INTRO COMMENTS: Hello and welcome to Modern Healthcare’s Next Up, the podcast for emerging healthcare leaders. My name is Kadesha Smith. I'm your host and I’m also the CEO of CareContent, a digital strategy agency for healthcare organizations.
If there’s anything this pandemic has taught us in healthcare, it’s that planning is wonderful. Many of us have not had the luxury to plan our response to this pandemic. We were playing whack-a-mole early on, trying to figure things out on the fly. But I think this has led to a whole new appreciation for being able to plan instead of being reactive.
One area where planning is definitely an option is when you’re looking at your health system’s next generation of leaders. Succession planning takes foresight, discernment, and a willingness to turn over the reigns to the next man or next woman up.
But how can health systems conduct effective succession planning in such a volatile healthcare landscape?
Today, we are talking to Nancy Schlichting, who spent 14 years as the CEO of Henry Ford Health System in Detroit. She’s also been named one of Modern Healthcare’s 100 Most Influential People in Healthcare 8 times. She’s also been one of Modern Healthcare top 25 Women in Healthcare 5 times.
She’s currently on the board for 10 different companies. And I just ordered a copy of her 2015 book, Unconventional Leadership: What Henry Ford and Detroit Taught Me About Reinvention and Diversity.
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MODERN HEALTHCARE: Now, let’s get into our discussion with veteran healthcare executive, Nancy Schlichting. Last year, she shared her thoughts on finding the next crop of leaders in a March 2, 2019 report with Modern Healthcare Editor-in-Chief, Aurora Aguilar. Her insights are even more true today.
MODERN HEALTHCARE: Hello, Nancy, how are you?
NANCY SCHLICHTING: Great. Hi, Kadesha, it's great to be with you today.
MODERN HEALTHCARE: Thank you so much for making the time. I just want to share some key data points to kind of guide our discussion. First is that 49% of hospitals do not have a formal CEO succession plan in place. Does that surprise you at all?
NANCY SCHLICHTING: No, it actually doesn't. It's a critical area, but I'm glad we're talking about it.
MODERN HEALTHCARE: We're also really focused on diversity, especially with women in leadership. There tends to be a lack of diversity on hospital boards with females, minorities, and younger people being significantly underrepresented. 13% of hospital CEOs are women. And about 30% of senior leadership positions are held by women. But women represent 65% of the healthcare workforce and 80% of healthcare consumers.
Amazing. You are kind of like the aspiration that, you know, we all want to be when we grow up. For those of us who are in healthcare and aspiring to leadership positions, whether it's on the board or within the hospital C-suite. The other data point I want to mention is that in 2018, 31% of hospitals updated their succession plan within two years compared with 38% in 2011, so there is some progress being made.
Let's dive into our questions. So, you made a bold move when you were at Henry Ford Health System to hire leaders from outside of the healthcare system. Would you change your advice to people to look outside of healthcare to fill some of these vacancies, or would you say that's a good, a good route to consider?
NANCY SCHLICHTING: I think it's a little more high risk to do it because, clearly, we are a unique industry — very complex — and people need to understand the risks, frankly, of leading a hospital, working with physicians, taking great care of patients, understanding their communities. So it's not an easy move, but I am delighted that I did, because frankly we were building a brand new hospital. And we opened in 2009, the middle of really the greatest recession since the Great Depression. And we also were in the Detroit area where we actually had the worst economy of the country. So it was very high-risk, and I knew that if I had done things traditionally that hospital may not agree.
But having an individual, and this was a person who had been Vice President for food and wine for the Ritz Carlton chain, and had run one of the top properties in Dearborn, Michigan, not in a resort area, but he created an amazing environment for his people and great customer service, and I knew him for a few years. So, when he joined us, he brought an entirely new vision of what he thought a hospital could be, and we surrounded him with great talent — clinical talent, great Chief Medical Officer, right, Chief Nursing Officer.
I met with him every two weeks for two and a half years before we opened the hospital, because I knew if I didn't have his back, he would not have survived. The culture would have eaten him up because, you know, in healthcare, if you aren't one of us, you know, you could sometimes be rejected. But, you know, what was great about it is, I not only backed him up but I also told him when he was off base, I kind of put him back on the right track. And so that is how I think he was able to succeed.
We opened that hospital in 2009 -- it was cash flow positive in one year. It had 99% customer satisfaction scores and quality above in the top decile. We really had a strategy that worked. The hospital is still doing very well today, you know, more than 10 years later. So it was worth the gamble. Again, you have to have a strategy behind it. You can't just bring people in and not help them succeed.
MODERN HEALTHCARE: So we talked about how this is not happening at hospitals the way it should — this type of succession planning and sort of positioning someone to be successful as a leader. What are the worst case scenarios that are possible when a hospital does not have that succession plan in place?
