The non-profit health and human service organization’s governance needs are changing – and becoming less similar to non-profit organizations in other sectors. Why? More of the organization’s total income is coming from services, there is more competition for that service revenue, which has more reimbursement tied to performance, and there are shifting standards for maintaining tax-exempt status.
The implications of this shift got a lot of attention at our recent 2019 OPEN MINDS Executive Leadership Retreat. My colleagues, OPEN MINDS Senior Associates Ray Wolfe, J.D. and George Braunstein, RN, FACHE, led a seminar on the implications for non-profit boards – Aligning Non-Profit Health & Human Service Boards For Sustainability With The New Market Landscape: An OPEN MINDS Seminar On Governance Issues In The Time Of Changing Reimbursement Models & Charitable Care Rules.
The seminar focused on sustainability issues – particularly the increasing pressure on operating margins in health and human services – for both for-profits and non-profits. And the increasing lack of predictability in revenue – and expenses – brought by value-based reimbursement. During the seminar, Mr. Wolfe discussed the challenge of ‘business as usual’ with non-profit boards. He noted that many non-profit boards operate with very active members meeting at a regular time, often two or three months apart, and limited knowledge of the implications of market changes on the financial management of the organization. In a value-based world, financial issues can change unexpectedly and timely attention to market shifts are necessity for success. Put simply, traditional models of governance are not effective.
That seminar led to the very natural question – what is needed of board members of non-profit health and human service organizations – and how can executive teams leverage the value of their board members? That was the topic of a subsequent session at the institute, Non-Profit Board Management: Keys To Attracting & Managing A Board That Can Operate In A Competitive Market featuring Spectrum Health Chief Executive Officer Bruce Nisbet, Aurora Mental Health Center Chief Executive Officer, Kelly Phillips-Henry, Psy.D., and Stephen Holoviak, Ph.D, OPEN MINDS Subject Matter Expert and board member of Summit Health.
The session facilitator, OPEN MINDS senior associate, Art Williams, opened the session with a summary of the key issue: The definition of what a board should look like has fundamentally changed. As the market changes, organizations need to attract board members who are competent, strategic, and understand the major environmental forces that affect the modern market. It comes down to remaining competitive. Board members need to have the industry knowledge to be aware of the resources required to meet the organization’s overarching mission.
In that context, the question was, how can executives increase the ‘contribution’ of board members to ensure future success? The panel’s advice—recruit the right members, think quality over quantity, and adjust the dynamics.
Recruit The Right Members—During the transition from volume-to-value, executive teams should adjust their expectation of board member roles to ensure strategic advantage. Board members require a new set of perspectives and skills, which makes recruiting individuals with business, financial, and entrepreneurial backgrounds equally important to recruiting those with clinical perspectives and the ability to raise money. These skill sets to help organizations navigate market forces with a commitment to the mission, and a willingness to learn new things.
“Healthy boards want ongoing governance training,” said Dr. Phillips-Henry. “Healthy boards want to learn and grow just like individuals.”
Mr. Nisbet agreed and said while it’s a challenging combination to achieve, it is possible and added:
As we move towards value-based reimbursement, we have a member who has experience working in managed care organizations and contracting, a chief financial officer/certified public accountant from a non-profit organization with value-based reimbursement contract experience, and a member with a legal background. We have strategically shifted our priorities in recruitment based on the key skill sets needed to position our organization for success.
Think Quality Over Quantity— Another consideration – having more board members does not necessarily mean a better board. Quality trumps quantity. The goal shouldn’t be focused solely on meeting an arbitrary number. Having a smaller group of board members whose skill sets and experience align with the organization’s strategic plan and mission will better position your organization for success versus having a larger group of board members. Dr. Phillips-Henry explained:
People are always asking about the appropriate size for boards and executives worry their boards are going to get too small but if you have eight to 10 really engaged, quality board members that board is much stronger than one with 20 members with low engagement. There shouldn’t be pressure to constantly recruit for larger boards. The trend I see is that smaller may be better.
To find the “right number,” Mr. Nisbet gave similar advice:
Our board is composed of nine people. The best advice? Select board members based on skill sets, not just on numbers. Half of our board has an immediate family member who struggles with mental illness or addiction, and the other half may not have an immediate family member, but they are very aware and understanding of those struggles. We ensure that board members have the appropriate skill sets and search for people who have a passion for the mission, the ability to work well with others, and to work toward consensus.
Adjust The Dynamics—Getting new board members up to speed on the mission, culture, and goals of an organization isn’t an easy task. It’s normal for a new board member to have challenges understanding the balance between the strategic plan and future goals – and understanding the board’s role in that. Dr. Phillips-Henry shared her organization’s strategy to pair new board members with peers in the first year to ease the transition:
The “buddy partner” approach involves pairing new board members with a seasoned colleague, who helps them understand the organization’s culture and pace of the board, so they become active members more quickly. New board members can be quiet for a while, but we don’t want them to be quiet. With a new and fresh set of eyes, new board members can ask disrupting questions that are important. We want them to feel a part of that process sooner and engage with the board to their full potential.
Now more than ever it’s critical to ensure that board members are ambassadors for your mission and active contributors to your success. Selecting them – and engaging them to bring critical skills to help the organization thrive in a changing environment is key. Mr. Wolfe summarized it well in his seminar: “The world we will soon face will require our organizations to develop new leadership skills and new knowledge sets. We will need to be able to do cost accounting, contract negotiation, build continuous improvement systems, buy and implement complex technology, and make key decisions in each of these areas. Can your board members provide wisdom and perspectives in these areas?”
For more on managing non-profit boards, check out these resources in the OPEN MINDS Industry Library:
- Advice To Board Members: Eyes On, Hands Off
- Keeping Your Board “On Board”
- Revisiting The Non-Profit Board/CEO Relationship
- Measuring The Performance Of Non-Profits—What Yardstick To Use?
- What Do Board Members Need To Know?
- Managing Your Boards Of Directors: Strategic Advice For CEOs
- The Board Doctor Will See You Now
- Getting A Board On Board
- Your Organization Is Ready, Are You?
- Guide To Good Governance: A Quick Overview Of Governance Models
Join us at The 2019 OPEN MINDS Technology & Informatics Institute for the session, “Leveraging Technology To Expand Access, Enhance Consumer Experience & Improve Outcomes In A Behavioral Health Care Marketplace Dominated By Value-Based Models” with Alison Nelson, Senior Vice President, Optum Technology, Optum.