Governance vs. Management – Utilizing a Decision Matrix
Episode #33: Governance vs. Management – Utilizing a Decision Matrix
Since we don’t give physicians any business training as part of your education, we see many groups that have governance, leadership, and management totally conflated. We see groups of physician owners who spend far too little time in oversight, and some who spend far too much time in the day-to-day operations. The trick is to get it just right where leading the group is concerned.
Let’s start with a quick description of each:
- Governance is setting the vision for the organization and being the steward of that vision. Calling for course correction when necessary and overseeing the leaders. All of the business owners should be involved in this to some extent.
- Leadership is implementing the vision of the owners or board and carrying out their instructions. Shaping and sharing a compelling vision for everyone in the organization to follow. Some of the business owners and your executive staff should be engaged in these activities.
- Management is implementing the vision, taking care of the day-to-day needs of the entity and its people. Making it happen. One or two of your physician owners, executive staff, and management staff should be engaged at this level.
Governance concerns itself with how the entity is run, how it makes decisions, and who is empowered to make decisions at what level.
It’s important to remember the board’s relationship to management. When we think about the above descriptions, and how the owners get involved in governance vs. leadership vs. management, this really becomes an exercise in delegation of authority. You cannot have the entire board or ownership group involved in the day-to-day running of the practice. It’s not practical and it’s not effective.
The board should vest the management team with authority over financial and internal controls, and the implementation of those. Leadership should oversee that management is getting those in place, and the owners should review the financial statements once a month and make larger financial decisions.
Leadership should work on budget creation and oversight, and the board should approve the budget or request changes. Management’s role is to manage the operations within the approved budget and explain any variance from the budget as we discussed in episode 3.
In some groups we observe that the owners or partners have abdicated much of the oversight, which is risky. If there isn’t enough of the right kind of oversight from the board, this can leave the practice at risk for embezzlement. Contrary to this, we do see some groups where there is way too much involvement from the physician owners on a daily basis and they are underutilizing their management and leadership teams. Sometimes this happens after a group has been embezzled, and sometimes it is just part of the culture. Either way, it is a missed opportunity.
Overall, the board or owners’ role should be one of monitoring and accountability, not actually attempting to manage the group.
As my friend and national healthcare consultant, Steve Franey, says, there are six C’s of governance success for owners and boards:
- Culture – setting the tone, establishing your culture, and being intentional about it.
- Communication – being clear about what’s being communicated, to whom and when, and also what’s NOT being communicated. The board deals with many things that need to remain confidential, and it’s important to be clear about what is appropriate to share and what is not.
- Chairperson – you may rotate this position, or it may be elected or appointed for a term or on an ongoing basis – we see groups structure this in any of those ways. Most important is to have a chairperson (president, chair of the board, medical director, whatever you call it) who is effective at leading your group.
- Consensus – we talk a lot about this as a decision-making model and along with this is the notion of “disagree and commit.” If your group has a commitment to making decisions by consensus, that doesn’t mean that everyone always agrees. It does mean that you can disagree, but when the group makes a decision based on the consensus, everyone must commit to it. Present a united front!
- Change – it’s the only constant and your group needs to be facile at making change and managing it. More on that in a future episode.
- Consultation – many boards don’t consult experts outside of the practice, even when making large decisions. We highly recommend using ex-officio members of your board like your practice accountant or attorney, a consultant, or other trusted advisor. Most will be humbled to be asked and some will do it at no cost, although I would always assume that you’d pay them for their time and expertise if you value it.
Now, at this point, you may be asking how can we assure that everyone stays in their lane? And how can we assure that decisions are made at the appropriate level?
We highly recommend developing and utilizing a Decision Matrix, which can also be known as an Authority Matrix.
This is a simple grid and should be a one pager at most. Running down the left side, it outlines levels of decisions, such as financial spending limits, Human Resources authority limits (such as who can counsel or discipline a manager, physician, or an owner?) and other governance level items. Across the top, we recommend outlining positions or individuals, so you might list your site managers or leads, practice manager, administrator or CEO, executive committee, and board. You can find an example of a Decision Matrix at the medicalmoneymatterspodcast.com website.
Once you have this drafted, discuss it at the board level first and get input and agreement. After that, you can socialize it at all levels and garner input. Once you’ve don’t that and have a final draft, you can bring it to one of your board meetings for formal approval at the board level. Be sure to include it in your minutes as this becomes an important governance tool.
Refer to it frequently until everyone is familiar with it and include it in the official orientation of anyone who holds a position that appears on it, so they are clear on their authority and the boundaries of it. Encourage them to ask questions too!
Review and update it once a year at your strategic planning retreat or at times of change or upon major events, and then LIVE it! Support everyone making decisions at their appropriate level and DO NOT second guess or revisit. If someone makes a decision you do not agree with or one you would not have made, begin by asking questions and seeking to understand why they made the decision they did. Approach it from a place of curiousness, NOT with any kind of “why-the-hell-did-you-make-that-goofy-decision” energy. Once you fully understand their thought process and rationale for the decision, you have two choices:
- Honor it and do the coaching about what you’d like them to do next time, or
- Reverse it (do this with extreme caution and VERY infrequently) and explain the why of it until they understand your perspective and why it needed to be reversed. Again, do NOT do this often as it undermines the person who made the decision and can leave them feeling untrusted.
This may seem a bit foreign to the group at first but stick with it and it will become a part of your culture. It’ll clean up your processes, and it should clear up a lot of confusion. After a while, you’ll wonder how you ever got along without one!
Join me for our next episode where we’ll do a deeper dive into appropriate oversight by practice owners.