NANCY SCHLICHTING: Well, sometimes, leaders don't want anybody to succeed now. You know, if you look around in healthcare, there are a lot of people that stay in the job a long time, they hang on for dear life, even if things aren't particularly going well, and they convince their board that they're the person — they're, you know, the savior of the organization. So you have to have a sense of humility, even to do this work and you have to believe in others, and help them be hopefully as successful as you think you are.
But I think the problem with poor succession planning is that when that person does leave, oftentimes things sort of fall apart because they haven't really thought through what the organization needs and worked with their board to make sure that they had a successor that was going to be wildly successful. So, I think oftentimes those transitions really become quite rocky.
MODERN HEALTHCARE: And that leaves the people — their peer leaders, the directors, managers kind of all scrambling to fill those positions.
NANCY SCHLICHTING: Everybody — it leaves the entire organization in peril. Because, in fact, you know, if an org — a healthcare organization is vital. And when it fails, it is really a disaster. So, that's why it is so critical to focus on leadership. Not just in a transition of leadership — all the time.
It's important to make sure you've got great leaders in every position, and that you're thinking through, you know, how do you bring people up? How do you make sure they're prepared for the next job? How do you develop talent?
MODERN HEALTHCARE: What are some of the key benefits or the best case scenarios that can happen when succession planning is done well?
NANCY SCHLICHTING: So my successor came two years before I left, and it allowed him time to really take over and be ready when I walked out that door. And, you know, now, three and a half years later, my successor, Wright Lassiter III, was just named the chair elect of the American Hospital Association.
MODERN HEALTHCARE: Yes.
NANCY SCHLICHTING: So, how great is that? And Henry Ford has done very well in the last three and a half years — great in quality, in terms of leapfrog scores, good financial results, you know, market growth. It's really been exciting to watch.
MODERN HEALTHCARE: That's great. And we actually just interviewed Carla Denise Edwards, who recently joined.
NANCY SCHLICHTING: Absolutely — great talent that Wright's been able to recruit.
MODERN HEALTHCARE: Awesome powerhouse for sure. So speaking of people like Dr. Edwards, what do women uniquely bring to the table when it comes to succession planning? And how can a succession plan that includes women really help benefit improvements in women's healthcare?
NANCY SCHLICHTING: You know, it's almost embarrassing to have to talk about this.
MODERN HEALTHCARE: I know.
NANCY SCHLICHTING: Because, you know, you mentioned that 65% of healthcare workers are women. It's actually higher than that at Henry Ford — I think it's more like 75 to 80%. Women are the decision makers in healthcare. It's crazy that we have to talk about this. It seems obvious to me that women in leadership are essential in healthcare because women understand the healthcare decision making, they understand what it's like to be on the frontline of healthcare.
And so, it's so important to have a very diverse leadership team in all aspects, but clearly to have, I mean — women are really, really important. And if you don't have women on your board or on your senior leadership team, guess what, you're not going to attract the best woman to those jobs because they're going to look at the organization and say, "Where are the women?"
MODERN HEALTHCARE: Mm hmm.
NANCY SCHLICHTING: And the exciting thing at Henry Ford is when I was selected in 2003 to lead the organization, we went from two women in senior leadership to well over 20, and it wasn't by only selecting women, it was because the most talented people in healthcare wanted to work for us — who were women.
And now, Wright is doing the same thing — enhancing the diversity of the team, both, he has both a high number of women, and a high number of African American people of color on his team, which is fantastic, especially in the city of Detroit, which is 85% African American. We should reflect our community in a much more substantial way.
MODERN HEALTHCARE: I'm so glad you brought that up because that brings us right to the next discussion about just sort of the lack of gender diversity and the lack of age diversity in leadership and on hospital boards.
So as health systems are looking for their next generation of leaders, how can they make sure that these leaders reflect the diversity in age and ethnicity that is represented in their communities?
NANCY SCHLICHTING: Well, it starts frankly by having your board represent your community, because if the board doesn't, I will tell you, when looking at a CEO candidate, you know, people tend to bring in people that look like them. And if you do not have a diverse board of all types of diversity that truly reflect the community — and insist on it.
I mean, we had separate hospital boards that were part of the Henry Ford Health System. And we looked at the, the actual demographics of each of the communities that the hospitals represented, and, you know, we sat there one time and, you know, we heard from the nominating committee chairs and they said, "Oh, we can't find people in our community. And plus, you know we don't really have many African Americans in our community." And I'm like, "Yeah, right." Let's show you the data — invited all these chairs in one day and said, "Here's the data. This is what we expect. And we're not going to stop until we get it."
So, we created this very wonderfully diverse board that, again, helps the whole organization see, "This is who we are. This is what we stand for. And this is how we're going to move forward in a leadership standpoint."
