Stakeholder governance in theory & practice - AZ Alma

Organizations are acting more than ever in a constantly changing environment. Political, economic, social, societal, and other shifts follow one another in rapid succession and demand a new perspective on governance. The first and second "governance wave" focused on clarifying roles within the board of directors and balancing shareholders. The third "governance wave" builds on these themes and emphasizes the alignment of interests among the various internal and external stakeholders.

The demand for starting points on how to involve stakeholders in decision-making is therefore high.  In the series "Stakeholder Governance in Theory & Practice," GUBERNA aims to outline a clear framework for organizations that want to approach dialogue and engagement with stakeholders in a structured and strategic way. The basis is an earlier conceptual paper entitled "Stakeholder engagement in the decision-making process - Implementation from a governance perspective." In addition, through practical examples, the series also provides an insight into the implementation of stakeholder engagement in various types of organizations.

It always follows the same structure: what are the challenges, how does one attempt to solve them, what is the added value of stakeholder engagement, and what are the "lessons learned".

Now it's the turn of AZ Alma, collective member at GUBERNA. We had the opportunity to question Lutgart Van den Berghe, member of the board of directors.

AZ Alma, located in Eeklo in the heart of the Meetjesland region, is a general hospital resulting from the 2006 merger between the Elisabeth Hospital and the Heilig Hart Clinic. AZ Alma had 493 beds, 150 physicians, 1,290 employees and 150 volunteers on December 31, 2021.  

The mission3 of AZ Alma is to work together with patients and healthcare providers in mutual trust and openness to expand a high-quality healthcare offer in the region. This is based on a Christian vision of man and society. From this mission, AZ Alma strives to be the hospital of choice for the inhabitants of the region: a hospital where people and care are central. The vision is powerfully summarized in the slogan "Care with a heart" with respect to patients, referring physicians, staff and society. 

The values that AZ Alma places central to this are trust, inspiring, responsibility, innovation, openness. 

The governance structure of AZ Alma is made up of the traditional governance tripod (i.e. general assembly, board of directors, and executive committee) and also has a fourth pillar with the medical council which is specific to the hospital sector. The latter is the legal body in which physicians participate in hospital governance. AZ Alma is also part of the KOM hospital network.

The challenges for the hospital sector and thus for AZ Alma are multiple and require a professional stakeholder policy.  

For many years, studies on the "financial health" of hospitals have pointed to major problems, always scrutinizing the sustainability of current hospital financing. Hospitals are confronted with a government that needs to make more and more savings, making government funding insufficient. Consequently, current Health Minister Frank Vandenbroucke sees hospital financing as a priority yardstick and in January 2022 came up with a roadmap as a starting point for negotiations with doctors, hospitals and health insurance companies4. 

Corona further rocked the financing system. Not only because of the large additional costs, less revenue came in because a lot of examinations and operations had to be postponed. Corona also highlighted the structural personnel shortage. Eight out of ten Flemish hospitals have to reduce their care offer due to structural staff shortages or are considering doing so in the near future5. 

In addition, a reorientation is underway from a supply- and provider-driven hospital organization and an internal and financial-oriented focus on the management of infrastructure, services and personnel to a demand- and patient-driven organization with much more attention to the patient and his care needs. Patients want to remain in control of their own care whenever possible as an equal/equal partner in the healthcare relationship. 

The increasing aging population and patient expectations, combined with a modern technological environment, also require very large investments. This in a particularly complex Belgian environment with a changing regulatory framework of both federal legislation and regional decree provisions. 

The government has obliged hospitals to integrate into a regional network of hospitals. AZ Alma is part of the KOM (Kust-Ommeland-Meetjesland) hospital network. This offers opportunities but practice points to major challenges in shaping the network, further developing cooperation formulas, and aligning strategy with the partners in the hospital network 

Finally, in order to bridge the gap between the hierarchical control structure or governance tripod and the large group of physicians, the hospital law has only provided for a complex system of consultation and advisory rights, weighted or not, for the physicians through the medical council. Strategic and operational issues are often overshadowed in this system by the frictions and disagreements that arise in response to discussions about resolving financial shortfalls. Above all, a final challenge is thus the need for a recalibration of hospital governance. This is not only to manage the growing role of physicians in hospital financing. More than that, there is a need for a new "co-governance philosophy" to allow hospitals to develop a sustainable long-term strategy.

AZ Alma, like most organizations, has a very diverse stakeholder landscape. These stakeholders have different interests and different importance to the organization. Therefore, the methodology of stakeholder management and analysis (i.e. identification, hierarchy, method) was applied to determine who the key stakeholders are and what specific interests, expectations and needs need to be taken into account. One cannot please everyone and so one must also rank stakeholder engagement methods somewhere on a spectrum ranging from informing to true involvement in decision making. However, one often has a fairly intuitive sense of where the importance of stakeholders for the efficient functioning of the hospital lies.  

