CEO SUCCESSION PLANNING

Presented at the “Leading Wisely, Leading Well” Retreat

Alderbrook Resort & Spa

May 22, 2007

Presented by Phil Sandifer, FACHE

The Lakes Group, LLC

Introduction

WHO HAS A FORMAL (OR INFORMAL) PLAN FOR THEIR SUCCESSOR? WHO KNOWS ABOUT IT?

WHOSE BOARD HAS A CEO SUCCESSION PLAN (THAT YOU KNOW ABOUT?)

ACHE STUDY“CEO Succession Planning in Freestanding U.S. Hospitals: Final Study”October 27, 2004 (Full Report Available on ACHE Website)

Study revealed: 21% of hospitals ‘routinely’ develop C-Suite leadership

succession; 17% of these have identified a CEO successor

Hospitals with a median of >130 staffed beds most likely to develop succession planning programs

Hospitals with median of <61 staffed beds rarely do succession planning

Hospital CEO Longevity and National Rate of Turnover

41% of hospitals’ have had 1 CEO for 5 years 22% have had 3-4 CEO’s over 5 years“The Impact of CEO Turnover in U.S. Hospitals: ACHE Final Report, Spring 2005”: Khaliq &

Thompson

National turnover rate 2006: 15%; 2005: 14%; 2004: 16% Washington State (2006) rated 16th at 12% turnover; Oregon 9th @ 10%;

California 29th @16%; Highest was #1 Delaware @ 40%

“Hospital CEO Turnover 1981-2006, Research Publications for ACHE”

Observations from an Interim CEO: Hospital Environment Upon ArrivalHospital Sizes 15-120 Beds

Hospital CEO’s had departed 10-20+days prior to arrival

Irregardless of the reason for CEO departure, I found:

Perceived (or real) communications breakdown in specific areas-internal and external stakeholders

Halt/slowdown of short term strategic and tactical planning

Communication issues led to negative perceptions toward the leadership team (to include the Board)

Key leadership (C-Suite) vacancies compromised operational/strategic accountability

Transition vs. Change

Change is “external”

Transition is “internal”

“Normal” Turnover, e.g. no succession planning can have negative impacts similar to the previous slide

Why Succession Planning for the CEO and Key Leadership is Not the “Norm” in U.S. Hospitals

Why do you think our Hospital Districts don’t do succession planning?

Future Board Development of Succession Planning(CEO Alert)

“Big Business” boards are encouraged to plan 4 years ahead

“Practical Governance” by Tyler and Biggs encourages hospital boards to:

Confirm succession planning is being done by adding to the CEO’s Performance Evaluation

Board to approve ‘successor’ and succession plan Board to ensure that future Board leadership supports plan

Final Thoughts?Questions?

Think about how your Board would react to your offer to develop a ‘Succession Plan’--Any comments?

Think about how you would respond if one of your Board members reads about the Board role in succession planning in a trade publication or it is a conference topic-any comments?

Questions?