MODERN HEALTHCARE: That is excellent.
NANCY SCHLICHTING: And it was our board who created a management incentive to make sure that all of our candidate pools for every leadership job in the health system had to be diverse, and we measured it, and we brought it to the board each year, and we were evaluated based on that.
MODERN HEALTHCARE: You know, Mellody Hobson made a very similar point earlier this summer that if you don't set goals for this, it's not going to happen.
NANCY SCHLICHTING: That's exactly right. And you have to, you know, really set your standards and keep with them. Don't deviate, and don't waffle, and believe in it. You have to believe this is the right thing to do. This is what we need to do from a strategic standpoint because this is our community. It seems, again, pretty clear.
MODERN HEALTHCARE: And back to your point about just taking years — like two, three years to plan this — kind of prevents you from just picking somebody because you're in a scramble because the CEO or a board member left in a hurry.
NANCY SCHLICHTING: Yeah, I mean, you know, you really want it to be a very thoughtful process. You want it to be a transition that goes smoothly, is successful, that you don't lose any momentum. And, in fact, when Wright came on board, he did two acquisitions in the two year period before I left. We would never have happened if he had been there. And the reason is that, you know, everyone knew I had announced my retirement and people, you know, they would have wondered who that next CEO was going to be.
But they didn't have to wonder — they were working with the CEO in the process of the acquisition. That was a great chance for him to demonstrate to our board, "Look, you selected the right person here."
MODERN HEALTHCARE: That makes perfect sense.
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MODERN HEALTHCARE: So, how involved, should — and you've answered this already, but let's just go for it again — how involved should the current CEO be in developing their successor? I mean, especially for those CEOs that are like not looking at retirement, not trying to hear it, even though it's clearly time.
NANCY SCHLICHTING: You know, it depends. I gotta say — I was very unusual. And my board asked me to help. That is not typical. Frankly, for the people that stay too long, that will never happen. Because, you know, if they're staying too long, they haven't developed their successor anyway, and the board has to kind of take over that role and move that CEO aside.
But I think, ideally, if someone, you know, has a lot of awareness around what needs to happen in the organization, the CEO can provide tremendous insight to the board on what the job is, what the qualities and competencies are that that leader really needs, and then, you know, how to go about going after that person.
So, in my case, you know, I did find Wright. He was on a panel with me. I was totally impressed with them. I told my board chair about him. She said, "Well, go see if you might have interest." So I went out to Oakland and spent a couple days, you know, meeting with his team and him. You know, he had to explain, sort of, not the truth about why I was there, but, in any event. It's interesting — that's how I met his new Chief Strategy Officer because she worked for him out there.
MODERN HEALTHCARE: Wow.
NANCY SCHLICHTING: And, but, you know, I spent a year, trying to recruit him. And, of course, coming from California to Michigan, you know, I don't think he was too excited, and his wife was definitely not too excited about the winter. And he blamed me for that — I think he still blames me for that.
But the truth is, you know, I brought them out on a beautiful week in September to see Michigan — it was gorgeous. I said, "You know, it's like this a lot of the year." So, I was quite involved, but, of course, the board made the final decision about selecting him.
MODERN HEALTHCARE: But that's interesting because, I mean, you were the one hunting. You were the one that sort of handpicked —
NANCY SCHLICHTING: I mean it's — it is not the traditional way.
MODERN HEALTHCARE: Not normal. Yeah.
NANCY SCHLICHTING: And I'm not sure, as I said, I'm not sure it would work in every situation, but I think there are times when it makes sense.
MODERN HEALTHCARE: So for those boards and executive leadership teams that do want to be proactive about this, what are some of the key hallmarks of a robust succession plan? So, for example, what leadership roles besides the C-suite should hospitals be developing succession plans for?
NANCY SCHLICHTING: Well, ideally, leadership development should be the core, because you really want to develop talent at all levels of the organization to create a pipeline of talent that's capable of moving up in the organization. We had actually three leadership academies at Henry Ford, and — actually, we had four. We had a new leader academy, mid-career, and a senior. And then we had a physician leadership institute. So that's where we really developed and identified diverse talent, because we wanted each of these academies to represent the diversity of our team and our community.
And we monitored — we looked at the performance. We looked at how many of those leaders we've retained. We looked at how many leaders that moved up in the organization, got promoted. And we reported that on an annual basis to the board.
So leadership development is very core. You have to have, you know, sort of an inventory of all your competencies of each person. You have to have a talent review on a regular basis to talk about the people and how they're doing. It becomes a really critical role for leaders on a constant basis to really be engaged in that process.
