As CEOs Postpone Retirement, Succession Plans Still Matter

It might be the challenge of being on the playing field for the rollout of the Patient Protection and Affordable Care Act. Or, it might be a lack of qualified successors, or a board of directors that just can't say goodbye, or even something as mundane as a gutted 401(k).

Whatever the reason, many healthcare CEOs age 55 and older say they're in no hurry to retire.

A May survey of 200 CEOs by executive search firm Witt/Kieffer found that only 24% are planning to retire within four to five years. Of those, 14% will retire within three years and 8% plan to retire within one year.
Nearly half of respondents?42%?are more than five years away from retirement and 12% have no retirement plans in place.

Most surprisingly, of those in the age 55-59 group, 71% either have no retirement plans, or plan to retire in more than five years.

Elaina Genser, senior vice president/managing director at Witt/Kieffer's western region says 88% of the CEOs say they have goals achieve before they retire and 83% said they wanted to help with the challenges ahead in healthcare, including PPACA.

"There are a lot of them thinking 'this the biggest thing since Medicare. I want to be part of it, and then I can leave,'" Genser tells HealthLeaders Media.

Three out of four CEOs say their boards don't want them to leave, and 52% say no one at their hospital is qualified to replace them.

Genser says the survey points to the need for succession planning in the C-suite, even for CEOs who aren't ready to retire. "As people get older, things happen health-wise. You have to balance it," she says. "You always want to train more than one successor. If they leave to go somewhere else, you wouldn't have anybody. This is about protecting the organization."

While noting that hospital boards usually name successors, Genser says that doesn't mean CEOs should play no role in the planning.

"The CEO should have a conversation with the board and say 'it is the fiduciary responsibility of the board and myself that we take a look at this. I don't have any plans to retire. This is my personal timeline, but we ought to start taking a look,'" she says.

Succession planning shouldn't necessarily be limited to the CEO.

"Maybe the entire executive team is aging in place and you need to start to look at succession planning around the organization as a whole," she says. "Then it does not become a situation where 'Oh we are worried the CEO is going to leave' and that gives a signal that others should start looking because who knows what will happen? It's more of a mindful approach to prepare for the future at all levels, just in case and to be prepared."

Succession planning allows hospital leaders to evaluate the skills, and skills gaps, of their would-be replacements to determine what experiences and exposures they need before taking over.

Genser says it's important for senior CEOs who are nearing retirement to understand that the demands in leadership have changed considerably over the decades since they launched their careers.

"We have a lot of bright young people coming out of graduate programs that are not getting the same opportunities that people had 20 years ago," she says. "It used to be that 20 years ago you could walk into an assistance administrative role and essentially be in the C-Suite in some role. Now you are lucky to get a director-level position for one department."

Genser says most current CEOs were younger than 35 when they landed their first leadership jobs. "If you look now at the number of people who are CEOs under 35 it is a very small number," she says. "In that time, I will grant you, healthcare has become more complex. But I also think people are reluctant to give those responsibilities to younger people as fast as they were given them themselves."

In addition, she says, the consolidation of the hospital sector is "radically" changing the role of the C-Suite and that could make it harder to find well-rounded and experienced senior leadership in the coming years.

"For example a hospital finance position, which before had responsibility for debt and treasury and bond issuances and even revenue cycle, may be part of a system now where all of those things are corporate," she says. "So, in some functional areas there is going to be a shortage, particularly of independent CFOs who can go the whole gamut."

"That is true even for CEOs who are probably called presidents in some of these systems. They are really more like operating officers," Genser says. "We are seeing a shift in the whole dynamic of organizational structures and where that is going. There will always be good talent. The question is can you attract it based on how you are structured if you need to go outside your organization? Or, can you grow and build it and develop it inside your own organization?"