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NAVIGATING THE BOARDROOM
  40 Maxims ... Things You Must Know and
         Do to Be a Great Director


                    By:

             Dennis D. Pointer
© Dennis D. Pointer, 2008




       Greenlake Press
       5544 Kenwood Place, North
       Seattle, WA 98103




           - i-
Washington State Hospital Association
               300 Elliot Avenue, West
               Seattle, Washington 98119


The Washington State Hospital Association is pleased to formally sponsor and
endorse Navigating the Boardroom. This is a highly practical, useful, empow-
ering and beautifully written book. It forwards 40 “shoulds” and “should-
nots” directors must heed to really govern plus ensure their boards are mak-
ing the most difference and adding the greatest value. WSHA, with the help
of its Hospital Governing Boards Committee and affiliate CEOs, will get this
book to trustees/commissioners in all the State’s health systems and hospi-
tals.

Worth mentioning: The book has a reach far broader than the title suggests.
Although targeted at healthcare organizations, most of the maxims are appli-
cable to other nonprofit, government agency and even commercial corpora-
tion directors.

Denny has done the field a great service by making a pdf version of the book
available as an open-source document.

This book has been a long time in the making; Denny has been tossing
scraps of paper with ideas scribbled on them in a folder for at least five years.
When he talked with me about finally writing Navigating and then giving it
away free-of-charge, I thought he’d lost it. His objective was to get the book
in as many directors’ hands as possible, explaining “a zero price has got to
help.” Over several lunches plus numerous telephone calls and e-mail ex-
changes we discovered that giving something away isn’t that easy; there are
no ready-made distribution channels in place for doing so. WSHA and I seek
your assistance in propagating this valuable book; send it to colleagues, di-
rect them to www.BoardFood.com (homepage) for downloading or post it on
internet or intranet websites.


Leo Greenawalt
President and CEO




                                      - ii -
Reviews

"Easy to digest, practical and condensed wisdom; an essential road map for
both new and experienced directors. This is valuable reading for all those
who are serious about governing."

                                                                 Mark R. Neaman
                                                                 President & CEO
                                                 Evanston Northwestern Healthcare
                                                                     Evanston, IL

"An extraordinary book, very well written. The 40 maxims are right on target
and valuable guides for all trustees. This is a must read."

                                                                Stephen A. Williams
                                                                   President & CEO
                                                                  Norton Healthcare
                                                                       Louisville, KY

“Denny has a nose for understanding best practices and worst mistakes. He
lays out ‘rules of the road’ for novice and experienced directors alike. Every-
one who enters a health system or hospital boardroom can benefit from this
book.”

                                                                  J. Knox Singleton
                                                                   President & CEO
                                                               Inova Health System
                                                                   Falls Church, VA

"Denny has pointed his pen and taken aim at directors of healthcare organiza-
tions. His 40 maxims provide a much-needed, focused and prescriptive road
map for greater trusteeship professionalism which, if followed, will result in
more proficient and effective governance."

                                                                        Ken Hanover
                                                                    President & CEO
                                                Health Alliance of Greater Cincinnati
                                                                      Cincinnati, OH

“All directors should read these 40 Maxims; they will change the way you
think about governing and perform in the boardroom.”

                                                                Douglas Hawthorne
                                                                   President & CEO
                                                            Texas Health Resources
                                                                      Arlington, TX

“The acid test is: Will these maxims improve director quality and effective-
ness? The answer is a resounding ‘absolutely’! Maxim #1 should have been:
Read these before embarking on the critical task of governing.”

                                                                 John W. O’Connell
                                                                   President & CEO
                                                    Franciscan Services Corporation
                                                                       Sylvania, OH




                                      - iii -
“I have spent 27 years of my life as the CEO of healthcare organizations, a
publicly traded company and a start-up IT venture; I’ve always sought
Denny’s counsel and advice about governance. These maxims will help direc-
tors make good boards great. In an era of transparency, boards that heed
these ideas will outshine their counterparts and be of greater value to soci-
ety.”

                                                                 R. Timothy Stack
                                                                  President & CEO
                                                             Piedmont Healthcare
                                                                       Atlanta, GA

“A must have resource for all health system and hospital boards; CEOs,
chairs and directors should make this valuable book part of their tool box.”

                                                              David D. Whitaker
                                                                President & CEO
                                                  Norman Regional Health System
                                                                    Norman, OK

"CEOs are realizing strong, informed and empowered boards are great assets
for navigating the challenges facing contemporary healthcare organizations.
High performance governance requires: boards that engage in best practices;
and directors who unde rstand and execute their critical roles. Denny's book
provides an essential road map for executives, board chairs and directors."

                                                              Gary S. Kaplan, M.D.
                                                                  Chairman & CEO
                                                    Virginia Mason Medical Center
                                                                       Seattle, WA

“Denny has produced an invaluable guide about the self-care and develop-
ment of board officers and members. It is targeted perfectly. I wish such a
list of do’s and don’ts had been available when I entered the field in 1955.
Clearly, in today’s complex environment, his contribution is of special value.
It serves as a powerful guide to strengthen executive-board relationships.”

                                                                       Austin Ross
                                                Executive Vice President, Emeritus
                                                    Virginia Mason Medical Center
                                                                       Seattle, WA

“Serving on a governing board is a monumental challenge. For the freshman
director or more seasoned one, this book lays out key elements of a well or-
ganized platform which each director needs to fulfill his/her fiduciary respon-
sibilities.”

                                                             William Himmelsbach
                                              Executive Officer, VHA Empire-Metro
                                                        VHA Senior Vice President
                                                                     New York, NY




                                     - iv -
“This concise and practical book captures the challenges, vitality, and com-
plexity of healthcare boards. Denny offers candid and straightforward advice,
plus numerous anecdotes, drawn from decades of governance consulting, re-
search and teaching experience. Navigating the Boardroom provides thought-
ful maxims for readers interested in a quick bit of advice or those wanting
greater depth.”

                                                 Dale Schumacher, M.D., M.P.H.
                                                                      President
                                                            Rockburn Institute
                                                                  Elkridge, MD




                                    - v -
Distribution and Use

     I’m making this book available free-of-charge for several reasons: First,
to facilitate spreading ideas I believe can help directors improve their per-
formance/contributions and get more out of the experience serving on non-
profit healthcare organization boards. Second, it’s a small way of saying
thanks to the field that has provided me such a meaningful and enjoyable ca-
reer.

    This is an open-source document. As such you may:

 • print from the pdf file, copy and distribute it in hardcopy;

 • circulate it as a pdf file;

 • post it on internet or intranet websites; and/or

 • employ www.BoardFood.com as a URL for others to download it in pdf
   format directly from the website’s homepage.

Duplication/distribution/posting must be done with full attribution and used
exclusively for non-commercial, educational purposes. Sale or repackaging,
in any form, is prohibited. Readers are expected to respect my intellectual
property and not use this material as the content for other documents or
speeches/prese ntations without my written permission.




                             Navigating the Boardroom: 40 Maxims by
                             Dennis Pointer (Bozeman, MT: Second River
                             Healthcare Press, 2008); ISBN-13 / 978 -
                             974F8609-6.

                             If you’d like to order a hardcover (“real book”)
                             version, it’s available from:

                                   Second River Healthcare Press
                                        for information, contact:
                                      www.secondriverhealthcare.com
                                              406-586-8775

                                               The price is $19.95.

“Ideal for CEOs or chairs who would like to provide board members something
more substantial than a 8½ by 11 ‘Xeroxed’ copy of Navigating.” Jerry
Pogue, Publisher; Second River Healthcare Press.




                                      - vi -
Dennis D. Pointer, Ph.D.

     Denny is Austin Ross – Virginia Mason Professor, Department of Health
Administration, School of Public Health and Community Medicine, University
of Washington (Seattle). He has held two previous endowed chairs: John J.
Hanlon Professor of Health Services, Graduate School of Public Health, San
Diego State University (1991-2002); and Arthur Graham Glasgow Professor
of Health Services Management, Department of Health Administration, Medi-
cal College of Virginia, Virginia Commonwealth University (1986-1991). From
1975 to 1986 he was affiliated with the University of California - Los Angeles
where he served as: Professor and Head, Program in Health Services Man-
agement, School of Public Health; Associate Director, U.C.L.A. Medical Cen-
ter; Professor, Anderson School of Management; and Professor of Psychiatry
and Bio-behavioral Sciences, School of Medicine. During his tenure at
U.C.L.A. he was a Research Fellow at the RAND Corporation. He has held
faculty appointments at the Mount Sinai School of Medicine (New York) and
the Baruch School of Management of the City University of New York in addi-
tion to having served as Associate Director, Department of Teaching Hospi-
tals, Association of American Medical Colleges (Washington, D.C.).

     Denny is the author of eleven books. Really Governing and Board Work
have won the James A. Hamilton book of the year award from the American
College of Healthcare Executives. His other books include: Getting to Great:
Principles of Healthcare Governance; The High Performance Board; The
Health Care Industry: A Primer for Board Members; Essentials of Health Care
Organization Finance: A Primer for Board Members; and Governing the 21st
Century Nonprofit Healthcare Organization: Transforming the Work and Con-
tributions of Your Board (estimated release in early 2009). He has written 80
scholarly and professional articles.

     Principal of Dennis D. Pointer & Associates, Denny has been retained as a
governance consultant, retreat facilitator and speaker by over 250 healthcare
organizations, commercial corporations, governmental agencies and profes-
sional/trade associations. He was a founding partner of the American
Healthcare Governance and Leadership Group LLC, now the Center for
Healthcare Governance of the American Hospital Association.

     Denny received his Ph.D. from the University of Iowa in hospital and
health services administration and B.Sc. in organizational psychology from
Iowa State University.




                                    - vii -
Letter to Readers

Dear Colleagues:

     There are approximately 10,000 nonprofit healthcare provider organiza-
tion boards in the U.S., each of which has about 15 members. Thus, the
best-guess number of directors is 150,000.

     The effectiveness of these boards ... the extent they make a difference
on behalf of their communities and add value to the organizations they gov-
ern ... depends on the qualities of directors; their dedication, effort, knowl-
edge, skills, experience and perspectives. Although governing is a “team
sport,” it’s practiced by individuals who occupy all those boardroom chairs.

     The vast governance literature has focused almost exclusively on boards;
their obligations, responsibilities and roles; the way they should be struc-
tured, configured and composed; how they should function; and what they
can do to improve their performance. Little attention has been accorded di-
rectors and directorship. The book was written to begin filling that void.

    Drivers’ manuals aren’t provided to directors at the time of their initial
appointment or during their terms of service. The assumption is that bright
people will figure out, and pick up the fundamentals of, board work by just
doing it. While experience is a great teacher, it can be enriched, leveraged
and enlivened when grounded on good ideas.

              max•im (mac’sîm); Succinct formulation of a
              fundamental principle; a guideline for thinking,
              deciding and acting.

     Navigating the Boardroom forwards 40 maxims, some things you must
know and do to maximize your performance and contributions as a nonprofit
healthcare organization director, whethe r you’re new or long-tenured. The
book is straight talk that forwards practical and usable wisdom.

     This is a product of what I’ve learned over 30 years of governance
consulting, teaching, research, writing and speaking. I’ve spent a huge
amount of time in boardrooms with directors, both colleagues and clients. I
owe these folks a large debt; they are, in every sense, my co-pilots in this
endeavor (bearing none of the blame for what you might find ill-conceived or
poorly stated). Additionally, it has been my good fortune to have worked
with a bunch of wonderful collaborators/friends over the years. With trepida-
tions regarding sins of omission, thanks to (in alphabetical order): Gary
Aden, Ted Ball, Jim Begun, Rick Carlson, David Cohen, John Colloton, Bill
Dowling, Charlie Ewell, Debbie Gramling, Leo Greenawalt, Jan Jennings, Nate
Kaufman, Dick Knapp, Jennifer Kozakowski, Baldwin Lamson, Sam Levy,
Roice Luke, Michele Molden, Jerry Norville, Jamie Orlikoff, Andy Pasternack,
Dave Pitts, Jerry Pogue, Austin Ross, Marty Ross, Lou Rossiter, Bob Simmons,
Mary Totten, Tim Stack, Dennis Stillman, Will Welton and Steve Williams ...
you’ve all enriched my life.

     I wanted to keep this book short [Maye West was wrong when she said,
“Too much of a good thing is great.”] So, rather than including numerous
referenced supplemental materials as appendices, they’re provided at
www.Boardfood.com; go to the navigational aids, other resources or book-


                                      - viii -
shelf pages and download what you find useful/interesting. The website also
contains a “truck-load” of other governance “knowledgeware,” all provided as
open-source documents.

Denny
Dennis D. Pointer
Seattle, Washington
dennis.pointer@comcast.net




                                    - ix -
The Maxims

1.    Governance matters.

2.    Evaluate your interest in, and commitment to, the or-
      ganization before serving or continuing to serve.

3.    Don’t be a “letterhead” director.

4.    Become a professional director.

5.    Know what’s expected of you.

6.    Get to know your colleagues.

7.    If you are a newly appointed director, hook up with a
      mentor.

8.    Immediately begin acquiring an understanding of gov-
      ernance and the nature of board work.

9.    Understand board topography.

10.   Serve your apprenticeship, but do so quickly.

11.   Realize governing is a distinctive organizational prac-
      tice.

12.   Recognize the difference between governing and man-
      aging, then respect it.

13.   Keep your eyes on the prize.

14.   Don’t represent narrow interests or constituencies.

15.   Understand your legal fiduciary duties of loyalty, care
      and obedience in addition to director liabili-
      ties/protections.

16.   Understand your board’s governing responsibilities.

17.   Acquire an increasingly sophisticated unde rstanding of
      content areas underpinning issues your board will be
      addressing.

18.   Develop (or enhance) your healthcare organization-
      specific financial literacy.

19.   If you’re the board chair, learn how to run effective and
      efficient meetings.

20.   Do your homework.

21.   Show up.



                             - x -
22.   Participate.

