CEO turnover holds

Hospital CEOs left their jobs at the same rate as the year before with a turnover rate of 16%, but the president of the American College of Healthcare Executives isn't calling that good news.

Thomas Dolan, ACHE president and CEO, predicts the rate will continue to rise, possibly returning to the all-time high of 2009, when levels reached 18%.

“I think with the retirement of baby boomers, and further turmoil, we're going to see that level may go a little higher,” Dolan said.

The turnover-rate data released last week by the Chicago-based ACHE reported the newest numbers from 2011. Dolan holds firm that it takes CEOs at least five years on the job to make a significant impact on their organizations. He's worried, he says, because the median tenure of a hospital CEO is four years, with 58% of current CEOs at their posts for fewer than five years.

ACHE research versus that conducted by Hinsdale, Ill.-based executive search firm CristKolder Associates shows the CEO turnover rate at hospitals is higher than that at large companies. CristKolder released data last year from 669 companies from the Fortune 500 and Standard & Poor's 500 that showed the turnover rate at those firms was 13% in 2010. That represented the highest rate since 2005, and their data from 2009 showed the rate at 10%, which represented a 15-year low.

Even if recruiters attempt to lure them away from their jobs, CEOs at larger companies tend to stay at their posts in a turbulent economic climate, said Matt McGreal, a principal at CristKolder.

“The devil that you know is better than the one you don't,” he said. “You know what's wrong with your company.”

From what McGreal's seen—taking into the account the larger sample, as the ACHE surveyed 4,542 hospitals—the healthcare sector typically has a higher turnover rate compared with those larger companies, he said. He predicts CEO turnover at those larger companies will increase in the near future, mirroring the trend predicted in the healthcare field by Dolan.

The stress levels hospital employees endure is another factor in the higher turnover rate, said John Tiscornia, managing director of Huron Consulting Group in Chicago. He wishes hospital boards showed more support for their CEOs. He cites the pressures from the evolving industry, not only because of the Patient Protection and Affordable Care Act, but also changes in the insurance industry and reimbursement.

Getting the board involved is important. One problem Dolan cited in finding a CEO who will stay is that many hospital officials delay establishing a succession plan believing that they have to wait until the end of the new CEO's honeymoon phase. That's a mistake, Dolan says.

“The average is in four years the person is going leave the organization; we should start CEO succession the day the new CEO comes onboard,” he said.

Tiscornia has a different take succession: “The plan should be an ongoing plan, continually updated every year,” he said. “It's not a plan you lay out only three to five years, it's an ongoing, living plan for succession.

Dolan also said hospitals should make more internal promotions, as those individuals will have a better familiarity with personnel, the facility's culture and are more likely to have better success in continuing their predecessor's policies. Healthcare officials also may just lack enough time to make retention a priority, as they're dealing with changes in policy including the reform law, Dolan said.

He put much of the burden in retaining a CEO on the hospital board. He said boards need to do a better job at selecting candidates and ensuring new hires have a better understanding of the board's goals and the hospital's infrastructure. Once the CEO is hired, the board's work isn't finished.

“There needs to be more positive communication between the board and the CEO; issues need to be addressed immediately,” Dolan said. “When the board or CEO puts off addressing difficult issues, by the time they do address those issues, it often might lead to the termination of the CEO.”