Assessing governance theory and practice in health-care organizations: a survey of UK hospices

Abstract

This paper sets out a theoretical framework for analyzing board governance, and describes an empirical study of corporate governance practices in a subset of non-profit organizations (hospices in the UK). It examines how practices in hospice governance compare with what is known about effective board working. We found that key strengths of hospice boards included a strong focus on the mission and the finances of the organizations, and common weaknesses included a lack of involvement in strategic matters and a lack of confidence, and some nervousness about challenging the organization on the quality of clinical care. Finally, the paper offers suggestions for theoretical development particularly in relation to board governance in non-profit organizations. It develops an engagement theory for boards which comprises a triadic proposition of high challenge, high support and strong grip.

Background

Carver¹ exhorts us to develop a global governance perspective which goes beyond the detailed scrutiny of current board practices and works towards a new and pared down understanding of the overall purpose and universal characteristics of boards. This is an ambitious undertaking. Within this spirit, this paper first reviews the literature to establish a theoretical framework and empirical foundation for the areas of board governance under scrutiny, reports the methods and findings of an empirical study of hospice board members and managers, and relates the findings to theory in order to frame conclusions and to identify areas for future empirical investigation. Finally it offers suggestions for theory development to fill ‘noticeable gaps’² in the theoretical literature which is pertinent to non-profit organizations.

It is worth pausing at this point to be clear what we mean by non-profit organizations. Accepting that they take a range of different forms, Steane and Christie³ offer a straightforward definition of non-profit bodies which fits the purpose of this paper, and which the UK hospice movement, as can be seen below, can be identified with: ‘….non-profits engage in a variety of philanthropic works and can be described as organizations neither established nor managed to make a profit for an owner or for distribution to shareholders…’ It has been mooted that charitable institutions are one of the earliest forms of corporations, with the case of Sutton's Hospital in London in 1612,⁴ in a dispute over inheritance, confirming their legal personality. Steane and Christie³ argue that there is an expectation that non-profit boards will mimic corporate sector boards. These authors found that in practice, together with greater diversity in composition, they deliberate and operate in ways which are distinctive from their corporate counterparts, more likely to engage in operational management and to embrace a stakeholder model of board working. Chait et al. ⁵ trace recent changes in the characteristics of non-profit organizations that have consequences for their boards: the managers have developed from administrators to sophisticated leaders, and, in turn, their trustees are becoming more like managers, presenting both a challenge and an opportunity in terms of board focus and dynamics.

The theories most commonly discussed in relation to corporate governance⁶ which include agency, stewardship, resource dependency and stakeholder are now examined in turn, particularly in relation to their relevance for non-profit organizations. An attempt is then made to relate these theories to evidence about recommended board activities and practices, and the conjunction of these theories and practices are presented in Table 1.

Table 1

Main board theories and practices

Theories	Practices
	Composition	Focus	Dynamics
Agency: Control of management; managers and owners have different interests	Tendency to homogeneity	Supervision of management	High challenge
	Tendency to small boards	Focus on compliance	Controlling
		Monitoring of performance against targets and objectives	Critical style in order to achieve goals
		Conformance as board task⁷
		Type 1 Fiduciary governance⁵
Stewardship: joint endeavour with management; managers and owners/stakeholders likely to have same interests	Unitary, tendency to homogeneity	Strategic thinking as board task⁷	Appreciative style to achieve goals
	Tendency to smaller boards	Type 2 Strategic governance⁵	Collaborative
		Use of resources	Well functioning board committees
Resource Dependency: leveraging of external expertise and influence as organization success dependent upon fit with external environment	Experts, boundary spanners, balance between homo and heterogeneity	Policy formulation as board task⁷	Predominantly external focus
	Board size varies	Type 3 Generative governance⁵
Stakeholder: mirroring community and society served to ensure that organization serves its mission and purpose	Representatives	Supervision of management	Predominantly external focus
	Tendency to heterogeneity	Focus on compliance	Tendency to be active in relation to sectional or political interests
	Tendency to large boards	Monitoring of performance against targets and objectives
		Conformance as board task⁷
		Type 1 Fiduciary governance⁵

