Something went terribly wrong. Maybe oil leaked into the Gulf or nursing home residents were being abused. Maybe a local pharmacy is selling opioids based on bogus prescriptions. I don’t need to go on, because you know the headlines.
But what is to be done about it? Who do we turn to when management of the oil company, nursing home, and pharmacy fails? The oversight body.
What is an oversight body?
Maybe it is a board of directors, a regulatory body, a legislative body. What we need is someone in authority higher up the food chain than the managers who made these egregious errors to hold these managers accountable and, possibly, to step in and act to clean up the mess:
The GAO’s Green Book says:
2.08 Members of an oversight body scrutinize and question management’s activities, present alternative views, and act when faced with obvious or suspected wrongdoing.
Why do oversight bodies fail?
Yes, this all sounds very nice. If front-line managers and executives fail, the oversight body is there to save the day. But that isn’t always the case. Oversight bodies fail for a variety of reasons, including that the oversight body members are not:
Objective: Often the oversight body is comprised of retired executives who have worked in that same industry all of their lives. They are friends with everyone already serving on the oversight body (how else do you think they got there?). But this myopia can be cured by filling open positions with people who bring a different perspective. It can be someone who does not fit the oversight body’s established cultural identity or someone who has earned their stripes in a completely different industry. The GAO’s Green Book calls this fresh blood an ‘independent member’ in section 2.08.
Hard working servants: Some oversight body members only agree to become a member of the oversight body so they can add a fancy title that will lend gravitas to their resume. They don’t do much except for show up at meetings and eat cookies. Yes, I have been on several boards of volunteer organizations where more than half the board members do absolutely nothing for their entire term, but when it is time to take a picture to prove that they have the title, they are happy to stand front and center! One way to combat this is to set goals for each oversight body member and evaluate their progress against these goals each year. A strong nomination committee can also help screen out posers.
Forward thinking: Change is the only constant (get it? change…constant 🙂 ). Oversight body members who get stuck in ruts or resist change are eventually blindsided by something they didn’t see coming. In order to combat stale attitudes, the oversight body should conduct a SWOT analysis at least annually and create long-range (not just short-range) goals.
I once facilitated a strategic planning retreat for a state board of nursing. The board had been in the habit of setting goals for only one year into the future. But they dreamed of opening a rehab facility for nurses who had drug problems (yes, nurses have access to drugs and therefore develop drug problems). In order to get to this larger, longer-term goal, they had to do things this coming year that would move them closer to their dream… like choose a site and start fund-raising. We made a list of all of the tasks that had to be completed to open a rehab facility and plotted them inside of a five-year plan. Seven years later (yes… there were some hang-ups), they cut the ribbon on their dream facility.
Trained: Some oversight bodies leave members to sink or swim; no one takes the time to orient the new members about their roles and responsibilities. At a minimum, new members should receive an orientation document that describes the organization’s goals and their role in the organization!
Qualified: In order for an oversight body to be credible and powerful enough to clean up a mess made by managers, they need exemplary members with diverse talents. The Green Book (Standards for Internal Control in the Federal Government) recommends:
2.07 …in determining the number of members of an oversight body, the entity or applicable body considers the need for members of the oversight body to have specialized skills to enable discussion, offer constructive criticism to management, and make appropriate oversight decisions. Some specialized skills may include the following:
- Internal control mindset (e.g., professional skepticism and perspectives on approaches for identifying and responding to risks and assessing the effectiveness of the system of internal control)
- Programmatic expertise, including knowledge of the entity’s mission, programs, and operational processes (e.g., procurement, human capital, and functional management expertise)
- Financial expertise, including financial reporting (e.g., accounting standards and financial reporting requirements and budgetary expertise)
- Relevant systems and technology (e.g., understanding critical systems and technology risks and opportunities)
- Legal and regulatory expertise (e.g., understanding of applicable laws and regulations)
In addition to being technically competent, an oversight body member needs to be smart and honest:
2.06 Capabilities expected of all members of an oversight body include integrity and ethical values, leadership, critical thinking, and problem-solving abilities.
Internal-control oriented: Internal controls mitigate risks and ensure that the organization keeps running without the direct intervention of executives or the oversight body. If members don’t model respect for internal controls, the rest of the organization will follow suit (and more undesirable things will happen) because the oversight body sets the ‘tone at the top’. Again, a little training on controls for each member of the oversight body will help.
Who oversees the oversight body?
In order to catch oversight bodies when they fail, oversight bodies often have their own oversight body. And this oversight body, in turn, has their own oversight body. Yes, layer upon layer of oversight!
Consider the following oversight structure for pharmacies (who have been under quite a bit of heat lately when it comes to selling opiates):
- Pharmacy corporation leadership
- Pharmacy corporation board of directors
- State Pharmacy Board
- State Legislature
- U.S. Food and Drug Administration
- U.S. Congress
And I’m leaving out a number of associations and standard-setting bodies involved in promoting and setting standards for safe prescription drugs (for more detail on this structure, check out a GAO report on prescription drugs).
Sometimes this goes too far
Layers and layers and layers of controls and oversight can create an unwieldy bureaucracy that burdens citizens and government employees alike. So the designers of the oversight structure must be careful not to go so far as to stymy innovation and progress. Strong oversight and overbearing oversight are not synonymous.
The following short quiz will give you an idea of where you stand: