Carlson: OK. Great. Actually our first audience question keys off of that point pretty well. It's a question for Mike. Mike, this is Leslie from Columbus. I agree that growing talent within the organization is very important today, but how do we balance that with the fresh blood that sometimes is required?
Connelly: Well, I think the polarity that I'm looking at, something that Tom mentioned, is most of the leaders tend to come in to an organization from the outside. And so if you want to look at it as the mixture if you were able to get 75% of your talent internally and 25% externally, measuring that is a good way of looking at it. But the problem is that a lot of times particularly for your senior positions you're probably getting 75% from the outside and 25% from the inside.
So what talent management is trying to do is reverse those numbers. I think that an interesting company that I admire in this area is Procter & Gamble. They never use a search firm for a senior executive position. Everybody in that organization is homegrown, and so they have kind of perfected it. There's a kind of a 100% model. And I'm not sure I'd go that far, but I do think getting close to them is beneficial. Because if you have a culture in an organization you want perpetuate, if you have a strong mission that just walking in from the outside and trying to have that picked up by a leader I think is a concern. So that's why I do have a bias towards the internal promotion.
Carlson: Tom, do you—does ACHE do anything to encourage this change that Mike's talking about? And do you find a similar sort of balance where maybe there's not as much or too much, you know, recruitment from within vs. outside?
Dolan: I agree with Mike. I think if you could make me guess I would say that probably 75% of CEOs are coming from outside the organization. And this is very different than in successful Fortune 500 companies where typically they are now promoted from within. And I think we need to do both. I think the ideal, as far as I'm concerned, is organizations that are producing so many leaders that they can't possibly use them all and they can export them to other organizations.
And I think like Mike does that where a lot of people that are trained in the system and are very successful in other organizations. But again, the reasoning, and again there's ample data on the for-profit side that CEOs or individuals that are appointed CEOs from within are more successful because they know the culture of the company. They know the staff, and they're intimately familiar with the challenges. And that is one of the things that ACHE is trying to do is deal within the organization.
My editorial in the current issue of the magazine, talks about what I consider to be the CEO turnover crisis and management succession crisis. Sixteen percent turnover, the median tenure for a hospital CEO right now is four years; 58% of all hospitals CEOs are in the jobs less than five years. And this is in comparison to the fact that we know from the management literature: It takes five years for a leader to make permanent changes in the organization. She can go in there, make dramatic changes, but if she leaves in four years oftentimes the organization will revert back to the way it was in the past. So my goal and the goal of ACHE is to see longer tenure for leaders within healthcare organizations so they can create positive permanent change.
Carlson: Lydia, is that something that students are taught about—both the question of whether you should work your way up within an organization vs. trying to join from the outside?
Middleton: I don't think we speak about it a great deal. We're more often than not students are in their mid-20s and they are just starting out their career in healthcare management. And if you're reasonably familiar with that demographic, these are people that tend to like to move around and like to have different experiences. So I don't think our expectation is necessarily that they're going to go into one organization and stay there their whole career. But we certainly do talk to them about the fact that every decision that they make and every action that they state is part of their permanent record at that organization and that there are many opportunities to move, with this degree, to move within an organization and actually move up the ladder.
Not surprisingly, a great many of our students come in wanting a job in the C-suite within the first two years of employment and we do a lot of reality check with them around that. But we do try to make them understand that this is a world where your record will go with you and it's a small world, it's a small community. So they have to understand that they may be able to make it a career organization, they may need to move around that. But whatever they do, they need to make the right decisions at every turn so that their record speaks for itself.
Carlson: And is there teaching about whether four years in an organization is too short of time to accomplish your goals?
Middleton: You know, I'm not sure what method each of our individual programs is sending on that context. I think that we are—we're more about lifelong learning and continuing to grow and expand your horizons. So, I think, as we've all said, it's a dynamic world. It's a dynamic profession. Opportunities come and go on a pretty quick basis, so I don't think our programs are really specifically talking about that in particular so much as continuing to grow and develop new opportunities.
Dolan: Let me jump in here.
Dolan: Again, what I'm talking about is chief executive officers being from within. I think the early careers, they should probably stay in a position three to five years. Early careers being the first 10 years of their career. Now they may be able to be promoted within their organization or they may go someplace else. And I think there's something to be said about a variety of experiences in early career and midcareer. It's really when we get the senior career that we need a little longer tenure. So again, for early careers, it's very appropriate them to go to a new position or even a new organization after being in a position three to five years.