Corporate governance theories

First, agency theory⁷ with its emphasis on conformance suggests that the monitoring role of the board, supported by processes such as external audit and reporting requirements, is likely to reduce the problems of managers pursuing their own interests or performing poorly. The emphasis is on avoiding performance problems stemming from poor management or inappropriate use of managerial discretion. Recent critiques of agency theory claim that it downplays the complexity of individual motivations and permutations of organizational life, and that it relates to a view about the self-centredness of human behaviour in organizations which is now contested.^8,9 Nevertheless, agency theory continues to hold sway, as it relates closely to the monitoring and compliance aspect of the board role which is commonly regarded as a cornerstone of board work. Although there is some ambiguity in identifying the specific proxy in non-profit boards for the principals or owners, nevertheless, Cornforth¹⁰ argues that trust law, in countries such as the USA and UK, reflects an agency model of governance even more closely than company law, particularly with the separation of the board of trustees from management, unlike on commercial and some public unitary boards. There remain some difficulties with the sufficiency of agency theory, on its own, as a corporate governance frame for the non-profit sector. It diminishes the purpose of the board in terms of setting the mission and values for the organization, and, further, it contains the inherent assumption that the board's main role is limited to the detection of neglect or malfeasance on the part of the management.

Second, stewardship theory is based on a view that managers and owners share a common agenda and work ‘side-by-side’, the emphasis is on the board's role in developing strategy rather than on monitoring performance and a preponderance of internal (or executive) directors with high levels of access to information is favoured.¹⁰ Critiques of stewardship theory indicate that there is at best mixed evidence to support this theory,¹¹ and that its application can lay organizations open to risks of governance failure, strategic drift or inertia. For non-profit organizations the theory however holds some intuitive appeal, with trustees and managers both sublimating their personal interests in pursuit, implicitly if not explicitly, of their organization's philanthropic goal.

Third, resource dependency theory focuses on how uncertainty caused by external environmental factors and dependence on outside organizations can be minimized. Four benefits that board directors can bring include advice, access to information, preferential access to resources and legitimacy.¹² A recent review of resource dependency theory¹³ confirmed theoretical support and empirical evidence for this lens for understanding boards, emphasized its contingent and dynamic nature, and its particular utility early in the life cycle of organizations and in times of stress or decline. The theory can be criticized for an overt focus on an external locus of control construct.¹⁴ It underplays the views of the board's role in determining its own future through strategizing, and in exercising over-sight of internal management actions and performance. For non-profit organizations, however, productive relationships with funders, media and local representatives of various kinds including politicians, play an important part in securing long-term funding and other forms of support. It can therefore be argued that the theory has a high degree of relevance to non-profit boards.

Fourth, according to stakeholder theory, the inclusion of a range of different stakeholders drives an inclusive approach which represents a wide spectrum of societal opinions, balances competing priorities and avoids dominance by one group with particular interests. Among the myriad of stakeholders, it also argues that boards have to identify the critical stakeholders (for example key staff groups) whose commitment is essential for long-term value creation. The theory can be criticized for encouraging risk averse, inoffensive but bland and lowest common denominator decision-making. It can lead to large and unwieldy boards with people recruited for whom they represent rather than for their board level skills.¹⁵ For non-profit organizations, the theory, on the other hand, is relevant in that it legitimates the board because the stakeholders between them represent society and the range of end users that the organization is serving.¹⁵

Board practices

What do boards actually do and what should they do? There have been calls for frameworks that combine the insights of different theories. Mapping evidence about board practice against the main sets of ideas about boards is now attempted and is also summarized in Table 1.

Garratt⁷ suggests that there are two main dimensions of the board's role, what he calls ‘conformance’ and ‘performance’. Conformance involves two main functions: external accountability including compliance with legal and regulatory requirements, and accountability to shareholders or other stakeholders, and supervision of management through oversight, monitoring performance and making sure that there are adequate internal controls. In contrast the performance dimension is about driving the organization forward to better achieve its mission and goals. This again consists of two main functions, policy formulation and strategic thinking, to take the organization forward.

