Although the majority of healthcare organizations point to recruiting and retaining talent as top priorities, few take the necessary steps to establish a solid succession plan, according to executive search firm B.E. Smith. Lack of succession planning has consequences at all levels of the organization, but the stakes are particularly high at the executive level.
The healthcare labor market today is highly competitive, and healthcare leaders know it — 63.5 percent of healthcare leaders responding to B.E. Smith's 2016 Intelligence Report indicated "finding quality candidates" was their biggest challenge when filling executive vacancies.
While more than half (53 percent) of respondents said their primary strategy for addressing this challenge would be internal development, only about one-third said they have a formal succession planning program.
"I've been doing this for 25 years, and succession planning is probably the biggest disappointment I've seen in [the healthcare] industry," says Mark Madden, senior vice president of senior executive search at B.E. Smith. "Everyone talks about succession planning and how important it is, but only a minority of organizations is willing to invest and do what's necessary to have a formal succession planning program."
Why a formal program is necessary for healthcare organizations
If a CEO leaves and there is no solid succession plan to enact, the organization is vulnerable to losing momentum and staff will likely lose confidence in the leadership. On the other hand, smooth leadership transitions can send a message of stability and mitigate uncertainty among staff when a leader departs.
Additionally, the leadership development component of succession planning has other tangible effects on organizational culture and employee engagement, according to Mr. Madden.
Most employees at any level appreciate opportunities for leadership development, especially millennials, according to Mr. Madden. Investing in their careers shows employees that the organization values their contributions and believes they have the potential to grow into leaders. This generates higher satisfaction and engagement among staff, which can help retention.
However, this sequence of positive effects will likely only occur if an organization establishes a formal succession planning program. "If it's not a formal program, there's a tendency for leadership development to become haphazard," says Mr. Madden. "It must come from the board and the CEO. If it comes from the top, there's an expectation that [leadership development] is part of the company culture — it becomes a program with sustainability."
6 common succession planning errors and how to avoid them
Organizations that choose to invest in a formal succession plan are often derailed by six common missteps. Here, Mr. Madden offers tips to avoid these pitfalls.
1. Lack of consensus around the succession plan. "If it's not endorsed by everyone in the organization, it can quickly be seen as bad or inconsistent," says Mr. Madden. A succession plan can only be successful if it is backed by the board and C-suite, because without their support, the rest of the organization will not take it seriously. "The succession plan must be hardwired into the strategic plan when looking at the organization as a whole," he adds.
2. Exclusive focus on top executive positions. It's important not only to have a succession plan in place to fill top executive roles, but to also develop leaders and aspiring leaders at all levels throughout the organization. The best leaders might emerge through the ranks if given adequate support and development opportunities.
3. The succession plan is too rigid. Mr. Madden says succession plans must be flexible and bend to accommodate candidates if they seem to be the right fit. He suggests thinking of one's journey to the C-suite as a career lattice instead of career ladder, meaning it's OK if a candidate has different kinds of experiences under his or her belt than those that have traditionally been included on CEOs' resumes. "Don't be so restricted that you only allow people through the succession planning program if they go from point A to B to C," says Mr. Madden.
4. Technology is overlooked. Many organizations are already implementing predictive analytics to support various initiatives, such as infection prevention and scheduling staff. These tools can also be applied to succession planning by anticipating the organization's future leadership needs and what types of skills will be most important, as well as predicting which candidates have the highest potential for success based on leadership assessments and evaluations, according to Mr. Madden.
5. Leadership development is too limited. A formal succession plan includes comprehensive leadership development programs inside the organization, but Mr. Madden says organizations should also encourage employees to seek further, less structured development opportunities outside. "If I was a healthcare leader and I had companies like GE, Apple, Microsoft or Google in my backyard, I'd be suggesting to some of my emerging leaders to go find someone in on of those organizations who they admire and ask them to be a mentor or coach," says Mr. Madden. "You can look outside of the healthcare industry, too."
6. Failure to train for the future. When designing a succession plan, remember that demands for talent and skills will change over time. For example, key leadership competencies today — such as adaptability and willingness to take risks — were not important criteria for leaders several years ago. These core traits and skills will continue to evolve in the future.