23.   Question.

24.   Play devil’s advocate.

25.   Acknowledge conflicts-of-interests and disengage when
      you have one.

26.   Keep sensitive information confidential.

27.   Be ethical.

28.   Do governing work only in the boardroom.

29.   Stroke.

30.   Don’t make individual requests of the CEO and execu-
      tive team members.

31.   Be prepared to vote no.

32.   Argue in the boardroom, lock arms when you leave it.

33.   Don’t engage in personal financial dealings with other
      directors or executives.

34.   Never do non-governance work for the organization.

35.   Keep your personal relationship with the CEO at arms-
      length.

36.   Provide the CEO with advice and counsel, but be care-
      ful.

37.   Be prepared to lead.

38.   Be a good board and organizational citizen.

39.   Prior to the conclusion of each term, assess your per-
      formance and contributions.

40.   Enjoy the journey and have fun.

References and Resources




                               - xi -
1.   Governance matters.                                      agement and physician leaders;
                                                              boards just get in the way and slow
     Healthcare organizations are impor-                      down an organization’s metabolism.
tant institutions. They’re a critical part of                 What do you think? What value can
your community’s infrastructure, provide                      boards add that executives and phy-
services affecting its wellbeing and have a                   sician leaders can’t? What are the
significant economic impact.                                  distinctive purpose and contributions
                                                              of boards? These question are fun-
      “A board is as high up in an organiza-                  damental ones, to which I will return
tion as one can go and still remain inside                    later.
it” (from Boards that Make a Difference by
John Carver). Accordingly, your board                  • What difference does your board
bears ultimate responsibility and account-               make and how much value does it
ability for the organization: everything it              add? During the past year, what were
is, does and should become; stewardship                  your board’s most important contribu-
of its resources and capacities; and how                 tions?
well it serves your community.
                                                       • In what ways has your board been a
      Because your board is where the buck               drag on the organization?
stops, its work has a potentially huge im-
pact on the organization’s performance                 • What are some things that have in-
and success. The issues your board ad-                   hibited/impaired your board from
dresses, and decisions it makes regarding                maximizing its performance and con-
them, defines the organization and shapes                tributions?
its future.
                                                       • What do you bring to this boardroom;
     If you don’t buy the notion that                    knowledge, skills, experiences and
boards make a difference, consider this                  perspectives? How much of a contri-
“reverse angle” thought experiment: Your                 bution do you make?
board has 15 minutes to make decisions
that would really harm the organization …              • What are things you might do to be-
strategically, managerially, financially, op-            come a better director?
erationally or clinically. Could you do it?
Every board to which I have posed this               2.       Evaluate your interest in, and
question has responded: “Yes, we’re up                        commitment to, the organization
to the challenge, it would be easy and                        before serving or continuing to
wouldn’t take 15 minutes.” Your board,                        serve.
the work it does and how well it’s done
has a significant impact ... for better or                Being a high performing/contributing
worse.                                               director requires conside rable time and
                                                     effort. Personal interest in issues being
directorship                                         dealt with by the board should capture
                                                     your attention and personal commitment
                                                     to the organization’s mission should sus-
 • Some contend that boards don’t make               tain your involvement over the long haul.
   a great deal of difference or add                 Both interest and commitment are neces-
   much value. They say: directors are               sary ingredients for great directorship.
   amateurs lacking a sophisticated un-
   derstanding of the healthcare indus-                  Anecdote: Several years ago a col-
   try, local markets, community needs,              league of mine resigned from a board she
   competitors and the organizations                 had joined only 14 months earlier. This
   they’re governing. They also argue:               board was first-rate and appointment to it
   the few things boards do reasonably               was an honor. She had wanted to work
   well could be done far better by man-             with its members, all “movers and shak-

                                           - page 1 –
                                        © Dennis D. Pointer
                                      www.BoardFood.com
ers.” Additionally, its quarterly meetings                  attendance and participation.
provided her an opportunity to spend time
with the CEO, a good friend. The prob-               • By taking a seat and then “checking
lem, recognized too late: this organiza-               out,” you rob the board of a valuable
tion’s mission and issues the board ad-                asset.
dressed weren’t important to her. Don’t
make a similar mistake.                            Serve, and continue serving, because you
                                                   have something to contribute and are will-
directorship                                       ing/able to do so.

                                                   directorship
 • How invested are you in this organi-
   zation? What about it is really impor-
   tant to you? How committed are you                • In all communities, the pool of tal-
   to its vision and mission? How inter-               ented/connected leaders is small and
   ested are you in issues passing                     such folks are sought by many orga-
   through the boardroom?                              nizations to serve on their boards.
                                                       Your interest, time and effort are fi-
 • Why did you decide to join this                     nite and you have a wide variety of
   board?                                              opportunities for giving something
                                                       back. Why did you choose this board
 • Overall, how does this director/board               as a way of making a contribution?
   experience stack up with others
   you’ve had?                                       • On how many boards do you pres-
                                                       ently serve? If it’s more than three,
 • What would cause you to resign?                     evaluate if you’re spread too thin.

3.   Don’t be a “letterhead” director.               • If you no longer have the necessary
                                                       time or level of commitment to serve,
     Being nominated or re-appointed to a              consider resigning. Don’t sully your
healthcare organization board is an honor              reputation by poor attendance and
and privilege; recognizing you’re a com-               problematic performance. Since
munity leader and a respected person in                healthcare organization boards are
the eyes of your peers, plus offering you              composed of the most connected and
the opportunity to do important work and               respected people in town, word
make a difference.                                     quickly gets around regarding direc-
                                                       tors who pull their weight and those
     Letterhead directors are those who                who don’t.
want the glory that comes with board
membership but rarely attend meetings              4.       Become a professional director.
and don’t participate or contribute much.
There are several good reasons, beyond                  Professionals are typically defined as
the obvious ones, for not being this type of       people who engage in occupations full-
director:                                          time for pay, whereas amateurs are those
                                                   who undertake the same endeavors on a
 • It totally depreciates the value associ-        part-time basis without compensation. In
   ated with board membership you                  this sense, all board members are ama-
   wanted when signing on.                         teurs. But, the following definitions get
                                                   closer to the essence of these terms.
 • You’re accountable and potentially li-
   able for board decisions/actions, even            • pro•fes•sion•al (pra`fêsh-a-nal); A
   when you don’t attend meetings. In-                 highly committed, knowledgeable,
   deed, you breach the fiduciary duty of              skilled and experienced practitioner.
   care (see Maxim #15) through non-

                                         - page 2 –
                                      © Dennis D. Pointer
                                     www.BoardFood.com
• am•a•teur (am`ã-tur); A person who                        torship?
   engages in an activity as a past-time;
   someone lacking a high level of so-                • Which aspects of your director prac-
   phistication and competency.                         tice are professional? Which are
                                                        amateurish?
     To make a difference, add value and
really govern, boards must be composed              5.       Know what’s expected of you.
of pros. Professional directors, as con-
trasted to amateurs:                                     The price of admission to the best
                                                    boardrooms is fulfilling (indeed, exceed-
 • undertake board service as a vocation            ing) expectations. Be clear about what
   - a role that’s assumed to perform               they are. Vague or totally unrealistic ex-
   important tasks; rather than as a                pectations are killers that can sap your
   hobby, done solely for personal grati-           motivation, erode the amount/quality of
   fication and amusement                           your participation and impair your
                                                    effectiveness.
 • take their responsibilities seriously;
   they’re not dilettantes                               Anecdote: I was being interviewed
                                                    for membership on two nonprofit boards
 • are committed to representing com-               and couldn’t accept both appointments.
   munity interests; not furthering their           Over dinners with the CEOs and board
   own                                              chairs I asked, “What’s expected of me?”
                                                    Here (paraphrased) are the responses I
 • devote considerable time and energy              got: Chair A: “Hum, haven’t really
   to the job; not just enough to get by            thought about it. I guess, not too much.
                                                    We meet every other month for three
 • are highly knowledgeable, skilled and            hours; you’d be expected to serve on
   experienced; not marginal practitio-             several committees and attend our annual
   ners                                             retreat.” Chair B: “This board takes its
                                                    work very seriously. We feel governance
 • are actively engaged; not passive                makes a significant difference to our
                                                    stakeholders and the organization’s long-
 • are inquisitive and somewhat skepti-             term success. The key is great directors
   cal; not totally accepting                       who understand what’s expected of them
                                                    and then deliver. We’ve thought very
 • function as checks-and-balances; not             carefully about this and have developed a
   “rubber stamps”                                  job description. I should have sent you a
                                                    copy before this interview, but here it is.
 • continually increase their competen-             Look it over and then let’s talk.”
   cies; aren’t satisfied with their own
   status quo                                       directorship

directorship
                                                         When being interviewed for a board
                                                    seat, here are some questions you might
 • Who are the pros on your board?                  ask:
   Who are the amateurs? What differ-
   entiates their director practice?                  • Why am I being considered for ap-
   Watch the pros and learn from them.                  pointment to this board? What
                                                        knowledge, skills, experiences and
 • All groups typically get what they ex-               perspectives are you seeking? What
   pect and continuously reinforce. To                  contributions do you think I can
   what extent, and how, does your                      make?
   board encourage professional direc-

                                          - page 3 –
                                       © Dennis D. Pointer
                                    www.BoardFood.com
• Do you have a director job description           Even if not offered, I think it’s a must to
  or position charter I can review?                ask for the opportunity to talk with several
  [This is a benchmark governance                  current directors. Schedule about an hour
  practice. If you’d like to see an illus-         with each individually. The key topics
  trative nonprofit healthcare organiza-           should be: the nature of their experiences
  tion director position charter, log-on           as directors, both pluses and minuses;
  to www.BoardFood.com, go to the                  and general board climate/culture.
  navigation aids page and download
  the document.]                                   6.       Get to know your colleagues.

• About how many hours per month or                     Governance is an intensely interper-
  year should I expect to devote as a              sonal activity. The best boards function
  member of this board?                            as focused, effective, efficient and creative
                                                   teams. A necessary prerequisite is mem-
• What is the term length and how                  bers who understand one another and
  many terms are members expected to               where each is coming from. Get to know
  serve before leaving the board?                  your fellow directors; their profes-
                                                   sional/personal histories, perspec-
• When does the board meet (day and                tives/values, interests, knowl-
  time)? How many regularly sched-                 edge/skill/experience mix, why they
  uled meetings are held each year and             choose to serve and continue serving, and
  how long are they? How many spe-                 what they want to accomplish.
  cial meetings were held last year and
  how long were they?                                    Although directors need not (and
                                                   probably shouldn’t) be best friends, it’s
• On occasion, can I participate in                critical they understand and respect one
  board meetings telephonically?                   another. Building wholesome and empow-
                                                   ering interpersonal relationships takes time
• On how many committees will I be                 and effort. This can’t be done through in-
  required to serve? How often do they             teractions in the boardroom alone; there
  meet and for how long? Do I have                 isn’t enough time and it’s not a particularly
  some input regarding committee as-               conducive space for doing so.
  signments?
                                                        Anecdote: I once sat on a commer-
• Does the board hold annual retreats?             cial corporation board where the directors
  Where are they typically held (locally           and key executives went on a four-day
  or at a distant location)?                       fishing trip each year to an isolated loca-
                                                   tion. I don’t like to fish and when first
• Am I expected to attend extramural               told of the annual ritual, I thought it was
  governance educational confer-                   an unnecessary boondoggle. After going
  ences/seminars? If so, how often?                on several of them, I came to realize how
                                                   important they were to our board’s
• What type of organizational events               healthy/empowering culture and effective
  will I be asked to attend during the             teamwork (one of the best I have ever
  year?                                            been part of). Members had the opportu-
                                                   nity to get into each others’ heads and
• Will I be expected (either explicitly or         skins. It was time and money well spent.
  implied) to make personal contribu-
  tions to the organization? If so, what           directorship
  is the norm? Will I be required to so-
  licit donations from individuals and
  organizations where I have connec-                 • I’ve seen boards that don’t give any
  tions?                                               thought or effort to integrating newly
                                                       appointed directors, other than going

                                         - page 4 –
                                      © Dennis D. Pointer
                                   www.BoardFood.com
around the table and having members                   up to speed and begin understanding this
      briefly introduce themselves. If this                 terrain in terms of boardroom substance
      is the extent of it, take the “bull by                and dynamics.
      the horns.” During the first several
      months of your service, schedule in-                      My recommendation: Early in your
      dividual lunch/dinner get-togethers                   tenure, enlist an experienced director to
      with all other board members. Rest                    serve as your mentor; someone that can
      assured, they will be blown away by                   help you understand the organization, the
      the gesture and effort. Use the time                  board, how it functions and issues coming
      to build rapport with, and get to                     before it.
      know, your colleagues.
                                                            directorship
    • Additionally, if not part of your orien-
      tation, insist the CEO arrange meet-
      ings for you with each executive team                   • If your board doesn’t have a formal
      member. Seize the opportunity to                          mentoring program as part of its new
      learn about them and what they do.                        director orientation (most don’t), talk
                                                                with the board chair and request that
    • If your board has someone that pro-                       someone is assigned to you to play
      vides staff support (i.e., executive as-                  this role. The individual should be an
      sistant, the CEO’s secretary, govern-                     experienced director (one that’s ex-
      ance coordinator, corporate secre-                        ceptionally competent and high
      tary), take him/her to dinner. More                       performing) who has the time and
      than anyone, he/she will be able to                       skills to work with you for about six
      provide you with a feel for the “lay of                   months. I recommend the following
      the land.”                                                two books on how to craft a produc-
                                                                tive mentor-mentee relationship: The
    • What are some things your board                           Mentee’s Guide to Mentoring by Nor-
      might do to help directors developing                     man Cohen; and Power Mentoring:
      better “interpersonal glue” and build                     How Successful Mentors and Protégés
      the team? It need not be a fishing                        Get the Most Out of Their Relation-
      trip to an isolated location. For some                    ships by Ellen Ensher and Susan Mur-
      ideas, I suggest you consult: The                         phy.
      Five Dysfunctions of a Team by Pat-
      rick Lencioni; and Team Building –                      • At your first meeting (perhaps during
      Proven Strategies for Improving Team                      a long conversation over dinner), get
      Performance by William Dyer, et. al.1                     an initial “navigational fix.” Some
                                                                things to talk about might include:
7.    If you are a newly appointed di-
      rector, hook up with a mentor.                                 - thumb-nail profiles of each director
                                                                       and key executive
     A good bit of what goes on in board-
rooms is rooted in long chains of                                    - strengths and weakne ss of the
events/issues that have evolved over                                   board in terms of how it considers
time, linked to a variety of other matters,                            and acts upon issues, plans, pro-
very subtle, permeated with nuance (i.e.,                              posals and recommendations
“politics”) and complex. Additionally,
every board has its own distinctive way of                           - the most important boardroom
doing business. Your success as a direc-                               norms; rules-of-the-road (rarely
tor will depend on how effectively you get                             formally codified or even dis-
                                                                       cussed) that guide director behav-
1
   The full citations for these, and all other                         ior and how business is conducted
books/articles mentioned in the following pages, are
provided in the “References and Resources” section.                  - nature of the board-CEO relation-

                                                  - page 5 –
                                               © Dennis D. Pointer
                                            www.BoardFood.com
ship                                            • the distinctive nature of a nonprofit
                                                         healthcare organization’s stakeholders
     - a brief history of how the board                  and how they relate to a board’s pur-
       has evolved and changed over the                  pose
       last five years or so; particularly
       seminal events ... major successes              • obligations, responsibilities and roles
       and failures, how the board coped                 of nonprofit healthcare organization
       with them and what was learned                    boards

 • Before each board meeting, get on                   • key factors that drive/affect board
   the phone with your mentor and                        performance and contributions
   spend some time reviewing the
   agenda.                                             • how boards exercise influence over/in
                                                         the organizations they govern
     - What are the key issues (both ex-
       plicit and below the surface)?                  • nature of the board–CEO relationship

     - What is the context and history               I will address these topics, very briefly, in
       surrounding items that will be ad-            some of the maxims that follow; but, it’s a
       dressed? Why are they on the                  mere “Baskin Robbins taste spoon.”
       agenda? What is wanted from the
       board and how can it make a con-              directorship
       tribution? What sensitivities (or-
       ganizational and personal) might
       emerge?                                         • To acquire a grounding, I recom-
                                                         mend:
 • After each board meeting huddle with
   your mentor to “re-view” the meeting                       - Getting to Great: Principles of
   and how the board went about its                             Health Care Organization Govern-
   work, in addition to your own per-                           ance by Dennis Pointer and James
   formance/contributions.                                      Orlikoff. This book is less than 200
                                                                pages, employs a principles for-
 • If you’re an experienced director, of-                       mat, is chock-full of application
   fer to mentor a newly appointed one.                         sidebars/guides and written in a
   You’ll get far more than you give.                           tight/conversational style. If you
                                                                want to review the book’s table of
8.   Immediately begin acquiring an                             contents, including a listing of the
     understanding of governance and                            72 principles, log-on to
     the nature of board work.                                  www.BoardFood.com, go to the
                                                                bookshelf page and download the
     Like all other types of work, director-                    document.
ship is a practice grounded on a body of
knowledge. You’ll pick up some of this in                     - The Excellent Board I and the Ex-
the boardroom over time. But, the under-                        cellent Board II by Karen Gardner
lying and essential fundamentals can’t be                       (editor) is a compendium of the
acquired by repeated observation and                            best articles on a wide variety of
practice alone; a little formal learning will                   governance topics taken from Trus-
be required.                                                    tee Magazine.