As an alternative, and of particular relevance to the non-profit sector, Chait et al. ⁵ propose a hierarchy consisting of three essential components of governance: fiduciary, strategic and generative. Fiduciary duties, or the monitoring and compliance aspects, relate to the legal responsibilities of trustees and to the agency theory of governance. The strategic component relates to the work of the board in setting direction and is closer to the ‘performance’ aspect of Garratt's two main dimensions of board work. Generative governance is also about performance, but it encapsulates leadership through governance and thereby aims for organizational renewal as well as tasks relating to strategy.

Garratt's and Chait's approaches emphasize mainly the importance of task and process, with a relative neglect of questions of composition and dynamics. There is an argument that the key to unlocking the ‘black box’¹⁷ of board theories and effective board practices may lie in pursuing insights into three key elements: the composition of boards, the focus of board effort and board dynamics, and that these insights may point to the emergence of new theory for boards.

In relation to the composition of boards, the quest for the ideal board form seems, from the evidence so far, to be a chimera. In a meta-analytic review of board composition, leadership structure and financial performance¹⁸ found no links between these, and nor did an analysis a decade later focusing on chief executive officer (CEO)/chair dualities and insider/outsider composition.¹⁹ The ‘right’ structure and composition of boards is highly context specific: it is not that it does not matter, but what works effectively in certain circumstances will not in others, and there is a degree of specificity that is missing from current research.

Board focus appears to be important. The emerging evidence is that high-performing boards across all sectors concentrate on shaping strategy, resource identification and use, and talent management.^16,20,21 They also match the weight attached to different board tasks with the prevailing internal situation and external environmental conditions. There are some worrying signs that the strategy space, either carved out for or by them, for non-profit boards may not be very great.^22,23 The lessons for the non-profit sector here appear quite straightforward: boards should be aware of the balance of time and effort they spend on the issues of strategic direction, strategic choices and talent management, as well as on monitoring management and on accounting to stakeholders. The balance of board tasks also needs to be attuned to the external environment and its attendant temporal pressures.

Board dynamics can be conceived as the enactment of process rather than about the process per se. Pye and Pettigrew²⁴ suggest that effective boards are more than the sum of their parts and, although this is so far under-researched and poorly theorized, it is the dynamic of board members working together which adds value to the organization. McNulty et al. ²⁵ in their report for the Higgs Review of the role of non-executive directors in the UK, characterize the effective non-executive director as ‘independent but involved’, ‘challenging but supportive’ and ‘engaged but non-executive’. Abbott et al. ²³ found that although it was part of their remit, board directors in the health sector often avoided a challenging style in their relationships with the executive but that the influence of directors in sub-committees was more extensive than typically found in the private sector, with roles as critical friends as well as scrutineers. The evidence adds up to a tentative triadic proposition of a new engagement theory focusing on board dynamics that is able to incorporate a way of working which combines high levels of engagement within a board climate of high trust and high challenge.

None of the theories and evidence about board practices encapsulates a wholly satisfactory explanation for boards of organizations which exist to ‘do good’, nor is there a straightforward connection between the main theories and the recommendations about ideal board structures, focus and behaviours. For now, we have provisionally mapped the likelihood of expected different board practices against the main theories in Table 1 for testing in our empirical study. For the non-profit sector there is an added complication that ‘performance’ cannot be measured solely by the usual financial metrics such as return on investment, favoured by the corporate sector, but by service excellence or social value. An analysis of boards along the dimensions of board composition, board focus and board dynamics may be valuable in theory development and points to the potential of a triadic proposition of high engagement of boards within a climate of high trust and high challenge, provisionally to be referred to as engagement theory. The empirical study described below, begins to test this triadic proposition in the context of non-profit boards, using as a framework of analysis the three dimensions of board composition, focus and dynamics.

