The following is a conversation between Witt/Kieffer president and CEO Andrew Chastain and Brian Krehbiel, leader of the new Witt/Kieffer Interim Leadership practice. [This discussion is also available in PDF format.]
Chastain: Over the past 25 years, I’ve noticed the use of interim executive leadership in healthcare has changed. What’s different?
Krehbiel: It was about 25 years ago, 1997, that the Balanced Budget Act was implemented and, among other things, reduced government payments to providers. This applied financial pressure on hospitals and systems to make cuts, including in the executive ranks. You’ll recall that it wasn’t uncommon for a manager or CEO to have 10 or 12 layers of leadership, so that had to change and interim executives were contracted to ease transitions. This gave the impression that interim executives’ primary role was as an agent of restructuring.
Since then, organizations have continued to flatten and remove managerial layers. It’s gotten to the point that leadership teams are pretty lean. When there’s an executive vacancy, it’s much more glaring, and hiring the right permanent leader is more critical. Interim executives are a clear solution to keep the ship on course – or even to chart a new course – while buying time to find the right replacement. They’re seen as an essential strategic tool, a competitive advantage. They’re a proactive rather than reactive executive talent solution.
Chastain: When I speak with CEOs, board chairs, HR leaders and others about their leadership teams, one of the biggest concerns is always turnover and retaining talent. It’s such a fluid marketplace. And in a lot of cases, the disruption in healthcare has meant that many organizations don’t know what their exact leadership needs are now, much less five years down the road. One board chair told me, “We need a CEO who can answer questions we don’t know even know to ask yet.” This could apply to a COO, CFO, and so on. It makes it tricky figuring out what your executive team should be when there’s so much upheaval internally in organizations as well as externally in the industry.
Krehbiel: Exactly. What I find in a lot of organizations is that they are using interim leaders to assess a specific position, one that has been vacated or even one they’re thinking about creating. Or they seek help in assessing their broader strategic and operational leadership challenges and charting a course forward. I’ll give you an example: one major health system I know was going through a merger that it knew would take another year to finalize. Yet their COO had left. So they brought in an experienced operations executive for the better part of that year. She kept the organization running smoothly, she also was able to say, “Here’s what I’m seeing and here’s what your next COO is going to have to do when the dust settles from the merger.” They were able to reimagine the role and align it with the goals of the consolidated organization so that the permanent COO, when hired, had a good blueprint to start with. There are countless examples like this out there.
Chastain: I wonder what this means in terms of executive tenure; we know from ACHE and other sources that healthcare executive turnover remains high. We’ve always prided ourselves, at Witt/Kieffer, in placing executives who stay on average for long tenures, who are committed to their organizations. I think interim executives actually set the table for the permanent replacement’s long-term success. Wouldn’t you agree?
Krehbiel: I would. A lot of the turnover that’s taking place in healthcare can be attributed to churn due to industry consolidation, baby boomers retiring, and so forth. But a lot of turnover comes from bad hires, or good hires who are bad fits for what they’re being asked to do. This happens when a hospital or system doesn’t have well-defined leadership roles and lacks a good foundation for a new hire’s success. An interim can buy time and provide expertise for defining a position or shaping it for the future.
Chastain: That’s why we recommend key executive roles be evaluated and redefined regularly, since the business conditions are in flux even if there’s no M&A activity. When there’s a leadership opening, I think there’s a natural instinct in healthcare to insert someone from the inside into the temporary role—the classic case being the COO to serve as the interim during a CEO vacancy. This can work if the COO is ready and wants to take on more responsibility. But it can backfire if the COO’s not ready, or if it strains the COO’s ability to simply manage operations. How do you know?
Krehbiel: It can work, but it can backfire, too. It’s important to really delve into what the broader leadership context is. If there’s a need to give executives opportunities to move into positions of greater authority, an interim role can be great for training or testing someone out in a new role. But it can put stress on the entire leadership team because everyone has to compensate to account for the temporary shuffling that goes on. It’s really situation-dependent, but in my mind an interim executive from outside the organization can alleviate the pressure that is placed on the C-suite when key vacancies occur.
Chastain: Who qualifies as an interim executive in healthcare? What incentive do they have?
Krehbiel: As you know, healthcare executives by nature are driven largely by passion and mission—a desire to help people and communities—and many of them could earn more in other industries. This hasn’t changed. Thus, there are a lot of experienced healthcare leaders who, financially, are in a position to take on interim roles rather than full time, or they are at a point in their careers where they seek new and different challenges. They enjoy the prospect of coming into an organization for several months or a year and making a true difference.
They’re also executives who are later in their careers but not ready to “retire” (if they ever would). They have a lot to give so this is a wonderful option to extend their careers, use their vast knowledge, and commit their energy to something they care about.
Chastain: How important is fit in an interim hire?
Krehbiel: It’s as important as in a permanent placement. Even for a three-month assignment, you have to hire an interim who gets what your organization is about and cares deeply to improve it. The executive’s personal mission and organization’s mission must align. If not, those benefits we talked about above (like “setting the table”) won’t materialize. So when we’re working with clients to place interim leaders, we’re prioritizing and assessing fit from a lot of angles—experience, skills, culture, passion, mission, and more.
Contact Brian Krehbiel about our interim capabilities.