    The best “book knowledge” leavens                  • If you want to move beyond the ba-
experience. Some things about govern-                    sics, I suggest: Governance as Lead-
ance and governing important to under-                   ership: Reframing the Work of Non-
stand are:                                               profit Boards by Richard Chait, et. al;
                                                         and Boards that Deliver by Ram Cha-

                                           - page 6 –
                                        © Dennis D. Pointer
                                      www.BoardFood.com
ran.                                                     ing boards bear legal fiduciary responsibil-
                                                                ity and accountability for their organiza-
9.     Understand board topography.                             tions. Advisory boards don’t ... they pro-
                                                                vide input, advice and counsel to govern-
     Nonprofit healthcare organizations are                     ing boards and/or management.
very diverse; accordingly, there’s a wide
variety of arrangements for governing                                There are four primary methods of di-
them. It’s important to understand key                          rector selection: 3
features of this terrain.
                                                                    • Appointed - One or more directors are
     There are two basic governance                                   chosen by (for example): a
structure s: centralized and decentralized.                           stakeholder group such as a sole cor-
                                                                      porate member (parent board in a
                       Centralized                                    health system); or city council for
                                                                      the board of a municipal hospital.

                          BOARD                                     • Elected - Some or all directors are di-
                                                                      rectly elected by (for example):
                                                                      members of the corporation; 4 or the
                                                                      general public in governmental, dis-
                    system or hospital
                                                                      trict hospitals. 5

                                                                    • Ex officio - One or more directors are
                                                                      appointed to the board because of
                                                                      other positions they hold. Some illus-
                                                                      trations include serving on a board by
                     Decentralized
                                                                      virtue of being: the CEO;
                          system
                                                                      chief/president of the medical staff;
                                                                      president of the volunteer organiza-
                      PARENT BOARD
                                                                      tion or foundation; or holding an
                                                                      elected political office.
       BOARD              BOARD            BOARD
                                                                    • Self-selected - Some or all directors
      subsidiary         subsidiary       subsidiary                  are chosen by presently serving board
     organization       organization     organization                 members.


In centralized structures, organizations
are governed by a single board. For ex-
ample, in centralized healthcare systems,
subsidiary organizations don’t have their
                                                                3
own boards. Decentralized systems are                               Note: These methods can (and often are) com-
composed of a parent and one or more                            bined in composing a board, for example: some
                                                                directors are appointed, some are ex-officio and oth-
subsidiaries, 2 each of which have boards;                      ers are self-selected.
governing responsibilities are subdivided                       4
                                                                    Although an increasingly ra re governance struc-
and shared among them.                                          ture, some nonprofit healthcare organizations have
                                                                “incorporators”; generally individuals meeting mini-
                                                                mal criteria who can become members after paying a
    There are two different types of
                                                                nominal fee. Typically, their sole function is electing
boards: governing and advisory. Govern-                         directors nominated by the presently serving board.
                                                                5
                                                                    Distric t hospitals are supported by public funds;
2
    Which could include hospitals, long-term care               typically, bonds and property taxes. The taxing
facilities, medical service organization (MSO), medi-           authorities are established like school distri cts; vot-
cal practices/groups/corporations, a foundation, joint          ers elect board members who are public officials.
venture corporations, real estate holding company,              States with significant numbers of distri ct hospitals
etc.                                                            include California, Texas and Washington.


                                                      - page 7 –
                                                   © Dennis D. Pointer
                                                www.BoardFood.com
directorship                                       board’s most senior, distinguished and
                                                   accomplished member. A lesson learned
                                                   the hard way.
 • Understand the positioning of your
   board in this terrain, along the key                  The wise person understands first im-
   dimensions:                                     pressions are critical because they come
   - parent/system or subsidiary board             first and are hard to undo.

    - type of board - governing or advi-           directorship
      sory

    - method(s) of director selection -              • What chair you take in the boardroom
      appointed, elected, ex-officio                   may be a trivial matter; but what
      and/or self-selected                             you say or don’t, isn’t. I recommend
                                                       sitting back and observing for your
 • If you serve on the board in a                      first three or four meetings. When
   healthcare system that’s decentral-                 you engage, do so by asking ques-
   ized: request and review a chart of                 tions; not the probing type, but
   it’s governance structure; and ask to               rather those designed to seek infor-
   see a document that specifies how                   mation, clarification and elaboration.
   governing responsibilities (see Maxim               A person rarely harms oneself by say-
   #16) are subdivided and coordinated                 ing too little, at least initially. My
   among parent and subsidiary boards                  greatest embarrassments as a new
   (i.e., who does what).                              director have come from making an
                                                       observation or suggestion whe n I
10. Serve your apprenticeship, but do                  didn’t understand context or know
    so quickly.                                        what I was talking about.

     If you’re a newly appointed director,           • Engage slowly and incrementally over
this particular boardroom is foreign terri-            time. Don’t come on like “gang bust-
tory. You’ve likely been “plopped down” in             ers.”
an unfamiliar industry/organization, are
dealing with issues you don’t fully under-           • Recognize that all boards have well
stand and are interacting with other direc-            defined authority/power structures
tors who are strangers. You’d be wise to               (“pecking orders”). Figure out what
serve an apprenticeship before engaging                they are. Enlist your mentor to help
as a full-fledged journeyman; do so, but               you here (see Maxim #7).
do it quickly. Keep in mind, you were ap-
pointed to this board because of your                • Use your time as an apprentice to:
knowledge/skills/experience and for the                get to know your colleague directors
contributions you’ll make.                             (Maxim #6); gain an understanding
                                                       of healthcare organization governance
     Anecdote: In the early 90s, I joined              (Maxim #8); and become familiar
the board of a NASDAQ listed healthcare-               with the content areas underpinni ng
focused information services company. At               issues flowing through the boardroom
my first meeting, I walked into the board-             (Maxim #17).
room and took a seat at the front of the
table, to the chair’s right. As the meeting        11. Realize governing is a distinctive
progresse d I noticed a bit of uneasiness              organizational practice.
and some sideways glances. At the break
I pulled an old friend aside who’d been a                   pra•tice (pràk-`tîcë); An ac-
director for several years and asked if                     tivity employing knowledge
                                                            (“know- what”) and skills
something was off. He responded: “You
                                                            (“know-how”), som etimes sup-
sat in John’s chair.” Mr. ______ was the

                                         - page 8 –
                                      © Dennis D. Pointer
                                    www.BoardFood.com
plemented by technologies, to
                                                              directorship
         solve problems and seize op-
         portunities.
                                                                • Many directors, particularly those who
     Governance, like management and                              practice their professions individu-
medicine, is a practice; however, when                            ally/autonomously (e.g., consultants,
contrasted with them, it’s distinctive.                           physicians, lawyers, accountants), of-
                                                                  ten have difficultly adjusting to a
     First, governance is part-time and oc-                       board’s collective orientation and col-
casional work. While executives, the                              laborative way of doing business.
medical staff and employees are perma-                            Consensus decision making, after
nent organizational fixtures ... directors                        long deliberation and debate, just
are not. Boards convene for short periods                         goes against their grain. How com-
of time, they adjourn and weeks or                                fortable, experienced and skilled are
months pass before they meet again.                               you at playing the team sport of gov-
                                                                  ernance ?
      Second, due to its part-time nature,
board work is episodic and fragmented.                          • I run across directors who think they
It’s done in discrete bursts of activity, not                     can make individual requests of ... or
continuously. As a consequence, collec-                           even tell ... executives, management
tive memory and momentum is difficult to                          staff, employees or physicians “what
sustain. No matter how important the is-                          to do.” They’re missing one of the
sue being addressed, it fades into the                            most fundamental aspects of govern-
background at the end of a meeting and                            ance as a collaborative practice.
must be resurrected at the next one.
                                                                • Because board attention and work is
     Third, boards exist only when they                           inherently fragmented ... memory,
meet, between “raps of the gavel.”6 The                           thrust, follow-through and follow-up
typical nonprofit healthcare organization                         are often problematic. Systems and
board meets for two – three hours, 11                             procedures must be put in place to
times a year; thus, it has only 22 – 33                           increase the seamlessness and conti-
hours per year to govern one of society’s                         nuity of governance work. Your
most important and complex institutions.                          board might consider implementing a
                                                                  follow-up agenda to track all action
     Fourth, while management and medi-                           items for review/assessment at future
cine are individual practices,7 governance                        meetings. Additionally, I recommend
is a “team sport.” A director has no indi-                        that you retain all board/committee
vidual authority and power, as governing                          meeting agendas and associated
responsibility rests with the board as a                          back-up materials for one year. This
whole.                                                            takes a bit of filing cabinet space, but
                                                                  it’s helpful as a memory refresher and
                                                                  personal tracking system.
6
     For example: boards, per se, don’t exist when
their committees meet. Committees are board com-              12. Recognize the difference between
ponents/sub-groups; they can’t (other than in iso-                governing and managing, then re-
lated and narrow instances), legally or functionally,             spect it.
discharge full board obligations and responsibili ties.
7
     I typically get a push-back on this from confer-
                                                                    Management’s job is to run the orga-
ence attendees, board retreat participants and my
graduate students; it’s always fun to discuss.                nization; the board’s work is to ensure
Clearly, managerial and medical work is sup-                  it’s run well. The more your board at-
ported/facilitated by many people; it couldn’t be             tempts to manage, the less it will govern
done without them. However, managerial and clini-
cal decisions are made by individuals. My favorite            effectively.
illustrat ion is asking a physician whose name is on
his/her medical license; it’s he or she, not a group.                  Clearly, the zone between governing

                                                    - page 9 –
                                                 © Dennis D. Pointer
                                               www.BoardFood.com
and managing is fuzzy. Diligent governing          move into a new and highly competitive
to one director is encroaching on man-             market. I started peppering her with rec-
agement prerogatives to another. Addi-             ommendations. I’ve taught graduate-
tionally, the governance-management                level courses in competitive strategy for
boundary changes over time. For exam-              the past 25 years and have done exten-
ple: a board might be more directive with          sive consulting in this area with both
a new, relatively inexperienced CEO than           commercial and healthcare organization
with one who’s done an outstanding job             clients. Bob, the President/CEO and board
for years.                                         chair said: “Denny you’re doing it again;
                                                   crossing the line and dabbling in man-
     General principle: the board’s role is        agement. I know you’re sinning because
to frame issues, question, probe and over-         I’ve read your book.” Sheepishly, I re-
see; management solves problems,                   plied, “You’re right; let’s move on.”
seizes opportunities, executes and runs            Driven by my personal interests and de-
things.                                            sire to be helpful, I had wandered where I
                                                   didn’t belong. As an aside, this inter-
     Illustrations help, here’s one. A fi-         change reflects a very healthy boardroom
nancial problem arises. Days of cash on            climate: the CEO felt comfortable usher-
hand have been falling over the last six           ing me back to the balcony.
months and the organization’s liquidity is
threatened. The board’s job is to: recog-          directorship
nize the problem (if it hasn’t already been
identified and brought to it by manage-
ment); understand the context and con-               • Pay attention when you begin “drift-
tingencies/constraints; explicitly and pre-            ing down to the dance floor,” then
cisely convey its expectations (the number             pull yourself back. This requires con-
of days of cash that should be on hand);               stant vigilance, because the desire to
hold management accountable for formu-                 be helpful by sharing your expertise is
lating a plan to correct the problem; and              deeply ingrained. This is particularly
then follow-up to ensure management’s                  true when the issue being discussed
plan is having the desired effect. The                 is in your professional “sweet spot.”
board should not spend time discussing
how to solve the problem; this is man-               • When a director colleague is ap-
agement’s job. Yet, I see boards crossing              proaching, or has crosse d, the gov-
this governing-management boundary all                 ernance-management boundary, help
the time. Such behavior deflects boards                pull ‘em back by providing some feed-
from what they should be doing, and                    back; do it lovingly and with humor.
wastes a lot of valuable time, while simul-            Like the “my sin anecdote,” healthy
taneously disempowering executives.                    boardrooms are characte rized by this
                                                       type of behavior.
     Here’s a metaphor I’ve found helpful:
The board’s role is to stay in the balcony,          • Encourage your board to have a dis-
orchestrating and overseeing the dance.                cussion regarding the general princi-
Management does the dancing. Tempta-                   ple forwarded in this maxim;
tions of the director: Every now and then,             whether it should be adopted as a
directors want to take a spin on the dance             “running rule” and how directors
floor; it’s often more fun than just watch-            should be reminded of it when they
ing. Simply: resist it!                                go astray.

