Notes From the Field: 7 Things to Know About Hospital CEO Searches
October 11, 2013 | Becker's Hospital Review
By Molly Gamble
An expert who has led hundreds of searches for nonprofit and for-profit healthcare organizations shares seven key observations on the executive search process. Executive searches are delicately nuanced in any industry, but they're quite interesting in healthcare given the sector's 17 percent CEO turnover rate. Certain relationships and skill sets can make or break a candidate's chances. Even after a new CEO is named, that person can have some big repercussions for other senior leaders' careers.
Robin Singleton, executive vice president and practice leader for DHR International's national healthcare practice, based in Atlanta, has led hundreds of executive searches for nonprofit and for-profit healthcare organizations. She says one specific skill set can say more about a CEO candidate than any others today, and she also sees CEOs let one executive from their team go more often than others. Ms. Singleton shared these insights and five more — field notes from her experiences leading hospitals' executive searches.
1. What influences decisions to bring on a new CEO from inside the organization versus an external candidate? Ms. Singleton said there are internal candidates in about half of CEO searches, especially more so recently. "In the last couple of years, people weren't that excited about moving because of the housing industry," she says.
Say a board is considering two CEO candidates — one from within the organization and one from an outside search. The two candidates are significantly similar. Ms. Singleton says, in these instances, one skill set usually makes or breaks a search decision. "The one thing that tips the scales is the executives' previously built physician relationships," she says.
Overall, outside candidates who do not possess strong physician relations skills have smaller chances of getting the job. These relationships can take years to build to becom e appositive influence, and boards may be more attracted to internal candidates if they already have strong ties with the medical staff. Starting from scratch can simply take too long. "If you have the trust of physicians, in light of the physician integration that's [required] to be successful right now, that's huge," says Ms. Singleton.
2. How do boards perceive "groomed" candidates? Only some CEOs spend time grooming a certain executive as their potential successor. Traditionally, this has been the COO. But if a mentored, internal candidate decides to throw his or her hat in the ring, Ms. Singleton says it's important to remember who will really make the ultimate decision.
"You have to remember CEO searches are led by the board," she said. It's rare, or practically unheard of, for a board to name an incumbent candidate "hook, line and sinker," says Ms. Singleton. "Even though the board may have someone who has been groomed as a successor, there's no guarantee."
Instead, boards want to ensure they have a solid point of comparison for each internal candidate and they want to be able to demonstrate to the community at large that they have done their due diligence, leading many to conduct an external, national search. Boards won't assume the person the CEO "groomed," such as the COO, is the perfect fit.
3. What risks do COOs face during an organization's CEO search? A COO might express interest in moving up to the CEO post only to watch an external candidate enter over him or her to the top of the ranks. This can be a sensitive situation, particularly if the COO has been with the organization for some time and is respected by the board.
If that's the case, the board anticipates this being an issue. "Many times, the board will say, 'We don't want to lose that COO. We like him or her, but we are going to do an outside search. There's no guarantee they'll get the job, but we want them to know we really want them to stay in the COO role if they don't get the CEO job,'" says Ms. Singleton.
But even if the board says this and establishes its good intentions with the COO, there are no promises about how the incoming CEO will affect the organization's culture. The COO and other executives have to wait and see whether it will be a smooth transition, and whether the CEO will bring his or her own team into the organization after a period of time.
These changes have nothing to do with the board, and instead boil down to executives' professional chemistry or whether the CEO prefers a previous colleague in a certain role. "It's tricky," says Ms. Singleton. "Every COO and other C-suite executive knows that when a new CEO is sought, whether the COO puts his or her hat in the ring, they may not stand the transition."
4. Which executive does a new CEO scrutinize the most? Even though COOs may experience some turbulence when a new CEO comes on board, it's the CFO who stands to undergo the most scrutiny, according to Ms. Singleton. "The CFO, more than any other [leader], is the CEO's righthand person as they also directly impact the bottom line," she says. "They have to work in tandem. If there's not a real trust level or superb chemistry, the CFO is the one [executive] I've seen let go more than any other executive," she says.
5. When might a new CEO start making some noticeable changes? CEOs don't come into an organization and make dramatic changes right away unless it's a turnaround situation. "Wise CEOs know that unless the organization is in total dysfunction, is on the chopping block or is fighting to keep its doors open, [dramatic changes] don't engender followership," says Ms. Singleton.
Instead, CEOs need to develop a sense of the hospital or health system's culture and will usually take some time and thought to identify what is working and what is not. They should take the first six to 12 months to implement development and coaching programs for leaders who have potential, but are falling short of it.
"CEOs typically won't make big changes in the first year," says Ms. Singleton. But there's no guarantee for what type of executive decisions will be made after that, as CEOs might assess the team and appoint people they find to be better fits for certain executive roles.
6. What questions should CEO candidates ask when considering a job with a new organization? Ms. Singleton said intelligent candidates ask a few specific questions. "I tell candidates to make sure they've done their homework," she says. "One hospital is not like the next. If candidates don't ask intelligent questions, it tells me something about the candidate, too," says Ms. Singleton. Here are a few she hears candidates ask most often about their potential new employer:
- What's the governance structure?
- What are the hospital or health system's overall, long-term strategic objectives and biggest current challenges?
- How well is the organization staffed? Is it overstaffed?
- Is this an organization that attracts and retains top talent? What kind of talent exists there now?
- How well do leaders function as a team? Is this an organization where the majority of leaders — from the manager level on up — work well together? Where might there be significant dysfunction?
- What are the organization's operational, quality and satisfaction statistics?
- What are the organization's scope of services and patient volumes? What are the largest service lines? What specialties are driving the most revenue?
- What do the organization's finances look like? What are its margins?
7. What are executive search consultants looking for during their site visits? An effective executive search firms help candidates through the search and transition processes smoothly and provide candidates with everything they need to know about a new job opportunity. This means consultants look at many specifics when visiting a hospital or health system to answer common questions the CEO candidates ask them later on.
Ms. Singleton says candidates often ask her if there are any political landmines in an organization, such as "physician renegades," conflicts between board members and administration, or conflicting agendas between members of the C-suite. Are certain clinical leaders highly defensive of their service line or area of responsibility? Does the nursing staff function well as a team? What is the organization's overall financial condition? These are but a few of the more frequently asked questions, she says.
Ms. Singleton also looks for consistency in the hospital's current executive team. "One of the worst things is for the candidate to go in and hear very different stories from everyone they meet. You can't make up consistency. I go to places, and I walk out and go, 'That organization is all over the place in what they consider the key long-term objectives,'" she says. "The CEO candidate will hear that and may say, 'No thanks.'"
She recommends boards and executive teams ensure they are on the same page before beginning a search. For example, when the CEO and CFO are asked the same question, the executive search consultant should not hear two different answers. "Bright candidates pick up on that in a heartbeat," says Ms. Singleton.