Should Hospital Boards Embed Generative Thinking into their Agenda?

Hospital systems and physician groups are faced with unprecedented change demanding decreased per-capita cost and increased quality in American health care. Boards of directors are underutilized resources that must be tapped more effectively in order for such organizations to survive in a time of industry consolidation. Generative thinking is a tool that can help organizations innovate in order to improve patient care and the financial bottom line.

Generative thinking is when a board becomes involved early on with management in trying to make sense of the current environment. For example, any US hospital must figure out strategies and tactics to deal with Medicare cuts, demands for higher quality, and migration away from fee for service to global payments in both the PPACA and the federal budget ceiling compromise that will result in at least $1.5 trillion or $1.2 trillion federal budget cuts staring in January 2012. Local events in each market will be different in each region. Western Pennsylvania hospitals, for example, must effectively respond to the Highmark purchase of West Penn Allegheny and the continuing tensions between Highmark and UPMC.

One way to encourage generative thinking in this setting is to make sure the board is present when a problem is defined because such a definition will affect strategies, policies, decisions, and actions to respond to the above described environment. Boards should help management decide what problems to pay attention to and not just respond to management’s understanding of the environment. Generative thinking has been described as getting to the question before the question and is about values, beliefs, assumptions, and organizational culture that will affect what problems we pay attention to and what strategies and tactics we choose.

The importance of framing the problem correctly was demonstrated by Clayton Christensen in The Innovator’s Prescription when he described the unsuccessful attempts by a company to increase milkshake sales. As Peter Drucker once wisely wrote: “The customer rarely buys what the company thinks it is selling him.” It turns out that 40% of milkshakes are purchased in the morning by long distance commuters who like the fact that it takes a long time to drink and that you can still drive with one hand on the wheel. By defining the job that the milkshake was being asked to accomplish, the fast food company was able to increase sales by making the shakes thicker so it would take more time to drink them on the long commute.

Generative thinking is not the only function of a board of directors. The three different modes of governance are fiduciary, strategic, and generative. The first two are self-explanatory, but the last mode is the least understood and the most neglected by non-profit boards.

Generative thinking requires a greater comfort with conflict and disagreement than is usually present on nonprofit boards. Because generative thinking is about deciding what the real problem the hospital faces in a confusing, unpredictable, and rapidly changing external environment, there needs to be conflicting viewpoints.

Alfred Sloan, GM chairman from 1923 to 1956, once stated: “Gentlemen, I take it that we are in complete agreement on the decision here. Then I propose we postpone further discussion to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.” John Wooden, the most successful basket coach in history advised, “Whatever you do in life surround yourself with smart people who’ll argue with you.” He won his first NCAA championship in his 16^th year of coaching at UCLA when he stopped hiring yes men and instead chose Jerry Norman as an assistant coach who installed the zone press Wooden detested.

A hospital board needs to understand generative thinking and decide if it wants to be involved upstream in discussions about how the hospita should respond to the environment. If there is agreement about the need to improve this mode of governance, then different methods can be tried to embed the concept into the work of the Board.

References:

Richard P. Chait, William P. Ryan, Barbara E. Taylor, Governance as Leadership: Reframing the Work of Nonprofit Boards. Hoboken, New Jersey: John Wiley & Sons, Inc., 2005.

Manda Salls, Why Nonprofits Have a Board Problem, Harvard Business School Working Knowledge for Business Leaders, 4/4/2005.

Michael A. Roberto, Why Great Leaders Don’t Take Yes for an Answer: Managing for Conflict & Consensus. Upper Saddle River, NJ: Prentice Hall, 2005.

Clayton M. Christensen, Jerome H. Grossman, MD, and Jason Hwang, MD, The Innovator’s Prescription: A Disruptive Solution for Health Care. New York: McGraw Hill, 2009.

Peter Drucker, Managing for Results, London: Heinemann, 1964.