     An anecdote, my sin: Some years               13. Keep your eyes on the prize.
back I was on the board of XYZ Corpora-
tion and attending a meeting where the                 This maxim is a famous quote from
Vice President for Business Development            Dr. Martin Luther King, Jr.
was doing a briefing on a contemplated

                                         - page 10 –
                                      © Dennis D. Pointer
                                    www.BoardFood.com
Health system boards, hospital                               Management’s plans, proposals and
boards, medical group boards, home                           recommendations are formulated to im-
health agency boards, nursing home                           prove strategic, operational, financial
boards, professional/trade association                       and/or clinical performance. However,
boards … quite a diverse lot. But, beyond                    when they’re being reviewed, discussed,
some superficial differences, they have                      considered and eventually voted on in the
identical obligations.                                       boardroom, it’s easy for the interests of
                                                             the organization per se to overwhelm and
     The purpose of all nonprofit boards is                  displace those of stakeholders.
to represent stakeholders; the rough
equivalent of shareholders in commercial                          Here’s the governing challenge: Most
corporations. Identifying them can be                        often, what’s good for the organization
quite involved; but, a rough first ap-                       also benefits stakeholders. But some-
proximation is: stakeholder = the com-                       times it doesn’t; what increases organiza-
munity. 8                                                    tional performance can decrease
                                                             stakeholder benefit. It’s the board’s obli-
     A board’s fundamental and overarch-                     gation to be vigilant in such circumstances
ing obligation is to make sure the organi-                   and carefully assess proposed initiatives
zation benefits its stakeholders. Organi-                    from a stakeholder value-added perspec-
zations are collections of resources:                        tive. Management should be concerned
money, personnel, facilities, equipment,                     about this, but it’s the board’s responsibil-
supplies, competencies and capacities.                       ity to ensure it.
These are means; the end is stakeholder
benefit. Boards must ensure organiza-                              Anecdote: With the objective of pre-
tional means lead to the end of maximiz-                     paring a case study (which never saw the
ing stakeholder benefit/value. This is the                   light of day), I interviewed directors serv-
BIG WHY of governing.                                        ing on the board of a nonprofit health sys-
                                                             tem that was considering the sale of one
     The problem is: in boardrooms,                          of its hospitals to a for-profit corporation.
means can overwhelm and eventually dis-                      Cutting through all of the detail, I found
place ends. This dynamic is called means-                    no evidence the board ever seriously as-
ends substitution.                                           sessed the deal’s relative costs and bene-
                                                             fits from a stakeholder benefit perspec-
     A board’s purpose is to represent the                   tive. Management’s analysis, contained in
interests of an organization’s                               a three-inch ring binder, and the board’s
stakeholders; management’s objective is                      discussion/deliberation was totally organi-
to enhance the organization’s perform-                       zational-centric; that is, how the deal
ance. A board’s purpose and manage-                          would benefit the health system. Put
ment’s objectives are different.                             simply: fundamentally flawed governance
                                                             flowing from a lack of clarity regarding
                                                             board purpose/obligations and stakeholder
                                                             interests.
8
    The community is clearly a nonprofit healthcare
organization’s primary and ultimate stakeholder.
However, this conceptualization is rarely fine-grained       directorship
enough, as communities are very diverse. Here’s a
simple illustration: Say you’re on the board of a
nonprofit condominium homeowners association.                  • I once sat on a Catholic hospital
Who are the stakeholders? At first glance the an-
                                                                 board where the sister chair (a true
swer is easy: those who own units (i.e., equivalent
to the community of a nonprofit healthcare organiza-             saint) began each meeting with a
tion). Actually, there are probably three stakeholder            brief reflection/discussion regarding
subgroups: those who own units and live in them;                 the board’s purpose and its obligation
and those who own units and rent them out; those
who rent units. Each of these groups have different              to stakeholders. This kept our “eyes
(and potentially conflicting) needs/interests which              on the prize.”
the board must represent.


                                                   - page 11 –
                                                © Dennis D. Pointer
                                             www.BoardFood.com
• For your board to be truly                                       cial).
      stakeholder-centric it must specify
      the organization’s key stakeholders                       • Gail, president of the medical staff,
      and understand their most important                         believes she serves on the board to
      interests. If you’d like to have a                          advance physician interests, espe-
      Board Stakeholders Briefing (which                          cially those of her specialty (radiol-
      provides much more depth on                                 ogy).
      stakeholders and how to map them,
      plus numerous nonprofit healthcare                        • Bill is a retired CPA and sings only
      organization examples), logon to                            one note: cost reduction.
      www.BoardFood.com, go to the navi-
      gation aids page and download the                         • Dan, the only Black on the board,
      document.                                                   perceives himself as an advocate for
                                                                  the African-American community.
    • You can learn more about
      stakeholders by consulting: Getting                       • Sharon has one issue, right-to-life,
      to Great: Principles of Health Care                         and isn’t interested in anything else.
      Organization Governance (Chapter 3)
      by Dennis Pointer and James Orlikoff.                     • Ann sees herself as the standard-
                                                                  bearer for women’s issues.
    • The foundational/critical importance
      of stakeholders, as a point of depar-                     • John, who several years ago made
      ture for governing, is emphasized in                        the single largest gift the organization
      Building an Exceptional Board: Effec-                       has every received, is only concerned
      tive Practices for Health Care Govern-                      about insuring his own legacy.
      ance – Report of a Blue Ribbon Panel
      published by the Center for                             Could this board govern effectively on be-
      Healthcare Governance (CHG),                            half of all stakeholders? Or would it be
      American Hospital Association. You                      torn apart, and eventually rendered impo-
      can download a copy, free-of-charge,                    tent, by each director’s narrow perspec-
      from CHG’s website at                                   tives and interests?
      www.americangovernance.com.
                                                                   Your board’s job is to represent; but,
14. Don’t represent narrow interests                          it must do so by balancing and aligning
    or constituencies.                                        the different/divergent interests of various
                                                              stakeholders. What you must not do is
    This is a more nuanced aspect of the                      serve as a narrowly focused standard
preceding maxim.                                              bearer and single issue advocate.

      Consider this, albeit “over-the-top,”                        If your board is composed of members
situation: 9 Friendly Hospital’s board is                     who seek to advance special interests, it
composed of directors who see them-                           will be torn apart by centrifugal forces and
selves as representatives of, and advo-                       its effort to govern fragmented. One direc-
cates for, various special interests. Some                    tor argues on behalf of a particular group;
illustrations:                                                other directors do the same thing from
                                                              equally narrow perspectives. The board
    • Harry feels it’s his duty to represent                  takes on the characteristics of a legislative
      employees (he’s a former union offi-                    body or courtroom.

9
    Although embellished, this is a real board for
                                                              directorship
whom I once conducted a retreat. It was a tough
two days. None of the members could transcend
their own narrow perspectives/interests and consider
those of all stakeholders; a crucial starting-point for         • As a director you are a stakeholder
really governing.                                                 agent. Your position is neither a li-

                                                    - page 12 –
                                                 © Dennis D. Pointer
                                              www.BoardFood.com
cense nor a platform for “beating the                 stakeholders always trumps loyalty to the
       drum” regarding issues you hold dear.                 organization. Accordingly, loyalty’s cen-
       You have a duty to balance/align the                  ter-of-gravity is serving as a stakeholder
       interests of all stakeholders, not rep-               agent and faithfully representing their in-
       resenting those of just one or a few.                 terests. You breach this duty when, for
                                                             example: a material conflict-of-interest
     • Ex officio directors (those who serve                 influences your decisions; you disclose
       on the board by virtue of other posi-                 confidential information that might have a
       tions they hold) face the greatest                    detrimental effect on the organization;
       challenges here. 10 For example, a                    you seize a business opportunity for your-
       physician who’s a director because                    self or other parties that legitimately be-
       he/she is the elected chief of staff.                 longs to the organization; you vote for an
       The medical staff expects this individ-               unlawful distribution of the organization’s
       ual to represent their interests. Your                assets which subverts its charitable pur-
       board must offer such directors assis-                pose and/or results in private inurnment.
       tance and “air cover”: providing
       them with gentle reminders when                            Care requires dischargi ng your gov-
       they overstep the boundary; and                       erning responsibilities with the diligence,
       constantly reminding their physician                  prudence and sound judgment equal to
       colleagues they’re on the board be-                   that of an ordinarily competent person in
       cause of the knowledge, skills, expe-                 similar circumstances. This duty focuses
       rience and perspectives they bring ...                on the process of acting and deciding, not
       not to represent medical staff inter-                 the results. The test is: Was reasonable
       ests.                                                 care exercised? Not: Was the outcome
                                                             optimal, satisfactory or even tolerable?
15. Understand your legal fiduciary                          You are permitted to presume that infor-
    duties of loyalty, care and obedi-                       mation, analyses and recommendations
    ence in addition to director liabili-                    provided by others (executives, staff and
    ties/protections.                                        consultants) are accurate, truthful and
                                                             informed ... if there are no compelling
     All state nonprofit organization incor-                 reasons to believe otherwise. This duty
poration laws hold that directors have a                     does not require you to be overly cau-
fiduciary duty to serve as stakeholder                       tious, avoiding all risks. Courts are very
agents, acting in ways that protect and                      hesitant to substitute their judgment for
advance their interests, carefully and in                    those of boards, after the fact. The ex-
accordance with the law. You are ac-                         pectation is simply that directors act care-
countable for being loyal, careful and obe-                  fully, with common sense and informed
dient and potentially legally liable if you’re               judgment.
not.
                                                                   Obedience requires that you obey the
     Loyalty is owed first/primarily to                      law. Directors must avoid acts beyond
stakeholders and then second/derivatively                    the board’s authority as articulated in ap-
to the organization. Loyalty to                              plicable laws, court decisions and regula-
                                                             tions in addition to those specified in the
10
    Ex officio directors have the same obligation as         organization’s own governing documents.
all other board members: to represent stakeholders           To discharge this duty you must: under-
as a “general class”; that is, balancing/aligning the        stand the law and the organiza-
interests of each stakeholder group, favoring no par-
                                                             tion’s/board’s charter, articles of incorpo-
ticular one. Look at it this way: What gets ex officio
directors to the boardroom is their membership in a          ration, bylaws and policies; and abide by
stakeholder group; the board wants/needs the com-            them. Unlike the requirement to be care-
petencies, experiences and perspectives that comes           ful, the test of fulfilling this duty is not
with such membership. However, once in the board-
room ex officio directors breach their fiduciary duty        merely good faith intentions, but rather
of loyalty (see Maxim #15) by solely representing            compliance and results. Ignorance is
the interests of the groups from which they came.            never a justifiable excuse for breaching

                                                   - page 13 –
                                                © Dennis D. Pointer
                                             www.BoardFood.com
this duty.                                                   covered (e.g., the cost of indemnifica-
                                                             tion); but certain types of claims are typi-
     The good news: nonprofit healthcare                     cally excluded. D&O insurance covers the
organization directors are rarely named in                   organization, not directors directly.
lawsuits. The bad news: if you are, it’s a
hassle. You must be loyal, careful and                       directorship
obedient; if someone feels that you’re
not, they can sue. In an increasingly liti-
gious society, and given heightened stan-                      • To learn more about your legal fiduci-
dards of board accountability, such actions                      ary duties, I recommend: The
are becoming more common. My intent is                           Board’s Fiduciary Role: Legal Respon-
not to scare you. However, because                               sibilities of Health Care Governing
board membership comes with potential                            Boards by Fredric Entin, et. al.
personal liability, it pays to be prudent.
                                                               Loyalty
     As a director you typically have two
protections: 11 indemnification and direc-                     • Insist that your board is reminded of,
tors and officers (D&O) insurance. Nei-                          and “re-briefed” by counsel regarding,
ther is automatic. The first must be pro-                        its duty of loyalty prior to considering,
vided (typically via your board’s bylaws),                       deliberating about and voting on ma-
the second has to be purchased by the                            jor issues, big deals and large finan-
organization on whose board you serve.                           cial transactions.

      Organizations can choose to indem-                       • With respect to issues coming before
nify directors (i.e., offer protection against                   your board, acknowledge any poten-
liability and financial loss), although spe-                     tial conflicts-of-interest and seek an
cific provisions vary considerably. If a di-                     opinion regarding their materiality. If
rector is named in a suit arising out of                         the conflict is judged to be material,
board service he/she may be reimbursed                           totally remove yourself from discuss-
by the organization for expenses incurred                        ing, deliberating, exercising any influ-
(including attorney’s fees) and in specified                     ence regarding, and voting on, the
instances for judgments, awards and                              matter. This is critical to fulfilling
fines. Typically, expenses are paid by the                       your fiduciary duty of loyalty, as ma-
organization during the action, not after                        terial conflicts are among the most
it’s resolved. The common standard for                           common causes of breaching it. See
such indemnification is: the director acted                      Maxim #25 where this is addressed in
in good faith and in a manner he/she be-                         more depth.
lieved to be in the best interest of the or-
ganization and its stakeholders; and (if                       • Never talk with outsiders about in-
the action is allegedly criminal), the direc-                    formation/matters deemed to be sen-
tor had no reasonable cause to believe                           sitive or confidential. See Maxim #26
his/her action was unlawful.                                     where this is addressed in more
                                                                 depth.
     Additionally, an organization may
purchase liability insurance that reim-                        • Ensure that the independe nt/external
burses expenses incurred due to actions                          auditor reports to the board any con-
for which its directors and officers are                         cerns regarding private inurnment ar-
                                                                 rangements that might jeopardize the
11
   In some states there are three; those that have               organization’s charitable purposes
enacted legislation providing the directors of certain           and nonprofit status.
charitable nonprofit organizations l imited indemnifi-
cation (or immunity). The provisions of such legisla-
tion vary so widely, I’ve chosen not to discuss them           Care
here. My recommendation: ask the organization’s
counsel for a briefing.                                        • Insist background materials are dis-

                                                   - page 14 –
                                                © Dennis D. Pointer
                                              www.BoardFood.com
tributed an adequate amount of time                       before dealing with important matters
  prior to board/committee meetings so                      and big deals.
  directors can carefully review and re-
  flect upon key issues before address-                 • If you’ve not done so recently, review
  ing them.                                               the organization’s articles of incorpo-
                                                          ration and charter in addition to your
• Expect analyses prepared by staff and                   board’s bylaws.
  consultants thoroughly/accurately
  portray both the positives and nega-                  • Request a book containing all board
  tives of proposed initiatives.                          policies (updated continuously) be
                                                          provided to you; then periodically re-
• You must be present and contribute                      view them.
  to exercise due care; attend board
  meetings and participate.                             Liabilities and Protections

• Come to every board/committee                         • These matters are very important,
  meeting prepared, having carefully                      complex and technical. Accordingly,
  read agenda materials and propos-                       each year, request the organization’s
  als/recommendations up for discus-                      counsel brief your board on potential
  sion and vote.                                          risks and legal liabilities in addition to
                                                          the nature/scope of protections avail-
• Always ask for additional information                   able. If your board’s indemnification
  and clarification when you do not un-                   provisions and D&O insurance cover-
  derstand an issue.                                      age haven’t been reviewed by an ex-
                                                          perienced governance/corporate at-
• Insist that adequate time is allocated                  torney in the last several years, re-
  for questions, elabora-                                 quest this be done.
  tion/clarification, discussion, delibera-
  tion and debate prior to votes ... es-                • You might want to have your personal
  pecially on important agenda items.                     attorney review the board’s indemni-
                                                          fication policy and D&O insurance. As
• Prior to votes on important matters,                    an extra layer of protection and com-
  ask for an assessment by counsel re-                    fort, ask your attorney for a referral
  garding whethe r your board has exer-                   to counsel experienced in govern-
  cised its duty of care.                                 ance/corporate law.

