CES Partners, Ltd. Executive Search Consultants

Nothing Succeeds Like Succession Planning

A critical challenge that every hospital or healthcare system has to face is the retirement, defection, or loss of its key leadership. Handing over the reins to the next generation is no easy task, especially when many healthcare organizations have no systematic process in place for replacing the CEO and other leaders.

While a change in healthcare administration can be tumultuous, the proper implementation of a succession plan can ease the disruption caused by transition. Simply put, succession planning is the carefully planned process of orderly transferring leadership within an organization by recruiting and preparing executives to assume future key leadership roles.

In the past, identifying and promoting executive talent was a fairly uncomplicated procedure. The retiring CEO or board of directors would simply nominate the number two person in line. But in today's complex business environment, the answer may not be so simple, especially when downsizing and limited training opportunities have depleted the available pool of qualified candidates.

Barry Cesafsky of CES Partners tells us, "Preparing for the next line of succession is absolutely vital to the future of any healthcare organization. The problem is most organizations are poorly prepared for CEO succession."

Planning Ahead

Clearly the best solution to the problem of transition challenges is a well-designed succession plan. When implemented correctly, a good succession plan is an investment in a healthcare organization’s future, safeguarding its mission, culture, and business strategy. Properly-designed succession plans should ideally be in effect well before the retirement of the incumbent CEO, so that the organization can focus on developing talent over the long term and allow for a gradual flow of one leadership style to the next. With a good plan in place, the organization can more easily weather the unexpected, such as sudden death, disaster, or termination.

An effective succession plan should include the following elements:

  • Specification of the succession timeline
  • Involvement of both the board and the current CEO
  • Recognition of the organization's culture and core values
  • Analysis and identification of key leadership skills and competencies needed
  • Definition of search process (internal and external)
  • Targeting of ideal potential candidates (internal and external)
  • Acknowledgment of the current CEO's preferred successor
  • Motivation of future candidates/fostering a spirit of loyalty to the organization
  • Institution of a mentoring program for candidates
  • Implementation of benchmarks to measure progress
  • Development of an emergency disaster plan
  • Development of a plan to communicate with the staff about projected changes

A well-designed succession plan can allow senior management and HR to adapt quickly to changes. Because it automatically assures leadership continuity, a good plan smoothes the transitional process, thereby easing the normal trauma and uncertainty caused by a CEO's departure. In addition, the succession planning process can create an opportunity for an organization to redefine its future goals and direction.

According to Cesafsky, "Sometimes healthcare systems don't keep pace with current market conditions and increased competition so it is difficult to shift gears when the business climate changes. By proactively creating a roadmap for the future, an organization can reevaluate its direction, identify its successes and failures, target future goals, and revolutionize its vision. This makes it much easier to seek out the ideal candidate who can effectively put that vision into operation."

Developing the Succession Plan

Transition plans should be viewed as a long-term investment in the future health of the organization. While human resources should play a facilitating role in the transition process, ultimately succession planning is the responsibility of the trustees and the incumbent CEO. Boards should form distinct succession planning committees and schedule regular sessions with the CEO to discuss and assess the planning program, as well as identify and evaluate potential candidates. Trustees may also decide to discuss and update the succession plan at the time of the current CEO's annual review.

Ideally, an effective succession plan should be in place at least five years before the anticipated retirement of the incumbent CEO. A forward-thinking board and CEO will bring in outside consultants, such as executive coaches and recruiters, to encourage an unbiased evaluation of the organization's goals and direction. Even if an internal candidate looks promising, it is vital to the planning process to consider outside recruitment, not only to "cover all the bases" by opening the door to fresh perspectives, but simply to verify, by comparison, that the preferred candidate is the right person for the job.

Regional Director of Human Resources for Providence Health Systems, Hugo Aguas , agrees. He tells us, "The more prominent a position is, the more difficult, not to mention riskier, it can be to find a suitable candidate. While it is important to look within the organization’s talent pool, bringing in a key executive from the outside can quite often be a successful alternative to an internal promotion.” Moreover, proper planning allows plenty of time for recruitment, training, and mentoring, resulting in a larger pool of qualified candidates. Potential candidates can assume key roles in strategy sessions by acting as temporary CEO's to have their performances evaluated under fire. And by planning ahead, a healthcare system or hospital can appoint an internally or externally-recruited "interim CEO" for the event of emergency, especially if a full succession plan has not yet been put into place. Aguas also believes, “It’s important not only to involve Human Resources with succession planning, but the organizational development function needs to play a part.”

Problems and Pitfalls

While well-defined succession plans are critical to the future of healthcare organizations, they are not without certain problems which must be prepared for. A few of these pitfalls are:

  • Though many CEOs take satisfaction in the process of finding their successors, others consider it a threatening reminder of their mortality and dispensability. Therefore they undermine efforts to choose a successor or try to extend their tenures.
  • Despite planning, succession may have a negative impact on organization morale and business performance. Change can be traumatic.
  • If the CEO is allowed to handpick a successor, he/she could choose a candidate too like-minded.
  • Boards may tend to select candidates who are "safe" or reflect existing leadership styles. Therefore they miss valuable opportunities to challenge the status quo, reevaluate the goals of the organization, and improve performance. Similarly, they may not look beyond the visible internal pool of senior executives and so neglect searching from outside the organization for ideal candidates.
  • Some retiring CEO's can't give up the reins and try to run the show from the sidelines.
  • Once the succession choice becomes visible, the best and brightest potential candidates may leave the organization.
  • Due to downsizing, many healthcare systems are "lean and mean", resulting in a reduced pool of available and qualified candidates, especially when aging senior staff members may be retiring at about the same time.
  • An organization may fail to regularly assess and update its succession planning goals.
  • A truly capable successor may not be well-suited to or interested in a subordinate role to the CEO.

These problems can be overcome by regular strategy meetings between the board and the incumbent CEO, communication of the plan to senior executives and staff, and by seeking outside input and advice from consultants and executive recruiters. 

In Summary

Succession planning is the best way to ensure the ongoing success of any hospital or healthcare system. By implementing a well-designed, long-term plan, an organization can effectively weather the unexpected as well as execute seamless transitions from one generation of leaders to the next.

More White Papers

Next: Executive Search 101
Previous: Recruiting a Recruiter

CES Partners, Ltd. is a premier retained executive search firm that specializes in serving healthcare provider organizations with tailored, personalized, senior level consulting services. With a national reach throughout the United States, CES Partners serves health systems, hospitals, group medical practices, and senior living communities. CES Partners’ main office is located at 1314 Kensington Road, #5195, Oak Brook, IL 60522-5195.