The functional organization chart of AZ Alma refers to the relationship with important stakeholders. It distinguishes between bodies with decision-making power, those with a mere advisory function, and those with both an advisory function and decision-making power. The hospital's governance charter6 also devotes a separate chapter to the hospital's stakeholder policy. Internal stakeholders (cf. physicians, employees, management, and of course the board of directors, and then the general assembly) are involved in its development.  

From a strategic point of view, and given the belief in the integrated care circuit, the patient, who seeks health assistance, is central to stakeholder thinking. From practical considerations, a distinction is made between internal and external stakeholders. Internal stakeholders include the members of the governance bodies, physicians, employees as well as volunteers. AZ Alma's external stakeholders include patients (with their families, informal carers and visitors), referrers (other care institutions, general practitioners, home nurses and paramedics), (network) partners, pharmacists, schools, trade union representatives, emergency services, health insurance funds, knowledge institutions, visitors, industry, funding agencies, governments and the wider community. AZ Alma ensures that an appropriate information and communication policy is developed for these stakeholders as well as a consultation, adapted to the involvement of each stakeholder.

First of all, AZ Alma highly values transparency and open communication (cf. Level 17 participation). This applies not only to internal stakeholders but also to communication with the many external stakeholders. The management, in close consultation and cooperation with the board of directors, develops a communication plan to frame the exchange of information with internal and external stakeholders/stakeholders within the mission and strategic policy plan. This plan shall describe what information is provided, how (e.g. written, oral or digital) and to whom the information is provided as well as the purpose of providing information to internal and external stakeholders. The website, annual report, social media, apps for patients, press releases, etc. play a role in this. For internal stakeholders, there are also various publications and digital information bulletins that structurally inform physicians and employees about important evolutions and specific points of interest, a triennial employee satisfaction survey, mail messages, etc. It is important that communication pays attention to ensuring respect for privacy and discretion whenever required. 

It also comes down to involving stakeholders appropriately in hospital policies and operations (cf. participation level 2). Regarding external stakeholders, agreements are made with some professional partners (e.g. general practitioners, pharmacists, etc.) and laid down in so-called 'service level agreements'. There are also close contacts and consultation moments with residential care centers, health insurance companies and other care institutions several times a year within some specialties (e.g. geriatrics, patient guidance service). In addition to a structured consultation with the medical staff, there are also structural consultations with general practitioners at least twice a year, together with representatives of the medical council and the management committee. AZ Alma also regularly organizes symposia and information and training moments for its (care) partners. 

AZ Alma opts not to work with a stakeholder consultation, but to engage with professional stakeholders at different times, in different forms and at different levels. The composition of a specific stakeholder consultation is a difficult balancing act. In addition, a unified, combined platform does not mesh with the variety of objectives of a hospital facility's stakeholder types. Also, a large number of stakeholders and their diversity complicates an efficient working body. Above all, it is consequently not the best platform to achieve real impact at the strategic level.

Patients are the main external stakeholders of a hospital because they are its raison d'être. AZ Alma opts not to work with a patient council because its members cannot possibly represent the point of view of the heterogeneous group of patients (cf. representativeness) and the topics do not always match the expectations of all patients. Therefore, AZ Alma deliberately chooses to engage with patients and their families at different times, in different forms and at different levels (cf. supra). This on a spectrum from informing, consulting, advising, co-producing, to co-deciding and that at micro, meso, and macro levels.  The methods of involvement that were/are being developed within this framework are preparatory meetings leading up to an admission, communication, patient brochures, symposia, satisfaction measurements centralized by the communication service, focus groups, patients in working groups, patient surveys, etc.  

Physicians as internal stakeholders perform a core function within hospital operations. This is shaped first and foremost by the medical council. This is the legal body in which physicians, who represent the most important stakeholder apart from employees, participate in hospital governance. The medical council has a number of advisory rights laid down in the hospital law. Every 3 years there is an election based on an "election list" that is made and a vote that takes place. Any doctor can stand for election and, depending on the number of votes obtained, obtains a seat on the Medical Council.  

In addition, where relevant, the council involves hospital physicians in its policies. The list of responsibilities of the management also states that one of the important result areas is to ensure effective and efficient cooperation between the physician corps and the hospital organization. Several bodies and committees play a role for physician consultation, of which we briefly highlight one specific one in this case: the Financial Committee/Business Advisory Council (FC/BAR). The FC/BAR stems from the integration of the finance committee (provided for in the Hospital Act art 143) and the tripartite consultation between the board of directors, executive committee, and medical council. There is a fixed meeting rhythm (monthly) and there are clear working agreements (regarding agenda, files, decision-making). As a rule, agenda items and files relating to the financial committee are dealt with in the unpaid months and agenda items and files relating to strategic matters in the unpaid months. The FC/BAR is an advisory and consultation platform whereby all proposals must subsequently be further discussed and validated by the respective governance bodies (i.e. board of directors, executive committee, and medical board) so that the policy-making bodies retain their autonomy and authority. 