• Don’t be pressured by apparent                        • Your best protection against the po-
  overwhelming agreement. In light of                     tential legal liability that comes with
  the facts, after listening carefully to                 board service is to understand your
  your director colleagues plus taking a                  job and do it conscientiously ... and, I
  stakeholder perspective, be prepared                    might add, heed these 40 maxims!!
  to vote “no.” See Maxim #31 where
  this is addressed in more depth.                 16. Understand your board’s govern-
                                                       ing responsibilities.
Obedience
                                                       The substantive work of governing
• Request that periodic educational ses-           entails fulfilling responsibilities. The core
  sions are held on legislative, legal and         ones for nonprofit healthcare organization
  regulatory developments in addition              boards are: 12
  to their implications for your board.
                                                   12
                                                      This model was originally introduced in Really
• Ask for the opinion of legal counsel             Governing: How Health System and Hospital Boards
  regarding the applicability of key               Can Make More of a Difference by Dennis Pointer and
  laws, regulations and court decisions            Charles Ewell. It was elaborated and expanded in:


                                         - page 15 –
                                      © Dennis D. Pointer
                                    www.BoardFood.com
specifying                                • review/approve key organization-wide
                   ORGANIZATIONAL
                        ENDS                                      goals14

                                                                • ensure management strategies 15 are
                                                                  aligned with the vision and key goals
       ensuring                         ensuring
      EXECUTIVE                        FINANCIAL
    PERFORMANCE                      PERFORMANCE                • monitor/assess how well the vision is
                                                                  being fulfilled, key goals are accom-
                                                                  plished and strategies are being pur-
                       ensuring                                   sued in addition to expecting correc-
                      QUALITY OF
                        CARE
                                                                  tive action if problems are detected

                                                              Executive Performance
Only the briefest synopsis of these re-
sponsibilities are forwarded here as                               A board has one direct report, the
they’ve been a major focus in four of my                      CEO; he/she is its agent and delegated
previous books.                                               authority to manage the organization’s
                                                              affairs.
Ends
                                                                   The board-CEO relationship is intri-
    Ends are destinations and paths                           cate and complex because the CEO: is
taken. Both are choices, and among the                        simultaneously the board’s “subordinate”
most important organizations make.                            (hired and fired by it) and a colleague di-
Formulating/approving them is a board                         rector (in over 80 percent of health sys-
responsibility.                                               tems and hospitals); and exerts a signifi-
                                                              cant influence over the amount/type of
      In attending to ends, your board de-                    information the board receives and its
fines the organization: what it is and                        agenda.
isn’t; what it will and will not become.
Governance begins here. Other responsi-                           Your board is responsible and ac-
bilities (for executive performance, quality                  countable for the CEO’s performance; it
of care and financial performance) all flow                   must:
from this one.
                                                                • recruit and select the CEO
    To fulfill this responsibility, your
board must:                                                     • assess the CEO’s performance
  • provide input regarding, assist in for-                     • adjust the CEO’s compensation
    mulating and approving the organiza-
    tion’s vision13                                           fine-grained and empowering visions. The reason is
                                                              simple: an organization cannot achieve that which
Board Work: Governing Health Care Organizations,              its leadership is unable to envision. Visions spell the
Getting to Great: Principles of Health Care Organiza-         difference between purposefully moving into the fu-
tion Governance and The High Performance Board:               ture versus aimlessly wandering there. A vision
Principles of Nonprofit Organization Governance all           specifies what an organization should/must become
by Dennis Pointer and James Orlikoff. The model               in order to maximize stakeholder benefit. The best
has become a standard framework for describ-                  way to formulate and codify a vision is not a prose
ing/prescribing the responsib ilities of nonprofit            statement, but rather a list of specific characteristic s
healthcare organization boards. See, for example:             regarding what the organization should look like, at
Building an Exceptional Board, Report of a Blue Rib-          its very best, in the future.
                                                              14
bon Panel on Health Care Governance (Center for                    Goals are the most important things an organiza-
Healthcare Governance, American Hospital Associa-             tion must accomplish for its vision to be fulfilled;
tion); and Board Roles and Responsibilities: Ele-             they increase a vision’s specificity and “density.”
                                                              15
ments of Governance (The Governance Institute).                    Strategies are specific plans for deploying an or-
13
    Highly successful organizations sha re one thing in       ganization’s resources (fiscal, human, facilities,
common: they have distinctive, explicit, precise,             equipment, supplies, etc.) to achieve key goals.


                                                    - page 16 –
                                                 © Dennis D. Pointer
                                              www.BoardFood.com
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Boardroom nav

