Why is hospital CEO turnover so high? B.E. Smith's SVP of Senior Executive Search Mark Madden weighs in

For the third consecutive year, hospital CEO turnover held steady at 18 percent in 2017, according to an American College of Healthcare Executives' report.

Elevated CEO turnover rates have become the norm in hospitals and provider organizations in the past several years as the industry experiences ongoing change. Becker's Hospital Review caught up with Mark Madden, senior vice president of senior executive search for B.E. Smith, to discuss key factors driving this turnover as well as strategies to manage executive changes.

B.E. Smith, a member of AMN Healthcare, specializes in interim leadership and executive search processes for hospitals and health systems. In his current role within the company, Mr. Madden leads executive search services for senior executive positions. He has more than 25 years of expertise in healthcare recruitment, during which he has established a vast network of executive contacts as well as developed a thorough understanding of urgent issues facing healthcare leaders today.

Note: Responses have been lightly edited for style and length.

Question: The healthcare industry is consistently among the top in regards to turnover rates in the C-suite and other leadership positions. What are some key factors influencing healthcare leadership turnover?

Mark Madden: The exact turnover rate varies by source, but most surveys show general healthcare turnover around 19 percent, with CEO turnover slightly lower at 18 percent. While there are several factors influencing healthcare's continued struggle with leadership retention, there are six primary issues which deserve the most focus.

  1. Aging baby boomers. Every day 10,000 Americans turn 65 years old. As the economy has improved in the past decade, a growing number of baby boomer executives in key leadership positions have begun to leave their positions for retirement or explore new career opportunities in interim leadership or consulting. These careers provide a much more flexible lifestyle compared to full-time positions.
  1. Exodus of current talent. Baby boomers are not the only executives leaving their positions. Voluntary nonretirement departures are also on the rise. There are several reasons. Executives may leave positions to care for elderly parents or to relocate closer to aging family members. Others may pursue positions which offer better work-life balance.
  1. Increased mobility of healthcare professionals. The departure of executives is resulting in increasing leadership opportunities in the workforce market. Additionally, there is a growing trend of healthcare professionals considering a career change. In a recent B.E. Smith survey, 57 percent of healthcare executives said they were considering a career change in 2017.
  1. Shortage of experienced talent. While it has been a focus for some time, the healthcare industry has been slow to implement succession planning. Only 30 percent of healthcare organizations have a succession planning program in place. Subsequently, many hospitals are finding internal talent is not sufficiently prepared to step into increasing leadership roles. This is also having a significant impact on employee engagement and retention. B.E. Smith's survey found 42 percent of healthcare executives believe they must leave their organization to advance their careers.
  1. Evolution of leadership roles. As the healthcare industry continues to shift to a value-based model, executive positions are evolving as well. Healthcare organizations are creating new positions with increasing focus on patient experience and population health. Additionally, executives in traditional roles are taking on increasing responsibilities or even filling dual roles. In response to these changing roles, hospitals are seeking healthcare professionals with a new mix of competencies. As a result, B.E. Smith is seeing increased turnover as executives choose to move on from a changing situation or organizations decide to go in a different leadership direction.
  1. Increasing mergers and acquisitions. Increasing industry consolidation through mergers and acquisitions is also having a significant affect on healthcare turnover. Organizational downsizing and centralization of functions is resulting in the elimination or alteration of executive positions. Additionally, new roles or merged environments also prompt departures.

Q: What are some the opportunities in healthcare leadership turnover?

MM: Leadership turnover presents a significant challenge and opportunity for both healthcare organizations and healthcare professionals.

For organizations, turnover is an opportunity to evaluate a position. Perhaps the position needs a complete overhaul with a new title and focus or simply adjusting the role's responsibilities will meet the requirements of the organization. Organizations should also consider the competencies and skill sets the new leader needs to be successful. Finally, organizations can use turnover to examine their compensation plan to ensure it is aligned with the shifting focus to value as well as the organization's mission and culture. Effectively aligning compensation will increase retention and engagement of the new leader.

For healthcare professionals, increased turnover is generating exciting new career opportunities. Healthcare executives with the right skills and leadership approach are finding positions which provide growth outside the traditional career path in their area of expertise. For example, there is an increasing demand for clinical leaders who can lead initiatives in population health or help integrate patient care and technology.

Q: Are there strategies for healthcare organizations to avoid or mitigate the risks associated with leadership turnover?

MM: Organizations can reduce the risk of leadership turnover by avoiding a common trap: viewing turnover in isolation. Turnover is a result of three specific areas of workforce management: recruitment, retention and engagement.

Recruiting the right executives up front is the first step in preventing turnover. Recruit a leader who will not only meet the needs of the organization today, but also for tomorrow. As mentioned previously, the new leader needs to share the organization's culture and mission. Finally, recruit a diverse set of leaders with different backgrounds, specialties and ideas.

Recruitment efforts are easily undercut if organizations are not focused on retention. Retention begins day one, by effectively onboarding new staff and setting them up for success. It continues through a succession planning program which develops staff and prepares them for future roles in the organization. Additionally, healthcare organizations must become more diligent to recognize good leadership skills and understand that leaders are transferable to most areas of the operation. Hospitals should use traditional ladder career paths but also have the flexibility of a lattice structure. This approach supports retention and provides interesting new opportunities and challenges which are attractive to members of younger generations.

Succession planning programs are also closely linked to engagement. Studies have shown leadership development programs are excellent tools for driving increased engagement and satisfaction. Additionally, organizations can drive engagement by building a culture which enables staff to meaningfully contribute to the organization and affect strategic goals.

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