Political board’s contribution to strategic management: a case study

ABSTRACT

This study examines the support, control and strategic functions of an executive hospital political board from the perspective of how institutionalised internal procedures influence board functions. Board members and leading hospital managers were interviewed about politicians’ ways of working, managers’ preparation of decision issues and board work under the presidency model. The politicians strengthened the decision-making processes by requesting additional supporting documents, and by defending the hospital from public criticism. However, the board exercises weak strategic and control functions; it absorbs the responsibilities of the hospital managers and the upper political levels as it reaffirms its executive authority. Nonetheless, the study suggests that abolishing or replacing the board with a non-political board may not improve organisational governance. The study gives insights in politicians’ contribution to strategic public management, an aspect lacking in existing literature.

KEYWORDS:

• Board function
• hospital management
• local government
• political board
• strategy development

1. Introduction

Literature on public strategic management, where ‘strategy is about purpose, direction and goals’ (Johanson 2009, 873), usually focus on: plan formulation, content or implementation, and describe the strategic process in discrete steps, ignoring iterative processes (Poister, Pitts, and Hamilton Edwards 2010). Studies on how knowledge on strategy develops are limited, including how different organisational levels interplay in the strategy development process, for example, how much managers control their agency´s strategy and how much is imposed on them (Bryson, Berry, and Yang 2010).

This study focuses on how strategies develop in the public sector as a multilevel process; specifically, how political boards contribute to strategic management in the interplay with senior managers. Remarkably, the politicians’ role is often not mentioned in strategic management research (Poister, Pasha, and Edwards 2013). New Public Management(NPM) (Hood 1995), which reinforces public strategy management (George and Desmidt 2014), even contradicts the interactive strategy function of a political board. NPM assumes that emphasis on responsibility can lead to improvements in public activity performance; this assumption requires the use of formal procedures that establish and maintain independence between boards and executive management (Fama and Jensen 1983). A theoretical basis for this assumption is the principal agent, maintaining that board of directors have a control function (Daily, Dalton, and Cannella 2003). However, after reviewing nearly 300 research articles, Boivie et al. (2016) concluded it was unrealistic to expect boards to be effective monitors if managers perform adequately because of lack of time, infrequent board meetings despite the size and complexity of the operations, and reluctance to challenge top managers. Instead, they argue, board of directors can provide expert advice. A more realistic expectation may then be that board of directors can demonstrate such accountability by exercising oversight and by participating in strategic development. Edwards and Cornforth (2003, 79) define the board’s strategic function as active participation in ‘discussions that incorporate[d] assessments of organizations´ overall resource and capability strengths and weaknesses, their relative performance [in relation to their goals] and their options and priorities for future development’. This function includes initiating, discussing and making decisions. Hence, board of directors are strategic partners and advisors to executives, not merely reviewers and endorsers of official decision-making.

An organisational problem arises if executive boards of public organisations (all members are politicians) are not perceived as links between the upper level of political boards and the executives in a chain of control. This is particularly critical when a gap exists between the board’s formal responsibility and its real influence on organisational activities. This questions the function of the public organisation’s executive board: in reality, do such boards have control or strategic functions? If not, should they be expected to exercise such functions?

Previous research mainly focused on private corporate governance and less on public organisation governance. Few studies examine the functions of, and influences on, public organisation boards. An exception is Svärd´s study (2016) in which he found that such boards may have clear support and advisory functions, where they often maintain a distance from the organisation’s strategic work. The board’s participation in strategic issues is influenced by limitations stemming from the decisions and actions by a superior board. These variables were not directly influenced by a particular exogenous institutional logic (either company-oriented or politically oriented), which the study claims was the main explanatory mechanism. Instead, these results reflected the rules for appropriate action that endogenous institutions set.

The purpose of this study was to explain why a public organisation board, with politician board members, has particular functions. Specifically, the study addresses how institutionalised internal procedures, i.e. ‘endogenous institutions’, determine whether such a board has support and advisory functions and/or strategic function. Here, a politician on the executive board at a public healthcare organisation was actively seeking a strategic function for the board.

The endogenous institutions studied (described below) are procedures for:

• politicians’ ways of working, including preparation for meetings,

• managers’ preparation of issues, including an understanding of the politicians’ role, and

• the work of the board according to the presidency model.

Newly appointed board politicians are indoctrinated on these endogenous institutions that determine which functions an executive board can reasonably be expected to perform.

