Succession Planning in Healthcare

Succession Planning in Healthcare: When to Do it & How to Do it Well


Healthcare leaders and board members alike agree that succession planning is important, but few organizations actually begin the process or do it consistently or efficiently.  Many leaders find succession planning daunting, uncomfortable for themselves and they fail to appoint someone to lead the charge. What some healthcare leaders don’t understand is that a failure to begin succession planning (and early on) could cost the organization a significant amount of money. A recent article in the Harvard Business Review touches on the high costs associated with poor succession planning, highlighting former CEO Steve Ballmer’s exit from Microsoft as a prime example of what not to do.


“Like Microsoft, many large companies fail to pay adequate attention to their leadership pipelines and succession processes.” Authors Claudio Fernández-Aráoz,  Gregory Nagel, and Carrie Green go on to say, “Large companies’ excessive tendency to hire leaders from outside is one of the biggest problems with succession practices. This propensity incurs three major kinds of costs: underperformance at companies that hire ill-suited external CEOs, the loss of intellectual capital in the C-suites of the organizations that departing executives leave behind, and for those companies promoting from within, the lower performance of ill-prepared successors.”


When Should Healthcare Organizations Begin Succession Planning?


Succession planning should begin the moment a new CEO is appointed. The Board and the newly appointed CEO should begin right away to kick-off succession planning. 

What does the Board want in future CEOs? Where is the organization going? Is there internal talent to fill the pipeline? Who might be a candidate internally? These are all questions that will come up and should be discussed openly between the Board and the newly appointed CEO to develop buy-in and transparency from both sides.


Key Steps to Successful Succession Planning


  1. The Board outlines the vision for the organization.
  2. The Board determines desired qualities and skills in the next CEO and outlines a succession plan.
  3. The Board identifies who on the senior team has the potential to be groomed for the succession planning pipeline.
  4. Senior leaders are evaluated and benchmarked according to the Board’s vision for the future of the organization.
  5. Gaps are identified via a 360 evaluation (eg. lack of clinical experience, financial acumen, etc.).
  6. Individual development plans are implemented as a result of each evaluation and who brings what to the table. 
  7. Succession planning is discussed at each annual performance review and includes plans to develop skills. This provides an objective look at what people need to do to achieve upward mobility.
  8. When the time is right for transition to a new CEO,  the Board taps the internal leader for emergency interim CEO service and potentially the future permanent CEO placement.


Succession Planning Scenarios: The Good & Bad


The Good: In the best of scenarios succession planning is baked into the healthcare organization’s culture—viewed as common, and expected even, going down many layers in the organization. Everyone from a certain level of seniority up discusses succession planning in their annual performance review. Everyone knows where they stand objectively and the role they fulfill should someone leave the organization. 

The Bad: A large healthcare organization engages an external search partner to complete its next CEO search. The search partner meets with the search committee and learns the COO is under the impression that he would be the successor. No formal discussion occurred and the search committee would like to entertain other potential candidates. As a result, there is likely to soon be a COO vacancy and the current climate at the executive level is uncomfortable at best. 


Barriers to Efficient Succession Planning


  1. Fear. Starting a new program can be intimidating. The concept of change and an increased workload can be a deterrent to getting started. 
  2. Internal insecurities. Some individuals struggle with emotional intelligence and feel as if they are replaceable or are fearful of hiring someone that could outshine them. A lack of confidence in one’s skills and abilities can breed volatility.
  3. Turnover of board members and senior managers. The absence of a point person(s) to drive the program will stop the succession planning process in its tracks. 
  4. Resistance to having crucial conversations. Succession planning can be uncomfortable, but it is necessary. While initial conversations can be difficult to navigate, these conversations pave the way for an effective succession planning program that will save time, money and headaches down the road.


Every Healthcare Organization Should Know the Strength of Their Bench 


It’s one thing to recruit and another to retain. The reality is that the true cost of turnover is much more than an executive’s salary. Many studies show that the total cost of losing an employee can be 1.5-2X annual salary. The key to combating this is devoting time and resources to developing your bench.

Do you have a consistent method for efficiently and objectively evaluating who is on your bench? Do you have someone who is next in line to move over? Retaining top talent in an extremely competitive employment market makes succession planning crucial to the long-term success of your organization. Without a strategic succession planning program, your organization is at a distinct disadvantage, especially if faced with an unplanned departure in leadership.   An added bonus to a transparent and consistently communicated succession plan is that it can serve to tether up and coming leaders to your organization and make them less likely to stray.


Value of Engaging an Executive Search Partner 


Having someone who is trustworthy, data-driven and can work at an arms-length basis with the Board, the CEO and the senior leadership team is extremely valuable. A skilled executive search partner knows what’s at stake and brings years of experience navigating human responses, strategy, governance and the special relationship that exists between the CEO and the Board. Knowledge of how senior leaders in healthcare think and the ability to objectively guide the process to completion ensures the organization is set up for long-term success. 

This is where Kirby Bates Associates can provide the most value, not only providing highly qualified executives but importantly, leaving behind a self-sustaining written succession planning program that the organization can maintain long after we leave. 


Trusted Partner in Healthcare Executive Search


With our nationwide network and reputation, our healthcare executive search team has helped clients match lasting exceptional leaders to key positions for over 30 years. We recruit difference-making healthcare executives and remain a trusted partner for hundreds of prestigious organizations because of our high success rate and first-hand knowledge as healthcare and nurse executives. We’ve spent our entire careers in healthcare so we know what it takes to lead organizations forward.

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