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Changing the Board Game

A Case Study in Transformational Best-in-Class Governance and Diversity Practices

LISA HEIDMAN LL.B.
SENIOR CLIENT PARTNER, THE BEDFORD CONSULTING GROUP,
NORTH AMERICAN DIRECTOR OF BEDFORD LEGAL

In the spring of 2013, the Board of Directors at St. Joseph’s Health Centre, Toronto, undertook an in-depth evaluation and assessment of their governance, board recruitment and diversity practices engaging both KPMG LLP on the governance side for the Health Centre and The Bedford Consulting Group to facilitate the board recruitment process for both the Health Centre and its Foundation.

Within less than an 8 week period, start to finish, 22 governance best practs were identified for the Health Centre Board to implement, and with the strategic objective of ensuring diversity of thought within its Board of Directors, 12 new board members were successfully appointed (5 to the Hospital Board and 7 to the Foundation) in advance of both the Health Centre and its Foundation’s respective June 2013 Annual General Meetings.

Women of Influence was interested in creating a roundtable discussion with the key leaders involved in this transformational process, including input from some of the new board appointees. We also invited Catalyst Canada to weigh in on why these issues, learnings and innovative processes matter to organizations and boards in both the corporate and public sectors.

Participating in these processes and in the roundtable discussion were: Ellen Malcolmson, Chair of the St. Joseph’s Health Centre, Toronto Board (“SJHC”), Michael McTeague, Chair of SJHC’s Governance Committee, Elizabeth (“Liz”) Buller, President and Chief Executive Officer of SJHC, Marilynne Day-Linton, Chair of the St. Joseph’s Health Centre Foundation Board (“SJHC Foundation”), Maria Dyck, President, SJHC Foundation, Janet Davidson, Former Canadian Executive within KPMG’s Global Health Care Practice and Georgina Black, Lead Partner, within KPMG’s Canadian Health Care Practice who together led SJHC’s governance review, Tom Woods, Senior Executive Vice President and Vice-Chairman at CIBC, and recent Board appointee to SJHC’s Board, Norma Beauchamp, Board Director and recent Board appointee to the SJHC Foundation Board, and Alex Johnston, Executive Director, Catalyst Canada. The Bedford/ SJHC Team that led SJHC and the Foundation’s board recruitment included Lisa Heidman, Senior Client Partner, Deborah Magidson, Principal, Darren Raycroft, Principal, Gord Urquhart, Senior Consultant, Matt Herrndorf, Research Consultant and Jaclyn Bell, Research Consultant and Project Coordinator.

This case study is intended to evoke important discussion around executive and board tables, and inspire and encourage innovative change to drive performance and best-in-class governance, board recruitment and diversity practices across North America.

In the words of Alex Johnston, Executive Director of Catalyst Canada: “Theory and research is one thing and is extraordinarily important for understanding the business case for diversity, but it is only the practical application and the learnings and solutions from it, that ensures real and meaningful change.”

LISA: WE HAVE OBSERVED THAT ORGANIZATIONS SELDOM UNDERTAKE NEW PROCESSES UNLESS THEY RECOGNIZE THEIR OWN NEED TO TRANSFORM. WHAT WERE THE CIRCUMSTANCES AND MINDSETS AROUND THE BOARD TABLES THAT LED SJHC AND ITS FOUNDATION TO ENGAGE IN THIS GOVERNANCE REVIEW AND THEIR NEW APPROACH TO BOARD RECRUITMENT?

ELLEN: There were several factors that influenced and presented us with a tremendous opportunity to really make a difference in how we approached board governance, board recruitment and diversity. In a similar time frame, we had a brand new board chair, a new CEO and multiple openings at the board level, as several long-standing board members were stepping off our board.

MARILYNNE: Simultaneously, the Foundation recognized the need to recruit a Foundation board that would support the Health Centre’s transformation.

ELLEN: We were, and are at, an important time and tipping point in SJHC’s history, partly due to the executive and board leadership changes taking place, a newly developed and working functional relationship between the Hospital and the Foundation, combined with the swiftly changing external environment in health care – that requires us to be innovative and embrace transformation. Also, as the incoming board chair, I saw processes, decision-making and structures in place that hadn’t been examined and evaluated in a long time. I knew we needed to make changes and there were things that I as board chair, and we as a board, wanted to do differently, but we wanted to ensure that we did so in alignment with emerging best practices both in governance and with a keen eye to developing a diverse board of directors.

