By Mike Alexander, M.S., FACHE, Senior Consultant, Via Healthcare Consulting
According to a survey released in 2021 by the American College of Healthcare Executives, the turnover rate for hospital CEOs has ranged from 16% to 18% per year on a fairly consistent basis for the past 40 years. While the national rate has been relatively stable, there is a wide variation of rates from state to state. According to this same study, for the calendar year of 2020, the District of Columbia led the category, with 40% of hospital CEOs leaving their position either voluntarily or involuntarily during the period. Washington, D.C., was followed by Maryland, Wyoming, Washington, North Carolina, and New Mexico, with at least 29% hospital CEO turnover each. In fact, at least 17 states had turnover rates of 20% or higher.
Even more startling, according to this same survey, 22% of hospitals reported having three or four CEOs in the past five years. With this in mind, it is fair to say that many hospitals will likely, in any given five-year period, have their CEO leave for one reason or another.
The Board’s Only Employee
One of the most important responsibilities of a governing board is that of hiring your CEO and evaluating the performance of your CEO. I say “your” CEO because while all other employees of the organization report either directly or indirectly to the CEO, the CEO reports directly to the board. It is well documented that CEOs have a huge impact on organizational success; therefore, it is critical that boards identify the right candidate and actively monitor progress against goals.
The CEO is chosen by the board and serves as the recognized leader of the organization. The CEO is responsible for overseeing the daily operations and performance of the hospital or system as it pursues the components of the strategic plan. The success of the person chosen to fill this role is vital to the overall success of the organization.
There are many factors and characteristics that determine the success or failure of the person chosen for this role, but one of the most important is his or her relationship with the board. It is, therefore, foundational that the board takes deliberate steps to ensure that its chosen CEO has every opportunity to succeed.
To improve the odds that your CEO will enjoy a long tenure, here are some practices that your board can follow to make this happen.
Hire the Right Person
Being the CEO of a hospital or system is among the most complex jobs in the market today. Few other industries have the same level of regulations dictating how everything that happens within their walls is done. These regulations include specifying not only how and who to bill for the services the hospital provides, but also what will be paid for these services. Add to this the requirement to provide services to those who have no means to pay…and this quickly becomes a very difficult business to operate successfully.
Despite the many challenges that are inherent within this business, there are many people with the proper education and experience that will apply for an open CEO position. However, simply meeting the basic requirements in a job description does not mean that someone will be successful in a given role. The proper education and experience are very important characteristics needed in a CEO. Just as important is what I refer to as the right “fit.” The role of a CEO is as much political as it is operational. Just knowing the right thing to do is often not enough.
A CEO has to be able navigate various personalities and perspectives and to bring other people (who sometimes have different ideas) in the direction that the organization is moving. Decision-making can grind to a halt if the CEO does not relate well with the key players and they dig in their heels in opposition. If this happens, then right or wrong, the CEO will be destined for failure.
The right CEO is one who not only has the vision for the future, but also can work with the unique personalities of the people and the distinct culture of the organization to be able to get them on board with the vision. Having a relatable personality and an inviting approach to dealing with people can be every bit as important as having the proper number of years of experience.
Pay Them Fairly
Compared to most jobs, the CEO position tends to pay quite well. Considering the requirements, the expectations, the personalities that must be managed and steered in a proper direction, along with the heavy responsibility that this position bears, the role of the CEO should pay well. Even with this in mind, it is usually less expensive to pay the right person a fair compensation package than it is to find a CEO “at a bargain” and then later have to replace that person. It is often a wiser decision to make sure that your CEO is satisfied with the working conditions and treated fairly and that the pay structure compliments the responsibility.
When a dissatisfied or unsuccessful CEO leaves, there are many projects and initiatives that, in the absence of this key leader, come to a screeching halt. Momentum is lost; members of the medical staff can get nervous about the stability of their futures and the future of the hospital. It can take six to twelve months to go through the process of recruiting, interviewing, re-locating, and on- boarding a CEO. (It can be even tougher if you are in a rural location.) Once this process has been completed, many plans and strategies will be starting back at ground zero again. Many of these related costs are not even measurable. In short, if you think that the compensation for the current CEO is expensive, just wait until you see what getting the next one is going to cost.
Introduce and Orient Them Properly
Within the hospital and medical staff, it is important that the board demonstrates united support for the chosen CEO candidate. Even if the vote was 4 to 3 on selecting the candidate, the board has made a decision, and it becomes each member’s obligation to get behind and support the decision no matter how each member voted as an individual. By “orient,” this doesn’t mean letting the new CEO know where the restroom and the cafeteria are located and where to park; it refers to helping get the CEO acquainted with the organizational terrain and the political landmines that he or she is sure to face. If there have been sources of division in the past— decisions that were controversial, particular members of the medical staff that tried to use back doors to get their ideas through, uncooperative board members, others on staff who had also applied for the job and are bitter about not being selected—don’t let the new CEO stumble onto these problems unexpectedly. Help to prepare him or her for these issues—because they will most assuredly arise.
This doesn’t mean telling the new CEO what he or she should think or what decision to make; just don’t let this person walk into a minefield completely unprepared. Early missteps can set the CEO off on the wrong path and can damage his or her ability to lead. Do everything that can be done, as a board, to set the new chief up for success.
