7 secrets to successful executive succession planning

Sanjay Saxena

Sanjay Saxena

What would happen if tomorrow, the CEO didn't exist? What would you do if he or she left, or somehow became incapacitated? Who would be the next person in line to fill the role? Under pressures of other priorities, most healthcare organizations find themselves without a plan for possible successors.

According to a report this week from National Center for Healthcare Leadership, succession planning is one of the least frequently practiced leadership development strategies, particularly at hospitals, compared to larger healthcare systems.

However, all healthcare organizations (regardless of size) should take a page out of the playbooks of some of the Fortune 500 companies, arguably the best-run organizations in the country, and seriously consider their succession plans.

"Succession planning absolutely needs to be a priority for healthcare executives," Dr. Sanjay B. Saxena (pictured), vice president and partner of San Francisco-based global consulting firm Booz & Company, told FierceHealthcare. "There's a significant level of drop-off in talent and experience that exists below the senior team that's been in place. A lot of that is because healthcare executives have not consistently or uniformly taken the time to think proactively about who are the future leaders within their organizations."

Booz recommends the following seven tips to successful succession planning:

1. Start early: Although some experts say that C-suite members and boards should always think about successors, Saxena recommends that it's reasonable to start thinking about some of the promising players a few years into a CEO's tenure. For example, begin succession planning at least three years from the CEO's expected retirement. Make it an institutional activity rather than taking an ad-hoc approach.

2. Promote board-CEO teamwork: "The hospitals that have done this and are thinking about succession planning are the ones where the boards have essentially brought it on the management team and asked the management team to think through it," Saxena said. "Absent that, few management teams are thinking about succession planning."

Define succession planning as a joint responsibility between the board and the CEO. Better yet, make succession planning a standing agenda item in CEO board meetings.

3. Establish successor criteria: What skill sets, experiences, and behaviors do you want the next head of the organization to possess? When developing criteria for the next C-suite member, look at the organization's anticipated market position five years out. This step requires some forecasting into overall industry trends.

"Strategically, you will want to have those individuals to be ones who have a broad-base understanding of not just the sector that they're in--not necessarily the hospital sector--but who have exposure and understanding of some of the other pieces of the system so they understand the financing component, [such as] working at insurers or reimbursement- or contracting-related functions," Saxena said.

4. Use that criteria to select candidates: Evaluate candidates using observable, measurable criteria. That means having one-on-one interviews to assess the operational, strategic, and financial skills and interests of the candidates. The management team and board members may find that, over time, original candidates will fall out of the running, and others may be more appropriate for the future role.

5. Gather a diverse pool of internal candidates: Employees within the organization who work up through the ranks may make the most ideal successors. Booz research found that although boards typically look outside for candidates, insiders tend to perform better and last longer. But looking within comes with a caveat; insiders can't be complacent about the ways things are. Instead, they must be able to envision room for change and flex their muscles in multiple areas. Those who have a well-rounded view often are the strongest leaders.

That doesn't mean to exclude external candidates, though. Assess insiders and outsiders using benchmarks for the candidates.

6. Set candidates up for success: Provide "stretch roles" for contenders to better prepare them for the CEO spot or another executive post.

"You see people who have spent their whole careers in hospital-based businesses," Saxena said. "They know how to run and manage operating rooms, emergency rooms and different services. But if you think about where healthcare is going with the continuum of care and having a broad view of the system, it's critical for an executive who doesn't have visibility in the outpatient environment to get him or her that exposure."

Give opportunities that allow potential successors to grow. Groom them for future positions with active mentoring and training programs to round out their toolkit.

7. Develop a detailed transition plan: When the time comes, detail the roles and responsibilities of the former and succeeding CEO. In addition, engage stakeholders, including board members, in developing and executing a six-month plan for this transition.

"The secret to making it work is when organizations institutionalize it," Saxena said. "It's about leadership development."