Editor’s note: This content is excerpted from an article in the August 2023 issue of BoardRoom Press, The Governance Institute’s bimonthly magazine. Visit the BoardRoom Press webpage (Governance Institute member login required) to access the full article.
Working in the healthcare field has become even more challenging and complex over the last few years. Most hospitals and health systems have recently experienced workforce challenges, operational strain, disruptive pressures from new players, lower investment performance and declining margins. Each one of these issues is arguably a key governance topic that requires the executives’ and board’s best thinking and analysis to exercise their fiduciary roles and do their best for patient care.
Healthcare organizations today—starting with the board and CEO—are trying to address these challenges while also ensuring high-quality, safe, equitable, accessible, affordable healthcare. In the current, very challenging environment, easy answers are in short supply. Indeed, leading today is a big job that, understandably, is resulting in tensions of a new magnitude as boards and executive teams navigate their way to the future.
A Strong Board–CEO Relationship Is Imperative
In our decades of work with boards and CEOs, we have noticed that those who have a healthy, trusting relationship are able to deal with stresses like these more easily and productively than those whose relationship is strained. Unfortunately, today’s pressures seem to be causing and/or highlighting tensions in the board–executive relationship.
For instance, with increased uncertainty, some board members are demanding more detailed information about financial and other challenges. If they perceive that their CEO and executives are reluctant to provide that level of information quickly and transparently, or intentionally omit key information, some board members may begin to feel that they cannot trust their executives to be honest about the negatives as well as the positives.
On the other hand, when boards continue to press for more data, some CEOs and executives may feel that their boards are crossing the governance–management line and/or that the board does not trust them to do their jobs. The result is often a difficult relationship between the board and its CEO and other key executives.
One possible negative outcome of unaddressed relationship issues could be the exit of the CEO. A June 2023 report from Challenger, Gray & Christmas regarding dramatically increased CEO exits across industries states that “the 80 (CEO) moves within hospitals from January through May were up 70 percent from the 47 recorded in the same period of 2022. The number marks the third-highest year-to-date total across all 29 industries and sectors measured.”
Some CEOs have told us in confidence that they left because of a poor relationship with their boards. Therefore, it is interesting to note that according to The Governance Institute’s biennial survey, for over a decade, boards have routinely rated their performance in the “board development” category as the lowest of all nine fiduciary duties and core responsibilities. And they have consistently rated “management oversight” as fifth or sixth behind financial oversight and the three core fiduciary duties.
Key Board Takeaways
These diagnostic questions can help ensure there is a strong, mutually trusting relationship between the board and CEO. It is important to keep in mind that trusting board–executive relationships require a healthy dose of introspection, focused dialogue, and carefully structured and facilitated discussions. To begin, consider these questions:
- (For CEOs and key executives) On a scale of 1–10, where 10 is high, how would you rate the level of trust between the CEO/executives and the board?
- (For boards) On a scale of 1–10, where 10 is high, how would you rate the level of trust between the CEO/executives and the board?
- If any of the ratings are lower than desired, explore these possible reasons:
a. Capabilities
b. Candor
c. Intent - Which of the following levers offer the best opportunities to improve the board–CEO partnership?
a. Communicate regularly and transparently.
b. Use competency-based selection.
c. Set clear expectations.
d. Prioritize healthy, collaborative relationships.
e. Check in and improve.
Deborah J. Bowen, FACHE, CAE, is president/CEO, American College of Healthcare Executives. Pamela R. Knecht is president/CEO, ACCORD LIMITED