A client of ours, a Chief Nursing Officer who has been in healthcare for 30 years, recently said, “I was planning on retiring in three years, but given the state of healthcare and the savings plan we have in place, I have moved up the timeline to next month.” As we dug deeper, we realized that there was not a clear succession plan in place. “None of my direct reports are ready, and there is no one in the system who can take on this big of a role either,” she explained. “We will need to do a national search.”
Unfortunately, this scenario is very common in healthcare today, yet workforce retention and succession planning challenges are nothing new to healthcare leaders. Becker’s Hospital Review reported five years ago that an aging workforce and the need to develop a new generation of workers amidst emerging challenges were two significant problems facing healthcare CEOs. More recently, Modern Healthcare reported that 70% of healthcare leaders said their organization had no succession plan in place — despite the fact that the American College of Healthcare Executives predicted that almost 70% of healthcare leaders would retire in the next 10 years.
So, why is succession planning so important now?
▷ Baby Boomer Retirements
Healthcare was already feeling the impact of Baby Boomer retirements and, according to the Pew Research Center, the retirement rate of Baby Boomers accelerated in 2020 and 2021, from 2019 rates, resulting in over half of workers aged 55 having opted for retirement as of Q3 2021. Roughly 10,000 Baby Boomers retire daily, taking their professional knowledge and skills with them, often with no clear, capable successors ready to carry on.
▷ Competition for Talent
Record resignations (a.k.a. “The Great Resignation”) and workforce shortages have resulted in increased competition for healthcare organizations looking to attract key talent for leadership and staff positions. We find ourselves competing not only with other healthcare organizations but with other industries for talent. According to the Bureau of Labor Statistics, 4.3 million workers quit their jobs in December 2021.
In addition to Baby Boomer retirements and competition for talent, the lack of (or lack of understanding of) opportunities for professional growth in their current organization can negatively impact employee retention. Younger members of the workforce expect their employer to provide development and advancement opportunities.
We believe intentional succession planning needs to be a priority for healthcare executives. In this dynamic environment, it is especially valuable to take a proactive approach to identifying potential successors and future leaders in the organization. There is frequently a critical skills and knowledge gap between the leaders who are/have been in place in an organization and those below them. Taking a more consistent, thoughtful approach to talent management and succession planning can help reduce vulnerability and disruption when transitions occur. Too often, organizations promote leaders who have a steep learning curve and hope for the best, rather than thoughtfully preparing them for the role and positioning them for success. In addition, many organizations do not have a process for understanding their employees’ leadership aspirations and providing them with meaningful training and development opportunities.
Given the right level of attention and planning, a strong talent review and succession planning process can save an organization time, energy and money. Some benefits of an intentional succession planning process include:
- Ensuring and Building a Strong Culture. Senior leaders can pass on their learnings, as well as organizational philosophy and values, to help ensure a strong and stable culture
- Retaining and Recruiting Top Talent. When a person is hired into an organization with a strong succession plan, they can see how they fit into the organization, recognize that the organization is committed to their growth and development, and are typically more engaged and inspired to continue to build their career there. This is particularly important to the Millennial generation, which makes up the largest share of the current workforce.
- Improving Key Scores and Reimbursements. A research study conducted by Kevin Groves, PhD, associate professor of organizational theory and management at Pepperdine University Graziadio School of Business and Management, revealed that hospitals that adopted talent management and succession planning best practices were associated with high scores on CMS’ Value-Based Purchasing metrics, which are tied to reimbursement rates for Medicare and Medicaid programs.
- Minimizing Significant Disruption During Transitions. Hiring from outside typically results in a 12-month learning curve for the leader to be fully effective. Effective succession planning and promoting from within can significantly shorten this time span.
- Revealing Vulnerabilities in the Workforce. By having a succession planning process, organization leaders can better understand what leadership will be needed in the future and the current state of leadership in the organization. Armed with an understanding of the organization’s leadership talent and skills gap, organizations can apply this wisdom to intentionally respond to individual and collective leadership development needs.
- Preserving Reputation and Relationships. Promoting from within allows key relationships to remain strong and reputation to stay intact. For example, physician relationships are incredibly important in healthcare. Each time a new leader comes on board, key physicians often worry, “Will they care as much as the old leader?” or “Will they understand what we are really trying to do here?”. One key physician leader confided, “It is an ongoing revolving door around here; very hard to make traction since we have to start all over again each time a new leader is brought in from outside.”
Building your Succession Planning Process
First, it is important to note that your organization will benefit most from succession planning if you broaden it beyond C-suite roles to include other levels of leadership. Below are some best practices for building your succession planning process.
▷ Understand current and anticipated leadership needs by business unit.
What are the current leadership needs and what key leadership needs/roles do you anticipate will be needed in the future (three to five years out) and what are the critical knowledge, skills and abilities that will be needed for success?
▷ Understand the current state of leadership across business units.
A structured annual leadership talent review process can help you assess current talent, clarify vulnerabilities and opportunities in key leadership, strategic and operational roles.
▷ Determine readiness.
Identify leaders who are (a) ready now for additional or new responsibilities, (b) likely to be ready with development, (c) well-placed in their current role, and (d) in need of development to succeed in their current role.
▷ Target development.
Armed with these insights, you can target individual development needs and match leaders with the right opportunities (e.g., stretch roles, projects, committees, further training and development). In addition to building your organization’s leadership capacity while achieving strategic goals, you will be able to identify and address themes in overall leadership development needs.
A thoughtful talent review and succession planning process will help position your organization for current and future success — if you manage it effectively.
Need to pick our coaches’ brains? We’re happy to answer questions and share what’s worked (or not) for organizations like yours.
Meet the authors:
Cheryl Foss has over 20 years of leadership development, team development, strategy development, organization design, and change management experience. She integrates extensive experience and deep knowledge in these areas in her work as an executive coach and consultant to elevate performance in complex systems and help executives achieve unsurpassed results.
Kathy Gibala is a sought-after executive leadership coach with more than 25 years of healthcare industry experience and over 15 years as a coach. She is honored to serve as a trusted partner and change catalyst to healthcare executives across the US to raise the bar on their leadership, build high-performing teams, and accelerate transformative change. Kathy incorporates neuroscience-based coaching techniques to help healthcare leaders expand their impact and reach their fullest potential.