How to replace an iconic CEO? Turnover at Pimco, Henry Ford Health

The retirements of such successful and iconic leaders could be challenging for the systems. And as a recent high-profile departure of a chief executive in the financial world has illustrated, poor succession planning can be detrimental.

Earlier this week, Henry Ford Health System in Detroit announced its long-time CEO Nancy Schlichting, will retire by the end of 2016.

The announcement, made more than two years in advance of her retirement date, is a signal the health system is serious about succession planning and maintaining organizational continuity during a major leadership change. In fact, the health system had already been working to identify a successor for two years before this week’s announcement, according to an article in Crain’s Detroit Business.

Schlichting joined Henry Ford in 1998 as chief administrative officer and became CEO in 2003. During her tenure, she turned around the ailing system and helped significantly expand market share. She also oversaw the opening of Henry Ford West Bloomfield Hospital in 2009. The West Bloomfield facility expanded the urban system’s reach into an affluent suburban community, and she brought in former Ritz-Carlton executive Gerard van Grinsven to run it. (van Grinsven is now CEO of Cancer Centers of America.)

Schlichting’s planned departure is the latest in a string of retirement announcements from CEOs whose reputations are intricately linked with the systems they lead: George Halvorson, CEO of Kaiser Permanente since 2002 retired in December of last year; Glenn Steele, who has led Geisinger Health System since 2001, will retire in 2015.

The retirements of such successful and iconic leaders could be challenging for the systems. And as a recent high-profile departure of a chief executive in the financial world has illustrated, poor succession planning can be detrimental.

Last week Bill Gross, co-founder and chief of investment for Pacific Investment Management Co., better known as Pimco, abruptly quit to join competitor Janus. A reported $10 billion in managed dollars followed him to the new gig, and it’s estimated that could reach up to $100 billion, according to a Forbes report.

Following Gross’ departure, Daniel Ivascyn was named group chief investment officer; according to a report in today’s Wall Street Journal, Ivascyn was “being groomed as a potential heir to Mr. Gross,” who is 70. He was recently named a member of the firm’s executive committee and oversaw its expansion into alternative strategies. The two hedge funds he managed even outpaced the one managed by Gross in recent years, according to a WSJ analysis.

Both the Forbes and Wall Street Journal reports point to the differences in leadership style between Gross and Ivascyn. The selection of the more team-focused Ivascyn seems to be quite purposeful. A number of challenges have faced the firm this year, including the departure of former CEO Mohamed El-Erian, an SEC investigation into one of its funds and the underperformance of Gross’ once blockbuster fund. Insiders suggest Gross did little to manage these situations, focusing on himself rather than the firm’s success. It’s likely some, if not many, at the firm wanted him out given his changing leadership approach.

Despite Gross’ change in performance, his very public persona as an investing legend seems to be intact, at least somewhat. In fact, Ivascyn's first major challenge as chief is to stem the bleeding at Pimco, as clients, and their money, follow Gross to Janus.
 
While health systems like Henry Ford and Geisinger have luckily avoided such abrupt departures, the Pimco situation shows just how difficult it is for new leaders to win the same level of respect from clients, as well as other key stakeholders.

Perhaps that’s why Schlichting will work side by side with Henry Ford’s newly named president, Wright Lassiter, for more than two years before she leaves for good.

If only Pimco had been as lucky. It appears the key difference is Schlichting was and is committed to ensuring a smooth transition, even hand picking Wright, who she met while on a panel together at a conference last November, according to the Crain’s report. Gross jumped shipped before his successor was fully groomed, and as a result, one of his successor's first duties has been to try to convince clients he's the man for the job.

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