2. Previous research

Previous research on-board functions primarily focus on board structure: the number, diversity, competence of members, members’ independence from board activities and political associations (Menozzi, Urtiaga, and Vannoni 2012). These studies assume that board composition will either determine or influence board action. Pugliese et al. (2009) claim that how functions are assigned to boards and composed can influence organisational results apart from the actual use of board members’ knowledge, contacts and powers.

The broad dissemination of results about the board’s functions can affect company results, depending on its composition. Pugliese et al. (2009) suggest that this explanation does not help us understand how board members actually use their knowledge, contacts and competences.

Therefore, recent research on board governance takes a process-based perspective (Gabrielsson and Huse 2004; Leblanc and Gillies 2004), where three categories have been identified (Huse 2005). The first refers to how board members resolve internal conflicts when they deal with third parties. The second refers to the standards that govern boards, the use of board member competences (Forbes and Milliken 1999) and the conduct of board work (Huse 2005). The third refers to the board decision-making culture that influences the initiation of new board members, board decision preparations and board interaction with executive management (Roberts, McNulty, and Stiles 2005). However, the boundaries between the three categories are not sharply defined. For example, Forbes and Milliken (1999) also address certain board norms such as board preparations, participation and contributions (‘the effort norms’).

Previous research also reveals interesting correlations in board work. High conflict levels and high control abilities are correlated. At the same time, low levels of strategic contributions to development result because high conflict levels also lead to the lower cohesion levels needed for transparent strategy discussions (Forbes and Milliken 1999; Minichilli and Zona 2009; Zona and Zattoni 2007).

Finally, a few studies have investigated the impact of performance information on politicians´ decision-making. The NPM paradigm presumes the necessity of performance information to enhance accountability and the rationality of decision-making (Hood 1995). However, the starting point for these experimental studies is that the use of performance measurement is both favoured in public guidelines for public management and strongly criticised by researchers, despite it being unclear whether and under what conditions it is used (George et al. 2018). The study demonstrated that performance information impacts on politicians’ attitudes towards spending when showing high and low performance, but not average performance, which was explained by politicians’ strategies to avoid blame (Nielsen and Baekgaard 2013). It was also demonstrated that knowledge of strategic goals among politicians influenced their decision-making, but not necessarily enforcing the impact of performance information (George et al. 2017). These studies highlight the need to include politicians and their interplay with managers in studies on public decision-making and to study the role of politicians not only in a control function but also in a strategic management function, since performance information may influence their decisions regarding purpose, direction and goal. Particularly interesting is the finding by George et al. (2018) that coercive institutional pressure, to conform to formal and informal rules and regulations, had a positive impact on purposeful performance use by politicians, but maybe just because these rules were tied to penalties. This study investigates the impact of endogenous institutions, which is not tied to a penalising mechanism.

3. Boards of directors’ functions and endogenous institutions

3.1. Boards of directors’ functions

3.1.1. The control function – the principal-agent theory

According to the principal-agent theory, the role of a board is to exercise control over upper management’s decisions and conduct to protect stakeholders’ interests (Fama and Jensen 1983). Accordingly, the board has the power to appoint and dismiss the chief executives (Zahra and Pearce 1989). Most studies on board functions take these responsibilities and powers as theoretical points of departure in discussions on corporate and organisational governance (Pugliese et al. 2009).

3.1.2. The support function – the stewardship theory and the resource dependence theory

According to the stewardship theory, the relationship between the board and management is based on trust and a common interest in the organisation’s success (Davis, Schoorman, and Donaldson 1997). The board should consult with management and offer advice in ways to achieve the organisation’s goals (Huse 2007); additionally, it should take a proactive role in strategic issues and its control role, including evaluating the results of strategic policies and actions.

According to the resource dependence theory, the board plays a support role by helping management access needed resources. This assistance may be, for example, by the board establishing contacts with other organisations that have such resources or by influencing external critics to help neutralise opposition to the organisation’s various activities. Moreover, the board, by its representation of the organisation to the outside world, can increase the organisation’s legitimacy and help manage (e.g. support or repair) its reputation (Pugliese et al. 2009). This theory also encompasses an advisory role for the board as far as strategic development (Nicholson and Newman 2010).

