When should a hospital CEO give notice?

The life of a CEO means being willing to adapt to change. For some, these changes come faster than others.

CEO turnover rates in the healthcare industry reached an all-time high of 20 percent in 2013, according to the American College of Healthcare Executives. While the rate decreased to 18 percent in 2014, turnover remains a constant in healthcare. A Challenger, Gray & Christmas, Inc. study shows that even in the first five months of 2015, the healthcare industry CEO turnover rate was significantly higher than that of other industries.

Why is the healthcare CEO turnover rate so high? The answer may lie in the trend of consistent industry reforms. "I think certainly the forces of reform and transformation are creating multiple dynamics. For some, it's creating new opportunities while others feel it's a good time to hang up their cleats," says Paul Bohne, managing partner of Witt/Kieffer's Eastern region.

Whether for retirement or to pursue other opportunities, all CEOs must ensure a succession plan is created prior to their departure. Robin Singleton, executive vice president and practice leader for DHR International's National Healthcare Practice, believes an incoming CEO should understand the plan and the reasons behind why the organization has come to such initiatives. She stresses that an outgoing CEO should assist his or her successor, but that he or she "needs to be prepared to step aside immediately."

Paul Esselman, senior executive vice president and managing director at Cejka Search, says the focus should also be on mentoring others in leadership roles who will eventually be able to step into the position of CEO.

When is the best time to make the announcement?
But when should a CEO officially make an announcement of departure? The answer may not be as clear. Four experts weighed in.

1. "The CEO transition time is all based upon the circumstances under which they're leaving," says Mr. Esselman. He suggests a six- to 12-month time frame for CEOs retiring and a six-month time frame for CEOs leaving for a different role. But whether retiring or leaving for another job, CEOs should provide at least 60 days of notice to the board and executive team, he says.

2. Mr. Bohne recommends a slightly longer interval. "As a notice period, you should really be in that eight- to 12-month frame," he says.

3. Ms. Singleton gives a somewhat similar view. "Nine to 12 months ahead of time is typical," she says. "We [at DHR International] recommend the 12 months because it takes into consideration the time to start recruiting and doing interviews."

4. Chuck Lauer, former publisher of Modern Healthcare, suggests a four- to six-month time period. He notes that announcing a departure a year or two in advance is risky. "It's unfair not only to the employees, but to the board in a sense. There's an uncertainty when someone says, 'I'm going to quit,'" Mr. Lauer says.

Too soon or too late?
But both a well-timed and an ill-timed announcement can cause difficulties. If CEOs declare their departure too late, they do not give the board ample time to coordinate a search and ensure a smooth transition. If the departure announcement is made too early, the CEO runs the risk of getting fired, according to Ms. Singleton.

This risk can pose a particularly challenging problem for CEOs leaving to take a leadership role elsewhere. "The difficulty is they cannot let their board or community know until they are the finalist for the search and an offer is forthcoming," says Ms. Singleton. If they announce their departure and eventually do not receive an offer, they are out of a job.

Mr. Lauer also notes that announcing a departure too early can harm relationships. "CEOs should specify a specific date and be fair to the people you've mentored and worked with so they know when the cutoff date is," he says. "Too many people think only of themselves. They forget there are all kinds of people who've given you their loyalty, worked with you in dreaming your dreams and given you 100 percent."

In other industries, CEOs can give 7 days of notice
The healthcare field may be unique in this regard, as many CEOs announce their departures or retirements eight months or more ahead of time. Other industries may not expect as long of a time frame. Some departures are announced retrospectively, after the CEO has already stepped down and a successor has been chosen.

On June 11, Dick Costolo, CEO of Twitter, shared plans to step down July 1. Larry Ellison's departure from the CEO role at Oracle was announced the same day his successors, two co-CEOs, were named last year. Jim McNerney, CEO of Chicago-based Boeing, gave seven days of notice. On June 23, 2015, he announced he would be stepping down as CEO effective July 1. Mr. McNerney plans to retire in February 2016.

Why do healthcare CEOs give their boards so much more time? Ms. Singleton attributes the answer to culture. "The CEOs of healthcare went into the field originally and they stay in it. They have a deep sense of commitment ultimately to their patients and they want to make sure their culture is protected," she says.

No matter the circumstances, CEOs should leave their organizations on as positive a note as possible, according to Mr. Lauer. "My advice to anybody that's leaving any organization is to leave them laughing and leave them with a smile on their face when you go," Mr. Lauer says. "Make people feel good about themselves and it pays off."

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