  • 1. NAVIGATING THE BOARDROOM 40 Maxims ... Things You Must Know and Do to Be a Great Director By: Dennis D. Pointer
  • 2. © Dennis D. Pointer, 2008 Greenlake Press 5544 Kenwood Place, North Seattle, WA 98103 - i-
  • 3. Washington State Hospital Association 300 Elliot Avenue, West Seattle, Washington 98119 The Washington State Hospital Association is pleased to formally sponsor and endorse Navigating the Boardroom. This is a highly practical, useful, empow- ering and beautifully written book. It forwards 40 “shoulds” and “should- nots” directors must heed to really govern plus ensure their boards are mak- ing the most difference and adding the greatest value. WSHA, with the help of its Hospital Governing Boards Committee and affiliate CEOs, will get this book to trustees/commissioners in all the State’s health systems and hospi- tals. Worth mentioning: The book has a reach far broader than the title suggests. Although targeted at healthcare organizations, most of the maxims are appli- cable to other nonprofit, government agency and even commercial corpora- tion directors. Denny has done the field a great service by making a pdf version of the book available as an open-source document. This book has been a long time in the making; Denny has been tossing scraps of paper with ideas scribbled on them in a folder for at least five years. When he talked with me about finally writing Navigating and then giving it away free-of-charge, I thought he’d lost it. His objective was to get the book in as many directors’ hands as possible, explaining “a zero price has got to help.” Over several lunches plus numerous telephone calls and e-mail ex- changes we discovered that giving something away isn’t that easy; there are no ready-made distribution channels in place for doing so. WSHA and I seek your assistance in propagating this valuable book; send it to colleagues, di- rect them to www.BoardFood.com (homepage) for downloading or post it on internet or intranet websites. Leo Greenawalt President and CEO - ii -
  • 4. Reviews "Easy to digest, practical and condensed wisdom; an essential road map for both new and experienced directors. This is valuable reading for all those who are serious about governing." Mark R. Neaman President & CEO Evanston Northwestern Healthcare Evanston, IL "An extraordinary book, very well written. The 40 maxims are right on target and valuable guides for all trustees. This is a must read." Stephen A. Williams President & CEO Norton Healthcare Louisville, KY “Denny has a nose for understanding best practices and worst mistakes. He lays out ‘rules of the road’ for novice and experienced directors alike. Every- one who enters a health system or hospital boardroom can benefit from this book.” J. Knox Singleton President & CEO Inova Health System Falls Church, VA "Denny has pointed his pen and taken aim at directors of healthcare organiza- tions. His 40 maxims provide a much-needed, focused and prescriptive road map for greater trusteeship professionalism which, if followed, will result in more proficient and effective governance." Ken Hanover President & CEO Health Alliance of Greater Cincinnati Cincinnati, OH “All directors should read these 40 Maxims; they will change the way you think about governing and perform in the boardroom.” Douglas Hawthorne President & CEO Texas Health Resources Arlington, TX “The acid test is: Will these maxims improve director quality and effective- ness? The answer is a resounding ‘absolutely’! Maxim #1 should have been: Read these before embarking on the critical task of governing.” John W. O’Connell President & CEO Franciscan Services Corporation Sylvania, OH - iii -
  • 5. “I have spent 27 years of my life as the CEO of healthcare organizations, a publicly traded company and a start-up IT venture; I’ve always sought Denny’s counsel and advice about governance. These maxims will help direc- tors make good boards great. In an era of transparency, boards that heed these ideas will outshine their counterparts and be of greater value to soci- ety.” R. Timothy Stack President & CEO Piedmont Healthcare Atlanta, GA “A must have resource for all health system and hospital boards; CEOs, chairs and directors should make this valuable book part of their tool box.” David D. Whitaker President & CEO Norman Regional Health System Norman, OK "CEOs are realizing strong, informed and empowered boards are great assets for navigating the challenges facing contemporary healthcare organizations. High performance governance requires: boards that engage in best practices; and directors who unde rstand and execute their critical roles. Denny's book provides an essential road map for executives, board chairs and directors." Gary S. Kaplan, M.D. Chairman & CEO Virginia Mason Medical Center Seattle, WA “Denny has produced an invaluable guide about the self-care and develop- ment of board officers and members. It is targeted perfectly. I wish such a list of do’s and don’ts had been available when I entered the field in 1955. Clearly, in today’s complex environment, his contribution is of special value. It serves as a powerful guide to strengthen executive-board relationships.” Austin Ross Executive Vice President, Emeritus Virginia Mason Medical Center Seattle, WA “Serving on a governing board is a monumental challenge. For the freshman director or more seasoned one, this book lays out key elements of a well or- ganized platform which each director needs to fulfill his/her fiduciary respon- sibilities.” William Himmelsbach Executive Officer, VHA Empire-Metro VHA Senior Vice President New York, NY - iv -
  • 6. “This concise and practical book captures the challenges, vitality, and com- plexity of healthcare boards. Denny offers candid and straightforward advice, plus numerous anecdotes, drawn from decades of governance consulting, re- search and teaching experience. Navigating the Boardroom provides thought- ful maxims for readers interested in a quick bit of advice or those wanting greater depth.” Dale Schumacher, M.D., M.P.H. President Rockburn Institute Elkridge, MD - v -
  • 7. Distribution and Use I’m making this book available free-of-charge for several reasons: First, to facilitate spreading ideas I believe can help directors improve their per- formance/contributions and get more out of the experience serving on non- profit healthcare organization boards. Second, it’s a small way of saying thanks to the field that has provided me such a meaningful and enjoyable ca- reer. This is an open-source document. As such you may: • print from the pdf file, copy and distribute it in hardcopy; • circulate it as a pdf file; • post it on internet or intranet websites; and/or • employ www.BoardFood.com as a URL for others to download it in pdf format directly from the website’s homepage. Duplication/distribution/posting must be done with full attribution and used exclusively for non-commercial, educational purposes. Sale or repackaging, in any form, is prohibited. Readers are expected to respect my intellectual property and not use this material as the content for other documents or speeches/prese ntations without my written permission. Navigating the Boardroom: 40 Maxims by Dennis Pointer (Bozeman, MT: Second River Healthcare Press, 2008); ISBN-13 / 978 - 974F8609-6. If you’d like to order a hardcover (“real book”) version, it’s available from: Second River Healthcare Press for information, contact: www.secondriverhealthcare.com 406-586-8775 The price is $19.95. “Ideal for CEOs or chairs who would like to provide board members something more substantial than a 8½ by 11 ‘Xeroxed’ copy of Navigating.” Jerry Pogue, Publisher; Second River Healthcare Press. - vi -
  • 8. Dennis D. Pointer, Ph.D. Denny is Austin Ross – Virginia Mason Professor, Department of Health Administration, School of Public Health and Community Medicine, University of Washington (Seattle). He has held two previous endowed chairs: John J. Hanlon Professor of Health Services, Graduate School of Public Health, San Diego State University (1991-2002); and Arthur Graham Glasgow Professor of Health Services Management, Department of Health Administration, Medi- cal College of Virginia, Virginia Commonwealth University (1986-1991). From 1975 to 1986 he was affiliated with the University of California - Los Angeles where he served as: Professor and Head, Program in Health Services Man- agement, School of Public Health; Associate Director, U.C.L.A. Medical Cen- ter; Professor, Anderson School of Management; and Professor of Psychiatry and Bio-behavioral Sciences, School of Medicine. During his tenure at U.C.L.A. he was a Research Fellow at the RAND Corporation. He has held faculty appointments at the Mount Sinai School of Medicine (New York) and the Baruch School of Management of the City University of New York in addi- tion to having served as Associate Director, Department of Teaching Hospi- tals, Association of American Medical Colleges (Washington, D.C.). Denny is the author of eleven books. Really Governing and Board Work have won the James A. Hamilton book of the year award from the American College of Healthcare Executives. His other books include: Getting to Great: Principles of Healthcare Governance; The High Performance Board; The Health Care Industry: A Primer for Board Members; Essentials of Health Care Organization Finance: A Primer for Board Members; and Governing the 21st Century Nonprofit Healthcare Organization: Transforming the Work and Con- tributions of Your Board (estimated release in early 2009). He has written 80 scholarly and professional articles. Principal of Dennis D. Pointer & Associates, Denny has been retained as a governance consultant, retreat facilitator and speaker by over 250 healthcare organizations, commercial corporations, governmental agencies and profes- sional/trade associations. He was a founding partner of the American Healthcare Governance and Leadership Group LLC, now the Center for Healthcare Governance of the American Hospital Association. Denny received his Ph.D. from the University of Iowa in hospital and health services administration and B.Sc. in organizational psychology from Iowa State University. - vii -
  • 9. Letter to Readers Dear Colleagues: There are approximately 10,000 nonprofit healthcare provider organiza- tion boards in the U.S., each of which has about 15 members. Thus, the best-guess number of directors is 150,000. The effectiveness of these boards ... the extent they make a difference on behalf of their communities and add value to the organizations they gov- ern ... depends on the qualities of directors; their dedication, effort, knowl- edge, skills, experience and perspectives. Although governing is a “team sport,” it’s practiced by individuals who occupy all those boardroom chairs. The vast governance literature has focused almost exclusively on boards; their obligations, responsibilities and roles; the way they should be struc- tured, configured and composed; how they should function; and what they can do to improve their performance. Little attention has been accorded di- rectors and directorship. The book was written to begin filling that void. Drivers’ manuals aren’t provided to directors at the time of their initial appointment or during their terms of service. The assumption is that bright people will figure out, and pick up the fundamentals of, board work by just doing it. While experience is a great teacher, it can be enriched, leveraged and enlivened when grounded on good ideas. max•im (mac’sîm); Succinct formulation of a fundamental principle; a guideline for thinking, deciding and acting. Navigating the Boardroom forwards 40 maxims, some things you must know and do to maximize your performance and contributions as a nonprofit healthcare organization director, whethe r you’re new or long-tenured. The book is straight talk that forwards practical and usable wisdom. This is a product of what I’ve learned over 30 years of governance consulting, teaching, research, writing and speaking. I’ve spent a huge amount of time in boardrooms with directors, both colleagues and clients. I owe these folks a large debt; they are, in every sense, my co-pilots in this endeavor (bearing none of the blame for what you might find ill-conceived or poorly stated). Additionally, it has been my good fortune to have worked with a bunch of wonderful collaborators/friends over the years. With trepida- tions regarding sins of omission, thanks to (in alphabetical order): Gary Aden, Ted Ball, Jim Begun, Rick Carlson, David Cohen, John Colloton, Bill Dowling, Charlie Ewell, Debbie Gramling, Leo Greenawalt, Jan Jennings, Nate Kaufman, Dick Knapp, Jennifer Kozakowski, Baldwin Lamson, Sam Levy, Roice Luke, Michele Molden, Jerry Norville, Jamie Orlikoff, Andy Pasternack, Dave Pitts, Jerry Pogue, Austin Ross, Marty Ross, Lou Rossiter, Bob Simmons, Mary Totten, Tim Stack, Dennis Stillman, Will Welton and Steve Williams ... you’ve all enriched my life. I wanted to keep this book short [Maye West was wrong when she said, “Too much of a good thing is great.”] So, rather than including numerous referenced supplemental materials as appendices, they’re provided at www.Boardfood.com; go to the navigational aids, other resources or book- - viii -
  • 10. shelf pages and download what you find useful/interesting. The website also contains a “truck-load” of other governance “knowledgeware,” all provided as open-source documents. Denny Dennis D. Pointer Seattle, Washington dennis.pointer@comcast.net - ix -
  • 11. The Maxims 1. Governance matters. 2. Evaluate your interest in, and commitment to, the or- ganization before serving or continuing to serve. 3. Don’t be a “letterhead” director. 4. Become a professional director. 5. Know what’s expected of you. 6. Get to know your colleagues. 7. If you are a newly appointed director, hook up with a mentor. 8. Immediately begin acquiring an understanding of gov- ernance and the nature of board work. 9. Understand board topography. 10. Serve your apprenticeship, but do so quickly. 11. Realize governing is a distinctive organizational prac- tice. 12. Recognize the difference between governing and man- aging, then respect it. 13. Keep your eyes on the prize. 14. Don’t represent narrow interests or constituencies. 15. Understand your legal fiduciary duties of loyalty, care and obedience in addition to director liabili- ties/protections. 16. Understand your board’s governing responsibilities. 17. Acquire an increasingly sophisticated unde rstanding of content areas underpinning issues your board will be addressing. 18. Develop (or enhance) your healthcare organization- specific financial literacy. 19. If you’re the board chair, learn how to run effective and efficient meetings. 20. Do your homework. 21. Show up. - x -
  • 12. 22. Participate. 23. Question. 24. Play devil’s advocate. 25. Acknowledge conflicts-of-interests and disengage when you have one. 26. Keep sensitive information confidential. 27. Be ethical. 28. Do governing work only in the boardroom. 29. Stroke. 30. Don’t make individual requests of the CEO and execu- tive team members. 31. Be prepared to vote no. 32. Argue in the boardroom, lock arms when you leave it. 33. Don’t engage in personal financial dealings with other directors or executives. 34. Never do non-governance work for the organization. 35. Keep your personal relationship with the CEO at arms- length. 36. Provide the CEO with advice and counsel, but be care- ful. 37. Be prepared to lead. 38. Be a good board and organizational citizen. 39. Prior to the conclusion of each term, assess your per- formance and contributions. 40. Enjoy the journey and have fun. References and Resources - xi -
  • 13. 1. Governance matters. agement and physician leaders; boards just get in the way and slow Healthcare organizations are impor- down an organization’s metabolism. tant institutions. They’re a critical part of What do you think? What value can your community’s infrastructure, provide boards add that executives and phy- services affecting its wellbeing and have a sician leaders can’t? What are the significant economic impact. distinctive purpose and contributions of boards? These question are fun- “A board is as high up in an organiza- damental ones, to which I will return tion as one can go and still remain inside later. it” (from Boards that Make a Difference by John Carver). Accordingly, your board • What difference does your board bears ultimate responsibility and account- make and how much value does it ability for the organization: everything it add? During the past year, what were is, does and should become; stewardship your board’s most important contribu- of its resources and capacities; and how tions? well it serves your community. • In what ways has your board been a Because your board is where the buck drag on the organization? stops, its work has a potentially huge im- pact on the organization’s performance • What are some things that have in- and success. The issues your board ad- hibited/impaired your board from dresses, and decisions it makes regarding maximizing its performance and con- them, defines the organization and shapes tributions? its future. • What do you bring to this boardroom; If you don’t buy the notion that knowledge, skills, experiences and boards make a difference, consider this perspectives? How much of a contri- “reverse angle” thought experiment: Your bution do you make? board has 15 minutes to make decisions that would really harm the organization … • What are things you might do to be- strategically, managerially, financially, op- come a better director? erationally or clinically. Could you do it? Every board to which I have posed this 2. Evaluate your interest in, and question has responded: “Yes, we’re up commitment to, the organization to the challenge, it would be easy and before serving or continuing to wouldn’t take 15 minutes.” Your board, serve. the work it does and how well it’s done has a significant impact ... for better or Being a high performing/contributing worse. director requires conside rable time and effort. Personal interest in issues being directorship dealt with by the board should capture your attention and personal commitment to the organization’s mission should sus- • Some contend that boards don’t make tain your involvement over the long haul. a great deal of difference or add Both interest and commitment are neces- much value. They say: directors are sary ingredients for great directorship. amateurs lacking a sophisticated un- derstanding of the healthcare indus- Anecdote: Several years ago a col- try, local markets, community needs, league of mine resigned from a board she competitors and the organizations had joined only 14 months earlier. This they’re governing. They also argue: board was first-rate and appointment to it the few things boards do reasonably was an honor. She had wanted to work well could be done far better by man- with its members, all “movers and shak- - page 1 – © Dennis D. Pointer www.BoardFood.com
  • 14. ers.” Additionally, its quarterly meetings attendance and participation. provided her an opportunity to spend time with the CEO, a good friend. The prob- • By taking a seat and then “checking lem, recognized too late: this organiza- out,” you rob the board of a valuable tion’s mission and issues the board ad- asset. dressed weren’t important to her. Don’t make a similar mistake. Serve, and continue serving, because you have something to contribute and are will- directorship ing/able to do so. directorship • How invested are you in this organi- zation? What about it is really impor- tant to you? How committed are you • In all communities, the pool of tal- to its vision and mission? How inter- ented/connected leaders is small and ested are you in issues passing such folks are sought by many orga- through the boardroom? nizations to serve on their boards. Your interest, time and effort are fi- • Why did you decide to join this nite and you have a wide variety of board? opportunities for giving something back. Why did you choose this board • Overall, how does this director/board as a way of making a contribution? experience stack up with others you’ve had? • On how many boards do you pres- ently serve? If it’s more than three, • What would cause you to resign? evaluate if you’re spread too thin. 3. Don’t be a “letterhead” director. • If you no longer have the necessary time or level of commitment to serve, Being nominated or re-appointed to a consider resigning. Don’t sully your healthcare organization board is an honor reputation by poor attendance and and privilege; recognizing you’re a com- problematic performance. Since munity leader and a respected person in healthcare organization boards are the eyes of your peers, plus offering you composed of the most connected and the opportunity to do important work and respected people in town, word make a difference. quickly gets around regarding direc- tors who pull their weight and those Letterhead directors are those who who don’t. want the glory that comes with board membership but rarely attend meetings 4. Become a professional director. and don’t participate or contribute much. There are several good reasons, beyond Professionals are typically defined as the obvious ones, for not being this type of people who engage in occupations full- director: time for pay, whereas amateurs are those who undertake the same endeavors on a • It totally depreciates the value associ- part-time basis without compensation. In ated with board membership you this sense, all board members are ama- wanted when signing on. teurs. But, the following definitions get closer to the essence of these terms. • You’re accountable and potentially li- able for board decisions/actions, even • pro•fes•sion•al (pra`fêsh-a-nal); A when you don’t attend meetings. In- highly committed, knowledgeable, deed, you breach the fiduciary duty of skilled and experienced practitioner. care (see Maxim #15) through non- - page 2 – © Dennis D. Pointer www.BoardFood.com
