Session 2: Health Service Governance The governance landscape and theoretical frameworks Claire Lea, Monday 23 September 2019, 9am Our microphones are currently muted
Record session 2
Session 2: Health Service Governance The governance landscape and theoretical frameworks Claire Lea, Monday 23 September 2019, 9am
Structure and timings • Presentation length: 45-50 minutes • Questions • Technical issues and sound check • Slides, recording and preparation • HSG study text 4
The study text 5
Governance definitions, issues and theoretical frameworks
Today’s plan • Introduction • Definitions and issues in governance • Definitions and issues in health service governance • Theoretical frameworks 7
Defining governance • Governance: the concepts of governance which are generally applicable regardless of landscape. • Corporate governance: the governance applied to the corporate commercial business world, including public and private companies. • Health service governance: the governance applied to NHS organisations. • Public sector governance: the governance applied across the wider public sector including the NHS. 8
The difference between governance and management In the chat box, please describe how you would see the difference between governance and management? 9
The difference between governance and management 10
The Governance Landscape “Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.” (Sir Adrian Cadbury, UK, Commission Report: Corporate Governance 1992) 11
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The balance of power 13
Corporate Governance 14
Setting objectives for an NHS organisation In your view what are the main objectives for an NHS organisation ? Who will come out on top? 15
Key issues in governance Transparent reporting and auditing Exercise of board-level power Risk management Stakeholder engagement Corporate social responsibility 16
Corporate Governance Voluntary codes such as: • UK Corporate Governance Code (2018) • Higgs Review & FRC Guidance on Board Effectiveness (2018) • Smith Report & FRC Guidance on Audit Committees • Turnbull Report & FRC Guidance on Risk Management, Internal Control and Related Financial and Business reporting • FRC: Corporate Culture and the Role of Boards (2016) • King Code III & IV • The Davies Report 2011/2013/2015 17
Public Sector Governance Voluntary codes such as: • Nolan Principles & NHS Board Standards • The Good Governance Standard for Public Services • Charity Governance Code 18
Theoretical frameworks In your study of the student text – what theoretical frameworks have you been introduced to? 19
Theories to consider • Agency theory • Stakeholder theory • Stewardship theory • Transaction cost theory • Generative governance theory Each theory is underpinned by an approach to governance 20
Agency theory Agency problem can be described as • arising from the separation of ownership and control within an organisation • how to align the interests of managers and owners The agency relationship is a form of contract between an organisation’s owners and its managers, where the owners appoint an agent (the managers) to manage the organisation on their behalf. As part of this arrangement, the owners must delegate decision-making authority to the management. This, however, gives rise to an inherent conflict of interest between the organisation’s owners and managers. Governance is designed to minimise the agency problem such as the shareholder value approach 21
Stakeholder theory Stakeholders defined as ‘any group or individual who can affect, or is affected by, the achievement of a corporation’s purpose’. Developed due to a growing appreciation that corporations created value through the complex interaction of various networks of relationships. Stakeholder theory takes the view that the purpose of governance should be to satisfy, as far as possible, the objectives of all key stakeholders – customers, employees, the general public, the government, investors, local communities, and major suppliers and creditors. The board of directors should therefore consider the interests of all major stakeholders. However, some stakeholders are more important than others, so management should give priority to their interests. Led to development of the stakeholder (pluralist) and enlightened shareholder approaches. King Code is an integrated approach. 22
Stewardship Theory This theory theory stresses not the perspective of individualism, but the role of top management acting as stewards, integrating their goals as part of the organisation. The stewardship theory suggests that stewards are satisfied and motivated when organisational success is attained. Prioritises a positive connection between public bodies and civil society. Key role of those who govern is to create a framework of shared values, then to engage with key stakeholders and a suitably skilled and autonomous workforce – all of whom benefit from helping the organisation to achieve its goals. One example is the policy governance approach 23
Transaction Cost Theory This theory is a variation on the agency theory. The problem it attempts to address is how to achieve effective and efficient accomplishment of transactions by the organisation. It describes governance frameworks as being designed to maximise the net effects of internal and external transactions, rather than focussing on contractual relationships outside the organisation. The theory is based on the assumptions that whilst profit maximisation is the rational objective of all business, human behaviour is not always rational as businesses can be very complex with a huge variety of different possibilities and individuals will always act with a degree of self interest. 24
Generative governance theory A new approach recently emerged from the US experience of not-for-profit boards. Sets out three modes in which the board should be effective: 1. Fiduciary (stewardship) 2. Strategic 3. Generative. The main contribution of this tri- modal model is to emphasise the role of ‘generative thinking’ in producing a sense of what knowledge, information and data mean. This requires an active process of dialogue and engagement between the board, staff and service users This has led to the governance as leadership approach. 25
Following this session… • Your chance to ask questions • Slides and recording • LinkedIn / Base Camp forum • Session 3: Monday 7 th October 2019, 9am. Link to follow • Reminder: exam entry June 2020 26
Thank you
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