In the business life of a hospital chief executive officer, few people are as important as the other members of the senior management team, the so-called C-suite. That's why a new study takes a look inside this all-important team, including the job shuffling that goes on after a new boss arrives.
Among the key findings: CEOs of top-performing hospitals are more likely than their peers at hospitals with average performance to look within their organizations for their senior teams. That's not surprising since more of the top-tier CEOs were promoted from inside than was the case for CEOs of typical hospitals.
CEOs and their boards at top hospitals "take a strategic recruitment approach and have a commitment for developing key roles in their organizations in order to build the bench strength needed for the future," says Carol Westfall, president of Cejka Search. Cejka, a healthcare executive and physician recruiting company based in St. Louis, conducted the study in conjunction with Solucient, a healthcare research company based in Evanston, Ill. Solucient compiles an annual 100 Top Hospitals study. The results of the current Cejka-Solucient study were released exclusively to Modern Healthcare.
Top hospitals were defined as institutions that made Solucient's list of top hospitals for three of the past five years, while median, or typical hospitals, were defined as organizations that ranked consistently in the middle quintile of hospitals during the past five years.
An insider's job
The study found that boards of top hospitals select a CEO from inside the organization about 50% of the time, while boards of typical hospitals promote insiders just 37% of the time. As was the case with the boss, the study found that senior executives other than the CEO at top hospitals also were significantly more likely to have been promoted from within: About 36% were chosen from inside top hospitals, compared with 21% at typical hospitals.
There's no question that when the new boss comes in, top jobs are vulnerable. CEOs at both top and typical hospitals usually retain less than 30% of the team that exists when they arrive, the study found. The actual percentage of retained executives in the real world might be higher because the survey question defined retention as remaining in the current position, according to Cejka.
Some experts think hospitals in both categories should promote from inside more often and retain more members of the existing senior team when a new boss takes over. "I think they could do better, frankly. I would like to see at least 50% of the CEOs coming from within. The same thing is true for other C-suite positions," says Thomas Dolan, president and CEO of the American College of Healthcare Executives. Dolan also says he is opposed to "CEOs coming in and replacing all of the people with their own team. My feeling is the CEOs should always give the incumbents the chance to prove themselves." In both cases, Dolan says the emphasis on continuity eases the inevitable strain on employees that occurs when there's a change at the top.
The current study was based on Solucient's annual roster of the 100 Top Hospitals. Solucient rates institutions based on how well they stack up against each other on measures of clinical and financial performance. The 100 Top list is divided into hospitals in five categories: Major teaching hospitals (400 or more beds and high levels of physician education and research); teaching hospitals (200 or more beds); and three tiers of community hospitals: large (250 or more beds), medium (100 to 249 beds) and small (25 to 99 beds). (See this year's list, these pages).
Responses to an e-mail survey were collected from 42 of 91 CEOs at top hospitals and 70 out of 581 CEOs at typical hospitals. "This study ... enables us to see clearly differences in priorities and practices between high-performing and more typical hospitals," says Jean Chenoweth, senior vice president for performance improvement and 100 Top Hospitals programs at Solucient.
But because the response rate for the typical hospitals was much lower than for the top hospitals, the results should be interpreted cautiously, Dolan says. "You got a very good response rate, about 46%, for the 100 Top Hospitals, but only 12% on the median hospitals."
With that caveat in mind, Solucient and Cejka found statistically significant differences between top and typical hospitals in approaches to hiring CEOs as well as the education and experience of executives holding the top job. Among those findings:
* Sixty-seven percent of CEOs at top hospitals were once chief operating officers, compared with 44% of CEOs at typical hospitals;
* About 42% of CEOs at top hospitals have teaching-hospital experience, compared with 22% of CEOs at typical hospitals;
* About 7% of the CEOs at top hospitals have more than one advanced degree, compared with 3% at typical hospitals. The majority of CEOs at both hospitals have one advanced degree, 88% at top hospitals versus 79% at typical hospitals.
The Solucient-Cejka study also found differences in the way CEOs chose their senior management teams as well as the positions included on the teams. While less than 30% of the existing team survives when a new CEO arrives, the types of executives retained differ between top and typical hospitals.
Although the results weren't statistically significant, 41% of the chief information officers were retained at typical hospitals, compared with 29% at top hospitals. The same was true of the vice president of funds and foundations: 30% were retained at typical hospitals versus 20% at top hospitals. The COO also was retained more often at typical hospitals (21%, compared with 15%) although that may reflect the finding that COOs of top hospitals are more likely to be promoted to the top spot.
The opposite was true of the statistically significant results for other positions. For vice presidents of support services, 60% were retained at top hospitals compared with 37% at typical hospitals, while 58% of the vice presidents of professional services were retained at top hospitals, 21% were retained at typical hospitals. The chief medical officer also was more likely to be retained at top hospitals, 43%, compared with 23% at typical hospitals.
