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Before you launch an exhaustive CEO search, look around: Your future leader may be standing right in front of you.

Most chief executive officers won't even take a sick day, let alone imagine their teams running full-time without them. But as average CEO ages rise and organizations both inside and outside of healthcare face unexpected turnover in the corner office, hospitals should consider a long-term plan for replacing their top executives.

Only about 30 percent of hospital CEOs said their hospitals practice routine succession planning, according to a 2007 survey by the Association for Healthcare Executives. When a senior leader leaves, organizations often have no choice but to launch broad searches for a replacement. Such searches can drag out, wasting time and resources. What's more, when an external candidate is hired, the results aren't always satisfactory or long-lasting.

"When you get in a car, you have a pretty good idea of how it will drive without really knowing what's under the hood. But companies, especially big ones, aren't like that," says Harvard Business School professor and leadership expert Joseph Bower. "You really do have to know how it works, what kind of capabilities the company really has, whether the technology is any good, whether the systems work. You need to know the culture and the markets and the competition."

By studying 1,800 successions across all industries, Bower determined that companies that promote insiders to senior leadership positions perform significantly better than companies that don't when performance is measured over more than three years. Internal hires stay at the company longer, and the company performs better while they're there. "This is particularly true when prior performance of the company has been sub par," Bower says­--ironic considering that most organizations look to outsiders when their performance is struggling.

Companies that manage succession well see it as part of the way they run the organization, Bower says. They are always looking at how potential future leaders are performing, what kinds of jobs they have, and how the organization can help them grow. "Succession planning permeates everything, from recruiting, to the way the company is organized, to the more obvious things like performance evaluation and compensation," Bower says.

Cultivating internal candidates requires backing from the board, of course, and many organizations don't have qualified senior executives-to-be just waiting in their wings. Nevertheless, some forward-thinking organizations have demonstrated that it's possible to identify potential leaders and hire from within without ever posting a want ad.

From bedside to corner office

Frank J. Cracolici has been a nursing director, a chief nursing officer, a chief operating officer, and now president and CEO--all within the same health system, Continuum Health Partners in New York City. His latest appointment, president and CEO at St. Luke's-Roosevelt Hospital Center, came about in 2007 after the hospital's long-time leader left to become the health commissioner for the state. Rather than launch an exhaustive national search for a chief executive of its 687-staffed-bed hospital, Continuum looked within.

Cracolici's appointment is unique in a couple of ways. First, he's an insider--he's spent the majority of his 20-plus-year career at Continuum hospitals. Second, he's an RN--a rare credential in the world of hospital CEOs. His nursing background gives him credibility with the 1,500 or so nurses who work under him, and his clinical acumen eases physician relations. Continuum's willingness to promote what was perhaps an unconventional type of hospital executive comes from senior leadership's belief that if you give people--all types of people--the right opportunities and good mentoring, you may uncover capable and unexpected leaders.

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