The most important responsibility of the hospital’s Board is to select, guide, evaluate and hold accountable their Chief Executive Officer. When the CEO’s chair becomes vacant due to a voluntary resignation, termination or death the Board is faced with the difficult decision of how the organization will be led during the search for a replacement, which can take up to a year if relocation is required.
The loss of the CEO often is a traumatic experience for the medical center thrusting it into a period of transition and instability, especially if the departure is unexpected. If the CEO was long tenured and well respected, there probably will be a period of time in which the organization is unable to function for it is difficult for the team to focus on what needs to be done following the loss of a steady hand on the tiller. If the CEO resigned, he or she will have already mentally moved on to the next chapter in their life and be considered a lame duck. On the other hand, if the organization is not doing well and the CEO was asked to leave, there are mission critical and cultural issues which must be dealt with quickly and expertly. If the CEO is to return following an extended absence due to medical or personal reasons, how is the leadership vacancy to be addressed?
The departure of the CEO presents both an opportunity as well as a threat. The opportunity is to reevaluate where the organization is and where it is going to make sure it is positioned on the right path. There may be some highly charged decisions which need to be made such as staffing levels, renegotiation of physician and union contracts, competitor issues and new revenue generating opportunities. While not every hospital need a turnaround, all will benefit from an experienced, objective assessment resulting in a plan being implemented to improve finances, quality, satisfaction, employee relations and governance. Threats include the loss of forward momentum, failure to assure Board priorities being met, ongoing negotiations which could fall apart, defection of key physicians and staff due to a loss of confidence brought about by a lack of leadership and competitor intrusions into the market.
The search for a new CEO can, at times, be done quickly but generally takes many months. The worst thing that can happen is for the Board to feel pressured to make a quick selection resulting in a poor choice. Having an interim CEO in place allows sufficient time to methodically assess needs and make a selection based on a well thought out set of criteria. The interim will assure forward momentum is maintained, the staff stabilized and the decks cleared so as to be able to attract strong candidates. If the medical center is in distress, a culture change will be needed requiring a skill set which is different than a CEO needs if the organization is stable.
Before the search process can begin, the Board will need to review the CEO position description to be sure it accurately reflects responsibilities, authorities and relationships, list the criteria they wish their new CEO to meet and determine the goals to be achieved within the first 12 to 18 months after hire. Generally an executive search firm is selected to generate and screen candidates, but which one and what should the contract include?
Interim CEO Appointed from Within
Many Boards select an individual or team from within the organization to provide interim leadership, raising some questions which need to be considered:
- Naming a team to provide interim leadership means there is no single individual to hold accountable, which is why committees are notoriously inefficient and ineffective. There will be differing opinions and styles among the interim leadership team causing power struggles as resolving differences will be difficult.
- There is a great deal of difference between the role and responsibility of a CEO and that of a COO, CFO or other executive who may be named as the interim. This is a particularly trying time to place such responsibility on an inexperienced individual who will also need to continue to do their former full-time job, usually meaning neither job will be done well.
- The executive team is correctly focused inwards on daily operations and do not have the skills or experience needed to be focused outwards and visioning the future.
- An internal interim will tend to avoid the difficult, politically-charged decisions as they will want to maintain their existing relationships as they expect to be returned to their former role once the search is concluded. The individual may be well respected in their present role but not have credibility as a CEO. This is not the time for on the job training.
- The internal interim is a part of the status quo bearing a share of responsibility for an organization which is not doing well and may lack the essential objectivity to turn it around. Certain programs and services will need to be modified or closed, yet may be protected “sacred cows”.
- If the individual is a candidate for the permanent CEO position, they will consider this to be a trial period during which they seek to gain favor and needed, but politically-charged decisions, may not be made.
- An internal interim will discourage some qualified outside applicants from applying for the permanent position as they will be perceived as having the inside track; thereby, denying the Board the consideration of some well-qualified candidates.
- There will be a difficult adjustment for the individual when they are returned to the ranks following the selection of the permanent CEO. All too often, this results in the loss of a valued executive due to disappointment at not being selected or not being able to adjust to not being the CEO.