Carlson: OK. And by the way, that's great if anyone else wants to jump in answers or add things or other points. We encourage that. So the next question is also for—we'll start out with Lydia. It's about clinical knowledge. And the question: how much clinical knowledge does a CEO really need to perform up to standard and how do you get that knowledge maybe not knowing exactly what's going to happen in the next 10 years as far as healthcare delivery?
Middleton: I'm going to defer to some extent to my colleagues because we frequently say we are not preparing CEOs. We're preparing people we hope will grow into CEOs.
It's very hard in a two-year master's and certainly a two-year bachelor's program to grow a CEO and certainly very difficult to give a whole lot of clinical knowledge when there's so much content around leading and managing organizations. So we rely very much on the practice community to start to embed future leaders with that more clinical knowledge and expose them to more opportunities to learn that.
Our programs will do rotations through hospitals, and we'll have shadowing with physicians and so forth, but, again, there's just so much time in that two-year curriculum. So we pass a lot of that responsibility, frankly, onto the person's second jobs that these entry-level individuals are going to have because, really, in the clinical setting it is much easier for a student to learn this or a graduate to learn this than to teach it in the context—the appropriate context within a classroom.
Carlson: What do you think, Mike?
Connelly: Joe, I'd add to that and suggest that really learning the major illnesses that your organization is treating is sort of critical for us as a CEO. And there can be developed learning. You need to understand the basic elements of congestive heart failure or COPD or diabetes or hypertension or oncology or heart surgery. If those are the services you're delivering, if you don't understand sort of the core elements of the clinical aspects of those illnesses, and that's something that can be self-taught. There's lots of ways to check of that knowledge, but I think it is important to be facile in those domains.
Carlson: I suppose particularly if you're going to be launching a new medical home model, for example, or something along those lines.
Carlson: The question we have next is … I think we should go to Tom for this one first. Tom, what's the trend of physicians holding C-suite-level positions in healthcare organizations? And are there particular competencies that you think physician-leaders need to be successful?
Dolan: Well, I think it's certainly a growing trend. It really began with chief medical officer. I think approximately 60% of all hospitals now have chief medical officers in the C-suite. They tend to be responsible for quality within the organization. On the other hand, there's still only about 300 physicians that serve as chief executive officers in this country. I expect that number to grow over time, but we will never be in the position of other countries where the majority of CEOs are physicians.
I think the reality is most people who go into medicine want to practice medicine. Some even relatively quickly or over time decide they can make a greater contribution at the administrative level, but like all of us that may need specific training in that. While a clinical background—whether it be medicine or nursing or some allied health profession—is a great foundation for healthcare leadership, there are specific skills that one needs as a healthcare leader, typically focusing on some of the techno skills or the business skills and also the interpersonal skills.
Where clinicians tend to work with individuals on a one-to-one basis, healthcare executives tend to work with groups and the total organization. So I think as clinicians go into these roles, and some are very successful, it's because they either have formal training in these areas or are some of those rare individuals that just naturally have that ability. So I think we'll see more clinicians in leadership roles, but I think it's important that they get the necessary training to be successful.
Carlson: Mike, you have 31 hospitals in CHP, are you seeing any change in the numbers of physician-leaders and physician-CEOs?
Connelly: We're seeing the need for a substantial increase in physician-leaders, but it's really more in the domain of organizing physician practices and in the domain of advancing quality. So we have some hospitals that are led by a physician, but I think that looking at healthcare today not just as being hospital-centric but being as a delivery system of large physician practices, home health services, long-term care, all these other dimensions. So the future is really about the leadership of integrated care delivery, not so much the individual components. And those leaders could well-be physicians, but I pretty much agree with Tom in terms of those percentages.
Carlson: The next question is about incentive pay. It asks: Does incentive pay—and I think I would ask this maybe of Mike just because by virtue of the number of CEOs under your watch—so incentive pay. Does incentive pay get the right results, and what might have to change with incentive pay in the future?
