Board human capital, business expertise and the performance of public service organizations

While public management reforms around the world have given business experts an enhanced role in the governance of public service organizations the impact of such change is poorly understood. In this paper we address this concern drawing on the ideas from the literature on board human capital as a theoretical framework. This approach is applied to the case of hospital boards in the English National Health Service to investigate whether increasing the presence of individuals with business expertise has any significant impact on performance. The findings show that while business expertise has no impact on service quality it does have a positive effect on financial outcomes. This however only applies to boards that are operating in organizations with less developed (in terms of board experience and organizational autonomy) corporate style governance arrangements. Consequently, the findings lend support to board capital theory and the importance of ‘publicness fit’, but also call for a reappraisal of this approach to account for changing conditions and performance demands in public service organizations.