The board of directors (cf. participation level 3) at AZ Alma is composed purely of independents8. Stakeholders are of course listened to by the board and their thinking is anchored in the complementarity of its composition. Conscious stakeholder engagement is part of the board's periodic evaluation. Ensuring that the stakeholder policy is implemented appropriately is also explicitly part of the board of directors' duties. At AZ Alma, however, the choice was made to highlight the independence of the board of directors, and to emphasize that, as a director, one is part of a collegial body that reaches decisions by consensus in the best interests of the organization. This is difficult when stakeholders are directly part of the board of directors. Similarly, the executive committee obviously does not include stakeholders but here, too, stakeholder interests are obviously considered. Through the participation of directors and management in various consultative bodies, there is intensive consultation with internal stakeholders anyway for the development of strategy, the strategic policy plan and the budget.  

Regarding the AZ Alma general meeting, the ambition is to give a clear place to the voice of external stakeholders through the inclusion of three additional external stakeholders within the general meeting. In addition, an annual stakeholder event will be organized, at which in a first section the results achieved by AZ Alma and a number of plans can be explained, followed by an exchange of views with the external stakeholders.  

Through this stakeholder approach, AZ Alma hopes to combine the efficient operation of traditional governance bodies (with an independent governing body and a general meeting with limited stakeholder representation) with broad stakeholder support. In doing so, it does not opt for the creation of a 'stakeholder council' but for a combination of consultation and participation in the focused stakeholder consultation platforms with an annual meeting for the broad field of external stakeholders.

The added value for AZ Alma to involve stakeholders in hospital operations is multiple. First of all, it allows it to provide a more targeted offer in terms of 2nd-line healthcare to its residents. Based on the contacts, AZ Alma can adjust or tailor the care offer to the formulated wishes, expectations, and needs. 

Stakeholder involvement also contributes to increased transparency and full ownership, which can increase support for (sometimes difficult) projects. Stakeholder engagement thus offers the opportunity to achieve better alignment in terms of ambitions and strategic objectives.  

Moreover, stakeholder consultations also allow one to get to know groups that are important to the hospital and should be included in the consultations. Groups that together with existing stakeholders can provide insights into the impact of decisions and activities.  

Finally, for the efficient functioning of the hospital, networks should be built as one depends on many other actors within the value chain and supply chain. Stakeholder engagement allows this to be done in a proactive and positive manner.

• First, stakeholder engagement should be intertwined in all parts of the organization to avoid getting bogged down in "window dressing. At AZ Alma, for example, the fact is directly anchored in the mission statement: "Working together with patients and healthcare providers in mutual trust and openness to develop a high-quality healthcare offering in the region." 
• In addition, it pays to approach stakeholder policy from a clear analysis that identifies stakeholders, ranks them according to importance, makes explicit why it is important to capture their voices, and identifies the method that is most appropriate for each stakeholder. The importance of the stakeholder to the organization's finality, the extent to which the organization influences them, as well as the extent to which the stakeholders influence the organization is the essence of stakeholder mapping. Practice at AZ Alma also indicates the importance of a diversity of methods. Stakeholders and their interests are so different and heterogeneous that it is presumably less relevant to put it into one council.  
• Nevertheless, a third "lesson learned" is that one must also be careful of "overshooting" and a situation of comitology. For example, unlike other organizations, the Hospital Act has already provided for a great deal of stakeholder consultation. Moreover, stakeholder involvement is not an end in itself but a means to achieve 'good (hospital) governance'.  
• Since stakeholders are crucial to the realization of the strategy, it is recommendable to involve them in its design. The essence of a 'strategy-focused organization' is to reach consensus on strategic initiatives and on the development of the hospital. Stakeholders often have specific expertise and experience, are best informed about the strategic context, the critical success factors involved, opportunities, etc. This strategic involvement should obviously take place with respect for the prerogatives of the governance tripod in this regard and the principles of good governance in general (e.g. delegation of authority, checks and balances, confidentiality, professional conduct, etc.).  
• It is also important that the stakeholder policy is formalized in the governance charter in which some basic principles regarding stakeholder engagement are made explicit. This increases transparency and clarity, and gives the stakeholder forums a clear mandate. 
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• An optimal stakeholder policy must also be agile so that it is able to adapt to changing environmental factors and developments. This requires regular questioning of the initiatives already developed and (further) development of new initiatives. 
• Finally, one should be aware that the board of directors is a collegial body that independently strives to make decisions by consensus in the best interests of the organization. This makes the board of directors probably not the most appropriate platform to represent stakeholder engagement.