In fact, the chief medical officer is an increasingly important member of the senior team. At top hospitals, 68% have someone in that position, compared with 52% at typical hospitals. The typical hospitals, however, are catching up. Fifty-seven percent of those facilities are creating the position, compared with 24% of the top hospitals.
The growing importance of the relationship between hospital executives and the medical staff has elevated the importance of the top physician, who increasingly is given "a seat at the table," says Lois Dister, vice president at Cejka. CEOs today rely on chief medical officers to keep up with what the medical staff thinks and feels. "It really takes away a lot of wasted time fixing bad relationships or on damage control," Dister says.
Top hospitals also are more likely to have elevated the top manager in both the human resources and legal areas to the senior team. That was the case for human resources in a majority of hospitals -- 92% of top hospitals, compared with 70% of typical hospitals. The top legal officer wasn't a member of the senior team nearly as often -- 43% of top hospitals and 20% of typical hospitals.
Richmond Harman, president and CEO of 308-bed Martin Memorial Health Systems in Stuart, Fla., can't imagine not having a chief legal officer. "There are so many legal issues today. It is such an important aspect of what happens. We always have a lot going on." Robert Lord, the vice president and chief legal officer at Martin Memorial, oversees legal issues, compliance, risk management, privacy and internal audits.
Martin Memorial also has a chief human resources officer (See related story, p. 12).
Though the results weren't statistically significant, CEOs of top hospitals were only slightly more likely than CEOs of typical hospitals to rank leadership development as a critical priority during the next three years. CEOs were asked to rank areas of critical focus from "least critical," which received a score of zero, to "most critical," which received a score of three. CEOs of top hospitals ranked leadership development at 2.4, compared with 2.2 for typical hospitals.
So while the results of the survey show that hospital CEOs think it's important to develop and promote leaders from within the organization, the study shows they could do a better job of carrying out that belief. And those findings mirror other research. The healthcare industry "does not have the same track record with succession planning that top-performing companies in other industries do," says Marie Sinioris, president and CEO of the National Center for Healthcare Leadership.
The lack of formal leadership development and succession planning at U.S. hospitals might help explain the high rates of turnover and external hires in the C-suite, according to the conclusion that an ACHE study reached last year. The study of succession planning at free-standing hospitals found that only 15% of the 722 institutions that responded to the survey had identified a successor to the CEO. A total of 21% of the respondents said that succession planning was routinely practiced in their organizations.
In other industries, the overall promotion rate for managerial positions hovers around 64%, according to the ACHE study. A companion study by the association of hospitals that are part of health systems, which is now in the works, will most likely show that a larger percentage of them have formal succession plans, Dolan predicts.
"There has to be far more emphasis placed not only on the CEO but other positions as well. Because I think that allows organizations to continue to be successful. Any kind of transition is going to be somewhat traumatic, but if it is carefully planned, I think it reduces that trauma," Dolan says.
Christopher Dadlez has striven for continuity in his senior staff since he became president and CEO of 515-bed St. Francis Hospital and Medical Center, Hartford, Conn., in October 2004, as well as in his previous post as the CEO of 360-bed Mercy Medical Center in Canton, Ohio. "I have never, ever come in and completely cleaned out an organization," Dadlez says. At Mercy, which Dadlez described as a turnaround situation, he changed about half of the senior team members, while at St. Francis, which he describes as a very healthy organization, he changed only two positions (See story, p. 10).
Cejka's Westfall applauds that type of strategy, believing that continuity strengthens an overall organization. "It is a visible demonstration of career path -- not just to that person who is selected for the job, but for all those employees in the organization. It gives them hope that they can develop their careers inside that organization without having to make a move. It is a morale booster for sure."
Succession planning not only helps improve the morale and caliber of talent within an organization but for the healthcare industry overall. "We do think (succession planning) is an absolutely critical way to develop leadership and improve leadership in our field," Sinioris says.
As the healthcare industry places more emphasis on improving safety and quality, better leadership skills will be essential, she adds.
But it's not practical to think that all hospitals will have the financial wherewithal to internally develop as many future leaders as they will need. For example, Martin Memorial doesn't have a specific successor in mind for the head of information technology. "It is a pricey position and we are just not quite big enough to have several of those people waiting in the wings," Harman says.
Even institutions with finely honed leadership-development programs recruit managers from outside. "No one advocates promoting managerial talent from within 100% of the time. Allowing some external hires into the mix has always been viewed as healthy in best-practice organizations because it brings in some new ideas," Sinioris says.
What do you think? Write us with your comments. Via e-mail, it's [email protected]; by fax, dial 312-280-3183.