Connelly: Well, the key to the right results is having a score card. [Laughs.] So, in our case our score cards are about 45% quality and safety, they're about 20% organizational effectiveness in terms of developing associates. They are probably about 20% financial, and then the balance would be on efficiency. So having a score card that's balanced like that that covers the key areas, I do find that adding a material financial reward for achieving your objectives works. (Laughs.) And so I think that another tricky thing in that is balancing the team result vs. the individual results, and so when you create those incentives, you don't want incentives that reward individual behavior. You want incentives that reward team behavior. And so that's another aspect of it, but I do find it an important tool. I think that people first rate the quality of their work-life and work experience, and I think finances are important, but I think they're secondary to that work environment. So it's a complementary pool.
Carlson: That doesn't sound like you're seeing a lot of these sort of futuristic goals built into incentive pay—let's establish an accountable care organization or let's set up—let's expand our medical home model or let's—
Connelly: Well, actually we do—we have outcome goals. We have process goals. And we have individual goals. And in our process goals, that's where we do the innovative things like implement a leadership academy and talent management program. That's where we develop the medical home. Those are the places we put those.
Carlson: The next question we have, I think we should start off with Lydia. The question is: How do you see the role of nurse-executives changing with regard to hospital leadership. And I think I would add to that: Lydia, you mentioned in your remarks, initially, an explosive growth in the number of—you graduate an inordinate numbers. Are any of those—how much of that is in the area of nurse-executives or back to our initial question of a few minutes ago of physician-executives?
Middleton: We do have a fair number of clinicians across the board in our program. I would mention also that there are growing number of specifically nurse-executive programs that are typically growing out of the nursing schools more than out of our program, but we're seeing increasing numbers of clinicians—physicians, nurses and right through the allied health professions—that are recognizing that there are huge opportunities for them to step into as Mike said, not the CEO role but in significant leadership roles.
And, so again what they need more than perhaps that clinical foundation or the context piece that I spoke of is really the leadership and the team-building and the interpersonal skills that allow one to be effective and to really hold people accountable, which is not something that's often part of the culture but is increasingly becoming so.
It's not as much a part of the culture within medicine or nursing as we want it to be. So, we're certainly seeing an explosion in those areas as well as growth of programs that are uniquely designed for that particular audience, that particular student body.
Carlson: And then the actual question was: How do you see the role of nurse-executives changing? Are nurse-executives moving beyond that CNO role, or do you find that the CNO role is becoming more common?
Middleton: I'm going to roll that one over to Mike.
Carlson: (Laughs) Mike, do you have any thoughts?
Connelly: Well, I think that's going to one of the key functional knowledge areas of quality and safety, nurses become a natural for leadership roles because they are more knowledgeable in those areas. So, I think nursing is a wonderful baseline background for leadership in healthcare.
Carlson: Tom, any thoughts?
Dolan: Yeah. I would agree with what both Lydia and Mike said. I think we're seeing more and more chief nursing officers becoming chief operating officers, and I would expect in the future a growing number of nurses will become chief executive officers. Ten percent of our membership has a nursing background. So, again, it has an excellent background, and clearly they are poised to be in more senior roles.
Carlson: Well, I think we're going to finish up with a question for Mike, and it plays off of something you mentioned in your opening remarks: You talked about emotional intelligence. And the question is: What is emotional intelligence, and why is it important?
Connelly: Well, I think that it has many dimensions to it, but there's a difference between intellect and understanding the people you're working with. And so I think emotional intelligence at the basic level is awareness of the individuals you're working with, how they react to what they're seeing, knowing what issues may trigger you. It may be that, would you have a negative reaction to personally, maybe, something that's important for you to be aware of so there's a lot of literature on emotional intelligence, and it's just another way of being aware of the people you're working with and how you are understanding the people you are working with.
Carlson: Great. Well, I'd like to thank our three speakers today. You've heard from Michael Connelly, president and CEO of Catholic Health Partners; you've heard from Tom Dolan, president and CEO of the American College of Healthcare Executives; and Lydia Middleton, president and CEO of the Association of University Programs in Health Administration. I'm Joe Carlson with Modern Healthcare, and you've been listening to our webcast on Leading in the Future. Thank you very much.
May: This concludes today's discussion on healthcare leadership for the future. For those who want to view this webcast again, all attendees will receive a follow-up e-mail with a link to the recording of the webcast available on modernhealthcare.com/webcasts. All slides presented during this webcast are also available at that address. Thank you.