William Leaver, president and CEO of the Des Moines-based system, said the organization recently made internal personnel assessment and succession planning part of its regular human-resources functions as a way to deal with uncertainty that can come with CEO changes.
As a result, the system has been able to retain CEOs in different roles when they might otherwise have left to pursue different opportunities outside the system, which owns 10 hospitals and runs 13 more under contract.
“The nature of these jobs is such that they can be pretty high stress. The complexity of most healthcare organizations can be daunting,” Leaver said. “We've been pretty actively out in the market, but also mindful of moving people to new opportunities internally, so that they stay in the organization but can use their skills in a different way.”
That was the case with Rick Seidler, who spent 12 years as president and CEO of Iowa Health's Allen Memorial Hospital in Waterloo before moving to the Quad Cities last year to become CEO of a three-hospital affiliate of Iowa Health called Trinity Regional Health System, based in Rock Island, Ill.
Seidler, the 2009 chairman of the Iowa Hospital Association, praised Iowa Health's talent assessment and succession planning. But that doesn't mean he hasn't seen first-hand the negative effects of turnover.
When he arrived at Trinity Regional in April 2010, he was the fourth CEO in just over two years—a rolling succession process triggered when Leaver left Trinity in 2008 to become CEO of Iowa Health. Leaver's successor at Trinity, Andrea Coleman, left after 18 months, only to be replaced by Tom Tibbitts, who worked five months as an interim CEO until Seidler was named Coleman's permanent successor.
Seidler said such turnover can have detrimental effects far beyond just the damage to long-range planning or creating lasting change. He said the CEO changes were followed by departures in senior leadership, and eventually even changes in the middle-management, all of which can trickle down to affect patient care.
“I saw this cascading of turnover that happened after the CEO left the hospital,” Seidler said. “When there's CEO turnover, that makes it difficult for people to feel like they're in a stable organization.”
Stability was apparently in shorter supply in many hospitals in 2009, judging from the ACHE's statistics on CEO turnover.
That year, CEO turnover in hospitals tied the all-time record at 18%. In 2010, the rate returned to a more historical rate of 16%, but ACHE's Dolan noted that the 2008 rate was lower than normal, at 14%.
“I think in retrospect that 2009 was a little higher because so many people put off retirement in 2008,” Dolan said, noting that executive retirement portfolios took a major hit along with the financial markets during the 2007-09 recession. “Maybe we should have looked at '08 and '09 together. If you average those together, it's 16%.”
C.J. Bolster, managing director of the healthcare practice for management consulting firm Hay Group, Atlanta, predicted turnover rates would edge upward in coming years through the combination of CEOs nearing their retirement ages and challenges to hospital performance in the reformed healthcare reimbursement system.
Bolster agreed with Dolan and Leaver about the importance of hospital and health system boards engaging in succession planning. But in addition to the more-apparent benefits such as readiness for leadership changes, Bolster said, board members can indirectly become better at their governance roles simply by engaging in the process of selecting future leaders.
That's because picking a new executive involves weighing future challenges and making decisions about an organization's mission and direction, he said. “Part of the real benefit of putting yourself as a board through this exercise is thinking about these questions,” he said. “There is a real, hidden benefit in starting to dig into those questions as it relates to your leaders.”