EXCELLENT GOVERNANCE LEADS TO EXCELLENT RESULTS

Daryl C. Wilson, FCA was appointed Auditor General of New Brunswick in 1997. He has served on the Board and Executive Committee of the Canadian Institute of Chartered Accountants, and chaired CICA’s Public Sector Accounting Board from 2002 to 2004. An active member of CCAF, he serves on the Program Advisory Group for the Public Performance Reporting Program. Daryl spoke on the issue of governance to the National Healthcare Leadership Conference in Saint John, N.B. on June 6, 2005. One of the conference sponsors was the Canadian Healthcare Association. In 2004-05, CCAF — in a joint research venture with the CHA — completed a consultation process and issued the research report, Excellence in Canada’s Health System: Principles for Governance, Management, Accountability and Shared Responsibility.

Following the conference, CCAF Executive Director Michael Eastman interviewed Daryl about his views on governance.

Michael: First, what was the focus of your presentation to the healthcare conference?

Daryl: Well, as you know from CCAF’s work with the Canadian Healthcare Association, good governance is particularly important – and particularly difficult – in the health sector, where you have a highly complex network of interests involved. In my presentation, I set out five conditions that, from my experience, need to be in place if the Board of Directors of a public sector institution is to provide excellent governance and contribute to the achievement of desirable results.

Michael: Your first point is that an agency needs a clear mandate and challenging performance expectations set by government.

Daryl: Every organization should know what it is expected to accomplish with available resources. The performance expectations should include both financial and non-financial performance and they should be clearly understood and accepted by both the government and the agency.

This information then becomes the starting point for the agency’s strategic plan, and provides a baseline for performance improvement and for ongoing dialogue between the Board and management.

Michael: Your next point addresses the issue of the quality of the people serving on the Board.

Daryl: Board members need to be independent thinkers who aren’t afraid to ask the tough questions and to be critical when appropriate. Ideally, they should have as much experience as the CEO, if not more. Most importantly, their experience should demonstrate that they know how to help deliver results. Lack of experience at this level should not be tolerated.

My third condition for excellent governance is that the roles of management, the Board and the government should be clearly defined. In my view, the Board’s role should be to challenge management’s recommendations. It should ensure that management has a rigorous decision-making process, and that it is operating on reliable information. The Board should also evaluate the CEO, a very common component of excellent governance, but one not always seen in the Health Sector. This role is likely to create a bit of tension between the Board and management, but a little friendly tension is a good thing. The Board should also regularly critique its own performance.

Michael: In our work with the CHA, we came to the same conclusion – that roles and responsibilities are very important. In fact, several of the 11 principles we set out in our joint report dealt with roles and responsibilities. We note that health system partners need to understand their roles and responsibilities, and that governance and management arrangements and practices must be in place to support people in fulfilling their roles. We said the conditions under which one partner gives direction to another need to be clear to all parties, with explicit and mutually understood mechanisms for giving direction. We also mention health system partners need to set clear conditions and criteria governing their respective rights and responsibilities.

Daryl: You would, of course, want those principles followed in any similar relationship, but they are particularly critical in the health sector, where the stakes are so high and the environment so complex.

Michael: Your fourth point deals with strategic planning.

Daryl: I’m a strong believer in the value of a strategic plan that sets out mission, goals, objectives and performance measures. The Board should play a role in the strategic planning process, ensuring that the plan elements support the mandate and are consistent with government expectations. The Board should question the choice of objectives, measures and targets. To do this effectively, of course, the Board needs the right people and a clear understanding of its role.

Michael: Again, that links to the work we did with the CHA. We emphasize that procedures for approving plans, and budgets as well, need to be clear and respectful of the legitimate interests of all parties. Your point stresses the role of the Board in this process in ensuring the government’s interests are respected.

Daryl: My final point is about the need for robust performance reporting, as you might expect from an auditor general and member of CCAF. Reporting should connect with the strategic plan, and cover both financial and non-financial performance. I believe both internal and external reporting are needed, with internal reporting focused on key measures and external reporting providing a balanced view of positive and negative results . The external reporting of results and comparing them to objectives and targets, provide a powerful incentive for the organization to remain focused and to succeed. The Board should play a role in reviewing and approving external reports.

Michael: Daryl, on behalf of our members, let me thank you for talking to us about your presentation to the National Healthcare Leadership Conference. Your presentation is an excellent example of the value our members can bring to the health sector.

Daryl Wilson’s presentation to the National Healthcare Leadership Conference is available online on the CHA’s website: www.cha.ca.

In early summer 2003, CCAF and the CHA launched their strategic partnership to develop a holistic set of principles for health system effectiveness and accountability. Both organizations believed the Canadian health system would be more effective and accountable if its major stakeholders - governments, governing bodies, managers, providers, and others – understood, shared and used a common set of overarching principles to guide their actions and interactions.

The resulting joint publication, Excellence in Canada’s Health System: Principles for Governance, Management, Accountability and Shared Responsibility, brought together CCAF’s knowledge of governance, performance management and accountability concepts and practices with CHA’ s knowledge and understanding of health system issues and interests. The CHA Health Systems Effectiveness Working Group and the CHA and CCAF governing boards provided strategic advice to this initiative. The member organizations of the CHA and CCAF and individuals from health facilities and agencies across Canada provided input and advice during the consultation process. Members can access the report through the Member Resource Centre of the CCAF website: www.ccaf-fcvi.com.

The next steps are to engage other stakeholders in a dialogue on these principles, to consider what they mean in practice within a province or territory, health region, and individual facility and agency, and to encourage and support efforts to apply these principles. This will require the participation of all stakeholders – a willingness to talk and listen to each other about what each holds important, a readiness to account for other perspectives, and a commitment to action.

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