3.1.3. The strategic function – the managerial hegemony theory and the stakeholder theory

The managerial hegemony theory does not envision a strategic function for the board. Hence, the board merely approves decisions already made by the organisation’s managers (Mace 1971). Managers are expected to develop strategies without participation from the board. In this passive role, the board exerts very little control although it helps legitimise management’s decisions.

According to the stakeholder theory, the board, as management’s strategic partner, should be involved in all strategic stages and decisions (Pettigrew and McNulty 1995). Given their various experiences and contacts with important stakeholders, board members can offer guidance on strategic development that balances the organisation’s varying interests (external and internal stakeholders) and supports the organisation’s long-term survival (Babić, Nicolić, and Erić 2011).

Table 1 provides a summary of the five theories discussed above.

Table 1. Various degrees of the board´s strategic function, according to corporate governance theories.

Degree of strategic function
No strategic function	Control function	Support function	Strategic function
Managerial hegemony theory	Principal-agent theory	Stewardship theory Resource dependence theory	Stakeholder theory

3.2. Exogenous and endogenous institutions

Institutional logics can explain how rules, both formal and informal, govern the actions of organisational actors (e.g. executives, board members, managers and others) (Thornton and Ocasio 1999). These exogenous logics, potentially derived from an organisation’s environment, are often reflected in legal texts (e.g. company and organisation laws). These logics, which determine the practices governing the board members’ actions, allow for the possibility that individuals may choose their behaviour (Friedland and Alford 1991). Actors must process these exogenous logics because other, and partially contradictory, logics also influence the organisational environment. Thus, actors have to choose among these institutional logics in order that their organisation will meet the requirements of various external institutions (Peters 2005). Thus, some rules are confirmed while others are not (Oliver 1992).

This processing of multiple institutional logics can lead to special work procedures, termed endogenous- or intraorganisational institutions (Elsbach 2002). The latter, Elsbach claims, consists of cognitive patterns and knowledge that are revealed in organisation structures and procedures (e.g. standards, habits and routines), all having a regulatory and normative character. Intraorganisational institutions are ‘taken-for-granted beliefs and arise within and across organizational groups and delimit acceptable and normative behavior for those groups’ Elsbach (2002).

Regarding the social construction of reality, Berger and Luckman (1966) state that when organisational rules are used extensively, actors may forget that other organisational actors actually created these rules. New actors may want to introduce new rules. As Elsbach (2002) argues, it is difficult, however, to replace established rules (standardised procedures and action protocols) due to the intransigent nature of current institutional structures (e.g. the method of power distribution) and of the institutionalised values. Making institutional changes requires a combination of reciprocal agreements, incentive structures and confidence-building measures (Woolthuis, Lankhuisen, and Gilsing 2005).

Institutions derived from an organisation’s environment are referred to as exogenous institutions (Scott 2008). Here, the term endogenous institutions (Jacoby 1990) are used for these intraorganisational institutions. Theories about endogenous institutions can help us understand the dynamics between the taken-for-granted rules and actors’ behaviour when organisational actors challenge difficult-to-change practices and norms (Kaghan and Lounsbury 2011).

The intention here is to show how the three endogenous institutions influence the functions of public organisation boards. An analysis of these functions reveals how organisational actors challenge the procedures set by the endogenous institutions and even proposes changes thereto.

4. The case setting

The setting of this study is a healthcare executive board at a regional hospital in Sweden. The hospital provides both basic and specialised care for inhabitants in the region and is country centre for certain specialised care. It is one of the largest hospitals in Sweden and of six with medical education and research.

Healthcare in this region is governed according to the purchase–provider split model and objectives and instructions from the Regional Council, the Regional Board (the Purchaser) and the Health Care Agency (the Owner). These entities have overall responsibility for strategic healthcare issues, wherein the hospital is the Provider.

The executive political board is responsible for the efficiency and high quality of the hospital´s activities, for the preparations and decisions related to investment issues following the Region’s model, and for addressing human resource issues. The board consists of nine members and three alternates. All are elected politicians with a 4-year mandate. The chairperson is from the governing political party and the vice chairperson from the opposing. Together, they are referred to as the Presidium.

Most board members have comprehensive political experience from decades in politics. Most have worked in some capacity with healthcare issues. Using these experiences, they take responsibility for various assignments related to hospital governance.

Because the hospital board is well known in political circles, board appointment is considered desirable. Many board members engage in politics only in their spare time. The chairman and vice-chairman receive a fixed annual compensation. Others are compensated only for their time when preparing for and attending meetings.

