Stop the Revolving Door – What Science Has to Say About Healthcare CEO Succession Planning
If your healthcare CEO left tomorrow, would your board of directors know exactly what to do? If you’re lucky, your CEO will stay in that position for about three or four years. But, the data shows that when a CEO leaves the healthcare institution, another four executives are highly likely to leave within a year of the CEO’s departure. You probably know that pared-down leadership has many negative effects on the middle and lower ranks within your organization.
Hiring a new CEO or other important executive can be a daunting process. Boards of directors want and need to get it right the first time because bad hires rarely get better. Meanwhile, too often boards tend to deny and delay addressing poor performers, especially those hired by the directors currently serving on the board. To compound the issue, most boards rush to hire an executive search firm as the answer to the problem – when, in fact, candidates hired by traditional search firms tend to have shorter tenure than candidates hired from inside the organization.
Meanwhile, CEO turnover often creates huge operational and financial losses for everyone involved. Research shows the actual cost of replacing organizational leaders above the $100K salary level are 6-10 times that person’s salary, and include high indirect costs, such as decreased team morale. These facts build a great case for using the right approach, selecting the right executive for the job and working to retain top talent using proven best practices.
Why Don’t Healthcare Boards Select the Right CEO?
The traditional first step in filling a vacant CEO position is to start collecting resumes and recruiting candidates who look great on paper. However, how can boards really know which candidates, if any, will be right for their healthcare institution?
Dr. Kenneth Cohen, Founder and CEO of The Synergy Organization, Inc., has discovered that boards of directors often lack accurate, meaningful and objective target criteria for new CEO candidates. Job descriptions for new CEOs tend to be vague and generic, pointing to the board’s lack of clarity about what traits are required to be most successful in the position. Despite their best intentions, what board members say they want from CEOs often is not what they actually need from them. Among other things, boards of directors often fail to factor in the critical importance of leadership style and personality characteristics when selecting a new CEO. Dr. Cohen will be talking more to this in an upcoming webinar with BoardEffect on November 6th.
A Broken Link in the Problem of Ineffective CEO Hiring Practices
About 20 years ago, Dr. Cohen began reviewing the traits of CEOs who receive awards from the Malcolm Baldrige National Quality Award and the Baldrige Performance Excellence Program. These programs, developed in the late 1980s by the U.S. Department of Commerce, were launched in response to challenges from foreign automobile manufacturers to the quality and overall performance standards of US leaders and their companies. Recipients of these award demonstrate they are seeking to improve core business practices by striving to be the best, most efficient, and most customer-responsive companies, using objective evidence to guide critical decision making.
Dr. Cohen became curious about what sets these award-winning leaders apart, and whether or not executive search firms might be able to identify these traits in candidates for open CEO positions. In reviewing the data and his own experiences, Dr. Cohen concluded that there exists a “broken link” in traditional executive hiring practices – most traditional search firms aren’t evidence-based in their approach to sourcing and recommending candidates. Rather than identifying the meaningful criteria aligned to the short and longer-term best interests of the organization and its prospective leaders, they tend to rely on a generic set of “CEO criteria” that may or may not fit the actual needs of the organization that CEO will lead.
Dr. Cohen, recognizing the significant impact that extraordinary leaders have on organizational performance, decided to conduct a national research study with a representative sample of Baldrige Award Recipient Presidents and CEOs who were administered a series of validated, leadership assessment instruments. The results obtained from this study yield powerful, objective and predictive criteria that will help progressive organizations to accurately diagnose their unique needs from their current and prospective leaders. The results also provide board members with objective, measurable and predictive criteria to help them select the senior executives most likely to achieve the desired goals, ensure leadership continuity and long-term organizational sustainability.
Lessons from an Evidence-Based Approach to Executive Search
A critical element of good corporate governance includes having plans for executive succession. Corporations should be able to identify and develop people to fill the executive roles as needed, and cultivate a strong “pipeline” of future leadership candidates. Unfortunately, many senior executives and board members are either reluctant or unable to effectively recruit, select, develop and retain organizational leaders to step up into the CEO’s position when needed.
Dr. Cohen identified a unique characteristic about leaders who best fit their CEO roles—they truly love what they do for a living and view it more as a calling than a job. In his research and work he’s found that perfect candidates might not necessarily be those with the best résumé; they are the ones who love going in to work on Monday morning. These attitudinal and core personality traits are what differentiate the best leaders from the rest. In his work with The Synergy Organization, Dr. Cohen and his team leverage the research findings to create an evidence-based approach to executive search hiring practices which integrates:
- A “Diagnosis Before Treatment” Approach
- Objective Measurement and Matching of Specific Dimensions That Matter Most to the Mutual Success of Boards and CEOs
- Conducting National Research Studies to Identify and Leverage Best Practices
- Practical Experience
- Saving Organizations’ Considerable Time, Money and Aggravation
- Common Sense
To learn more about Dr. Cohen’s research and how your board can use these findings to be better prepared for executive succession, join us for this webinar briefing on Monday, November 6.