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Fundamentals of governance vital to senior living board effectiveness

April 9, 2024 Article 5 min read
Dana Wollschlager Plante Moran Living Forward
Senior living boards need to master these key responsibilities to compete in the rapidly changing industry.
Senior living board of directors seated around a table in a conference room

“We have just come out the other side of the greatest transformation our industry has ever seen.”

This declaration kicked off the first of a five-webinar series hosted by LeadingAge Southeast and development advisory firm Plante Moran Living Forward (PMLF). Presenters Dana Wollschlager from PMLF and Frost Law Attorney Director Michael March highlighted both the strategic and legal responsibilities boards need to master in a rapidly changing industry.

Fundamentals of a board’s strategic responsibilities

Senior living boards can expect more exponential change in the coming years. Adapting to those changes will require strong, strategic leadership at the board level.

The first key element of successful board leadership is understanding the difference in roles and responsibilities between governance and management. Governance roles need to focus on mission, values, and purpose. Management positions should focus on day-to-day operations, business plans, and budgets.

Blurring these distinct roles is a significant pitfall for organizations, as the minutia distracts them from providing oversight, foresight, and insight. Maintaining distinct responsibilities allows boards to delegate with clarity, guide management without meddling in the day-to-day operations, rigorously evaluate performance, and truly lead their organizations through change.

The second key element of a successful board is organizational strategy.

Especially in times of change, boards may have trouble making wise decisions around growth, repositioning, and other changes without a clear strategy. “It’s hard to know where you are going to end up if you don’t define the path to get there,” Dana explained. A clear strategy and plan for the organization will allow it to adapt to changing market drivers and ensure continued relevance with consumers.

“I think boards are pretty good at developing their strategic initiatives and their priorities,” Dana says. But she warns that strategic planning shouldn’t stop there. “Where most organizations fall down is they do not tie the strategy to their operations.”

Boards should make sure management has a clearly defined execution strategy that ties into the strategic plan’s overall organizational goals and objectives. Boards may find it difficult to hold management accountable if they haven’t established strategic priorities. “How can you identify that your C-suite and leadership team will take you where you want to go if a strategic plan hasn’t defined those goals and objectives for your community?” Dana said. Measurable performance metrics help create a “culture of accountability” across the org chart, driving sustainable performance.

Boards with a clear understanding of their roles and responsibilities and a thoughtful, up-to-date strategic plan aligned with operations will be better equipped to lead their senior living organizations to future success and brand health. Organizations without a strategic plan, or with one that is more than five years old, should make updating it a priority.

A clear strategy and plan for the organization will allow it to adapt to changing market drivers and ensure continued relevance with consumers.

Fundamentals of a board’s legal responsibilities

The board’s responsibilities do not end with strategy. Frost Law Attorney Director Michael March says the board’s legal responsibilities are important to mitigate risk to your organization, another important role that boards have.

The first key legal responsibility your board needs to understand is the importance of detailing your bylaws. Bylaws are composed of board of directors’ powers (voting rights), officer responsibilities, committees (how many and their scope), immunity and indemnification, and dissolution documents. Michael warned, “A lot of those little questions that pop up when you’re starting to form these documents become prevalent when all of the sudden you are in a litigation, or the IRS is asking questions.” Making your bylaws extremely detailed is one of the most important things you can do to mitigate risk.

The second key legal responsibility your board needs to understand is the continuity of annual filing requirements. Maintaining continuity will always ensure there is always proper documentation. “I see people stop filing their Form 990s, or making mistakes on these forms all the time,” said Michael. It may be time to hire an external accountant to catch costly errors, make sure financials are moving smoothly, and provide continuity as boards turn over.

Legal responsibilities aren’t only tied down to forms. Michael brings up the importance of staying on top of the duty of care and negligence. Are entities acting within their scope of employment or are they becoming negligent? When preparing for litigation, “legal teams will start with the duty of care, so they must be correct,” said Michael. To avoid problems down the line, the services you’re offering need to conform and be available when there is a breach in duties.

Boards also need to carry out the duty of loyalty, which ensures they act in the best interest of the corporation and confidentially. “You must do things in good faith,” Michael summarized. Boards cannot put personal interests above that of entity and disclose conflicts. A red flag to look out for? “If you see an organization going after a new contractor and has a board member who also has the same level or interest operating in the same field, then it’s time to revisit your duty of loyalty,” warned Michael. Unfortunately, your board needs to have a process in place to handle these situations — favorably documented ones.

Tying back to Dana’s points, Michael emphasized the importance of the strategic plan. “Getting a committee to function properly is also built upon the bylaws and having a good understanding of what Dana called a strategic plan.” The strategic plan looks toward what a board can do, while many turn a blind eye to what they can’t do. For example, organizations can’t do proxy voting, can’t not show up for in person events, or not be involved in their committee. Make sure members of your organization understand and adhere to the strategic plan.

Stay on the sustainable path

To be effective, mitigate risk, and keep their organizations on a sustainable path in a rapidly changing industry, board members must understand the fundamentals of their strategic and legal responsibilities. To learn more, watch Dana and Michael’s full webinar, “Fundamentals of Governance,” on demand.

If your organization would like to learn more about senior housing industry trends, Plante Moran Living Forward offers board education services. Contact us to learn more. 

Information cited from Frost Law and expressed within the article are solely the opinion of Frost Law and do not reflect the opinions and beliefs of Plante Moran or its affiliates. While obtained from sources deemed reliable, no warranty or representation, expressed or implied, is made as to the accuracy of the information summarized from sources outside of Plante Moran.

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