Why health systems are relying more on interim leadership

Amid leadership turnover, hospitals and health systems have various choices in terms of filling executive positions, such as appointing a successor from inside the organization or selecting an external —  or internal — professional to take the role on an interim basis during the search for a permanent replacement. 

For Sharp HealthCare, the latter approach has provided an opportunity to bring experience and structure to the organization during a challenging time in healthcare, according to Chris Howard, president and CEO of the San Diego-based health system.

Mr. Howard has experience hiring interim leaders to support his team. He has hired Cindy Johnson, interim chief human resources officer, and interim CFO Doug Watson recently.

"We have choices when we need to fill those positions," Mr. Howard told Becker's. "We either appoint someone directly as a successor from within the organization or if, for any reason, we don't have that opportunity and we take time to conduct a search, that brings in to bear the opportunity to bring an interim leader into place."

No approach, of course, is a one-size-fits-all solution for every healthcare organization. But Brian Krehbiel, managing partner of the interim leadership practice at WittKieffer, an executive search and advisory firm which has supported Sharp, said he anecdotally has observed health systems using interim leaders for longer periods as it takes longer to fill the position permanently. 

The organizations "that have used interims as part of their management structure are using it more," Mr. Krehbiel said. "And a lot of the organizations that never used to use it, because they thought they had bench strength and could move people up, are coming around to the benefits of placing interim leaders in key roles."

He said he's seen this trend due to various factors, including the financial, workforce and operational challenges hospitals and health systems face today. A Kaufman Hall M&A report published Oct. 12 found that more than one-third of hospital and health system transactions announced in the third quarter involved an organization that cited financial distress as a driving factor. Additionally, an Oct. 16 report from Definitive Healthcare found that an estimated 145,213 healthcare providers left the workforce from 2021 through 2022.

"They're finding it hard to promote people when you have these extraordinarily challenging situations and talent shortages like we have now. When you have situations that are reasonable, it's a lot easier to get someone to step up," said Mr. Krehbiel. 

Mr. Howard, with Sharp, said Ms. Johnson, who has been at the organization for one year, specifically has helped maintain stability while also introducing new structures to the organization's human resources function.

"At times it's helpful to have an interim with significant experience who can spend a little more time putting those new and important structures in place so that the stage will be set for the permanent leader once that leader arrives," Mr. Howard said. 

He also pointed to the caliber of interim leaders available, including people with significant years of experience, with matrix structure experience, and people that have worked in different states and regions.

"That varied perspective is quite useful when you come to a system like Sharp that is a complex, highly integrated, forward-thinking organization," said Mr. Howard. "It's helpful to have the degree of leadership acumen that's available on the market today."

Like Mr. Krehbiel, he's also observed more leaders willing to appoint interim executives and more interim leaders available on the market today for such roles than he has seen previously.

"And these individuals in many instances are quite content to fill an interim role for however long necessary because they aren't as interested in moving back to a full-time leadership position," he said.

He attributed this movement, at least in part, to the post-pandemic climate of challenging financial times for healthcare organizations. He said this has resulted in leaders retiring early or deciding to take on different roles of size, scale and scope. 

"Because that's just the right fit for them, especially as we experience a state of turnover that we've not seen in many years," said Mr. Howard. "And as that dynamic unfolds, whether that be for opportunity or organizational necessity, it just creates a larger pipeline of individuals that both are transitioning out and those that are available to fulfill interim roles."

He also pointed to factors such as an aging healthcare executive workforce and the number of leaders who are electing to retire.

"That's creating a larger demand than perhaps we've had in former years," he said.

study conducted by Equilar also showed that "forever CEOs" are looking less evergreen. The study found that the median tenure length for S&P 500 CEOs was six years in 2013. By 2022, it was 4.8 years — a 20 percent decrease, according to an Aug. 3 post from Joyce Chen, an associate editor at Equilar, on the Harvard Law School Forum on Corporate Governance. Average CEO tenure length also decreased during this time period, from 7.6 years in 2013 to 7.2 years in 2022. 

Mr. Howard said he sees the "forever CEO" coming to an end in healthcare. 

"The challenges of our industry and the opportunities that are present in our industry, I believe, are creating opportunities for individuals to either accept greater responsibility elsewhere or simply decide in some cases that their time as leaders has come to an end, and that it's time to either take on interim roles and enjoy more time with their family or retire for good," he said.

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