According to the American College of Healthcare Executives, national healthcare CEO turnover is at its highest rate in more than 30 years, hitting 20 percent in 2013. This is a near 25 percent change; since 2003, the average national turnover rate has hovered slightly under 16 percent.
Despite the national jump, 2013 varied quite a bit from state to state. In some places, like Alaska, Oklahoma and Arkansas, turnover was at least 30 percent. In others, like West Virginia and New Jersey, it was just 10 percent. In two states, Vermont and Rhode Island, all CEOs stayed put for the 2013 calendar year.
What is behind the highest CEO turnover in years? "There’s a confluence of events causing the increase," says Ron Seifert, an executive compensation expert at Hay Group. "Perhaps the most significant are the dynamics within the marketplace. Hospitals and health systems are assessing their futures. Mergers, acquisitions, and affiliations are part of the healthcare world, and the reformed environment is creating challenges for organizations to find the best leaders in a changed world. In addition, we’re also seeing a cadre of CEOs who had extended their employment during the 2008-2010 market downturn coming to the end of their terms and not wanting to extend further."
Two CEO personalities
The higher rate of CEO turnover is creating a unique climate for leaders and the systems they command. Of course, when it comes to organizational leaders, no two are the same. In general, there are two types of personalities at the helm of an organization, which inform what that leader will be best positioned to accomplish, according to Mr. Seifert. "Those who specialize in turnarounds have the ability to hone in on specific problems and get the organization hyper-focused on fixing them. These same leaders can sometimes be challenged to craft a new vision and build out collaborative business models and partnerships to move the organization forward,” says Mr. Seifert. “Conversely, broad, strategic thinkers can sometimes miss some of the important details that are necessary for success. The best leaders and leadership teams have both sets of capabilities."
It is difficult to say whether shorter-term or longer-term CEOs are generally more profitable for a hospital, since depending on what an organization needs, an executive of shorter or longer tenure may serve the purpose of a hospital or health system equally well, he adds. It's also tricky to tell if most CEOs set out to stick to their organizations or to turn them around and move on, as their attraction to the job at hand may be more personality-based than situational.
CEO tenure does have an effect on the value of a hospital when it comes to the stability of management as a whole. "Leadership and performance stability is something bond raters look to — the condition of the business and the strategic process. The point about tenure is that it gives more information on the leader in the role and whether or not that leader delivers on his or her commitments. It's a track record," says Mr. Seifert
18 years as CEO
Mike Murphy, president and CEO of San Diego-based Sharp HealthCare, has been with the system since the early 1990s, becoming CEO in 1996. "Our [executive] team, for the most part, has been together since the early 1990s, which has brought a stability, direction and consistency in focus, allowing us to execute on our short- and long-term plans," he says, echoing Mr. Seifert.
Mr. Murphy stays at Sharp because he is genuinely proud of the staff there, numbering more than 17,000, and the work they do. The biggest change he's seen in his tenure, he says, is an intense focus on the culture of care, something Sharp has branded as the "Sharp Experience." Launched 14 years ago, the initiative engages the health system’s hospital, patients and community as partners in care. "It's top of mind for leadership and for everyone in the organization, and it keeps us rallied around doing the great work that we do," he adds.
In Mr. Murphy's experience, whether or not a CEO is best suited for long-term or short-term work varies. "It depends on each individual's own personality and what their skill sets and desires are," he says. "In the mid-1990s we needed to make some fairly significant turnaround decisions for the organization, but since that time we have been fortunate to successfully execute our plans and position Sharp for current and future success in this challenging environment. I personally am inspired to continue improving the organization so it can succeed no matter who the CEO is."
This onward-and-upward approach may very well be the only one that is foolproof: "Having stability in management is great, just as introducing new thinking is very helpful. But good leadership is good leadership," says Mr. Seifert.
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