MARILYNNE: The Foundation had already begun our own internal board recruitment review and we knew as a result of that assessment that we needed to undergo some significant changes to our own board composition. We had moved into a different stage of the Foundation’s development and needed new perspectives and experiences at our own board table to support our growth mandate. I am also a big believer, both for corporate and volunteer boards, that there should be reasonable term limits on all board appointments. Term limits create opportunities for new board members to join and contribute to an organization’s growth and evolution.

LIZ: We were also in the process of developing a new strategic plan for the Hospital. This involved really looking at our organization, who we are and where we need to go to take SJHC into the future. As part of this analysis, and as a new CEO, we began to examine: Do we have the right diversity of skill sets, experience and competencies around both the board and executive tables to facilitate where we need to be, not just right now, but for the next 5-10 years in this swiftly changing health care environment? We also thought this would be a tremendous opportunity for the Health Centre and the Foundation to partner together and support each other in facilitating our respective mandates.

 

MICHAEL: Our chair and CEO have built an effective and open relationship with the Foundation, and that’s relatively new for us. The frequent dialogue between the two organizations, the sharing of ideas, and working to find solutions together, has really made a marked difference. When we looked at both the challenges and opportunities ahead of us, it just made so much sense from every perspective, including cost, talent and reputation to work together on these mandates. But I credit the openness and the trust built between the leaders of both organizations to allow that to happen.

MARIA: Continuing to evolve and develop our relationship between the Health Centre and the Foundation, beginning with a new Memorandum of Understanding that further clarified and strengthened our partnership was important. I’ve worked at several health care organizations and know how critically essential the relationship between the Hospital and its Foundation is, and how powerful it can be when there is effective alignment between the two organizations. Bottom line, it facilitates delivering results.

LISA: WHY WAS ACHIEVING DIVERSITY OF THOUGHT AROUND THE BOARD TABLE SO ESSENTIAL TO SJHC AND THE FOUNDATION?

LIZ: When I walk in the front doors each morning at SJHC, it’s Canada’s mosaic in our front lobby. Our employees and our patients are truly a multi-cultural representation of Canada. At St. Joseph’s, we believe it’s essential that our boards reflect the communities we so proudly serve.

MICHAEL: Also, as we were initiating our governance review and our strategic planning process, we knew that this would require looking at who is sitting around our board table. We understood that diversity of thought, diversity of skill sets and competencies, diversity of people from a cultural and community representation standpoint and diversity of gender were all important considerations when building and re-examining the composition of our board. When we looked around the room at our remaining board members and at our skills matrix, we quickly realized, as is true for most boards in Canada: We have a lot of people who look a lot alike, and with very similar backgrounds and experience.

ELLEN: The diversity of thought component was also very significant for us, as we knew we needed new ways of thinking about government relations, community relations, investments, pensions and technology to empower our care delivery, as just a few examples. So it really was diversity in all its forms and definitions that mattered to both SJHC and the Foundation boards. We knew we needed it, that we didn’t yet have it, and fundamentally believed that building a diverse board not only mattered, but was necessary to achieve our objective to become a leader in health care in Canada.

LISA: WAS IT A CHALLENGE TO GET BUY-IN FROM THE SJHC BOARD TO GO EXTERNALLY AND SEEK CONSULTANT SUPPORT TO FACILITATE THIS GOVERNANCE REVIEW AND BOARD RECRUITMENT? ISN’T THIS OFTEN WHAT BOARDS AND GOVERNANCE COMMITTEES TRY TO UNDERTAKE ON THEIR OWN?

MICHAEL: I think there was a healthy debate about what we were trying to achieve and how best to go about it. Whenever you are looking at changing long-standing processes, there is resistance to doing something differently, and a desire to continue to do what’s known, including bringing in who you already know and trust, to join your board. There’s comfort in that. There was a little bit of: “We can’t be doing things all that badly, because you found someone like me” and also “I know of a few terrific board candidates to consider, do we really need to do all of this?” to “Is this something we should be spending money on?” Also, there was some discussion whether it was our responsibility to do this on our own. Were we abdicating some of our key responsibilities by not leading this process ourselves? We had a little bit of trouble getting over what was initially perceived as letting go of that process. It was new for us.

ELLEN: Ultimately on the governance side, we agreed as a board that we knew we were doing some things right, but there was recognition and consensus that we really didn’t know what emerging best practices were, that there was certainly room for improvement, and we felt an obligation and a responsibility as a board to seek this governance expertise and guidance.