  • 15. • am•a•teur (am`ã-tur); A person who torship? engages in an activity as a past-time; someone lacking a high level of so- • Which aspects of your director prac- phistication and competency. tice are professional? Which are amateurish? To make a difference, add value and really govern, boards must be composed 5. Know what’s expected of you. of pros. Professional directors, as con- trasted to amateurs: The price of admission to the best boardrooms is fulfilling (indeed, exceed- • undertake board service as a vocation ing) expectations. Be clear about what - a role that’s assumed to perform they are. Vague or totally unrealistic ex- important tasks; rather than as a pectations are killers that can sap your hobby, done solely for personal grati- motivation, erode the amount/quality of fication and amusement your participation and impair your effectiveness. • take their responsibilities seriously; they’re not dilettantes Anecdote: I was being interviewed for membership on two nonprofit boards • are committed to representing com- and couldn’t accept both appointments. munity interests; not furthering their Over dinners with the CEOs and board own chairs I asked, “What’s expected of me?” Here (paraphrased) are the responses I • devote considerable time and energy got: Chair A: “Hum, haven’t really to the job; not just enough to get by thought about it. I guess, not too much. We meet every other month for three • are highly knowledgeable, skilled and hours; you’d be expected to serve on experienced; not marginal practitio- several committees and attend our annual ners retreat.” Chair B: “This board takes its work very seriously. We feel governance • are actively engaged; not passive makes a significant difference to our stakeholders and the organization’s long- • are inquisitive and somewhat skepti- term success. The key is great directors cal; not totally accepting who understand what’s expected of them and then deliver. We’ve thought very • function as checks-and-balances; not carefully about this and have developed a “rubber stamps” job description. I should have sent you a copy before this interview, but here it is. • continually increase their competen- Look it over and then let’s talk.” cies; aren’t satisfied with their own status quo directorship directorship When being interviewed for a board seat, here are some questions you might • Who are the pros on your board? ask: Who are the amateurs? What differ- entiates their director practice? • Why am I being considered for ap- Watch the pros and learn from them. pointment to this board? What knowledge, skills, experiences and • All groups typically get what they ex- perspectives are you seeking? What pect and continuously reinforce. To contributions do you think I can what extent, and how, does your make? board encourage professional direc- - page 3 – © Dennis D. Pointer www.BoardFood.com
  • 16. • Do you have a director job description Even if not offered, I think it’s a must to or position charter I can review? ask for the opportunity to talk with several [This is a benchmark governance current directors. Schedule about an hour practice. If you’d like to see an illus- with each individually. The key topics trative nonprofit healthcare organiza- should be: the nature of their experiences tion director position charter, log-on as directors, both pluses and minuses; to www.BoardFood.com, go to the and general board climate/culture. navigation aids page and download the document.] 6. Get to know your colleagues. • About how many hours per month or Governance is an intensely interper- year should I expect to devote as a sonal activity. The best boards function member of this board? as focused, effective, efficient and creative teams. A necessary prerequisite is mem- • What is the term length and how bers who understand one another and many terms are members expected to where each is coming from. Get to know serve before leaving the board? your fellow directors; their profes- sional/personal histories, perspec- • When does the board meet (day and tives/values, interests, knowl- time)? How many regularly sched- edge/skill/experience mix, why they uled meetings are held each year and choose to serve and continue serving, and how long are they? How many spe- what they want to accomplish. cial meetings were held last year and how long were they? Although directors need not (and probably shouldn’t) be best friends, it’s • On occasion, can I participate in critical they understand and respect one board meetings telephonically? another. Building wholesome and empow- ering interpersonal relationships takes time • On how many committees will I be and effort. This can’t be done through in- required to serve? How often do they teractions in the boardroom alone; there meet and for how long? Do I have isn’t enough time and it’s not a particularly some input regarding committee as- conducive space for doing so. signments? Anecdote: I once sat on a commer- • Does the board hold annual retreats? cial corporation board where the directors Where are they typically held (locally and key executives went on a four-day or at a distant location)? fishing trip each year to an isolated loca- tion. I don’t like to fish and when first • Am I expected to attend extramural told of the annual ritual, I thought it was governance educational confer- an unnecessary boondoggle. After going ences/seminars? If so, how often? on several of them, I came to realize how important they were to our board’s • What type of organizational events healthy/empowering culture and effective will I be asked to attend during the teamwork (one of the best I have ever year? been part of). Members had the opportu- nity to get into each others’ heads and • Will I be expected (either explicitly or skins. It was time and money well spent. implied) to make personal contribu- tions to the organization? If so, what directorship is the norm? Will I be required to so- licit donations from individuals and organizations where I have connec- • I’ve seen boards that don’t give any tions? thought or effort to integrating newly appointed directors, other than going - page 4 – © Dennis D. Pointer www.BoardFood.com
  • 17. around the table and having members up to speed and begin understanding this briefly introduce themselves. If this terrain in terms of boardroom substance is the extent of it, take the “bull by and dynamics. the horns.” During the first several months of your service, schedule in- My recommendation: Early in your dividual lunch/dinner get-togethers tenure, enlist an experienced director to with all other board members. Rest serve as your mentor; someone that can assured, they will be blown away by help you understand the organization, the the gesture and effort. Use the time board, how it functions and issues coming to build rapport with, and get to before it. know, your colleagues. directorship • Additionally, if not part of your orien- tation, insist the CEO arrange meet- ings for you with each executive team • If your board doesn’t have a formal member. Seize the opportunity to mentoring program as part of its new learn about them and what they do. director orientation (most don’t), talk with the board chair and request that • If your board has someone that pro- someone is assigned to you to play vides staff support (i.e., executive as- this role. The individual should be an sistant, the CEO’s secretary, govern- experienced director (one that’s ex- ance coordinator, corporate secre- ceptionally competent and high tary), take him/her to dinner. More performing) who has the time and than anyone, he/she will be able to skills to work with you for about six provide you with a feel for the “lay of months. I recommend the following the land.” two books on how to craft a produc- tive mentor-mentee relationship: The • What are some things your board Mentee’s Guide to Mentoring by Nor- might do to help directors developing man Cohen; and Power Mentoring: better “interpersonal glue” and build How Successful Mentors and Protégés the team? It need not be a fishing Get the Most Out of Their Relation- trip to an isolated location. For some ships by Ellen Ensher and Susan Mur- ideas, I suggest you consult: The phy. Five Dysfunctions of a Team by Pat- rick Lencioni; and Team Building – • At your first meeting (perhaps during Proven Strategies for Improving Team a long conversation over dinner), get Performance by William Dyer, et. al.1 an initial “navigational fix.” Some things to talk about might include: 7. If you are a newly appointed di- rector, hook up with a mentor. - thumb-nail profiles of each director and key executive A good bit of what goes on in board- rooms is rooted in long chains of - strengths and weakne ss of the events/issues that have evolved over board in terms of how it considers time, linked to a variety of other matters, and acts upon issues, plans, pro- very subtle, permeated with nuance (i.e., posals and recommendations “politics”) and complex. Additionally, every board has its own distinctive way of - the most important boardroom doing business. Your success as a direc- norms; rules-of-the-road (rarely tor will depend on how effectively you get formally codified or even dis- cussed) that guide director behav- 1 The full citations for these, and all other ior and how business is conducted books/articles mentioned in the following pages, are provided in the “References and Resources” section. - nature of the board-CEO relation- - page 5 – © Dennis D. Pointer www.BoardFood.com
  • 18. ship • the distinctive nature of a nonprofit healthcare organization’s stakeholders - a brief history of how the board and how they relate to a board’s pur- has evolved and changed over the pose last five years or so; particularly seminal events ... major successes • obligations, responsibilities and roles and failures, how the board coped of nonprofit healthcare organization with them and what was learned boards • Before each board meeting, get on • key factors that drive/affect board the phone with your mentor and performance and contributions spend some time reviewing the agenda. • how boards exercise influence over/in the organizations they govern - What are the key issues (both ex- plicit and below the surface)? • nature of the board–CEO relationship - What is the context and history I will address these topics, very briefly, in surrounding items that will be ad- some of the maxims that follow; but, it’s a dressed? Why are they on the mere “Baskin Robbins taste spoon.” agenda? What is wanted from the board and how can it make a con- directorship tribution? What sensitivities (or- ganizational and personal) might emerge? • To acquire a grounding, I recom- mend: • After each board meeting huddle with your mentor to “re-view” the meeting - Getting to Great: Principles of and how the board went about its Health Care Organization Govern- work, in addition to your own per- ance by Dennis Pointer and James formance/contributions. Orlikoff. This book is less than 200 pages, employs a principles for- • If you’re an experienced director, of- mat, is chock-full of application fer to mentor a newly appointed one. sidebars/guides and written in a You’ll get far more than you give. tight/conversational style. If you want to review the book’s table of 8. Immediately begin acquiring an contents, including a listing of the understanding of governance and 72 principles, log-on to the nature of board work. www.BoardFood.com, go to the bookshelf page and download the Like all other types of work, director- document. ship is a practice grounded on a body of knowledge. You’ll pick up some of this in - The Excellent Board I and the Ex- the boardroom over time. But, the under- cellent Board II by Karen Gardner lying and essential fundamentals can’t be (editor) is a compendium of the acquired by repeated observation and best articles on a wide variety of practice alone; a little formal learning will governance topics taken from Trus- be required. tee Magazine. The best “book knowledge” leavens • If you want to move beyond the ba- experience. Some things about govern- sics, I suggest: Governance as Lead- ance and governing important to under- ership: Reframing the Work of Non- stand are: profit Boards by Richard Chait, et. al; and Boards that Deliver by Ram Cha- - page 6 – © Dennis D. Pointer www.BoardFood.com
  • 19. ran. ing boards bear legal fiduciary responsibil- ity and accountability for their organiza- 9. Understand board topography. tions. Advisory boards don’t ... they pro- vide input, advice and counsel to govern- Nonprofit healthcare organizations are ing boards and/or management. very diverse; accordingly, there’s a wide variety of arrangements for governing There are four primary methods of di- them. It’s important to understand key rector selection: 3 features of this terrain. • Appointed - One or more directors are There are two basic governance chosen by (for example): a structure s: centralized and decentralized. stakeholder group such as a sole cor- porate member (parent board in a Centralized health system); or city council for the board of a municipal hospital. BOARD • Elected - Some or all directors are di- rectly elected by (for example): members of the corporation; 4 or the general public in governmental, dis- system or hospital trict hospitals. 5 • Ex officio - One or more directors are appointed to the board because of other positions they hold. Some illus- trations include serving on a board by Decentralized virtue of being: the CEO; system chief/president of the medical staff; president of the volunteer organiza- PARENT BOARD tion or foundation; or holding an elected political office. BOARD BOARD BOARD • Self-selected - Some or all directors subsidiary subsidiary subsidiary are chosen by presently serving board organization organization organization members. In centralized structures, organizations are governed by a single board. For ex- ample, in centralized healthcare systems, subsidiary organizations don’t have their 3 own boards. Decentralized systems are Note: These methods can (and often are) com- composed of a parent and one or more bined in composing a board, for example: some directors are appointed, some are ex-officio and oth- subsidiaries, 2 each of which have boards; ers are self-selected. governing responsibilities are subdivided 4 Although an increasingly ra re governance struc- and shared among them. ture, some nonprofit healthcare organizations have “incorporators”; generally individuals meeting mini- mal criteria who can become members after paying a There are two different types of nominal fee. Typically, their sole function is electing boards: governing and advisory. Govern- directors nominated by the presently serving board. 5 Distric t hospitals are supported by public funds; 2 Which could include hospitals, long-term care typically, bonds and property taxes. The taxing facilities, medical service organization (MSO), medi- authorities are established like school distri cts; vot- cal practices/groups/corporations, a foundation, joint ers elect board members who are public officials. venture corporations, real estate holding company, States with significant numbers of distri ct hospitals etc. include California, Texas and Washington. - page 7 – © Dennis D. Pointer www.BoardFood.com
  • 20. directorship board’s most senior, distinguished and accomplished member. A lesson learned the hard way. • Understand the positioning of your board in this terrain, along the key The wise person understands first im- dimensions: pressions are critical because they come - parent/system or subsidiary board first and are hard to undo. - type of board - governing or advi- directorship sory - method(s) of director selection - • What chair you take in the boardroom appointed, elected, ex-officio may be a trivial matter; but what and/or self-selected you say or don’t, isn’t. I recommend sitting back and observing for your • If you serve on the board in a first three or four meetings. When healthcare system that’s decentral- you engage, do so by asking ques- ized: request and review a chart of tions; not the probing type, but it’s governance structure; and ask to rather those designed to seek infor- see a document that specifies how mation, clarification and elaboration. governing responsibilities (see Maxim A person rarely harms oneself by say- #16) are subdivided and coordinated ing too little, at least initially. My among parent and subsidiary boards greatest embarrassments as a new (i.e., who does what). director have come from making an observation or suggestion whe n I 10. Serve your apprenticeship, but do didn’t understand context or know so quickly. what I was talking about. If you’re a newly appointed director, • Engage slowly and incrementally over this particular boardroom is foreign terri- time. Don’t come on like “gang bust- tory. You’ve likely been “plopped down” in ers.” an unfamiliar industry/organization, are dealing with issues you don’t fully under- • Recognize that all boards have well stand and are interacting with other direc- defined authority/power structures tors who are strangers. You’d be wise to (“pecking orders”). Figure out what serve an apprenticeship before engaging they are. Enlist your mentor to help as a full-fledged journeyman; do so, but you here (see Maxim #7). do it quickly. Keep in mind, you were ap- pointed to this board because of your • Use your time as an apprentice to: knowledge/skills/experience and for the get to know your colleague directors contributions you’ll make. (Maxim #6); gain an understanding of healthcare organization governance Anecdote: In the early 90s, I joined (Maxim #8); and become familiar the board of a NASDAQ listed healthcare- with the content areas underpinni ng focused information services company. At issues flowing through the boardroom my first meeting, I walked into the board- (Maxim #17). room and took a seat at the front of the table, to the chair’s right. As the meeting 11. Realize governing is a distinctive progresse d I noticed a bit of uneasiness organizational practice. and some sideways glances. At the break I pulled an old friend aside who’d been a pra•tice (pràk-`tîcë); An ac- director for several years and asked if tivity employing knowledge (“know- what”) and skills something was off. He responded: “You (“know-how”), som etimes sup- sat in John’s chair.” Mr. ______ was the - page 8 – © Dennis D. Pointer www.BoardFood.com
  • 21. plemented by technologies, to directorship solve problems and seize op- portunities. • Many directors, particularly those who Governance, like management and practice their professions individu- medicine, is a practice; however, when ally/autonomously (e.g., consultants, contrasted with them, it’s distinctive. physicians, lawyers, accountants), of- ten have difficultly adjusting to a First, governance is part-time and oc- board’s collective orientation and col- casional work. While executives, the laborative way of doing business. medical staff and employees are perma- Consensus decision making, after nent organizational fixtures ... directors long deliberation and debate, just are not. Boards convene for short periods goes against their grain. How com- of time, they adjourn and weeks or fortable, experienced and skilled are months pass before they meet again. you at playing the team sport of gov- ernance ? Second, due to its part-time nature, board work is episodic and fragmented. • I run across directors who think they It’s done in discrete bursts of activity, not can make individual requests of ... or continuously. As a consequence, collec- even tell ... executives, management tive memory and momentum is difficult to staff, employees or physicians “what sustain. No matter how important the is- to do.” They’re missing one of the sue being addressed, it fades into the most fundamental aspects of govern- background at the end of a meeting and ance as a collaborative practice. must be resurrected at the next one. • Because board attention and work is Third, boards exist only when they inherently fragmented ... memory, meet, between “raps of the gavel.”6 The thrust, follow-through and follow-up typical nonprofit healthcare organization are often problematic. Systems and board meets for two – three hours, 11 procedures must be put in place to times a year; thus, it has only 22 – 33 increase the seamlessness and conti- hours per year to govern one of society’s nuity of governance work. Your most important and complex institutions. board might consider implementing a follow-up agenda to track all action Fourth, while management and medi- items for review/assessment at future cine are individual practices,7 governance meetings. Additionally, I recommend is a “team sport.” A director has no indi- that you retain all board/committee vidual authority and power, as governing meeting agendas and associated responsibility rests with the board as a back-up materials for one year. This whole. takes a bit of filing cabinet space, but it’s helpful as a memory refresher and personal tracking system. 6 For example: boards, per se, don’t exist when their committees meet. Committees are board com- 12. Recognize the difference between ponents/sub-groups; they can’t (other than in iso- governing and managing, then re- lated and narrow instances), legally or functionally, spect it. discharge full board obligations and responsibili ties. 7 I typically get a push-back on this from confer- Management’s job is to run the orga- ence attendees, board retreat participants and my graduate students; it’s always fun to discuss. nization; the board’s work is to ensure Clearly, managerial and medical work is sup- it’s run well. The more your board at- ported/facilitated by many people; it couldn’t be tempts to manage, the less it will govern done without them. However, managerial and clini- cal decisions are made by individuals. My favorite effectively. illustrat ion is asking a physician whose name is on his/her medical license; it’s he or she, not a group. Clearly, the zone between governing - page 9 – © Dennis D. Pointer www.BoardFood.com
  • 22. and managing is fuzzy. Diligent governing move into a new and highly competitive to one director is encroaching on man- market. I started peppering her with rec- agement prerogatives to another. Addi- ommendations. I’ve taught graduate- tionally, the governance-management level courses in competitive strategy for boundary changes over time. For exam- the past 25 years and have done exten- ple: a board might be more directive with sive consulting in this area with both a new, relatively inexperienced CEO than commercial and healthcare organization with one who’s done an outstanding job clients. Bob, the President/CEO and board for years. chair said: “Denny you’re doing it again; crossing the line and dabbling in man- General principle: the board’s role is agement. I know you’re sinning because to frame issues, question, probe and over- I’ve read your book.” Sheepishly, I re- see; management solves problems, plied, “You’re right; let’s move on.” seizes opportunities, executes and runs Driven by my personal interests and de- things. sire to be helpful, I had wandered where I didn’t belong. As an aside, this inter- Illustrations help, here’s one. A fi- change reflects a very healthy boardroom nancial problem arises. Days of cash on climate: the CEO felt comfortable usher- hand have been falling over the last six ing me back to the balcony. months and the organization’s liquidity is threatened. The board’s job is to: recog- directorship nize the problem (if it hasn’t already been identified and brought to it by manage- ment); understand the context and con- • Pay attention when you begin “drift- tingencies/constraints; explicitly and pre- ing down to the dance floor,” then cisely convey its expectations (the number pull yourself back. This requires con- of days of cash that should be on hand); stant vigilance, because the desire to hold management accountable for formu- be helpful by sharing your expertise is lating a plan to correct the problem; and deeply ingrained. This is particularly then follow-up to ensure management’s true when the issue being discussed plan is having the desired effect. The is in your professional “sweet spot.” board should not spend time discussing how to solve the problem; this is man- • When a director colleague is ap- agement’s job. Yet, I see boards crossing proaching, or has crosse d, the gov- this governing-management boundary all ernance-management boundary, help the time. Such behavior deflects boards pull ‘em back by providing some feed- from what they should be doing, and back; do it lovingly and with humor. wastes a lot of valuable time, while simul- Like the “my sin anecdote,” healthy taneously disempowering executives. boardrooms are characte rized by this type of behavior. Here’s a metaphor I’ve found helpful: The board’s role is to stay in the balcony, • Encourage your board to have a dis- orchestrating and overseeing the dance. cussion regarding the general princi- Management does the dancing. Tempta- ple forwarded in this maxim; tions of the director: Every now and then, whether it should be adopted as a directors want to take a spin on the dance “running rule” and how directors floor; it’s often more fun than just watch- should be reminded of it when they ing. Simply: resist it! go astray. An anecdote, my sin: Some years 13. Keep your eyes on the prize. back I was on the board of XYZ Corpora- tion and attending a meeting where the This maxim is a famous quote from Vice President for Business Development Dr. Martin Luther King, Jr. was doing a briefing on a contemplated - page 10 – © Dennis D. Pointer www.BoardFood.com
