CEO Succession Planning: Helping Boards Prepare for a Smooth Transition

It is the dread of every hospital board of directors across the country: an esteemed, longtime CEO announces the intention to resign. A replacement must be found, and the transition—as perceived by patients and the community—must be seamless. With foresight, however, executive transitions need not shock the system, and effective CEO succession planning can give your hospital or healthcare system an opportunity to explore alternative philosophies, practices, and even new strategic directions.

Is it really necessary?

With so many priorities demanding their time, boards often ignore CEO succession planning, deeming it an unachievable item on their to-do lists. According to a recent study, about two-thirds of healthcare CEOs report that their organizations do not have formal succession plans in place.

Many trustees cite the need for boards to address more pressing financial and strategic issues affecting their hospitals. Others believe their sitting CEO is likely to remain in the role for years and a plan is not necessary. But CEOs do step down—sometimes without warning—and a leadership gap can prove disastrous to an organization riding the already-complex wave of healthcare reform and hospital management.

An ongoing process

A CEO transition plan is a living document that breathes with each change in the C-suite management. CEO succession planning, as an exercise, gives trustees the opening to maintain greater contact with the senior leadership team and ensure that their respective approaches align with the board’s vision and direction.

This ongoing process allows for an unhurried opportunity to identify and groom talented internal successors before the need to replace a CEO hits you unexpectedly.

Easing successor selection

Just as CEO succession planning shouldn’t start when a CEO resigns, the search for a replacement shouldn’t start with traditional recruitment. When the time does come to identify potential successors, the first step is an internal “cultural audit” to ensure that the stage is set for the best possible selection.

During a cultural audit, hospital officials interview trustees, physicians, staff, community leaders, and industry partners to uncover their views on the organization’s culture, strategic vision, leadership capabilities, and needs for future success. These findings offer a valuable blueprint for developing the new CEO’s job profile. Should the incoming leader have a tendency toward risk-taking? Is experience moving a system from nonprofit to for-profit status critical?

The need for a CEO profile cannot be overstated. This profile forms the basis for your search and determines the direction that your hospital takes into its next generation.

Be sure to include these factors when developing this profile document:

  • Responsibilities
  • Competencies
  • Goals
  • Leadership style
  • Track record

The search is on

A search committee with fewer than 10 members is optimal (larger groups are unwieldy and impede decision making). The committee must first develop a charter, a document that assigns roles and responsibilities between the committee and the board. For example, does the committee select a handful of final candidates and ask the board for group review, or does it offer a singular recommendation and turn final approval over to the board?

When interviewing begins, ensure that internal and external candidates are judged according to equivalent criteria. Cast a wide net as part of the search, but be careful to avoid the “halo effect” of newcomers by making direct comparisons between all candidates, internal and external.

Also, consider utilizing outside search counsel to obtain additional feedback on candidates’ strengths and weaknesses. These professionals are also useful in conducting reference checks and verifying professional experience.

Welcome and farewell

After making a selection, be sure to welcome your new CEO warmly and immediately establish a professional connection. Ease the transition for your incoming leader by providing him/her with a personal advisor to assist in the initial weeks of the new role, but don’t step too softly in introducing the day-to-day realities of CEO life at your hospital.

And be sure to send off your departing CEO with gratitude for their service. It was under their leadership, after all, that your organization grew to become what it is today—and performed the CEO succession planning that paved the way for your seamless leadership transition.

The above post was co-authored by Jena E. Abernathy and Andrew P. Chastain

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