The do's and don'ts after an abrupt exec resignation

Turnover among hospital and health system CEOs and other executives is to be expected, and many times they involve planned retirements or advance notice of departures for new roles. However, there are also times when a leader abruptly exits their role.

A number of hospitals and health systems, including Houston, Mo.-based Texas County Memorial Hospital and Springfield, Ill.-based Hospital Sisters Health System, have experienced such unforeseen exits in recent years. This also occurred at Franklin, Ind.-based Johnson Memorial Health. Johnson Memorial CEO Larry Heydon resigned in February 2019 after serving in the role for more than a decade. David Dunkle, MD, was subsequently named interim CEO and took over the role permanently in May 2019.

"When I took over, it was really a baptism by fire," Dr. Dunkle told Becker's. "No one really knew that a change was coming. It caught the entire team off guard. And I think you have to work hard to stay calm. It's like any crisis that you work your way through. You have to be very well-organized. You have to set out a plan of attack and execute the plan. And also it's including the whole team, because it didn't just affect myself moving to the CEO role. It affected the whole executive team. It affected the whole organization."

While the number of CEO exits that qualify as truly abrupt or unforeseen is unclear, there is data on exits in general.

Data from the American College of Healthcare Executives shows that the rate of hospital CEO turnover was 16% in 2022 and hit a high in 2013 at 20%. In 2019, the turnover rate was 17% before moving to 16% in 2020, 2021 and 2022. 

Additionally, Challenger, Gray and Christmas data has shown that 2023 began with 23 CEO departures announced in January at hospitals and health systems, marking the highest monthly total for the sector since August 2018. The year ended with 10 CEO departures announced in December.

Anecdotally, Dr. Dunkle and Donna Padilla, executive partner and healthcare market leader at WittKieffer, indicated they have observed an uptick in unforeseen exits.

"We're seeing more and more abrupt departures, and I think it's the stress of the job," Dr. Dunkle said. "And also hospitals are under much more financial pressures. I think that's led to a lot of this."

Ms. Padilla told Becker's that she has observed an uptick in unexpected exits — or at least, in exits that appear unexpected.

"Sometimes they feel abrupt to the market, and they aren't to those from inside," Ms. Padilla said. "You can certainly tell where some of the abrupt exits are. Usually there's a little bit of noise, a little bit more noise and then, all of a sudden, the CEO is leaving. But some of these have honestly been planned a little more than perhaps the market or the news picks up on."

The reasons for exits that appear unexpected vary and may involve the organization dismissing the executive, the executive resigning under varying circumstances, or the executive leaving for health or family reasons. There is also no one-size-fits-all approach when it comes to preparing C-suite members for what comes next when an abrupt executive exit occurs. However, Dr. Dunkle and leaders at executive search firms provided some general do's and don'ts.

Having a succession plan

This is a must whether the leader leaves abruptly, exits for health reasons or perhaps is dismissed, according to Dr. Dunkle. 

"It's having a plan for succession and then being sure you're developing your leaders," he said. "You've got to develop those next-in-line leaders."

Jena Abernathy, senior client partner specializing in executive search at Korn Ferry, also advocated for an emergency succession plan to alleviate any shock following an abrupt departure. 

"In life, there are always circumstances that could lead to this abrupt change, and it could be a health crisis and to be in the business of health, and to not be thinking about an emergency succession plan is really surprising," Ms. Abernathy said. "So we tell boards all the time, 'You should have an emergency succession plan. You should know if the CEO exits tomorrow, who will be your interim?'"

The person who is named to the interim spot may or may not be a potential candidate for the permanent role. However, the primary aim should be stability immediately at the time an abrupt departure is announced, she said.

"This can definitely go a long way in terms of being able to calm the waters with your internal as well as your external [teams] as well as with the community," Ms. Abernathy said. "So that is where I would start."

Todd Drometer, executive lead partner with AMN Healthcare's Leadership Solutions division, agreed.

"The executive team, including human resource leadership, will first need to determine who in the short run can step in as the interim leader," he said. "This person may not be the long-term solution, but rather a short-term bridge to ease employee concerns. Sudden leadership turnover creates uncertainty, and it is important to have someone step into the role on an interim basis to provide reassurance and stability."

Mr. Drometer also recommended that the executive leadership team, in partnership with the internal communications, quickly draft and send a communication to the organization about the recent departure and the new interim leader. He also advised hospitals and health systems to quickly coordinate an in-person or virtual meeting with all related employees to explain the situation and role of the interim leader. Additionally, he recommended that the interim leader schedule smaller group meetings with all related employees to instill confidence and support.

Moving into the search process 

Meanwhile, hospitals and health systems typically move into a search process for a permanent replacement around the time an interim replacement is identified. There are various options for filling the permanent role, whether that's through an external search or promoting an individual from within.

"I think that anytime there is an abrupt change, it's a matter of 'what's next?'" Ms. Abernathy said. 

"What we will tell people is very quickly move into a process where you identify your search committee, and you identify your firm and you do it quickly, so that all of that can be part of the announcement [of the departure], so that people know right from the start that the board is fully engaged, they are on top of this, they already have a plan, and this is what this is going to look like over the next six months," she said. "At that point, then you can start to orchestrate moving into whether it's having internal candidates as part of the process. There are any number of ways to execute the search at that point. But you can move very quickly in the process."

Mr. Drometer agreed that hospitals and health systems should quickly evaluate options for filling the permanent role when an abrupt exit occurs.

If it appears this process may take an extended period, "then leadership should also determine if there is a need for a different longer-term interim leader who will fit the needs of the department(s)," he said.

"Such longer-term interim leaders can either be filled by an appropriate internal leader or by hiring of an external interim leader," Mr. Drometer said. "Regardless of the direction taken, related communication to the employees affected should be frequent, as employee retention becomes a major risk during times of uncertainty."

Transparency amid the unknown

Dr. Dunkle particularly saw the importance of transparency when he moved into the top role at Johnson Memorial. 

"I was aware of the major issues, the major things that the CEO at the time was dealing with," he said. "But there were a lot of other things, community engagements, boards, other things that I wasn't aware of, nor were other members of the team. And I would learn by looking back at the calendar."

Today, he receives updates from his direct reports, even in reference to smaller initiatives within their departments. He said he also tells his team members "basically everything that I'm doing, even the things that maybe haven't been formally approved yet or the things that I'm working on in the background." For example, he notified the executive team of his targets in terms of direct employer contracting and strategic initiatives he's working on in the background. He also created folders for his leadership team in reference to initiatives across departments. 

"It's easily accessible," Dr. Dunkle said. "Transparency is key. If you fail to prepare, you're preparing to fail. … Being ready for an abrupt change of leadership is just something you have to plan for because, unfortunately, it's becoming more of a likely occurrence in today's environment."

Connections between C-suite leaders and community leaders 

Dr. Dunkle also invites other members of his executive team to attend community engagements so they are more aware of the contacts he has outside of the office with local and state officials as well as other community leaders. This includes his CFO, COO, chief nursing officer and vice president of physician practices. 

It's ensuring "they're being seen at these community events and that they know the friends of the organization," he said, adding that his COO has increasingly given talks within the community about the health system.

"I want people to realize everything that he's doing and the importance of the organization," Dr. Dunkle said. "My CNO is very visible as well, and that's important. I think sometimes organizations get in the habit that only the CEO sometimes is the public face of the organization, and there are many people in the organization. They're working hard every day, and I think it's important for the public to realize that."

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