The board holds approximately 10 all-day meetings annually. In 2016, the board addressed 125 cases that required decisions. On average, 10 politician board members and 17 hospital managers were present at the meetings.

The political parties instruct board members on political participation in the board work, based on an apprenticeship model in which mentors support the newly appointed members as they learn how to build networks, seek broad knowledge, and represent their party’s values and ambitions. They are acquainted with the board’s assignments and with previous issues that have arisen. They also make study visits, meet key people, and interact with various board members as they learn how the board functions. The new members then receive assigned board responsibilities.

5. Method

5.1. Participants and data collection

Seven of the nine board members and two of the three alternates (chairman (majority), vice chairman (opposition), four board members and one alternate from the majority and one board member and one alternate from the opposition) were interviewed so that all parties in the board were represented. Below, one of these board members, representing the majority, is identified as ‘the Strategist’, who attempted to involve the board in the hospital’s strategic work. Interviews were related to: (a) political and healthcare background, (b) board appointment and (c) preparation for board assignments. Additionally, four senior hospital managers were interviewed on decision preparations and on communications with the politicians. These managers shared other observations about the role of the politicians and the parties in the work of the board. All interviews, which were semi-structured and lasted for 50–60 min each, allowed for follow-up questions and were audio-taped. When transcribed, the interview data comprised about 300 pages of text.

Also, a board meeting, led by senior hospital managers who presented the supporting documents behind their proposed decisions, was observed. Following this presentation, the board announced its decisions.

5.2. Data analysis

In Step 1, following transcription the interview transcripts were grouped into the mentioned themes guiding the data collection, and the most significant viewpoints were noted in first-impression commentaries. In this stage of interpreting and sense-making, the transcripts were sorted after their descriptive content (Kvale 1996). Section 6 is structured according to these first-order categories. In Step 2, the theoretical framework was used for second-order theoretical categories (Kvale 1996). Four questions guided the analysis of the first-order categories. Does the board have a strategic function? Does the board have a passive control function? Does the board serve a support function and contribute in some capacity to the strategic work? Is the board an active partner with management in the development of long-term, sustainable strategies for operations? Section 7 is structured according to responses on these questions, resulting in second-order categories.

5.3. Validity and reliability

The validity of data depends on its authenticity. It is problematic if interviewees and observed meeting participants narrate what they think the researcher expects, instead of lived experiences (Yin 2003). This can be avoided by blending in Czarniawska (2007). In observations, this would likely happen very soon after the discussions have started. In interviews, asking for concrete examples allows the respondent to recollect lived experiences, according to Van Manen (1997).

Reliability was ensured by transcribing the taped interviews verbatim and by reading and rereading the transcripts several times.

6. Influence of endogenous institutions

6.1. Procedures for politicians’ ways of working

A general observation in this study is that politicians think they have relatively little influence on hospital activities. One explanation is that the hospital operates in a healthcare system with an established framework for the management of various property and personnel issues. Another explanation is that a central (political) mandate exists regarding the hospital’s activities and budget. Yet another explanation is the variability in the hospital’s activities, e.g. it is impossible to predict patient flows or epidemics with certainty.

An analysis of the politicians’ participation in the decision-making processes reveals the limited extent of their involvement. They prepare for board meetings, where decisions are made, by reading supporting documents on discussion issues. Sometimes, they seek additional information from party contacts or, more rarely, from hospital representatives. These supporting documents can be extensive, e.g. 220 pages in preparation for the initial board meeting in 2017. Most of the politicians find the supporting documents sufficiently informative and the preparation adequate.

If more information is needed, the politicians pose their questions to hospital managers or to the hospital director (who may then refer to other hospital employees). The politicians prepare their questions carefully to avoid repetition and to ensure efficient flow of the meeting agenda. The hospital managers, who value good relationships with the politicians, respond quickly to these questions.

Nevertheless, while these supporting documents and the managers’ responses may explain the motivations for the decisions under consideration, they do not reflect in-depth analyses and issue problematisation. The politicians really need to understand the history and the complexity of numerous relationships, especially when the supporting documents are incomplete. Although the board members realise that the supporting documents may be insufficient, they generally trust in the knowledge and competence of the hospital managers. They are conservative in respecting the communication structures of the hospital’s decision-making processes.

