Governance
Managing CEO Transition
By John R. Gardner
CEO turnover has become all-too-common in hospitals. The American College of Healthcare Executives reported that the turnover rate for hospital CEOs in 2004 was 16 percent, which means that almost every week, more than a dozen hospital boards are challenged to replace their leadership.
When faced with CEO turnover, the hospital board must have a plan to fill the leadership gap on an interim basis.
The position could be filled through an outside firm that maintains a pool of experienced hospital executives available for short-term interim assignments, or the board may appoint a member of the hospital’s leadership team to serve as the interim CEO. The effectiveness of the interim CEO sets the stage for the arrival of the new CEO. When an interim management plan is successful, the organization can move forward, building from existing momentum. But mismanaged interim leadership sets the stage for lost ground that will have to be restored, and may never be recovered by the new CEO.
The CEO’s departure may create harmful organizational dynamics. As the CEO prepares to leave, the remaining members of the leadership team are likely to experience anxiety and uncertainty. These feelings can permeate the entire organization, leading to defections of valued employees and medical staff. These losses damage the hospital’s ability to function optimally.
During this period, the board may decide to designate an interim CEO. Whether the board opts to appoint an internal transitional leader or bring in an outside executive to fill the role, it must set the stage for the interim CEO to lead the hospital effectively.
Key Guidance from the Board to the Interim CEO
When the board appoints an interim CEO, it needs to establish performance expectations that extend beyond the usual financial performance and quality-of-care standards. The following guidelines should be given to the interim CEO to clarify his or her role during the search for a permanent CEO:
1. Avoid a “minding the shop” mentality. Executive searches frequently take considerably longer than anticipated. Choosing a “holding pattern” during this time (usually from six to nine months), with no focus on strategy or operations, can result in a significant and costly setback for the hospital.
The interim CEO must behave as if he or she has the permanent role. Decisions that help the hospital grow and thrive should not be put on hold until the permanent CEO arrives. Credibility must be maintained with the hospital’s internal and external stakeholders, and business priorities must be articulated.
2. Focus on the executive team and its needs. If the interim CEO is going to succeed, he or she must create an environment of trust and open communication by sharing the board’s expectations of the leadership team. As decisions are made, consult with the leadership team and encourage input. When this doesn’t happen, the hospital is rudderless.
3. Define a shared situational understanding. Interim CEOs will be hard-pressed to succeed if their understanding of organizational conditions and challenges is different from others on the executive team. Interim CEOs will receive a tremendous amount of information about the organization in a short amount of time. As they learn about the culture of the hospital, its financial condition, the local market, medical staff issues, etc., a picture of what challenges the hospital may be facing and how to face them will begin to form.
Interim CEOs must share their perceptions with the executive team, reach agreement on how problems are defined, strategies for addressing them and the assignment of responsibility. Without this shared understanding, it is difficult, if not impossible, to achieve cooperation or agreement on the organization’s priorities.
4. Focus on strategy. Without a focus on strategy, hospital leaders remaining with the hospital will tend to fix their attention on their future role (if there is to be one) in the organization. Until the leadership team is aligned with organizational expectations and priorities, the hospital may be on a path to failure.
To avoid this pitfall, the interim leader must assemble the leadership team to identify and discuss the priorities of the hospital. A focus on strategy will help guide the team through such difficult issues as poor financial performance, medical staff challenges, or competitor strategies.
5. Communicate, communicate, communicate. The interim CEO needs to communicate with all the various stakeholders of the hospital. Frequent communication with employees, physicians, board members, and sponsoring organizations is vital. Communications should focus on what has been accomplished, decisions that have been made and, where appropriate, the challenges that the organization is facing. The absence of communication creates an opportunity for rumors as stakeholders begin to speculate on what is happening in the organization.
Two examples of effective communication are: weekly communications to the board of directors, employees, and medical staff describing key events, hospital utilization, financial performance, and critical challenges the hospital is facing; and meeting with the local media to apprise them of the state of the hospital.
The hospital board’s leadership during a CEO transition sets the stage for the successor and the future of the hospital. The above guidelines provide a foundation for communicating leadership expectations and accountability to the interim CEO and the management team.
John R. Gardner is currently an interim administrator with Grand River Hospital District in Rifle, Colo. He can be reached at thehmg@msn.com or at (970) 988-1559. The author acknowledges the support of Jaren Wilson, a consultant with Denver-based Policy Studies Inc. who provided research for this article.
This article 1st appeared in the December 2099 issue of Trustee Magazine.
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