The demographic bulge of citizens nearing retirement age should worry hospital governing boards that have not readied for a chief executives departure.
Begin planning immediately, said Thomas Dolan, president and chief executive officer of the American College of Healthcare Executives, which last week released its yearly snapshot of hospital CEO turnover.
The rate, which has hovered between 14% and 16% since 2001, held steady last year at 15%, a fact that Dolan called unexpected as the oldest baby boomers edge into their 60s. I wouldnt have been surprised if it was higher, he said.
Retirement age varies widely, he said, making projections difficult. But Dolan said he anticipates a wave of aging chief executives making their exit in the next 10 years. Roughly 37% of the Chicago-based professional groups members are ages 50 to 59 and nearly 11% are age 60 or older. One in five is a CEO.
Healthcare reform may also affect hospital CEO turnover in coming years, he said, since significant changes may be attractive to some, but will drive others out of the business.
Chief executive turnover on top of turmoil could jeopardize a hospitals operations, Dolan said. Any organization that does not have a leader during times of change isnt going to fare as well.
Such disruption at the top can be costly in a number of ways, said executive recruiters. Hospitals risk foundering as an unprepared board scrambles to fill a top spot. A hastily launched search can leave a complex business operating without effective leadership in a highly competitive industry. Time and money are at stake without some succession planning.
So is an organizations ability to hang onto talented managers and executives, said Paul Frankenberg, president and CEO of Kraft Search Associates, a Nashville-based healthcare search firm. Succession plans help identify strong internal candidates to succeed outgoing chief executives. Recruiting from the outside will likely be more disruptive than promoting from within, Frankenberg said. That should seem intuitive, he said. Meanwhile, hospitals that overlook promising internal candidates may lose managers for employers that invest more in leadership development. Its a double whammy.
Barton HealthCare System included two internal candidates in its 2006 search to replace its CEO of 18 years, said Robert Chester, president of the South Lake Tahoe, Calif.-based systems board. Barton hired an external candidate after an extensive search, Chester said, but the board required the incoming chief executive, John Williams, to regularly assess the leadership potential of an internal candidate who may succeed him. I cant second-guess the time it took to recruit Williams, he said. The search began in January 2006 and Williams arrived in November. We got the results we wanted.
James Gauss, president and CEO of executive search giant Witt/Kieffer, said broaching an executives departure can be difficult for CEOs, trustees and officers. It takes a certain maturity in an organization to address the financial, professional and contractual issues raised by preparing for a transition at the top.
Succession planning must also compete with critical strategic and operational issues for board members and executives time, he said. Historically, healthcare has lagged behind other industries in adopting succession planning, he noted, but that appears to be changing. I do think its getting better, Gauss said.