We can go directly to the officials, we have a right to, but it can be perceived as undermining the director’s position, that you don’t have trust. (Alternate Opposition Party Board Member)

I am hesitant about building a contact network more systematically to gain views from citizens and patients. It can create expectations that we can’t live up to. (Opposition Party Board Member)

The Strategist, however, actively seeks information about decision issues from independent sources.

I arranged a meeting with the head of the ambulance care hospital. I also meet with a few hospital staff members during breaks. […] I listen to the doctors I know and follow the media that describe the current healthcare situation, including both good and bad elements. […] We do not receive all the information we need. Hospital managers know their worlds and can describe them to us. But we need insights into their worlds. We also need to know what patients think. (The Strategist)

The Strategist is critical of how decisions are made and how board members rarely question or challenge these decisions.

It is not possible to identify the essential information in the documents. […]; What are the fundamental issues, risks, opportunities and economic consequences? Instead, the documents drown one with information that is too detailed to evaluate thoroughly. It’s a serious problem. We agree it is important to devote ourselves to strategic issues rather than just to the areas the hospital managers want us to address. (The Strategist)

The Strategist opposes the role that most board politicians assume. He seeks additional and independent information on decision issues as he strives to engage the board in more strategic discussions. However, he still has not succeeded in changing the board’s approach to decision-making.

6.2. Procedures for managers’ preparations of issues

The hospital managers want to provide the information requested by board members. However, sometimes the relevant information is extremely detailed. The managers explain that because the issues are very complex, they cannot easily summarise and present such information. They agree, however, to submit additional relevant data if requested.

The managers agree their assignment is to present supporting documents that justify a particular decision rather than to present detailed analyses with more decision options. They think politicians should have confidence in their professional knowledge and competence.

Sometimes the politicians address the issues from a perspective derived from their experiences or contacts and offer suggestions on the decision-making processes, which managers tend to regard as interference.

I imagined that if you are in an executive board, you have the opportunity to influence, but it has proven to be only partly true. (Opposition Party Board Member)

They think the politicians’ knowledge and experience are too limited to be useful.

The politicians may think their particular expertise is relevant and useful … for example, they may have expertise in IT- or human resource issues, etc. To some extent, this expertise may be advantageous in that it may increase their cultural understanding of issues or add technical competence to decision-making. […] But it’s very easy for them to overestimate their contribution. (Hospital Manager)

6.3. Procedures for the work of the board, according to the presidency model

The board follows the presidency model in which the chairperson and vice-chairperson (i.e. the Presidium) have a dominant role, while other board members have a more passive role. The tasks of the Presidium are explained by the chairperson:

The Presidium prepares the issues for discussion at the board meetings, meets with the hospital management to discuss which issues require more analysis, what can be postponed, and what can be decided by the managers. (The Chairperson)

The Presidium also represents the board before other political bodies in the Region. Therefore, because of their external and internal roles, the Presidium is more informed about the issues than other members.

The chairperson admits that some board members find this information incomplete.

The best opportunity for board members to suggest changes or additions to the decisions is prior to the board meetings. Otherwise, it is difficult to change the decisions. While the board members may still make suggestions before decisions are finalised, generally they avoid doing so, except in the unusual situations when political party conflicts arise. However, even the opposition party board members understand that party politics have a limited role in decision-making. Newly appointed board members soon learn this unwritten rule.

The opposition party’s role in an executive board is special. However, many important decisions are not partisan. We, in the opposition, tend to take the majority position in an executive board. Such a board is generally not an arena for political division. (Vice Chairperson)

The dividing line on the board is not between the political parties. Rather, it is between the Presidium and the other board members. These members are expected to approve the Presidium’s decisions, which are not expected to be challenged or debated. However, some board members who are uncomfortable with procedures want greater transparency and more opportunities to participate in the decision-making.

Everything goes through the Presidium. We only receive verbal feedback, never written. (Majority Party Board Member)

The Strategist is quite critical of the situation that limits the board members’ influence.

The managers make the decisions. The chairperson approves the decision formulations in advance of the board meetings, in theory after a discussion. However, it is really not possible to change the decisions that have been made […] We have morning meetings just prior to the board meetings to discuss the decisions, but they are mere formalities. I have asked to meet earlier, without success. (The Strategist)

In order to exert some influence, the Strategist attempts to circumvent this decision-making structure by contacting the chairperson directly.