Professional Interim CEOs
A growing number of medical centers are turning to professional interim CEOs to help them successfully navigate through this turbulent time. A “professional” interim is a well-seasoned hospital CEO with significant interim and turnaround experience. Turnaround experience is essential if the organization is in difficulty and if the Board is looking for more than a “seat warmer” during the CEO search period. These executives are not looking for something to do during retirement nor are they seeking a permanent position. The professional interim has made a career choice to work with organizations in transition and crisis. Such an individual can:
- Bring a strong resume demonstrating the ability to quickly assess the organization’s needs, develop credibility and earn the trust of all constituencies. Not having a personal stake in existing programs and services, pre-existing relationships with staff and bringing an objective point-of-view enables difficult decisions to be made when needed. If the organization needs a cultural change, such as developing accountability, the professional’s skill set enables the difficult transformation.
- Help the Board to assure the mission and vision for the medical center are on point, the position description and criteria for the permanent CEO are appropriate and assist in the selection of an executive recruiter and the negotiation of their contract.
- Stabilize the organization by supporting the Board, staff and community as they adjust to the loss of their CEO. If the permanent CEO is on an extended leave for personal or medical reasons, naming an interim demonstrates to all stakeholders the Board values its staff as there will be a job for the CEO when the leave is concluded.
- Complete an objective assessment of the organization and present to the Board a set of recommendations which will reposition the hospital by making needed course adjustments. If a turnaround is needed, quickly proceed to stabilize the organization and address the root causes of the problems identified utilizing tools and systems which have proven to be effective. Turnarounds are intense, time-consuming efforts which are not generally well done by existing staff that do not have the objectivity, tools, experience, are caught up in the whirlwind of daily operational activities and cannot provide the intense sustained focus which is needed. A “slash and burn” methodology is to be avoided as a balanced approach to managing expenses and building revenue is needed. An turnaround executive can serve as a Chief Restructuring Officer working with the Board and the executive team to accomplish a turnaround.
- Do any “heavy lifting” which may be required to position the medical center for success. While sensitive to the ramifications, the outside interim will not be constrained by concerns for promotion, retirement or long term relationships. Place the black hat on the “outsider” to position the organization to succeed as a well-positioned medical center will attract stronger candidates by obviating the need for them to make difficult decisions, which may bring political baggage, shortly after appointment.
- Mentor individuals promoted from within, or provide an onboarding process for the new CEO. Too many are just hired and then left to their own devices which lead to frustrations, mistakes and resignations. Providing a thorough orientation and support for a period of time shortens the learning curve enabling them to become effective and successful more quickly. This process is equally important for the individual promoted from within as transitioning to the role of a CEO is a very large step indeed.
What to Look Out For
The selection of an interim needs to be done quickly to stabilize the organization and to provide the necessary time for the search for the permanent CEO. However, be aware:
- Some management firms offer interim executives who may lack seasoning in a CEO position contending with issues and culture similar to yours. They may offer a lot of “support” from the home office, but it comes with a price.
- If your organization is in distress, an interim CEO with turnaround experience is essential as this is not an “on the job” training opportunity.
- Do not permit your interim CEO to be a candidate for the permanent position.
- Get your interim from outside your organization so you can benefit from an objective, fresh perspective. Qualified interim CEOs are uniquely prepared for the position and not just “in the right place at the right time”.
- If your CEO was terminated due to poor performance, do not rely upon a member of the existing team to provide change leadership during the turbulent interim period.
- Seek an interim CEO who can document a successful track record of interim achievements in multiple organizations.
- The interim period should not go on too long as the search for the permanent individual needs to proceed with deliberate haste. If the organization needs a turnaround, cultural change or other major work to better position it to attract strong candidates, negotiate reasonable timelines to help to assure things move crisply. Remember, cultural change takes years and the interim can only lay the foundations. Continuing to build on these foundations needs to be goals for your new permanent CEO.
- Bringing in an interim can be costly, but experience shows that the tangible and intangible return on investment greatly exceed the cost. A properly constructed engagement can help to assure this outcome.
The Board and the interim CEO will need to come to a clear agreement on what is expected to be delivered within a specific time frame. The agreement will include an assessment and a set of recommendations to effectively deal with the identified opportunities. If the medical center is in difficulty, the Board probably should wait until it is stabilized and on stronger footing before undertaking the search for a permanent CEO.