Cultivating aggressive and progressive leaders is crucial to the success of healthcare institutions and upper-tier commercial enterprises, but Fortune magazine's "most admired" companies outpace healthcare when it comes to the scope and importance of leadership development programs.
A new survey on leadership offers a jarring contrast between the views of executives heading Fortune companies and those at the helm of top health organizations.
The report, Leadership Development in Healthcare Organizations: A Comparison of Leading Healthcare and Fortune Companies, was released this month by the Health Management Academy in Alexandria, Va.
Compared with their healthcare cousins, Fortune executives give higher grades to their companies' commitment to leadership development, emphasis on strategic vision, internal recruitment of leaders, stress of key leadership skills, evaluation of return on investment for development efforts and broader use of sophisticated development tools.
But there are indications that gap may be closing. And it must if health systems and hospitals are to successfully navigate the tumultuous healthcare environment.
For now, much can be gleaned from the difference between the healthcare and nonhealthcare companies.
While executives in both arenas consider leadership pivotal to institutional success, those affiliated with Fortune corporations are significantly more satisfied with their pool of high-potential leaders, 73% vs. 41%, and identification of future leaders, 65% vs. 36%, than their counterparts in healthcare. Only 39% of academy executives are satisfied with their organizations' leadership development programs, as compared with 74% of the Fortune executives.
This disparity between the importance of leadership and satisfaction with existing leadership development programs likely hinges on three causative factors.
First, preoccupying financial imperatives in an erratic healthcare environment make it difficult for hospital and health system helmsmen to devote sufficient attention and resources to leadership development--often viewed as a less pressing, ongoing issue. When evaluating the relative urgency of long-range leadership goals against the fire du jour, the flames generally win.
Second, our industry lacks a clear idea of what the leaders of today and tomorrow should look like. Public sector influence is swelling as governmental revenues increase and the not-for-profit health sector increasingly resembles a public utility model. As healthcare organizations struggle to transition from a traditional, not-for-profit structure to one with more of a business focus--against a recent backdrop of explosive growth and assimilation of acquired hospitals and health systems--a suitable leadership profile has become elusive.
Third, the most common leadership development model for senior healthcare executives, such as hospital CEOs, is a masters program, residency and progressively responsible administrative positions. Since health institutions frequently do not have a formal development program, these executives often lack experience with one.
When it comes to recruitment, survey respondents are more satisfied than Fortune companies with recruiting for leadership positions externally rather than identifying executives internally, 63% vs. 36%. To the extent recruits are plucked from other healthcare organizations with no formal leadership development program, it is possible that generations of executives may cycle through entire careers without prolonged contact with a particular program.
Emphasis placed on strategic vision also divides the camps. In evaluating why high-potential executives derail, 73% of Fortune executives point to strategic vision, compared with only 28% of survey respondents.
Why the differing emphasis on strategic vision? Because Fortune leaders operate in a sector that historically has rewarded strategic vision, required leadership training and offered abundant experience with earnings and cost pressures.
Healthcare executives only recently are influenced to a similar extent by such concerns.
Ninety-seven percent of healthcare executives cite social and emotional skills as critical to the success of their top leaders, while 71% point to technical ability as imperative. In contrast, 100% of the Fortune affiliates view social and emotional skills as key, and only 44% consider technical proficiency essential. This discrepancy flows from Fortune company's relative abundance of leaders and a higher percentage of healthcare positions requiring advanced technical skill. Thus, corporate environs can focus more on social and emotional aptitude and less on technical competence in selecting and fostering leaders.
More Fortune 500 corporations quantify return on investment (ROI) of leadership development programs than do healthcare entities. More than half of the institutions represented in the survey have no method of measuring ROI, while only 35% of Fortune companies lack such a method. At 70%, the prevailing mode for Fortune companies' calculating ROI is participant satisfaction, while a mere 22% of healthcare organizations rely on that quantifier. One similarity exists: approximately three-quarters of both groups surveyed don't calculate ROI in terms of actual business impact.
Fortune companies lean more heavily on a broader array of sophisticated development tools than the healthcare institutions. The Fortune firms mix traditional training programs with ongoing development efforts, such as outside executive programs, individual coaching and career assignments that expand expertise and business perspective.
Compared with medical entities, the Fortune corporations are more inclined to utilize every means of development measured by the survey, including planned career assignments, 61% vs. 14%; business schools, 35% vs. 0%; formal in-house training, 52% vs. 22%; one-on-one consulting, 57% vs. 39%; and tailored development programs, 17% vs. 2%.
So where does accountability for developing employees ultimately rest? Both groups of executives rate their organizations comparably here. Both strongly assert senior managers should be held accountable for such development, but only about one-half of each believe their organizations are effective in doing so.
The perspective of the healthcare executives reflects systemic challenges to the turbulent industry in which we all seek not merely survival but success.
And yet there is reason for hope. Eighty percent of survey respondents say they are considering revamping their leadership development programs.
Such a shift is sorely needed, though there are obvious differences between Fortune 500 companies and healthcare organizations: The former have a larger corps of executives, a historic need to attract candidates out of school to develop from the ground up and an entrenched goal of profitability within the dynamics of their industry. The latter are in a destabilizing state of flux, grasping for a handhold in the slouch toward Wall Street.
Still, success for both groups hinges on programs fostering leadership development-a complex and ongoing enterprise requiring appreciable commitment and participation by the most senior management.
The Fortune most admired executives score their organizations higher in such development and therefore offer lessons that can flatten the learning curve for healthcare institutions. Given a steady supply of fires to put out, why reinvent this particular wheel?
Instead, the healthcare industry would do well to take a page from the Fortune companies' playbook by increasing commitment to leadership development, stepping up emphasis on strategic vision, developing leaders internally, focusing on social and emotional skills, quantifying return on investment and embracing a spate of development tools so healthcare leaders will more closely resemble captains of industry.
As we should. Because, increasingly, the theaters in which the two operate are one and the same.
The Health Management Academy, an association of healthcare leaders dedicated to improving health delivery and financing, conducted the survey in conjuntion with HayGroup, a Philadelphia-based human resource sonsulting firm, and Witt/Kieffer, Ford, Hadelman and Lloyd, an executive recruiting company based in Oak Brook, Ill. The survey was conducted in June through August 2000 and had a 70% response rate with 26 participating organizations representing 18 health systems and eight hospitals.