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Succession Regression

Molly Rowe, Senior Editor, Leadership, December 14, 2007

Good news for CEOs: You really do matter.

A recent Wall Street Journal article describes several studies linking the success of companies to the personal lives of their CEOs. Not that we didn't already know CEOs matter, but this study shows a leader's influence goes well beyond his or her presence in the corner office.

A Denmark study found a link between reduced profitability and CEO-family deaths; another study showed a dip in stock performance after CEOs purchased exceptionally large homes. Although the studies focused on the performance of large public companies outside of healthcare, healthcare leaders weren't immune to researchers' scrutiny.

Tenet Healthcare CEO Trevor Fetter reportedly purchased a 10,000-square-foot mansion in 2005. Since then, Tenet's stocks are off more than 60 percent, according to one study (Tenet's spokesperson had no comment for the Journal). Researchers don't know why a company's profitability drops after the CEO buys a big home, but some theorize that these leaders spend more time writing checks than scrutinizing company financials.

Regardless of the explanations, this type of research highlights a healthcare leadership hot button: succession planning.

If executives' personal lives really affect the bottom line as much as these studies say they do, organizations should plan accordingly. If, for example, there's a death in the CFO's family, does she have adequate time away from the office -- and Blackberry-- to cope? More importantly (from a business standpoint), have you trained a capable #2 to make decisions in her absence?

Earlier this month, I spoke with Harvard Business School Professor and leadership expert Joseph Bower for an upcoming story in HealthLeaders magazine. Bower's looked at more than 1,800 successions in companies across all industries. By and large, Bower says, most companies don't undertake appropriate succession planning. This holds true in healthcare where, according to the Association for Healthcare Executives, only about 30 percent of hospital CEOs say their facilities practice routine succession planning.

"Succession planning" means more than selecting a new leader six months before a retiring CEO leaves the building. It's a state of mind, says Bower. "Good succession planning means you organize the place so that, over time, the jobs of department heads include not just running the department well but also running the hospital. You have a cohort of doctors that have a broad view of the hospital and how to run it. You begin to have people that you can look to to succeed," Bower advises. You also have people that can step in when personal lives get in the way.

You may have difficulty imagining your organization without you or your leadership team, but you'd be wise to. This type of growth planning makes your staff stronger in their jobs today, and it prepares your organization for the unpredictability of tomorrow.


Molly Rowe is leadership editor with HealthLeaders magazine. She can be reached at mrowe@healthleadersmedia.com.

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