The assimilation of a hospital CEO into a new position is not only about an introduction to the hospital and medical staff, but also to the community in general. In most cities, hospitals are an important source of health and health care, yet they are also a business and a vital part of the economic engine that drives the city and county where they operate. Many times, the hospital can be one of the larger employers in the area. Taking this into consideration, it is important that the hospital be seen by the community not only as a trusted provider of health care but also as a good corporate citizen.
Be sure to introduce and involve the new CEO with the city and county leadership, including civic groups, media leaders, and the chamber of commerce and other economic development groups. Encourage the CEO to join in and help to make the town a better place to live.
Set Clear Goals and Measures
One of the most common mistakes made by boards is to assume that the new CEO knows exactly what you as a board want to see happen. More than once, I have been part of discussions that went something like: “Well, I just don’t like where he/she is headed.” Or maybe, “That is just not how that should have been handled.” And, “They just never even seem to focus any attention on…”
Very often, the lack of satisfaction comes from not having discussed and agreed on specific goals and areas of focus that should be targeted and how they should be measured. I have been witness to CEOs who have been left to their own direction and lose their jobs over what was more of a poor communication issue rather than an actual performance problem. It is very frustrating for a board to see things not going in the direction that was expected, and, believe me, after spending years in the CEO seat, it can be just as frustrating not to have clear direction and to be missing something that you didn’t even know was a target.
It is very important to set these goals early and then review regularly, rather than waiting until the end of the year to see how they are coming along. I recommend quarterly reviews so that if course corrections need to be made, constructive criticism needs to be given, or some goals even need to be revised or removed as situations change, these adjustments can be made early to avoid wasting time and resources. When the CEO and the board sit down to complete the annual evaluation, there should be no surprises on either side of the table.
Give Them Some Leash
Each person brings a unique style and personality to the job. There was something about this person that clicked in the interview process that made clear he or she would be the best choice for the job. Trust your decision and allow this person the opportunity to do the job with his or her own approach.
Obviously, you can’t allow the new CEO to proceed in ways that violate policies or laws, but you can provide some freedom to approach things in a way that may be a little different from how the last CEO would have handled it. Let the CEO have the chance to develop his or her own culture. The board can determine if it is working or not; but at least leave some room for the chance to approach the work from a different perspective. Fresh eyes can bring fresh perspective. There may be strategies or service lines not previously considered that may be ripe for implementing. You are paying the CEO to do a job, let him or her do it.
Have Their Back
In the current evolving environment, every CEO will have to face some tough choices and decisions. There may be some decisions that were put off because the previous CEO knew he or she was leaving. Now the new person has to face these challenges. Maybe it is a personnel issue that has needed to be addressed for quite some time, but no one has been willing to tackle that fight, and it has just refused to go away. A good CEO will do his or her best to make sure that this type of issue does not catch the board off guard. When the CEO sees something brewing, he or she should inform the board about its possibility and the plan to address the issue. Many times, there is a tendency to put off tough decisions or maybe just avoid them altogether, but when it gets right down to it, the right action needs to be taken. Don’t be afraid to let that decision or action happen and don’t hesitate to stand behind your CEO when he or she has to be the one to do it.
Remember That You Are Hiring a Human Being
Those who fill the role of CEO may have wonderful educations, and they may tell stories during the interview of how they transformed hospitals from the brink of disaster and took them to new heights of profitability and performance. The truth is that underneath all the experience and accolades, there is a (relatively) normal, imperfect human, just like you. They have families whom they worry about; they struggle with keeping off that extra weight; they get nervous before they stand up and speak to a group. Sometimes they even say the wrong thing or react the wrong way to a situation.
Keep in mind that CEOs in health care are under a great deal of stress as they carry the weight of responsibility for a large organization that holds not only people’s lives, but people’s livelihoods in its hands. They are going to forget something at times, they are going to take some risks that don’t go quite as well as planned. They take the pressure personally. Be there for them as they work through these things, encourage them, coach them up, stand with them. They are counting on you for that.
Let Them Have a Life
Being the CEO of a hospital takes long hours; it weighs heavily on the mind even when away. It is a very consuming job, but that is what it is…a job. It does not stand for someone’s life. CEOs need time away from their jobs. They need a mental break. A hospital runs 24/7/365, but the CEO cannot be there every minute. The CEO needs family time to just be somewhere else. CEOs should have generous vacation time and be encouraged to use it. When there is no time to recharge, it is too easy to burn out in a hurry.
I recently heard about a hospital board chairman who would call the CEO every morning at 5:30 a.m. to find out what he was going to be working on that day. First of all, that is not the proper role of a board chair. This person has not only stepped over the line between governance and management but has gone all of the way into micro-management. I can imagine that it will not be long before that board is going to be looking for a new CEO. No one wants to work and live under that kind of scrutiny. This is clearly an organization that could benefit from bringing in an external advisor to help them to reset some proper boundaries.
Secondly, that is just an inappropriate time to call someone about anything that is not an emergency. Respect a leader’s time away from the office. Let the CEO have a life, or soon he or she will be choosing to live that (work) life somewhere else.
Set the Table for Success
Getting your new CEO off to a good start and providing an opportunity to have a healthy balance between work life and personal life will pay dividends to your organization for years to come. This will not only enable your organization to function on a higher level, but it will also do the same for the board. It is a much more efficient use of the board’s time to be planning for the future of the hospital rather than spending it trying to hire another in a string of CEOs.