agreed methods of working and self-discipline to ensure that time is used efficiently June 2008 – Characterisitics Of an effective board……

37. “I’d just ask that [Monitor] understand our willingness to invest time (and money) in the pursuit of good governance. We are still working it out and it has caused (and is causing) some great debates about what matters to us. My board is behind the idea of better governance and as you know PG is our (my) preferred vehicle for pursuing this. It is beginning to make a discernible difference to how the board sees its role and how its actions can lead to improvements in healthcare. The energy it seems to release at our meeting is – at times – quite remarkable, hugely constructive and very challenging.” John Bruce, Chair, Southend University Hospital NHS foundation trust

38. HEALTHCARE GOVERNANCE LIMITED www.healthcaregovernance.com THANK YOU……and please consider supporting our research programme and/or coming to a Policy Governance NHS workshop at Birkbeck, London University on 22 October 2008 - see www.ukpga.org.uk Stuart Emslie SVEmslie@aol.co.uk