COVID-19 casts new light on leadership

Many hospitals are delaying their planned leadership transitions as their organizations manage COVID-19, which, along with the collateral social unrest, is casting a new light on potential successors.

Rather than sticking to succession plans set to roll out in the spring or summer, health system leaders are opting to help their organizations weather the pandemic, healthcare executive search experts said.

The growing public health concerns resulting from COVID-19 and racism also caused boards to revisit what type of executive is best-equipped to lead their organizations out of the pandemic as well as reevaluate who best represents the communities they serve.

“Announcements for CEOs who had planned to retire have been put on hold because they can’t make that change in the middle of this challenge,” said Mark Madden, managing principal of Cejka Search, which specializes in healthcare executive placements. “They don’t want to raise the anxiety level any higher than it already is—they also feel a responsibility to get the organization through this.”

COVID-19 has upended the healthcare industry as telehealth utilization ramps up, staffing and supply chains are disrupted, margins plummet and providers double down on emergency preparedness. That has materially changed the jobs and responsibilities of hospital CEOs and executive teams, which recasts the requisite qualities and characteristics individuals need to manage a post-pandemic world, recruiters said.

There’s too much uncertainty to make a leadership change now, said Paul Keckley, healthcare analyst and managing editor of the Keckley Report. “Unless there is a big consolidation play on the table, boards don’t want to bring in a new face right now,” he said.

“In a time of uncertainty, you look for places where you can maintain some certainty,” added Greg Eli, a shareholder at LBMC’s healthcare consulting practice.

It’s rare to find someone who can come off as calm, collected, agile and directive during a crisis while not seeming authoritarian. “During times of challenge is when you (see) really good leaders emerge,” Madden said. “But COVID-19 is also showing organizations that some candidates couldn’t handle the situation, causing them to redirect or do some additional training. It is an interesting filter to see things through.”

For instance, executives now have to take a much more active role in procurement and cost containment, Eli said.

At the same time, the Black Lives Matter movement has accelerated diversity and inclusion efforts, which largely have been relatively modest up to this point. “Most organizations right now are taking a closer look at that,” said Jessica Jones, managing director and chief operating officer in Huron’s Studer Group business. “The pandemic has emphasized that healthcare in particular has a close linkage to its community.”

In instances where executives are leaving, organizations are seeing some holes in their succession planning, Jones said. “A lot of organizations don’t have the capacity to do the interviewing,” she said, adding that some don’t have the infrastructure. “If an organization didn’t have a good succession plan and a CEO moves forward with retirement, the qualifications and skill sets for successors are actively changing. Organizations are looking for individuals who can navigate a turnaround situation.”

Either way, there can be unintended consequences. If a leadership change is delayed, that could deter successors who were eager to take over, Eli said. “The current CEO who stays on gives a great degree of comfort to the board or investors,” he said. “But for the very talented younger professionals who have been preparing for the role, waiting is difficult.”

Burnout could further compound matters, particularly for healthcare organizations without succession plans. Nearly 80% of 343 healthcare executives surveyed in mid-2018 said their organization wasn’t doing enough to prevent executive burnout, according to a survey from Witt/Kieffer, an executive search firm. In a more recent Advis poll from June, a majority of more than 100 health system executives surveyed said that burnout was a major concern.

The situation could become more dire if COVID-19 produces a mass exodus of healthcare professionals who need a break after dealing with the pandemic. Hospital CEO turnover remained at 18% from 2014 to 2018, according to the American College of Healthcare Executives.

“There’s a lot of talk about succession planning, but many organizations never really back it up,” Madden said. “Those that had a succession plan for senior leaders often didn’t have one for entry-level employees and middle management, which means you are losing out on a lot of potential. For those of us investing in these health systems, those types of programs are what’s needed to carry the industry forward.”

Fifty-four percent of 164 healthcare executives surveyed in early 2019 said they don’t have a ready successor and 43% operate without an effective internal succession plan, according to a poll from executive search firm Korn Ferry. Nearly a third lack a succession plan entirely.

“Most of the boards are not prepared,” said Keckley, adding that boards often align with chief executives and consultants rather than offer a dissenting view. “Is there a point at which boards become more independent and accept their fiduciary role as if they are being paid? That is the conundrum here—many not-for-profit boards are not being paid.”

Across all sectors, only 29% of human resource professionals said they are confident their organization has the right people to guide their company into the future, according to a Korn Ferry survey from earlier this year. Around half said they don’t have programs to help them identify and develop internal candidates.

“A number of organizations are now asking, ‘Do we have the right leaders in place?,’ ” Jones said. “Or, ‘Do we have the right leadership development in place to adapt and move forward?’ ”

Whether the sought-after skills are related to telehealth, supply chain management, or diversity and inclusion, the health system CEO role is going to look different than it did prior to the pandemic, executive search experts said. “Telehealth is going to be significant as we look forward in regard to leadership competencies,” Madden said. “One of the must-haves in searches is going to be involvement in innovation related to technology and how to best use it, as well as advanced strategic initiatives in training physicians to have appropriate bedside manner via video and make sure the organization is getting reimbursed at the maximum level.”

Disaster planning, supply chain management and COVID-19 experience will also rise to the forefront, Madden said. “One of the requirements will be how you managed COVID-19 and what were the results,” he said.

Lower capital expenditures and related cost-cutting measures will become even more important over the short and medium term, Keckley said. Academic medical centers, for instance, will not be able to use research as a justification for an inefficient operating model. “You can’t leverage the teaching and research model like you did in the past,” he said. “You can’t subsidize research and teaching by charging more for patient care. The AMC CEO is going to need to be a different breed.”

Flexibility will be key, with CEOs needing to not only ensure strong alignment across the entire C-suite, but be able to shift directions quickly.

And organizations are likely to be under more scrutiny, too, in terms of how they address inequality both in care and their leadership ranks. “The idea of whole-person care and the social determinants of health is still foreign to most people in traditional roles,” Keckley said.

Minorities only represented 11% of executive leadership positions at hospitals, even though minority groups combined made up nearly 40% of the U.S. population in 2015, according to a survey from the American Hospital Association from that year, the most recent data available. Only 14% of hospital board members and 9% of CEOs are minorities, the AHA’s Institute for Diversity and Health Equity found.

The share of minorities in leadership positions has remained flat since 2011, and chief diversity officers made up the vast majority of those positions.

Gender equity hasn’t improved much either. Only five of the country’s 50 largest not-for-profit health systems by operating revenue were led by female CEOs in 2018 and those women made 67 cents for every $1 their male peers made, a Modern Healthcare analysis found.

Novant Health has built diversity inclusion and health equity into the short- and long-term goals of its workforce, from the executive team to front-line employees, said Carl Armato, CEO of Novant. “They are rewarded based on delivering those goals,” he said, adding that the organization sets certain benchmarks as it relates to hiring and outcomes. “The goal is to reflect the communities we serve.”

For many organizations, these goals have been an afterthought. That needs to change, experts said.

“We have seen a focus on developing diversity on the board and executive team,” Madden said, noting an increasing awareness of unconscious biases. “But what we see coming out of this is not so much talking about it as do you understand what it means.”