Corporate governance challenges in the UK hospice movement

The non-profit sector faces particular challenges in ensuring that modern standards of governance are established and adhered to. These include the unpaid and voluntary nature of the role of the trustees, variability in size, and maturity of the organization and funding uncertainties periodically or constantly faced.¹⁰ Hospices in the UK occupy a unique place within the non-profit sector. They provide a much valued alternative to end of life care in hospitals and care homes: ‘….Born out of frustration with the cold, technical, medical deaths many people had in hospital, hospices embody a holistic philosophy that combines top quality medical services with social activities, spiritual and psychological care’²⁶. The first modern hospice was established in the UK in 1967; now, with a collective annual turnover of approximately £700 million, they are the largest provider of voluntary sector public service provision which is free at the point of delivery. About 70% of their income is through fundraising and donations.²⁷

In common with other charitable non-profit organizations governed by UK charity law, the boards of hospices are composed of volunteer trustees, with managers in attendance, not as board members. What theory of board governance and what set of board practices should they follow? Cornforth¹⁰ posits that trust law reflects an agency model of governance, particularly with the separation of the board of trustees from management, unlike on commercial and some public unitary boards. Stewardship theory on the other hand offers the attraction of the ‘joint endeavour’ towards a noble end. Resource dependency theory highlights the importance of external influence and the leveraging of resources and expertise for organizations that are highly dependent on fundraising and grant seeking. Stakeholder theory is persuasive about the need for organizational and societal inclusivity. We have identified the relevance of these main theories about boards to the non-profit sector, examined the range of recommended board practices in relation to composition, focus and dynamics, and provisionally mapped these against the main theories. We have concluded that there is potential for an additional or an alternative theory about boards and board practice that encapsulates high trust, challenge and engagement, and that this would have particular relevance for the non-profit sector and for hospices.

Research questions

The following four clusters of research questions were designed to relate responses to the main theories of board governance and recommended practices, and to test the viability of the posited engagement theory as a new composite.

Cluster 1 general: What does good governance in the hospice movement look like? What are the perceived strengths and weaknesses of trustees?

Cluster 2 board composition: What is the governance architecture? What are the processes for recruitment and succession management of board members?

Cluster 3 board focus: What functions and tasks does the board focus upon? Which topic areas are prioritized? What information is reported to and used by the board?

Cluster 4 board dynamics: What is the nature of relationships on the board and with the managers? What are the opportunities for board review, and for training and development?

Research methods

A mixed method study was chosen because the aim was to unearth, measure and map, rather than to test specific hypotheses or to identify cause and effect.²⁸ Two methods were used: a survey questionnaire sent by email and a series of tape recorded focus groups and interviews which were aurally thematically analyzed by the interviewers. As is recommended,²⁹ a pilot questionnaire was distributed before the main questionnaire to test acceptability of the questions and to predict response rate. Minor adjustments were made as a result. Quantitative data from the questionnaires were analyzed by examining frequency and cross-tabulation tables, together with bivariate correlations. Material from the free text comments in the survey questionnaire, the focus group discussions and the single depth interviews was subjected to content analysis and coding, and categorizing of themes.^28,30

Despite hospices having trustee-only boards, the decision was taken to survey both trustees and managers in order to obtain a more comprehensive view about the governance of their organizations, and because corporate governance theory relates to both constituencies. In May 2010 a link to an online questionnaire was emailed to 770 members of senior management teams from 190 hospices belonging to a UK national association of hospices, with a reminder email one week later. A total of 232 individuals responded (31%), including 11 people who had responded to the pilot version, representing 147 hospices (77%). In addition to the survey questionnaire, the research team conducted three focus groups and two single in-depth interviews (for those unable to attend the focus group discussions) with 25 individuals between November 2009 and May 2010. Caution has to be adopted in generalizing the findings although, as a case study,³¹ the findings can stand up to analytical generalization and, in this instance, to the illumination of theory and practice for other organizations in the non-profit sector.

Findings

Cluster 1 general: What does good governance in the hospice movement look like? What are the perceived strengths and weaknesses of trustees in this context?

There were strong views from the focus groups and single depth interviews that governance discussions should be fully contextualized. The hospice movement has a specific history and culture. It was felt important not to lose sight of the specific vision, values and ethos of hospices per se: the debate about governance therefore has to start with clarity about ‘ends’. It was stressed that the model of care was continuing to evolve. As medical science and caring technologies continue to improve, hospices are increasingly embracing the ethos of a ‘place to live’. This impacts on their vision, strategy and direction. Hospices are each at a different stage of development in the organizational life cycle. Due to their local roots, hospices are also quite diverse in their make-up; some are non-residential, some are for children, some have got a chief executive, others an administrator. It was underlined that hospice organizations tend to be one of the largest charities with a strong sense of ‘belonging’ to the local community. This was seen as creating a particularly close and positive link between the trustees and their local community.

