A new survey of 200 healthcare provider CEOs shows that nearly half haven’t identified a potential successor to the top management spot at their organization and only 17 percent feel they have someone who is prepared to step into the top spot.
The report, “Future Plans for Transitioning Out of the C-Suite: A Confidential CEO Survey,” from Witt/Kieffer, a healthcare executive search firm, also shows that nearly three-quarters of healthcare CEOs between the ages of 55 and 59 have no plans to retire or are at least five years from retiring and 36 percent of surveyed CEOs over the age of 60 had no plans to retire.
“People don’t know what they are going to do next. The work is exciting, with the changes and healthcare reform and ACOs – people want to be a part of that and see it as the next Medicare and won’t be able to participate in this change if they retire,” said Elaina Genser, senior vice president with Witt/Kieffer. Further, Genser noted, she knows many executives over the age of 70 who have no plans to retire, mostly because they aren’t sure how they would spend their time otherwise.
“I think many would like to find a way to channel their energies, but they haven’t found a way to do that,” she said.
But there is a danger to not having some kind of succession plan in place or if an organization is not actively preparing others in the organization to take over the top spot. This can be particularly damaging to an organization should something unexpected happen to the CEO that would require someone to step into the post immediately.
“Most people have had some level of conversation (about this), and the organization – where boards of directors are stating to say ‘you know what? We really need to pay attention to this’ – are really starting to gear up, because there is a lot to be done,” said Genser.
Typically, it will take an organization about five years to execute a succession plan, but that doesn’t mean they should wait until they can clearly see that retirement window to lay the groundwork for it.
One difficulty some providers may face right now in planning for succession is that many have significantly pared down their management ranks in the past few years in an effort to be leaner and more profitable. This has left many hospitals and IDNs operating without a chief operating officer, since many have figured it is a job that could be covered as part of the CEO’s regular duties.
And while a COO is often the most likely candidate to be groomed for the CEO’s chair, Genser said organizations planning a succession should consider other senior management roles as potential CEOs too. Some also fear that grooming senior management for the CEO role 10 or more years ahead of a CEO retirement is a recipe for having those managers snatched up by other healthcare providers and competitors.
“If you are 10 years away from retirement and you spend five years developing somebody and they go someplace else, you can always bring them back,” Genser added. “One of the most frustrating things boards will say to an internal candidate is ‘you haven’t sat in that seat before.’ You can’t get the experience until you have the experience so going someplace else to get it isn’t the worst thing that can happen.”
Other survey results in addition to the 17 percent of organizations who have identified a successor to CEO showed that 51 percent have worked wsenior management team to identify potential successors; 39 percent have worked with their board of directors to develop a formal succession plan; 34 percent of CEOs have mentored their successor; and 29 percent have identified a successor to step into the CEO role.
Genser sees the need to increase mentoring within healthcare organizations as particularly important and that one reason it may not be as important today, is that many are so thin in the top ranks that it takes all the executives’ time just doing the day-to-day work.
“There needs to be a greater emphasis on mentoring successors and taking the time to do that,” she said. “That is a place where you can reach down in an organization and ask them to work on a project and give them a stretch opportunity. I’d love it if these organizations could find a way to slow down, so these executives don’t need to be working those 70-hour weeks anymore and could use that time to mentor the up-and-comers.”