MICHAEL: There were a few things that helped get us there on the board recruitment side. We knew of our previous efforts and challenges attracting a diverse set of board candidates. We also didn’t have a succession plan or pipeline developed for new board or committee members, nor any meaningful way to attract diversity candidates. Like many boards, the conversation annually involved asking our board members whether they knew of any potentially good board candidates. Historically, and in addition, we had also placed ads in local newspapers, contacted the Institute of Corporate Directors, reached out to our employee base, management and board (all good things to do) but none of it had really changed the composition of our board significantly, and we still were lacking a pipeline of board and committee talent. We started to wonder if we could be successful on our own, in attracting the diversity of thought within the board that we were looking for and we asked ourselves: Did we have the expertise either internally or around the board table to really run an effective board search beyond who we ourselves knew? And the candid answer was no.

JANET: These discussions are important. The real question for boards interested in diversifying their board composition, is how can you afford not to do this? Isn’t effective governance essential to running an effective organization? And can you reasonably say that the board has the expertise, or even the internal organizational expertise, to attract the best and the most diverse pool of board and board-ready candidates? If most boards in Canada asked themselves this question, the candid answer would also be, no.

ELLEN: We had also recently had the experience with Bedford placing our new CEO. We had great success with our CEO search, and through it, were introduced to an effective competency based and stakeholder engagement process, and a lot of impressive CEO candidates.

MICHAEL: I’d say that’s when the mindset shift occurred for all of us. Finding a CEO is also one of the key responsibilities of a board and we benefited tremendously from a rigorous search and due diligence process. Why would we not go through this same rigor to ensure we consider, assess and attract the best and most diverse pool of board candidates? How could we invest in recruiting our executive leadership, yet not invest in recruiting for our board?

LEFT TO RIGHT: MARIA DYCK, PRESIDENT OF SJHC’S FOUNDATION, GEORGINA BLACK, PARTNER, CANADIAN HEALTH CARE PRACTICE, KPMG LLP, ELIZABETH BULLER, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF SJHC, LISA HEIDMAN, SENIOR CLIENT PARTNER, THE BEDFORD CONSULTING GROUP, ELLEN MALCOLMSON, CHAIR OF BOARD, ST. JOSEPH’S HEALTH CENTRE, TORONTO, MICHAEL McTEAGUE, CHAIR OF SJHC’S GOVERNANCE COMMITTEE AND ALEX JOHNSTON, EXECUTIVE DIRECTOR, CATALYST CANADA. PHOTO TAKEN AT THE SHANGRI-LA HOTEL, TORONTO, CANADA.

LISA: HOW DID YOU GO ABOUT CHOOSING YOUR GOVERNANCE AND BOARD RECRUITMENT PARTNERS? ANY LEARNINGS FROM THIS PROCESS?

LIZ: As a public sector entity, we proceeded with a request for proposal process for both projects. What we have learned is that in the public sector, and particularly in health care, RFP’s are often left solely to procurement departments to craft and distribute to the market. With the best of intent, procurement is not sitting at the board and executive tables and hasn’t heard what is needed. It’s incumbent to clearly articulate and communicate to procurement the unique skill set you are seeking in an external provider – or simply put, what you are looking for in a partner and why it matters. How can you assess your providers effectively if the right questions haven’t been posed in the first place?

ELLEN: We had such extensive discussions around the table on these issues that it was clear what we were seeking in our governance and board recruitment partners. We needed partners that understood the health care sector, but had a broad reach and experience in both the corporate and public sectors as we did not want to limit this expertise or their potential reach solely to health care. We also were seeking innovative leadership in both governance and diversity and the ability to demonstrate a strategic level of partnering beyond straight-forward search processes or governance assessment. We also sought an understanding of faith-based care, and an alignment with our mission and values. All in, we wanted innovative partners that could help take SJHC and its Foundation to the next level, and after our assessment of multiple providers, we determined KPMG and Bedford as our best partners to do that, and to do that well.

LISA: WHAT WAS THE GOVERNANCE ASSESSMENT PROCESS? WHAT WERE THE KEY RECOMMENDATIONS?

GEORGINA: When we begin our assessment process, we look for strengths that already exist in an organization and its board. There were some best and emerging practices that SJHC could benefit from and we made 22 recommendations to that effect. These included clarifying the board roles and responsibilities of board members and between board and management; moving away from operational to strategic governance; developing new and more meaningful collaboration with key stakeholders; and re-examining the skill sets required and the composition of the board.