In the focus group discussions and single depth interviews, and ‘free text’ comments from the survey questionnaire there was a high degree of consensus of the characteristics of an excellent hospice board. This included a grip on the work of the hospice without micromanagement. It also comprised trust and confidence in the executive team and a coming together of the two worlds of clinical and organizational quality, or otherwise described as ‘excellence in care, linked to excellence in governance’. In excellent hospices, systems of governance are easy to understand and follow; full responsibility is taken for risk identification and management, and governance arrangements act as a watchdog over the organization. Open recruitment processes related to skills and expertise, and fixed terms for trustees were emphasized. It was reinforced that volunteers and service users can make extremely effective board members, as they give a much needed service user perspective. This can also enhance the diversity of the board. Service user and volunteer involvement in hospice governance systems and processes was stressed, for example patient partnership groups with clear links with trustees to provide a structure for opinion and feedback.

Conversely there was also a degree of clarity about what bad governance was like, summarized by the view that poor governance can result in poor quality of service and increased risk to the organization, business risk and damage to reputation. The behaviours and practice of such an organization included an inability to learn from mistakes, uninformed decisions being taken by the organization, poor internal and external communications, and unmanaged clinical risks. Organizations with poor governance do not keep up to date, are not always cognizant of new legislation and lack robust systems of performance management.

Particular strengths of boards of trustees in terms of achieving good governance were reported as including a well-rounded mix of skills and experience, a high level of commitment and good understanding of governance issues (see Tables 2 and 3 for more detail with regard to perceived strengths and areas for development).

Table 2

Strengths of trustees in relation to governance

Question: What do you perceive to be the particular strengths of your board of trustees?
Category of comments	Frequencies
Trustees have a broad range of professional skills	98 (42%)
High level of commitment (including attendance at meetings)	45 (19%)
Level of experience available	32 (14%)
Well versed in governance issues	31 (14%)
Trustees understand their role	30 (13%)
…	…
Follow business plans closely	14 (6%)
Generally supportive	13 (6%)
High level of openness in the way trustees act	12 (5%)
Willingness to challenge	12 (5%)
Members have links with external bodies	10 (4%)
Trustees have a ‘hands off’ approach	10 (4%)

Table 3

Areas for development for trustees

Question: What do you perceive to be the areas for development?
Category of comments	Frequencies
A broader understanding of the organization	35 (15%)
Training and development in many areas	33 (14%)
An increase in skills and expertise	18 (8%)
Strategic and succession planning	14 (6%)
More contact with other organization members inc. trustees, management, staff	12 (5%)
Increase awareness on clinical issues	11 (4%)

inc = including

The focus group discussions and single depth interviews elicited more detail behind perceived strengths and weaknesses. Trustees with a financial background were seen to be very helpful. Boards were generally reported to be strong on finance. During the financial downturn, which was becoming evident in the data collection period, this strength is seen as particularly relevant. Some suggested that success was overly defined by good finances, perhaps due to a dominance of trustees with a finance background. Where boards do not have clinical members, there is considerable reticence about getting too involved in clinical matters, amounting in one case to a ‘subconscious conspiracy’ with clinical colleagues to keep this status quo. This was highlighted as a problem of ‘angel syndrome’: hospices always provide excellent care and therefore there is no challenge in this area. In addition, the perspective of patients was reported as being underdeveloped by some: ‘….patients are not mentioned…. I keep patients on the agenda… and get resented for that’.

Despite this, there was, generally, evidence of a relatively strong ‘caring’ ethos within trustee boards. This can lead to friendly discussions, focused on non-clinical operational matters (for example regarding fundraising) without much challenge, and a variable grip on what is going on. Although hospice boards are often good on handling strategy matters, it was perceived that this discussion tends to be led by the managers; and this can lead to the trustees being over reliant on the executive and a board which merely rubber stamps decisions taken elsewhere. This can be exacerbated by dependence on staff for critical financial and clinical information.