MODERN HEALTHCARE: Absolutely. So you mentioned, being very intentional about the diversity part of it, making sure that your board is diverse so that they will then collect a pool of candidates that are also diverse. How do you recommend healthcare organizations do that without getting into, like, tokenism — “Oh, we have a woman, we checked that box, let's move on?” How do you recommend that they do that?
NANCY SCHLICHTING: You look at the results. If you don't have the results you're seeking, then there's something wrong with the proces. It could be unconscious bias. It could be not having diverse interviewers for candidates. Now, there always have to be the courageous people who are the first. But it also requires, you know, an organization to really adapt and make sure that they are looking at every part of the process to make sure that it's going to be successful.
MODERN HEALTHCARE: This podcast is part of the preface to the women leaders and healthcare conference coming up. If there is a woman who is in a healthcare organization, performing very well, and she has her eye on a C-suite role that may become available in the near future, what should happen to prepare her to be considered? What should she take the initiative to do, and then what should the organization do?
NANCY SCHLICHTING: Well, you know, there are a couple things that I would, I would call out. One is, you know, obviously the best path to success and a promotion is your current performance.
MODERN HEALTHCARE: Right.
NANCY SCHLICHTING: You know, there are some people that have their eyes so much on the next job, they're not really doing the current one, to its full capacity, and I've seen it a lot. And I always remind people that, "Look, you know, if you perform well, in this organization you're going to have opportunities."
But sometimes, it's going outside the traditional lines of the job — offering yourself for a complex project, taking on something that no one else wants to do. Those are the things that often really have people stand out. And sometimes, you know, people don't take that risk. I've watched it 100 times. People say, "Oh, I want to move up, but I don't want to have to drive more than 10 miles to the job." Well, that's not going to work. You've got to have flexibility, you have to adapt. You have to take risk, obviously perform at the highest levels.
And have people get to know you — network in the organization, ask people to be your mentors. You know, really step out of your comfort zone, sometimes. I think those are all things that can really help you.
MODERN HEALTHCARE: And then, last thought, what's your opinion of how COVID-19 has impacted succession planning? Do you think there's any extra level of consideration that health systems need to take into account considering just how ever-changing this environment is and how things may never be back to normal again?
NANCY SCHLICHTING: Well, you know, if you think about it, I mean, healthcare it's never been —
It's never been for the faint of heart. Running a hospital, you know, or a complex health system is probably one of the more difficult jobs there is. It's incredibly complicated. It's 24/7, 365 days a year. You know, there are never moments where you can kind of breathe, you know, it's always changing.
I think what COVID-19 has really pointed out is that succession is even more important, because this is a role today, this is the most demanding role I think I've ever seen in my career, or a healthcare leader, and you have to be resilient. You have to be agile. You have to be innovative.
I mean, we're learning a lot right now about how to change healthcare. Now, telehealth has just ballooned in no time. And you can see how you want to seize the moment and take advantage of that. So I think succession planning is going to be critical because not everybody is going to be able to step up in this role. Not everyone is going to be as resilient and as adaptable as this type of environment requires. I can see a lot of retirements on the horizon.
NANCY SCHLICHTING: I think a lot of people are gonna say I've had enough.
MODERN HEALTHCARE: Burnout alone would probably prompt a lot of that, but I think you're right that, you know, if you have your qualities that you want to see in your next leader, I'm sure that resilience has risen to the top three.
NANCY SCHLICHTING: Absolutely. Creativity and, you know, being calm in the storm, being a good communicator. Because, you know, today, when people are working virtually, if you don't have good communication skills, it's really tough on everyone.
MODERN HEALTHCARE: Absolutely. We talked with Dr. Joanne Conroy at Dartmouth-Hitchcock, and she is the most calm, cool, and collected person in the eye of a storm. She gave the exact same advice. Like, the ability to stay calm and communicate well is going to be a major trait that all leaders will need if you don't have it already.
NANCY SCHLICHTING: It's essential. And I think we're seeing a lot of those essential qualities of leadership right now.
MODERN HEALTHCARE: That brings us to the end of our discussion. I appreciate your time, and enjoy your retirement.
NANCY SCHLICHTING: Thank you.
OUTRO COMMENTS: Thank you, Nancy, for that sage advice.
Planning for the next generation of leaders will be a key point of discussion for the upcoming Women Leaders in Healthcare Conference. The virtual event will be held on August 13th and 14th, and if you use the code NextUp, you’ll get 25% off the registration fee.
To register, visit modernhealthcare.com/womenleaders.
I’m your host, Kadesha Smith, CEO of CareContent. We help health systems reach their growth goals through digital strategy and digital content.
Again, we’d also like to thank the sponsor for this episode, Masimo.
Look for more episodes of Next Up at modernhealthcare.com/podcasts or subscribe at Apple podcasts, Google podcasts, or your preferred podcatcher. Thank you again for listening.
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