Occasionally, I have raised issues that are not on the agenda. More often, I have mentioned them to the chairperson since he is the ultimate decision-maker. I do not always think the chairperson listens to me. (The Strategist)

The Strategist opposes the formal board structures and divisions of labour among the board members that reduce their ability to influence board decisions. The Strategist sees the chairperson and vice chairperson as party leaders, mainly interested in defending their political positions.

The chairperson and vice chairperson could mix with us a lot more […] In reality, we have very limited influence. They seem to fear competence. When people fear their positions are at risk and that others who are more skilled or knowledgeable are available, they feel threatened. (The Strategist)

The Strategist, as the one dissenting voice on the board, resents the fact that he is limited as far as his participation in the board’s work.

7. Strategic or control role?

The three endogenous institutions are described separately, although together they create a network that harmonises the functions of the hospital board. This study reveals that the board has control, support, and advisory functions but not a strategic function.

7.1. The control function

The politicians may request supplementary information about proposed decisions. The managers, who expect such requests, have preparation procedures that allow them to respond as needed. Beginning with their initial preparations for a decision under consideration, the managers focus on making documentation available. Good preparation should anticipate external reviews. Trust in hospital management depends on the quality and accuracy of the documentation. However, although the documentation may be extensive, it is not always relevant.

This focus often results in more background material on proposed decisions but at the expense of relevance. With the board’s insistence on complete information, it may be assumed that the board exerts stronger control over hospital management. However, this focus actually weakens the board’s participation in strategic issues. The Strategist’s attempt to insist on relevant data and the reasonableness of the managers’ claims does not lead to change. The chairperson, in his dominant role under the presidency model, ensures that the managers are in control.

Other individuals may provide support for, and advice on, the board’s decisions (e.g. other hospital professionals, service providers or party members). However, assistance from such sources appears to be of minor importance. The managers are disinclined to find such information as being relevant.

The hospital director arranges hospital study visits for the politicians to increase their understanding of hospital activities. The motivation for such visits is that an in-depth understanding of these activities can supplement supporting documents without provoking challenges to the decision-making processes. The Strategist organises his own study visits, intended to provide alternative information and to evaluate whether the supporting documents are really relevant. He has been unsuccessful in changing other board members’ opinions.

The politicians find it somewhat problematic to evaluate the decision support by reference to their own experiences and to the information provided to them by outside sources. Such evaluations suggest that the members are trying to use their professional competences and political ideologies to make decisions. A politician who takes this approach may easily be marginalised as far as the work of the board. To be effective, board decisions require majority approval. The ‘lone wolf’ approach is unlikely to produce a change in the managers’ decisions.

Ultimately, the majority party board members may, in agreement with the opposition party members, try to introduce another form of decision preparation within the framework of the decision-making processes. This preparation, which occurs at the Presidium meeting, is intended to counteract the managers’ non-disclosure of information. Majority approval by the board is required for this process to go forward.

The presidency model is intended to promote efficiency and speed in decision-making processes. Here, the model is intended to reconcile the views of the chairperson with those of other board members so that questions and challenges are avoided at board meetings. The model, however, allows for clarifications on the decision-making processes such as the prerequisites for decisions. The model also offers guidance to the managers on the kinds of supporting documents needed for future cases.

Nonetheless, it appears there is never really an appropriate time to challenge the managers’ decisions or to propose alternative measures. A board member who raises an objection is typically regarded as interfering with the decision-making process. It is more or less implicitly accepted that while the politicians may request additional information, they have no real influence in changing decisions. Given this tradition on how board decisions are made, any substantive changes in decision-making are difficult.

The board’s control function apparently extends only to ensuring that the supporting documents are all-inclusive to withstand external review. Such control requires the functional cooperation of the hospital director and of staffing continuity among the hospital managers who prepare the supporting documents. Lack of continuity in the contacts between the politicians and the managers hampers the effectiveness of the control function.

7.2. The support and advisory functions

The endogenous institutions explain which type of control is appropriate and effective. Moreover, they provide a space for the politicians to exercise their support and advisory functions. The politicians typically are in powerful party positions, with good contacts in the regional government and with other political committees. Hence, they can advise hospital management on regional decision-making processes and the projected economic consequences of the board’s decisions, including but not limited to the results of major investments.

