Board Governance & Culture
Boards must realise that the most important thing that helps a corporation manage clinical risks is the ‘culture’ of the corporation. Culture because it can be a key driver of conduct within the corporation. Given that there often is a strong connection between poor culture and poor conduct, poor culture is a key risk area.
This makes culture the central factor on which risk management and clinical governance depend. The lack of an appropriate culture or a lack of a clearly expressed culture is a recipe for failure in clinical governance.
Given the central role of culture, how much time do Boards actually spend on culture? Can Boards spell out what corporate culture is? For example, what does it mean to have a ‘learning culture’ or a ‘culture of innovation?’ How do you create and maintain a culture?
Generally, culture is a shared set of values or assumptions, which reflects the underlying mindset of a corporation. It guides how a corporation and its staff think and behave, and shapes attitudes and behaviours.
A corporation can only act through its people and culture is one way in which people can be influenced to act appropriately. A key aspect of good governance is getting the culture of a corporation right.
Culture can make a difference from a financial or clinical perspective. Research has shown that corporations with a strong culture tend to have sustained high performance over the longer term. In addition, those corporations that have a strong client focus tend to compete more effectively.
Conversely, poor culture may adversely impact a corporation by failures in clinical governance.
In the commercial world, the London School of Economics and Political Science reported that the cost of poor conduct for the 10 most-affected global brands was approximately $US 250 billion between 2008 and 2012. KPMG have also reported that since 2011, the largest banks in Britain have paid almost 60 per cent of their profits in fines and repayments to customers.
What are the Key drivers of positive culture? Three things stand out:
- Communication i.e. that acceptable and unacceptable conduct and behaviours is clearly articulated;
- Challenge i.e. examine and challenge existing practices. Employees should be encouraged to escalate potential practices or behaviours of concern; and
- Complacency i.e. it is crucial that boards avoid complacency and actively manage risk by building ongoing processes that are continually reviewed, enforced and validated.
The first driver of positive culture is setting the right tone at the top. The board and senior management are responsible for creating a culture where everyone has ownership and responsibility for doing the right thing and a focus on achieving good outcomes for clients.
The board should set the values and principles of a corporation’s culture, which should be reflected in its business’s strategy, business model and risk appetite. These must then be consistently demonstrated by the board and senior management, and cascaded throughout an organisation.
It is imperative that there exists oversight and control to monitor an entity’s culture. This involves promoting, monitoring and assessing the impact of culture on conduct and making changes where necessary. It also includes ensuring that there is adequate governance in place to mitigate the risk that staff will benefit from problematic behaviour.
Boards, as part of their governance responsibilities should spend considerable time establishing and maintaining an organisational culture. The PMS metrics (‘People Matter Survey’) for example, should be the basis or starting point for any discussion on culture.
WPL provides governance training for Boards. The training is provided on site at a time convenient for boards and usually takes about two hours.
For experienced Boards, a session on governance is in the form of “Conversations on Governance” rather than a formal power-point presentation which may be necessary for new or incoming Board members.
For more information on Governance Training, please contact Ignatius on 9972 4950 or by email at email@example.com