Cluster 2 board composition: What is the governance architecture? What are the processes for recruitment and succession management of board members?

The great majority of respondents (84%) noted that there was someone who undertakes the duties of a company or board secretary. However, a wide range of job titles were named within which this role was included, with some responses (for example, chair and trustee were named by 17 respondents) indicating a degree of misunderstanding about the job of the board secretary. Nearly all hospices reported that they had functioning sub-committees with clear and regularly reviewed terms of reference.

Survey respondents were asked to state if they knew if there was a time limit on board of trustee membership, and this seemed to indicate a significant split in current governance practice with 64% stating that there was and 30% stating that there was no time limit for these roles. Differences in trustee turnover were reported from the focus group discussions, from one example of a chair of trustees having been there more than 25 years, and the same board having no trustee with less than eight years service, to another board which had gained five new trustees in eight years, and some boards with fixed terms and others unlimited. There was quite a deal of disquiet expressed that the processes used to recruit trustees tended on many occasions to be unsystematic and ‘undemocratic’. In many cases trustees were still approached on an individual basis and encouraged to join the organization ‘on the nod’, sometimes through an ‘old boys network’. This was seen as increasingly old fashioned and unprofessional.

Cluster 3 board focus: What functions and tasks do the board prioritize? What information is reported to and used by the board?

Nearly all respondents said that their hospice had a statement of values and principles and an organization strategy approved and regularly reviewed by the board of trustees. More than 90% of respondents said that their hospice board was updated on relevant national policy developments and on activity, resources, quality of clinical care and patient experience in their organization as part of an annual agenda cycle. The respondents gave a comprehensive set of descriptions of what data and information is reported to their board of trustees. The details are provided in Table 4. Information about finance, staffing, clinical activity and fundraising, in that order, comprise the top four items reported on, in terms of frequency.

Cluster 4 board dynamics: What is the nature of relationships on the board and with the managers? What are the opportunities for board review, and for training and development?

Table 4

Information routinely reported to the trustees

Question: What information is routinely reported to the board?
Category of comments	Frequencies
Financial/accounts/cash balance	156 (67%)
Staff statistics (sickness, absence, turnover)	66 (28%)
Clinical activity data	65 (28%)
Fund-raising activities	48 (21%)
Patient activity reports	41 (18%)
Subcommittee reports	41 (18%)
Incidents reports/issues	40 (17%)
Risk management/register reports	38 (16%)
Complaints/patient satisfaction questionnaires/customer feedback	36 (16%)
Bed occupancy levels/patient numbers	34 (15%)
Management/department reports	33 (14%)
Key performance indicators	24 (10%)
Audit information/reports	23 (10%)
Human resources department reports	19 (8%)
Policy/procedure changes/documentation	19 (8%)
Clinical governance issues	18 (8%)
Retail performance report/issues	16 (7%)

Respondents in the survey overwhelmingly indicated that the respective roles of chair of trustees and CEO (or equivalent) and also the respective roles of trustees, senior managers and clinicians were clear and agreed. The quality of teamwork among trustees, senior managers and clinicians was described as good or excellent by 85%. There are some exceptions to the majority view, for example in the experience described by this respondent: ‘No staff [are] routinely allowed into board meetings unless we ask first. Board [is] very secretive. No free flow of information. Staff feel undervalued. No clinical staff on our board, so they don't know what we are expected to do.’

Only 46% of the respondents reported that the board of trustees reviews its own performance. The main ways in which this is carried out (in order of frequency of mention) were through individual appraisals with the chair, whole board away days, and board assessment survey tools. Only 55% of the respondents indicated that the performance of trustees was reviewed regularly. The trustees were asked about gaps in their competencies to fulfil their responsibilities and whether or not there was training and development in place to address these gaps. While 85% stated that there were gaps identified, only 67% indicated that there was training and development to address these needs, with induction programmes for trustees being the most common.

It was suggested that trustees sometimes exhibit a ‘fear factor’, and that they can tend towards diffidence when dealing with hospice business (even though in their other ‘day jobs’ individual trustees may be highly experienced and confident). One suggestion to address this was a national induction and support mechanism for newly appointed trustees, together with possibly a locally appraised probationary period.

