I recently attended a Governance Institute conference, as a board member of Appalachian Regional Healthcare. The conference focused on board and organizational leadership education. It was interesting, informative and thought provoking.
One session addressed the issue of hospital independence vs merger or affiliation. The panel included two CEOs. One led his organization through a merger and the other is currently leading an organization whose board is "fiercely independent." I could relate to both, and I found the case studies fascinating.
The "merged organization" had given up independence from a governance perspective and had transferred ownership of all asset and liabilities to the new owner. The "fiercely independent" organization was independent from the perspective of governance. The board retained control of all assets and liabilities but operationally the organization had agreements, partnerships and alliances with many different entities to ensure financial viability.
I think when independence is discussed, in general, we often do not consider the difference between operational and governance independence. Boards of independent organizations have the fiduciary responsibility to protect the assets of the organization but not the responsibility of operationally managing it. The CEO is the one employee of the board and he/she manages the organization through various means to move the organization in the direction the board has set. That can and often does mean operationally partnering with many different organizations.
As a board discusses the option to give up its independence, it should have a clear understanding of what independence means. That discussion should include deciding what is non-negotiable. For instance, is local control through decision making the only non-negotiable item? If so, the CEO then has the direction needed to proceed with other types of operational partnerships to ensure there are financial resources sufficient to execute the strategic plan.
These are major decisions that should not be taken lightly nor should they be neglected until there is an operational/financial crisis that forces a hasty decision. I believe independent organizations today should regularly evaluate governance independence vs affiliation with a set of metrics that helps to provide an unbiased and non emotional starting point for the discussion. I believe it is the board's fiduciary duty.
(Photo by Tim Foster on Unsplash)