Executive turnover in healthcare is not new. Nearly all issues of Becker’s Hospital Review report on executive moves and departures. The American College of Healthcare Executives (ACHE) has tracked hospital CEO turnover for many years, reporting a rate of 16% in 2021 — a persisting trend that’s ranged from 13% to 20% since the early 80s. Though other C-suite roles may have experienced slightly lower turnover rates, the “Great Resignation,” aging Boomer executives, mergers and acquisitions, all add up to a perfect storm affecting all executive positions.
Also, not new to healthcare, is one powerful antidote or protective measure against the fallout of high turnover: succession planning. While most healthcare leaders know and understand the concept of succession planning, studies show nearly 70% of all succession management plans fail at the implementation stage. Leaders have an intent to do it, but don’t.
Benefits of Effective Succession Planning
On the flip side, when succession planning is successfully implemented, research shows organizations reap significant benefits, including:
- Ensuring the retention and advancement of the best talent in the organization
- Identifying potential successors so they may be groomed for top leadership ahead of time
- Limiting disruption in the organization when unplanned turnover occurs
- Building your competitive advantage and outperforming competitors
It’s interesting to note that among S&P Fortune 500 companies, 63% of newly appointed CFOs are promoted internally as a result of succession planning. If market leaders find the practice beneficial, why isn’t it practiced more widely?
Steps to Effective Succession Planning
To achieve successful succession planning, follow these steps:
- Identify Key Roles: Begin by identifying which roles are critical for succession planning. This includes assessing which positions have the most significant impact on organizational success and stability.
- Talent Assessment: Evaluate internal candidates’ readiness through performance reviews and 360-degree feedback. This process helps in understanding the strengths and development areas of potential successors.
- Development Programs: Implement targeted leadership development programs. These may include mentorship, coaching, and training initiatives to prepare candidates for future leadership roles.
- Implementation and Monitoring: Develop strategies for implementing succession plans and continuously monitor their effectiveness.
Succession Planning Obstacles
Succession planning is challenging. Common pitfalls include a lack of commitment from senior leadership and inadequate resources allocated to the process. Try these steps to overcome obstacles:
- Gain Leadership Buy-In: Ensure that senior leaders understand the value of succession planning and are actively involved in the process. Regularly communicate the benefits and progress to secure their commitment.
- Allocate Adequate Resources: Budget for succession planning and development programs. Investing in these areas is essential for long-term success and should be treated as a priority.
- Create a Succession Planning Committee: Form a dedicated team to oversee the succession planning process, giving the attention and resources needed for successful implementation.
The ROI of Investing in Succession Planning
In an error of cost containment and financial struggles, leadership development activities tend to move down on the priority list, with costly consequences. It becomes a paradox to know that succession planning can save an organization money, yet no money is allocated to the strategy.
In reality, organizations that invest in leadership development, mentoring, and executive coaching are a step ahead in their succession planning and in their overall retention plan. Calling it a “mission critical” responsibility, the American Hospital Association (AHA) suggests the return on investment (ROI) of succession planning takes into account the costs of recruitment, onboarding, turnover, and leadership development with how well individuals are performing in their new positions.
Ensuring a consistent and effective leadership at the top should be a priority for healthcare organizations, the AHA argues: “Comprehensive succession planning is a significant part of [your] leadership responsibility.”
Can you afford not to invest in succession planning?
Debra Harrison was the Chief Nursing Officer for Mayo Clinic in Jacksonville, Florida from 2006-2016. She retired in May 2016 and joined MEDI as an Executive Coach in early 2017.
Gina Schneider leads business development and operations for MEDI Leadership.
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