Discussion: implications for practice

Table 5 summarizes the findings of this study in relation to the main board theories and practices. One of the potential dangers of the UK hospice movement with such a strong and united ethos (with varying manifestations) is that of complacency. The triadic proposition of high engagement within a climate of high trust and high challenge has implications for how trustees may wish to enact their role to overcome this.

Table 5

Main board theories and practices in relation to UK hospice governance

	Practices
Theories	Composition	Focus	Dynamics
Agency: Control of management; managers and owners have different interests	Tendency to homogeneity	Supervision of management	High challenge
	Tendency to small boards	Focus on compliance	Controlling
		Monitoring of performance against targets and objectives	Critical style in order to achieve goals
		Little challenge on clinical performance
		Conformance as board task⁷
		Type 1 Fiduciary governance⁵
Stewardship: joint endeavour with management; managers and owners/stakeholders likely to have same interests	Unitary, tendency to homogeneity	Strategic thinking as board task⁷	Appreciative style to achieve goals
	Tendency to smaller boards	Type 2 Strategic governance⁵	Collaborative
		Use of resources	Well-functioning board committees
Resource dependency: leveraging of external expertise and influence as organization success dependent upon fit with external environment	Experts, boundary spanners, balance between homo- and heterogeneity	Policy formulation as board task⁷	Predominantly external focus
	Board size varies	Type 3 Generative governance⁵	High level of commitment
Stakeholder: mirroring community and society served to ensure that organization serves its mission and purpose	Representatives	Supervision of management	Predominantly external focus
	Tendency to heterogeneity	Focus on compliance	Tendency to be active in relation to sectional or political interests
	Tendency to large boards	Monitoring of performance against targets and objectives
		Conformance as board task⁷
		Type 1 Fiduciary governance⁵
Gaps: Importance of contextual factors (eg organization size, maturity)		Importance of organization public service mission and ‘public value’	Need for fuller understanding of the organization

Commonly mentioned are underlined, and rarely mentioned are in italics

The study found six main strengths in hospice governance overall. These are the level of commitment and expertise of trustees, described as the discretionary deployment of ‘will and skill’ by Pettigrew and McNulty³²; a mixture of controlling and collaborative behaviours at the board³³; the existence of a broad-range and clearly defined cycle of board tasks¹⁶; a focus on use of resources²⁰; well-functioning board committees^23,34; and clarity about the respective roles of the chair and the CEO. The two main weaknesses were lack of challenge, particularly on clinical matters, and relatively low involvement of trustees in shaping strategy.

In relation to the engagement theory, embodying within it a modus operandi of high trust and high challenge introduced earlier, trustees of non-profit organizations may wish to focus on the following three areas. Firstly, in terms of engagement, attention needs to be paid to getting to grips with the business. In the case of the hospice movement, this means understanding the (changing) mission, the local context and the characteristics of clinical excellence. Secondly, in terms of trust, board members need to deal with any barriers to the development of their confidence in managers, while not abrogating to managers the fiduciary, strategic and generative roles of the board. This entails a degree of reflexivity with regard to how the board is operating. Thirdly, high trust must not lead to low challenge. A high degree of challenge and constructive disagreement should instead enable the difficult conversations to take place cordially,³⁵ facilitate creative thinking and embed double-loop learning³⁶ which will ensure that non-profit organizations such as hospices secure and maintain their position as places of continuous innovation and excellence.

Discussion: implications for theory

What do the findings tell us about how boards in the UK hospice movement currently operate in relation to the main theories about board governance? Table 5 summarizes the findings against the main board theories and practices.

There are four key areas of findings which may help to illuminate theory. Firstly, the study confirms the importance of system and organization context for corporate governance, even within sectors, which has been highlighted previously.^17,37–39 Contextual factors comprise organization size, maturity, the particular historical or religious origins of the hospice, the nature of its relationship with the local community and sources of funding in addition to fundraising. Despite acknowledgement of their significance, contextual factors are not yet adequately represented in corporate governance theory at the level of the role of the board, although these factors have been explicated in discussions of board power.^32,37,40 Theory therefore needs to account for the heterogeneity of organizations in explaining the purpose of boards.