  • 23. Health system boards, hospital Management’s plans, proposals and boards, medical group boards, home recommendations are formulated to im- health agency boards, nursing home prove strategic, operational, financial boards, professional/trade association and/or clinical performance. However, boards … quite a diverse lot. But, beyond when they’re being reviewed, discussed, some superficial differences, they have considered and eventually voted on in the identical obligations. boardroom, it’s easy for the interests of the organization per se to overwhelm and The purpose of all nonprofit boards is displace those of stakeholders. to represent stakeholders; the rough equivalent of shareholders in commercial Here’s the governing challenge: Most corporations. Identifying them can be often, what’s good for the organization quite involved; but, a rough first ap- also benefits stakeholders. But some- proximation is: stakeholder = the com- times it doesn’t; what increases organiza- munity. 8 tional performance can decrease stakeholder benefit. It’s the board’s obli- A board’s fundamental and overarch- gation to be vigilant in such circumstances ing obligation is to make sure the organi- and carefully assess proposed initiatives zation benefits its stakeholders. Organi- from a stakeholder value-added perspec- zations are collections of resources: tive. Management should be concerned money, personnel, facilities, equipment, about this, but it’s the board’s responsibil- supplies, competencies and capacities. ity to ensure it. These are means; the end is stakeholder benefit. Boards must ensure organiza- Anecdote: With the objective of pre- tional means lead to the end of maximiz- paring a case study (which never saw the ing stakeholder benefit/value. This is the light of day), I interviewed directors serv- BIG WHY of governing. ing on the board of a nonprofit health sys- tem that was considering the sale of one The problem is: in boardrooms, of its hospitals to a for-profit corporation. means can overwhelm and eventually dis- Cutting through all of the detail, I found place ends. This dynamic is called means- no evidence the board ever seriously as- ends substitution. sessed the deal’s relative costs and bene- fits from a stakeholder benefit perspec- A board’s purpose is to represent the tive. Management’s analysis, contained in interests of an organization’s a three-inch ring binder, and the board’s stakeholders; management’s objective is discussion/deliberation was totally organi- to enhance the organization’s perform- zational-centric; that is, how the deal ance. A board’s purpose and manage- would benefit the health system. Put ment’s objectives are different. simply: fundamentally flawed governance flowing from a lack of clarity regarding board purpose/obligations and stakeholder interests. 8 The community is clearly a nonprofit healthcare organization’s primary and ultimate stakeholder. However, this conceptualization is rarely fine-grained directorship enough, as communities are very diverse. Here’s a simple illustration: Say you’re on the board of a nonprofit condominium homeowners association. • I once sat on a Catholic hospital Who are the stakeholders? At first glance the an- board where the sister chair (a true swer is easy: those who own units (i.e., equivalent to the community of a nonprofit healthcare organiza- saint) began each meeting with a tion). Actually, there are probably three stakeholder brief reflection/discussion regarding subgroups: those who own units and live in them; the board’s purpose and its obligation and those who own units and rent them out; those who rent units. Each of these groups have different to stakeholders. This kept our “eyes (and potentially conflicting) needs/interests which on the prize.” the board must represent. - page 11 – © Dennis D. Pointer www.BoardFood.com
  • 24. • For your board to be truly cial). stakeholder-centric it must specify the organization’s key stakeholders • Gail, president of the medical staff, and understand their most important believes she serves on the board to interests. If you’d like to have a advance physician interests, espe- Board Stakeholders Briefing (which cially those of her specialty (radiol- provides much more depth on ogy). stakeholders and how to map them, plus numerous nonprofit healthcare • Bill is a retired CPA and sings only organization examples), logon to one note: cost reduction. www.BoardFood.com, go to the navi- gation aids page and download the • Dan, the only Black on the board, document. perceives himself as an advocate for the African-American community. • You can learn more about stakeholders by consulting: Getting • Sharon has one issue, right-to-life, to Great: Principles of Health Care and isn’t interested in anything else. Organization Governance (Chapter 3) by Dennis Pointer and James Orlikoff. • Ann sees herself as the standard- bearer for women’s issues. • The foundational/critical importance of stakeholders, as a point of depar- • John, who several years ago made ture for governing, is emphasized in the single largest gift the organization Building an Exceptional Board: Effec- has every received, is only concerned tive Practices for Health Care Govern- about insuring his own legacy. ance – Report of a Blue Ribbon Panel published by the Center for Could this board govern effectively on be- Healthcare Governance (CHG), half of all stakeholders? Or would it be American Hospital Association. You torn apart, and eventually rendered impo- can download a copy, free-of-charge, tent, by each director’s narrow perspec- from CHG’s website at tives and interests? www.americangovernance.com. Your board’s job is to represent; but, 14. Don’t represent narrow interests it must do so by balancing and aligning or constituencies. the different/divergent interests of various stakeholders. What you must not do is This is a more nuanced aspect of the serve as a narrowly focused standard preceding maxim. bearer and single issue advocate. Consider this, albeit “over-the-top,” If your board is composed of members situation: 9 Friendly Hospital’s board is who seek to advance special interests, it composed of directors who see them- will be torn apart by centrifugal forces and selves as representatives of, and advo- its effort to govern fragmented. One direc- cates for, various special interests. Some tor argues on behalf of a particular group; illustrations: other directors do the same thing from equally narrow perspectives. The board • Harry feels it’s his duty to represent takes on the characteristics of a legislative employees (he’s a former union offi- body or courtroom. 9 Although embellished, this is a real board for directorship whom I once conducted a retreat. It was a tough two days. None of the members could transcend their own narrow perspectives/interests and consider those of all stakeholders; a crucial starting-point for • As a director you are a stakeholder really governing. agent. Your position is neither a li- - page 12 – © Dennis D. Pointer www.BoardFood.com
  • 25. cense nor a platform for “beating the stakeholders always trumps loyalty to the drum” regarding issues you hold dear. organization. Accordingly, loyalty’s cen- You have a duty to balance/align the ter-of-gravity is serving as a stakeholder interests of all stakeholders, not rep- agent and faithfully representing their in- resenting those of just one or a few. terests. You breach this duty when, for example: a material conflict-of-interest • Ex officio directors (those who serve influences your decisions; you disclose on the board by virtue of other posi- confidential information that might have a tions they hold) face the greatest detrimental effect on the organization; challenges here. 10 For example, a you seize a business opportunity for your- physician who’s a director because self or other parties that legitimately be- he/she is the elected chief of staff. longs to the organization; you vote for an The medical staff expects this individ- unlawful distribution of the organization’s ual to represent their interests. Your assets which subverts its charitable pur- board must offer such directors assis- pose and/or results in private inurnment. tance and “air cover”: providing them with gentle reminders when Care requires dischargi ng your gov- they overstep the boundary; and erning responsibilities with the diligence, constantly reminding their physician prudence and sound judgment equal to colleagues they’re on the board be- that of an ordinarily competent person in cause of the knowledge, skills, expe- similar circumstances. This duty focuses rience and perspectives they bring ... on the process of acting and deciding, not not to represent medical staff inter- the results. The test is: Was reasonable ests. care exercised? Not: Was the outcome optimal, satisfactory or even tolerable? 15. Understand your legal fiduciary You are permitted to presume that infor- duties of loyalty, care and obedi- mation, analyses and recommendations ence in addition to director liabili- provided by others (executives, staff and ties/protections. consultants) are accurate, truthful and informed ... if there are no compelling All state nonprofit organization incor- reasons to believe otherwise. This duty poration laws hold that directors have a does not require you to be overly cau- fiduciary duty to serve as stakeholder tious, avoiding all risks. Courts are very agents, acting in ways that protect and hesitant to substitute their judgment for advance their interests, carefully and in those of boards, after the fact. The ex- accordance with the law. You are ac- pectation is simply that directors act care- countable for being loyal, careful and obe- fully, with common sense and informed dient and potentially legally liable if you’re judgment. not. Obedience requires that you obey the Loyalty is owed first/primarily to law. Directors must avoid acts beyond stakeholders and then second/derivatively the board’s authority as articulated in ap- to the organization. Loyalty to plicable laws, court decisions and regula- tions in addition to those specified in the 10 Ex officio directors have the same obligation as organization’s own governing documents. all other board members: to represent stakeholders To discharge this duty you must: under- as a “general class”; that is, balancing/aligning the stand the law and the organiza- interests of each stakeholder group, favoring no par- tion’s/board’s charter, articles of incorpo- ticular one. Look at it this way: What gets ex officio directors to the boardroom is their membership in a ration, bylaws and policies; and abide by stakeholder group; the board wants/needs the com- them. Unlike the requirement to be care- petencies, experiences and perspectives that comes ful, the test of fulfilling this duty is not with such membership. However, once in the board- room ex officio directors breach their fiduciary duty merely good faith intentions, but rather of loyalty (see Maxim #15) by solely representing compliance and results. Ignorance is the interests of the groups from which they came. never a justifiable excuse for breaching - page 13 – © Dennis D. Pointer www.BoardFood.com
  • 26. this duty. covered (e.g., the cost of indemnifica- tion); but certain types of claims are typi- The good news: nonprofit healthcare cally excluded. D&O insurance covers the organization directors are rarely named in organization, not directors directly. lawsuits. The bad news: if you are, it’s a hassle. You must be loyal, careful and directorship obedient; if someone feels that you’re not, they can sue. In an increasingly liti- gious society, and given heightened stan- • To learn more about your legal fiduci- dards of board accountability, such actions ary duties, I recommend: The are becoming more common. My intent is Board’s Fiduciary Role: Legal Respon- not to scare you. However, because sibilities of Health Care Governing board membership comes with potential Boards by Fredric Entin, et. al. personal liability, it pays to be prudent. Loyalty As a director you typically have two protections: 11 indemnification and direc- • Insist that your board is reminded of, tors and officers (D&O) insurance. Nei- and “re-briefed” by counsel regarding, ther is automatic. The first must be pro- its duty of loyalty prior to considering, vided (typically via your board’s bylaws), deliberating about and voting on ma- the second has to be purchased by the jor issues, big deals and large finan- organization on whose board you serve. cial transactions. Organizations can choose to indem- • With respect to issues coming before nify directors (i.e., offer protection against your board, acknowledge any poten- liability and financial loss), although spe- tial conflicts-of-interest and seek an cific provisions vary considerably. If a di- opinion regarding their materiality. If rector is named in a suit arising out of the conflict is judged to be material, board service he/she may be reimbursed totally remove yourself from discuss- by the organization for expenses incurred ing, deliberating, exercising any influ- (including attorney’s fees) and in specified ence regarding, and voting on, the instances for judgments, awards and matter. This is critical to fulfilling fines. Typically, expenses are paid by the your fiduciary duty of loyalty, as ma- organization during the action, not after terial conflicts are among the most it’s resolved. The common standard for common causes of breaching it. See such indemnification is: the director acted Maxim #25 where this is addressed in in good faith and in a manner he/she be- more depth. lieved to be in the best interest of the or- ganization and its stakeholders; and (if • Never talk with outsiders about in- the action is allegedly criminal), the direc- formation/matters deemed to be sen- tor had no reasonable cause to believe sitive or confidential. See Maxim #26 his/her action was unlawful. where this is addressed in more depth. Additionally, an organization may purchase liability insurance that reim- • Ensure that the independe nt/external burses expenses incurred due to actions auditor reports to the board any con- for which its directors and officers are cerns regarding private inurnment ar- rangements that might jeopardize the 11 In some states there are three; those that have organization’s charitable purposes enacted legislation providing the directors of certain and nonprofit status. charitable nonprofit organizations l imited indemnifi- cation (or immunity). The provisions of such legisla- tion vary so widely, I’ve chosen not to discuss them Care here. My recommendation: ask the organization’s counsel for a briefing. • Insist background materials are dis- - page 14 – © Dennis D. Pointer www.BoardFood.com
  • 27. tributed an adequate amount of time before dealing with important matters prior to board/committee meetings so and big deals. directors can carefully review and re- flect upon key issues before address- • If you’ve not done so recently, review ing them. the organization’s articles of incorpo- ration and charter in addition to your • Expect analyses prepared by staff and board’s bylaws. consultants thoroughly/accurately portray both the positives and nega- • Request a book containing all board tives of proposed initiatives. policies (updated continuously) be provided to you; then periodically re- • You must be present and contribute view them. to exercise due care; attend board meetings and participate. Liabilities and Protections • Come to every board/committee • These matters are very important, meeting prepared, having carefully complex and technical. Accordingly, read agenda materials and propos- each year, request the organization’s als/recommendations up for discus- counsel brief your board on potential sion and vote. risks and legal liabilities in addition to the nature/scope of protections avail- • Always ask for additional information able. If your board’s indemnification and clarification when you do not un- provisions and D&O insurance cover- derstand an issue. age haven’t been reviewed by an ex- perienced governance/corporate at- • Insist that adequate time is allocated torney in the last several years, re- for questions, elabora- quest this be done. tion/clarification, discussion, delibera- tion and debate prior to votes ... es- • You might want to have your personal pecially on important agenda items. attorney review the board’s indemni- fication policy and D&O insurance. As • Prior to votes on important matters, an extra layer of protection and com- ask for an assessment by counsel re- fort, ask your attorney for a referral garding whethe r your board has exer- to counsel experienced in govern- cised its duty of care. ance/corporate law. • Don’t be pressured by apparent • Your best protection against the po- overwhelming agreement. In light of tential legal liability that comes with the facts, after listening carefully to board service is to understand your your director colleagues plus taking a job and do it conscientiously ... and, I stakeholder perspective, be prepared might add, heed these 40 maxims!! to vote “no.” See Maxim #31 where this is addressed in more depth. 16. Understand your board’s govern- ing responsibilities. Obedience The substantive work of governing • Request that periodic educational ses- entails fulfilling responsibilities. The core sions are held on legislative, legal and ones for nonprofit healthcare organization regulatory developments in addition boards are: 12 to their implications for your board. 12 This model was originally introduced in Really • Ask for the opinion of legal counsel Governing: How Health System and Hospital Boards regarding the applicability of key Can Make More of a Difference by Dennis Pointer and laws, regulations and court decisions Charles Ewell. It was elaborated and expanded in: - page 15 – © Dennis D. Pointer www.BoardFood.com
  • 28. specifying • review/approve key organization-wide ORGANIZATIONAL ENDS goals14 • ensure management strategies 15 are aligned with the vision and key goals ensuring ensuring EXECUTIVE FINANCIAL PERFORMANCE PERFORMANCE • monitor/assess how well the vision is being fulfilled, key goals are accom- plished and strategies are being pur- ensuring sued in addition to expecting correc- QUALITY OF CARE tive action if problems are detected Executive Performance Only the briefest synopsis of these re- sponsibilities are forwarded here as A board has one direct report, the they’ve been a major focus in four of my CEO; he/she is its agent and delegated previous books. authority to manage the organization’s affairs. Ends The board-CEO relationship is intri- Ends are destinations and paths cate and complex because the CEO: is taken. Both are choices, and among the simultaneously the board’s “subordinate” most important organizations make. (hired and fired by it) and a colleague di- Formulating/approving them is a board rector (in over 80 percent of health sys- responsibility. tems and hospitals); and exerts a signifi- cant influence over the amount/type of In attending to ends, your board de- information the board receives and its fines the organization: what it is and agenda. isn’t; what it will and will not become. Governance begins here. Other responsi- Your board is responsible and ac- bilities (for executive performance, quality countable for the CEO’s performance; it of care and financial performance) all flow must: from this one. • recruit and select the CEO To fulfill this responsibility, your board must: • assess the CEO’s performance • provide input regarding, assist in for- • adjust the CEO’s compensation mulating and approving the organiza- tion’s vision13 fine-grained and empowering visions. The reason is simple: an organization cannot achieve that which Board Work: Governing Health Care Organizations, its leadership is unable to envision. Visions spell the Getting to Great: Principles of Health Care Organiza- difference between purposefully moving into the fu- tion Governance and The High Performance Board: ture versus aimlessly wandering there. A vision Principles of Nonprofit Organization Governance all specifies what an organization should/must become by Dennis Pointer and James Orlikoff. The model in order to maximize stakeholder benefit. The best has become a standard framework for describ- way to formulate and codify a vision is not a prose ing/prescribing the responsib ilities of nonprofit statement, but rather a list of specific characteristic s healthcare organization boards. See, for example: regarding what the organization should look like, at Building an Exceptional Board, Report of a Blue Rib- its very best, in the future. 14 bon Panel on Health Care Governance (Center for Goals are the most important things an organiza- Healthcare Governance, American Hospital Associa- tion must accomplish for its vision to be fulfilled; tion); and Board Roles and Responsibilities: Ele- they increase a vision’s specificity and “density.” 15 ments of Governance (The Governance Institute). Strategies are specific plans for deploying an or- 13 Highly successful organizations sha re one thing in ganization’s resources (fiscal, human, facilities, common: they have distinctive, explicit, precise, equipment, supplies, etc.) to achieve key goals. - page 16 – © Dennis D. Pointer www.BoardFood.com