The hospital director’s close cooperation with the Presidium facilitates the informal transfer of information from relevant board members. Thus, politicians can convey comments, including criticism, on hospital management that they hear at regional council meetings. Through the Regional Council, a wide network of individuals can express their opinions on how the hospital handles its assignments.

Perhaps the board’s most important support and advisory function is exercised when the chairperson represents the hospital in meetings with the Regional Board (the Purchaser). The Presidium attends these meetings, together with the hospital director and representatives from the medical profession. The Presidium explains the hospital’s existing and future capabilities at these meetings to influence the hospital’s assignments. The chairperson also represents the hospital on study visits that are intended to support the hospital’s reputation.

Under the presidency model, the chairperson has a very important position that, to some extent, excludes other board members from power. The advantage of the model, however, is that it facilitates and speeds up decision-making in a way that strengthens the board’s support and advisory functions.

7.3. The non-strategic function

One explanation for the politicians’ limited support and advisory role is that the decision-making processes for major areas (e.g. new construction and other large investments) are very complicated and resistant to change. However, the non-strategic function should be viewed in terms of how Edwards and Cornforth (Edwards and Cornforth 2003, 79) define the strategic function (quoted in Section 1): ‘active participation in discussions and decisions that revolve around the company’s overall resources, its strengths and weaknesses in relation to the goals, and the opportunities and priorities that will be made for the future of the company success’. Thus, the three endogenous institutions primarily limit the board’s strategic function.

One limitation derives from the endogenous institution that relates to the managers who initiate decision preparation. Their motivation is to separate their professional judgment from their political judgments. The goal of the preparation procedure is to present complete (to the extent possible) supporting documents and to propose one decision.

The managers’ decision proposals should be supported by facts, be relevant to the current conditions and be based on their professional opinion. It is not expected that their decisions will necessarily satisfy all board politicians. When the politicians do not readily accept a decision, then time-consuming revisions may be required because, with only one proposed decision, an alternative decision is unavailable. In such cases, when the Presidium and the senior managers have not discussed the issue thoroughly enough to reach a consensus, the chairperson tries to reach an agreement with these managers prior to the board meeting. If no agreement is reached, the work of the board is threatened.

When only one decision proposal is offered for a particular case, there is little room for board members to exercise a strategic function.

The decision preparation by the managers for presentation to the Presidium aims at stability and predictability in the decision-making process. The Presidium’s preparation also pre-empts the interaction between the other politicians and the hospital director and senior managers. Thus, the decision preparation means these politicians, for the most part, do not participate in discussions and decisions based on an overall view of the hospital’s needs and conditions.

8. Discussion and conclusions

This study examines the reasons that the politicians on a public hospital board have limited influence on the hospital’s activities. The three endogenous institutions – procedures for how the politicians work, how the managers prepare and present the issues, and how the presidency model works – explain this limitation. Together, these endogenous institutions create a powerful force on board activities that inhibits the presentation of decision proposals, criticism and alternatives. Consequently, the politicians have little opportunity to engage with strategic issues.

The results of this study support the idea of the executive board’s limited strategic function as concluded by other studies (e.g. Huse 2005; Pugliese et al. 2009; Svärd 2016). However, the three endogenous institutions primarily explain the phenomena that Svärd’s (2016) study on the influence of exogenous institutions does not. The hospital managers use endogenous decision-making processes that lead to decisive and timely actions. They initiate and drive the decision-making process.

A difference between earlier studies and this study concerns the public organisation board’s control function. In studies based on the principal-agent theory (e.g. Daily, Dalton, and Cannella 2003), the independence of boards is regarded as problematic because it is difficult to take a creative and interactive role when the organisation is under tight control by executive leadership. Boivie et al. (2016) reached similar conclusions, mentioning that boards avoid challenging the top managers; accordingly, it may be assumed that the board avoids challenging the executives’ strategy development. Here, the leadership somewhat protects the organisational activities from external criticism. This aspect of control, which emphasises the board’s independence, is diminished by the endogenous institutions’ regulation of control considered appropriate. The idea of control is perhaps better understood using stewardship theory. It is therefore unlikely that the control function will conflict with management’s strategy development. The importance of the control function in this study is that the board uses it to confirm the managers’ actions and thereby to take responsibility for how citizens view the hospital’s management.

