Shortage of healthcare leaders means premium deals
By John S. Lloyd, for HealthLeaders.com, May 3, 2002
Healthcare leaders are in short supply, especially since many senior healthcare leaders in integrated delivery systems are planning early retirement (HealthLeaders.com, Where have all the leaders gone?). But with the shortage comes opportunity. The National Summit on the Future of Education and Practice in Healthcare Management and Policy examined the severity of the leadership shortage and listed nine factors that contribute to it (see chart). The 2001 summit participants - all leaders in the healthcare industry - agree there exists an acute shortage of executives who have the training to lead multi-billion-dollar healthcare systems and health insurance companies.
While the industry faces a leadership gap, this shortage actually is good news for executives who are ready to step up to the challenge and tackle the CEO position in health care. These leaders can use their confidence and competence to great personal advantage. The best leaders communicate factually, accurately, concisely and honestly about their accomplishments. These executives are clear in their own minds about what they can accomplish. So, when opportunity presents itself, they know how to respond, as in the following scenario:
Assume the board of an integrated delivery system wants you to be the new CEO. Also, assume that no appropriate internal candidate exists. During your first visit to the system, you see significant financial and operational problems, but you are confident you can fix them.
In your meeting with the board, you advance your candidacy by discussing realistic solutions to the problems. Your discussion attracts the board's attention.
Later, the board's executive search consultant tells you the board is definitely interested in your candidacy. You indicate your desire to accept the challenge, but only if you and the board can agree on the following negotiation points:
During the next round of board appointments, you will have an opportunity to recommend three candidates for the board from inside and outside the community. You expect one or more of them will be appointed.
*In addition to serving as a voting corporate officer, president and CEO, you also request the title of vice-chair of the holding company.
*If the board is larger than 12 members, you suggest a seven- or eight-member board.
*You require the chief medical officer serve on the senior management team, or you plan to hire a senior medical officer for the team as soon as possible.
*You suggest a major continuing education budget increase for governance, medical leadership and management.
*You require a median salary (based on the revenue of the organization), but request a 300 percent long-term performance bonus based on reaching set performance goals. This will help the board's compensation committee understand what ""outstanding performance" " really means.
*A real-estate loan of between $500,000 and a $1,000,000 will be forgiven over a five-year period assuming you provide strong organizational performance. If you leave before five years, you agree to repay all or part of the loan.
*You ask for three years' severance and box seats at "Derby Day," or any other special request.
Board members who are unfamiliar with the realities of the CEO marketplace may find these requests bold. But if you are a strong leader, you will eventually find yourself in the driver's seat.
To steal a sports analogy, this is a perfect time to be a free agent - and you may even want to secure an agent to represent you and your interests to an executive search firm and the board. If the board members really believe you can fix their problems and enhance their status in the community, you will get what you want.
What Today's Up-and-coming Leaders Seek . . .
Recently, Witt/Kieffer asked 27 up-and-coming healthcare executives, as determined by Witt/Kieffer partners, to comment on what they seek in a CEO opportunity at an integrated delivery system. More than half of those surveyed responded to these three questions:
You are ready to assume the leadership of a complex healthcare organization. What three elements must such an opportunity have to interest you (excluding compensation)?
What are the right answers you must hear before you will seriously consider an outstanding opportunity?
Beyond base compensation, what other cash compensation, benefits and perks or other conditions would ensure your acceptance of the offer?
Interestingly, more than 80 percent of these outstanding executives say the geographical location of the system is a determining factor in their interest to pursue a position. Equally as strong, the respondents also believe the organization's reputation, market share, financial stability and commitment to patient quality and satisfaction would affect their interest in the opportunity.
Critical Issues in 21st Century Healthcare Management
*Deficiencies in healthcare cost, quality and patient satisfaction
*Failure to attract a new generation of leaders
*Uncertainty as to the career benefits of attaining academic degrees in health care
*Communication breakdown between practitioners and academic institutions
*Insufficient number of residencies, postgraduate fellowships and other practical approaches to professional development
*Declining support for young managers through mentoring and planned career development
*Uneven mid-career education, as compared to that offered by leading corporations outside of health care
*Inability to advance women and minorities to leadership roles
*Shortages of executives ready to enter the senior ranks of emerging multibillion-dollar healthcare systems and health insurance companies.
A senior executive officer of a major Midwest integrated delivery system said, "I personally would be interested in assessing the culture of the organization to determine the quality of its work environment and leadership, including governance, physicians and management. I would only accept a position where my style, capabilities and interest complemented the organization - and I was sure that the organization could and would advance their performance to a higher level."
When it comes to the right answers potential candidates want to hear, the responses suggest that the board must demonstrably show it understands the role of the CEO as leader, creator of strategy and top executive.
Respondents want support from their board and a consistency of values from the board and the medical staff. They want board leadership that will encourage the organization to grow and succeed. Board leaders, not the medical staff, will have a major influence on the candidate's continuing interest in the opportunity.
Finally, respondents assume they will receive a competitive base salary. But equally important is the size and type of long-term incentive plan the board has or is willing to implement. For their outstanding performance, the respondents want plans that will pay 100 percent to 300 percent of their base compensation. They want enhanced Supplemental Executive Retirement Plans (SERP). More than 50 percent expect multi-year (three or more) contracts with similar severance provisions. And they want paid relocation costs, including the management of real-estate sales on their behalf. To quote one respondent: "The hassle of a real-estate transaction is a burden ... The prospective employer should minimize the expense and time related to this onerous task."
Boards have included all of the previously mentioned stipulations in CEO compensation packages. When board members strike these deals, they are more likely to support their executives and the tough decisions every leader must make. Their failure to groom future leaders internally is really an opportunity for executives who are ready to accept risk and achieve the highest levels of performance for healthcare systems.
John S. Lloyd is vice-chairman of Witt/Kieffer, a healthcare executive search firm based in Oak Brook, Ill. He can be reached by phone at 630/990.1370 or by email at johnl@wittkieffer.