JANET: What impressed me about SJHC was their keen interest in exploring governance and best practices from the outset. I don’t think there was any doubt in our review that they were a high performing board and part of what makes them such, is their desire to constantly look at new ways of improving. This in itself, is a best practice. The idea of not sitting back and just assuming that what they were doing was right, but instead appreciating that continuous improvement is an ongoing journey. It was exemplified in the questions they asked and by the clear commitment of the board and the CEO to learn and want to truly be leaders in governance and in health care. It was a fulsome approach, always peppered with questions of: How can we be more strategic, efficient and effective? Our recommendations, also included seeking out an external search partner to assist them in developing a more robust pool of diverse board of director candidates to effectively help implement their new strategic plan.

ELLEN: We lucked out with that one, as we had already figured out our need to do so, and were running both the board recruitment process and governance assessment and implementation processes simultaneously. It was reassuring to know however, that KPMG supported our decision to seek out a board search partner and that from a diversity and governance standpoint, it was best practice to do so.

JANET: SJHC had a detailed skills matrix, as many boards do, but they hadn’t really taken it to the next level. Boards today need to be looking to make sure the required skills and competencies are much broader than your traditional legal, accounting and human resources focus. It’s essential to look for strong governance experience, public relations, government relations, stakeholder engagement as a few examples – and also to consider gender and cultural diversity, and how collectively, these skill sets can drive organizational performance.

GEORGINA: The reason we paid attention to and identified board composition as an issue, is that SJHC has an opportunity to truly to be a leader in health care in Canada. In order to get them there, it was clear they needed to have a board that can think big and differently about the many challenges facing the Hospital and how to improve operational, financial and quality performance. When you have an engaged board, committed to identifying and thinking differently about problems, and to providing innovative solutions, your board and management team is learning, and you really become a high performing organization, and in so doing, a magnet for top talent.

JANET: In health care, and broadly within the public sector, the magnitude of issues that these organizations are facing are extraordinary. These include financial pressures, increasing competition, and the war on talent in a highly regulated environment. Our best practice guidance is to work to develop a highly engaged board, clear on their mandate as individuals and as a collective, each of whom can bring perspectives from a variety of areas and provide new ways of thinking, to ensure that they can help management respond to those issues and key opportunities. This guidance is equally important for corporate boards.

GEORGINA: The other important best practice, and I don’t think a lot of boards get this right, is in respect to the culture of a board. In my experience, a lot of boards are really nervous about committing to becoming a diverse board, which does take work, as “group think” is clearly easier to manage. However, the results in terms of improved performance and innovative outcomes and solutions are proven, as Catalyst and McKinsey, among others have demonstrated. It’s also important to assess the skills of the board chair, their ability to build consensus, facilitate process, to create a culture of trust amongst board members and management and to nurture and develop a board culture where divergent perspectives and skill sets are valued. SJHC has this in their new chair and in their CEO and this is going to set them up for success. What needed to happen next was to attract a diverse pool of board candidates.

LISA: WHAT WORKED WELL FROM THE BOARD RECRUITMENT PROCESS? WHAT MATTERED, AND WHY?

ELLEN: Bedford’s advisory approach and unique competency and stakeholder process really set us up well from the start. This included the important discussion on who should participate on the Selection Committee and equally who might well be engaged as part of the stakeholder process.

LIZ: What really helped me as a new CEO was to be included in the board selection process from the start, which Bedford encouraged and the SJHC board supported from the get-go. Participating along side the board allowed me to better understand how our board members think and helped the board get to know their new CEO better. Working through the conversation about what was needed to deliver on our new strategic plan and what executive team and board skill sets were required to do so, strengthened the relationship between the board and management.

ELLEN: The stakeholder work with the Selection Committee, the Executive Team and with internal and external partners was extremely valuable and complemented our governance assessment. But it’s truly the board competency process and discussion we went through with Bedford that helped further develop our thinking and effectively facilitated not only what we needed around the board table, but much more importantly why we needed it. It fleshed out and reassessed our existing skills matrix and gave it meaning, purpose and connection to our strategic plan.

MICHAEL: This process built important consensus among all of us, and engaged not only the Selection Committee, but our broader board and stakeholders. The rigor of it built confidence with the board and the governance committee that we had a process that was building on what we had in place, assessing and developing it, not replacing it. As a group we felt engaged and confident in the process. We not only got clear and consistent around key themes, the facilitation process gave meaning to key deliverables – it tied our board competencies to our strategic plan. More importantly, it looked much broader than what a single individual could bring to our board, but required us to look at the collective board and executive team abilities. This expanded our thinking of what multiple new skill sets and competencies could bring to SJHC. It also helped build out what has to be the most robust and compelling board profile I have ever seen. It really made crystal clear, in both the profile and the advertisement placed in the Globe and Mail, what we were seeking from potential incoming board members and why it was important to us. We kept to that profile and focused on these core set of competencies in a very disciplined way, right through our final assessment and evaluation of candidates.