Regarding the support and advisory functions, the public organisation board members’ specialist knowledge, (e.g. in IT or logistics), unlike that of private company board members (Nicholson and Newman 2010), does not appear to have much relevance in their work. The endogenous institutions rather limit these politicians’ ability to use their various skills and knowledge in their work.

They can link the organisational leadership with the Purchaser, neutralise criticism from superior political bodies and improve the reputation of the activities (Pugliese et al. 2009).

Other explanations may help us understand why the politicians on public organisation boards lack a more strategic function. However, one may exclude the idea that conflict among board members hinders strategic work (Minichilli and Zona 2009; Zona and Zattoni 2007). Here, opposing party ideologies did not obstruct the work of the board. Rather, they are amenable to the majority party ideas, including budget proposals. The opposition politicians are quite cooperative in fulfiling the hospital’s assignments as well as possible.

Previous studies (e.g. Mace 1971) have addressed the importance of boards of directors’ practical conditions such as access to information and time availability. Much of board work consists of extensive preparation in the decision-making processes (especially document review). The amount of time that such preparation takes necessarily limits the time available for strategic thinking, external meetings and internal discussions. However, it is notable that the politicians in this study did not blame lack of time for their limited strategic contribution.

The study has implications for public management theory on how strategy develops in the public sector as a multilevel process, by demonstrating how boards of politicians contribute to strategic management in the interplay with their senior managers, as requested by Bryson, Berry, and Yang (2010) and Poister, Pasha, and Edwards (2013).

The board of a public organisation strengthens the decision-making process by its support of the completeness of the managers’ supporting documents. Its main role is as an advisor on, and supporter of, a series of operational decisions. While this role is essential, in itself, it does not seem to fulfil the role in a chain of control that is expected in government reforms. Following the theories that support such government reforms, politicians on boards of public organisations should maintain a distance from organisations when they are responsible for their management.

The significance of the endogenous institutions demonstrated here supports previous findings by George et al. (2018) that coercive institutional pressure has an impact on the politicians’ function, and furthermore answers their question that this is not necessarily due to a penalising system tied to the formal and informal rules.

Finally, the findings in this study have implication for management practice. It is difficult to see how a non-political board with a strategic function could offer the protective support that a political board can. A political board has an important role in legitimising managers’ decisions for society and in shielding them from the media’s frequently negative spotlight.

It is also difficult to see how the purchase–provider split model can influence the performance of the executive board if the endogenous institutions remain intact. This situation is unlikely to change if any other governance models are adopted that do not reject or adapt the three endogenous institutions described here.

A possible solution would be to abandon the political board and, in its place, allow the Regional Council to exercise more distant control functions. Consequently, the managers’ accountability might increase. The control functions, which would probably be limited to budgetary and certain key management issues, however, might be insufficient to stabilise management’s activities. Another consequence is that the superior political board’s accountability might also increase. Thus, the executive board absorbs the responsibility of the managers and of the superior political board.

However, this study suggests that another paradigm governance model is worthy of investigation. This alternative model might establish zones of ‘regulated freedom’, in which the actors are encouraged to follow certain managerial ideals (Rose 1996).

8.1. Suggestions for further research

The board members in this study were observed as they worked in crisis-free conditions. It is conceivable that a political board in the midst of a crisis would act differently, e.g. take a more proactive role in the decision-making and become more involved in the strategic function. Therefore, researchers should study how hospital board members (i.e. politicians) act in emergencies (e.g. malpractice hospital crises or financial resources crises).

Furthermore, it is true the board members in the studied hospital are probably more experienced politicians than board members in general in smaller hospitals, but the complexities in the assignment of smaller hospitals are probably also less. Therefore, the strategic contribution of politicians in such hospital boards should be studied.

Moreover, public boards, in which independent and critical voices (e.g. like that of the Strategist) are heard, should be identified and studied, with emphasis on the importance of observations at board meetings and at Presidium meetings.

Acknowledgments

The author would like to thank Karen Nowé Hedvall and Rolf Solli for their contributions to data collection and helpful comments on earlier versions of this article, as well as the anonymous reviewers for their constructive comments.

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Notes on contributors

Roy Liff

Roy Liff is an Associate Professor of Business Administration at the University of Borås and senior Research Fellow at Gothenburg Research Institute, University of Gothenburg. His main research areas are public management, multi-professional teamwork and risk management. He has recently co-authored articles in Accounting, Auditing and Accountability Journal, Journal of Professions and Organization and Journal of Knowledge Management.