What to expect when a long-term CEO retires

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What to expect when a long-term CEO retires

When a long-term chief executive officer decides to retire or leave a hospital/health system, there is a chance for a huge cultural shift. It not only affects the C-suite, but it spreads to all areas of the hospital. In July of 2018, Becker’s Hospital Review reported 57 health system CEO resignations from the first and second quarter of the year. At the end of 2018, Tyler & Company announced four new chief executive officer searches, that were taking place due to retirement. From our searches, the CEOs had a tenure that fell between 7-25 years.  

The rise of long-tenured CEO retirement in the health care industry, allows the board and employees of the organization to embrace a new opportunity – a new chapter. A new CEO on the horizon, provides organizational growth. While it may be uncomfortable, this is the chance for the board to impact their hospital/health system’s future. So, what should board members expect when a long-term CEO retires?

Development of a New CEO Profile and a future-focused CEO

“The chief executive officer appointment is the most important thing a board does. The new CEO profile needs to be future-focused,” said Dennis Kain, senior vice president of Tyler & Company.

The profile should be designed on the organization’s vision for the future and the search committee’s interpretation of how the culture works within the hospital/health system. If the board hopes to move the hospital in a new direction, it should stray away from trying to recreate a profile that matches the previous leader. The best thing the board can do is focus on the leader needed now and for the future. The new CEO might need a different perspective, skills and might be someone who can change the overall direction of the hospital.

“It is crucial for the board to understand their job is not to replace a person but to find someone that fits the organization’s long-term needs. While they engage in the search process, they need to honor the current chief executive officer and focus on the skills that the new leader would need to succeed. The former CEO might have done a fantastic job, but it is crucial for the board to be future-focused,” said Marion Spears Karr, vice president of Tyler & Company.

“While developing the new profile the board and search committee need to be aware of satisfaction statistics (from physicians and employees) and quality from patients. It starts with the search committee getting to know what the process is and how it is executed,” said Kain.

“The number one thing boards should think about is not whom they should hire. It is what does the organization need to be sustainable to continue to grow? Board members should think about why you need to hire and why it matters,” said Karr.

Key Strategic Decisions

Key strategic decisions get put off until the new CEO is appointed.

“It’s important for the board to understand critical decisions should be addressed right away.” Said Kain, “But the board wants the new leader to verify it, validate it and to carry decisions through.”

Tyler & Company recently worked with an organization that had a great succession plan in place, which helped avoid postponing decisions. Ideally, the search process should begin while the long-term CEO is active in the organization.

“We recently closed a CEO search at Peterson Health. They had a fantastic transition plan in place. Not only that, but they started the search process early. The sitting CEO was extremely involved, and the board was specific to what they wanted for their new leader. Without a doubt this organization did a phenomenal job in avoiding postponing decisions by having a good succession plan in place,” said Karr.

If decisions don’t get postponed, they might be reversed.

“Previous strategic decisions could be altered or reversed. The new leadership may have a new direction for the way the want to shift things, so they might shift resources,” said Diane Nicholas, vice president of Tyler & Company.

However, if you don’t have a succession plan in place, there are other options to consider. One of the options is to engage an interim leader to start the evaluation. By engaging an interim leader, the board is shortening their evaluation process and providing the new leader a distinctive road map.

There is always opportunity when you have a change in leadership. Hospitals and health systems can bring in an interim leader to conduct the 90-day to 6-month evaluation to provide the board with an objective third party during the search process or before the process begins. When you have someone in the role for so long, you may not have the full picture. Interim leaders can help ensure the board is asking the tough questions.

Unplanned turnover in the C-suite before and after new CEO is announced

One of the most common reasons for turnover in the C-suite once a long-term CEO retires is due to internal candidates who did not get chosen for the position.

“There are ways to avoid this type of turnover. Board members and the leadership team should remind internal candidates that they are valued at their organization and assure them, they still belong there even if it is not in the CEO position” explains Karr.

Another reason for unplanned turnover comes from team members who do not accept change and who don’t want to be involved in the next chapter of the organization. People tend to cling to the familiar and have a hard time transitioning to a new model.

 “The board needs to do an outstanding job with the new hire. When the board starts to plan the new leader profile, they need to focus on the skills, the background, how he or she will perform, how it will connect to the mission and vision and how he or she will interact with others. If the board does not want to have turnover, they need to match the new leader with the culture,” said Karr.

Turnover, when a new leader enters a hospital, is prevalent. It is common in every industry. Some of the turnovers fall on the leader itself. New CEOs tend to “clean house” as needed. 

 “The new CEO needs to take time to evaluate talents and figure out who best fits and make sure that the bad players are removed. This happens based on the strategic plan and it can vary from individual to individual,” said Kain.

The unplanned turnover in the c-suite can have side effects throughout the hospital.

“Turnover also happens in the director level, when there is an opportunity for change in leadership. Key departments should have a contingency plan. Contingency plans help try to secure the leaders. If the hospital or health system happen to lose an important director, it can affect the patient flow of the organization, “said Nicholas.

Adviser for new Chief Executive Officer

For the new CEO to succeed, it would be ideal for the long-term CEO to serve as a needed adviser to the new leader.

“When new leaders begin their positions, they like to have the opportunity to give a call to the previous CEO to bounce off ideas with them. But we must keep in mind, that there is a difference between being available to the new CEO and the old CEO wanting to still act like the leader in place,” said Kain.

One way the current CEO can act as an adviser to the incoming CEO is by working with the new leader for a day or two. It allows the new chief executive officer to watch the current one in action and it gives a glimpse of their day at the organization.

“It’s not a bad idea to transition the leadership for a few weeks or months. New leadership always brings a new perspective and can infuse your organization with new ideas and creative approaches,” said Nicholas.

In the end, it is the board’s job to focus on what they need for the future. Knowing this provides them a framework during the executive search process. As baby boomers continue to retire, hospitals will have to understand how to properly handle the process and results that come from a long-term CEO leaving their position. If you focus on these four ideas, you’ll be able to understand and be fully prepared when your long-term CEO retires.

 If your current CEO is about to retire, reach out to Tyler &Company. Our customized search solutions are your best opportunity to attract and acquire the best leader possible. Learn more about us and our searches here.

Sources

Vaidya, A. (2018, July 5). 57 hospital, health system CEO resignations in 2018 so far: Becker’s Hospital Review reported on the following latest hospital and health system executive resignations in the first half of the year. Retrieved April 16, 2019, from https://www.beckershospitalreview.com/hospital-executive-moves/57-hospital-health-system-ceo-resignations-in-2018-so-far-7-5-18.html

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