TOM: I’ve been on about a dozen boards in my career. Most of the time, I’ve been tapped on the shoulder which is still the approach most boards take today. You never really know why you’re being tapped – Is it personal connections? A good cause? My business network? Probably all of these reasons. In this situation, it was clear to me why I was being invited to explore this opportunity. What made a significant impression for me as a potential board candidate was the professionalism of the approach and the process. The clarity, foundational work and thinking upfront told me that the board, the management team and the consultants had invested in a thoughtful process and had done their homework. It changed the conversation entirely, to one of meaning and assessment both for me, and for the Selection Committee, as to what I could contribute to the board and engaged me in a compelling discussion. It was clear from the outset, this wasn’t a popularity contest but a meaningful exercise to really educate, engage and discuss where SJHC was going and how I could uniquely add value to their board and to an existing group of talented board members.

NORMA: Best said, the process really connected the dots meaningfully for me. Bedford’s in-depth assessment and conversations with me really brought it home, and set me up for success in the interviews with the Selection Committee. It was clear SJHC and its Foundation were running a thorough, deep, open and inclusive process and it created an excitement that made me want to join the board. I have been through numerous processes, but what was noticeably different about this experience is that the expectations of the board were clear from the outset. There was nothing vague about it and the process was very high quality and transparent from the start. I understood there were numerous candidates that were also in the process. And I now know why I was chosen and how I can add value to the Foundation board. This does wonders for effective on-boarding and board member engagement.

LISA: WHAT WERE THE RESULTS OF THE BOARD RECRUITMENT PROCESS?

MICHAEL: There was an extensive, exceptionally high caliber and diverse group of qualified board candidates for us to choose from. We never imagined we would be able to attract the breadth and caliber of talent, from both the private and public sectors, that we did.

ELLEN: The intentional focus about the whole process of diversity in all its forms and challenging our thinking during our assessment process was invaluable. We not only found candidates that we proudly could present to the board, but we got so much more out of it than that. We got a caliber of board talent that we could never possibly have found on our own, and a much better understanding of what diversity means and why it matters. We built conversation and trust with our board and executive team and key stakeholders; we now have a funnel of diverse board talent to engage in the future; a succession plan in place for future board and committee members; and it created a real excitement about SJHC and the Foundation’s future. It exceeded all expectations.

ALEX: This case study puts what we know at Catalyst about diversity into meaningful practice. We hope that others take key learnings from SJHC and its Foundation’s processes – because it really is game changing. What’s important from the outset for corporations and organizations to know is: There is a way to change the board game. It requires a new conversation, and a new approach. It requires the insight and the confidence of the board to change the way you have done things in the past, including seeking external partners that have the expertise to provide guidance on best governance, diversity and recruitment practices. Competency and board culture driven discussions and rigorous due diligence processes are also essential. If you are truly dedicated to finding and attracting an exceptionally qualified and diverse pool of board candidates, it clearly requires going beyond who you, and your fellow board members, may know. On a whole other level, it is important to assess not only what any individual candidate may bring to a board, but to connect this assessment to an evaluation of the board and management team’s existing capabilities. Tying all of that back to the organization’s strategic plan and key deliverables to drive company and organizational performance is the next evolution in the best-in-class diversity practices. That’s an analysis that is missing and one that is really going to change the game and provide new opportunities for many. This process focuses the conversation on what the organization actively needs to deliver on in its strategic and/or business plan, while simultaneously attracting and developing a pipeline of new and diverse board candidates for consideration and comparative assessment to existing board member skill sets. The big picture and innovative approach that SJHC, its Foundation, KPMG and Bedford undertook and put into practice, is why this case study is such a strong example from Catalyst’s perspective. The next time we hear: “We can’t find a pool of qualified diversity candidates to join our board” or “We don’t have the time to do so”, we’ll remind them of St. Joseph’s and their timely and transformative results. This is indeed how to change the board game.

Lisa Heidman, LL.B., Senior Client Partner, The Bedford Consulting Group, North American Director of Bedford Legal, brings over 15 years of Legal, Board and Executive Search Experience working with Boards and their Senior Leadership Teams, placing Board, CEO and C-Suite Executives across functions. Appointed to the Board of Directors of Women of Influence in 2009. Lisa can be reached at lheidman@bedfordgroup.com.