Secondly, the study shows the importance to the participants of holding in their minds the mission of the organization. This is territory covered by Carver¹ in his argument about clarifying the essential purpose of the board. The study revealed a robust articulation of the need to start with clarity about ‘ends’. The challenge of understanding the mission of charitable spend in contrast to expenditure of other kinds of organizations was highlighted. None of the main corporate governance theories adequately explain the role for boards in non-profit organizations which exist to ‘do good’ and which have a philanthropic basis. The notion of ‘public value’ which is gaining ground^41,42 in debates about the focus for public sector services may be helpful here towards filling this gap. Here, the place of the board is to engage in a joint endeavour and promote clarity of organization purpose (akin to stewardship theory) as much as to monitor and control the actions of management (the emphasis of agency theory).

This brings us to the third area which is that, despite the hospice governance architecture of trustee-only boards that are separated structurally from management, which relates to an agency theory view, the language which the participants used and the opinions which were expressed relate much more closely to the stewardship theory of boards. The focus group discussions highlighted the congenial (high trust) nature of board meetings, with managers usually taking the lead in strategy debates, and the survey results found that the quality of ‘team working’ across trustees and managers was in the main (85%) perceived as good or excellent. Interestingly, participants in the focus groups were also keen to recommend joint governance training. Somewhat confusingly the study shows, in addition, that there are indications of other board theories in play. It would therefore be over simplistic to argue that hospices are straightforward examples of stewardship theory in action. A degree of opacity that was reported in the selection and turnover of trustees inclines to agency theory, according to which managers as insiders should play no part in this aspect of governance. The strong reported focus by hospice boards on monitoring of the implementation of objectives, financial performance and risk management also indicates an enactment of agency theory. The support for a clear delineation of chair and CEO roles is also aligned with agency theory. But other examples include a strong preference for board members who have a range of relevant professional skills (a stewardship view of boards) and an opinion that volunteers and service users should be considered as board members to enhance diversity (a stakeholder view of boards).

The fourth and final area relates to board challenge. Time and again respondents emphasized the importance of board ‘grip’ without descending into micromanagement. In terms of perceived areas for trustee development, the most frequent mention was the need for a fuller understanding of the organization. Although the receipt of business plans and the monitoring of objectives was routinely carried out by the board, the shaping of strategy tended to be led by managers with a relatively strong culture of acquiescence often at play. There is also a lack of reflexivity, suggesting that hospices may, in the main, be operating at the level two strategic rather than at the level three generative level of governance described by Chait et al. ⁵ The most vivid example, given many times, was the lack of challenge around performance in the clinical domain, which of course is the core focus of effort for hospices. The information routinely reported to the board was more than twice as likely to be about finances than about clinical activity. The participants described the trustees as being relatively diffident in this respect in comparison with, for example, their scrutiny of financial performance. Lack of challenge here may be a consequence of the lack of clarity about mission, which we have discussed earlier and for which the theory appears under developed.

In conclusion, these findings confirm that the main theories of boards have at least a partial resonance for the non-profit sector, as epitomized by the UK hospice movement in this study, with elements of all the main theories found in how these boards conceptualize their purpose and how they operate. There are gaps in terms of accounting for context, explaining the mission and determining the challenge. The proposition of an additional theory alluded to in our brief review of the literature which we provisionally called ‘engagement theory’ to explain the purpose and role of boards in the non-profit sector, appears to be supported by the evidence in this survey. This theory does not deny the value of other governance theories but draws together the relevant parts of these into a separate and meaningfully coherent whole. This is a triadic proposition which, within a commitment to high levels of engagement, combines a climate of high trust (drawn from stewardship theory) and high challenge (drawn from agency theory). High engagement means boards which have an excellent, contextualized and nuanced understanding of the particular business that they are controlling and of its public value. Engagement also means boards with a sharp focus on the mission in strategic discussions, and continuous reference to the mission in monitoring performance. The non-profit sector embodies the notion of ‘service’ and therefore the default position of both trustees and managers is a strong commitment to the ‘joint endeavour’ from which flows engrained collaborative working and high levels of trust. High challenge in this context operates as a counter balance, not as a defensive routine, but as a creative process producing innovation and organizational renewal.

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