How many of you CEOs plan to retire one day?
I'll bet all of you are nodding your heads vigorously, especially if you're having a particularly bad day. But let me finish. I'm not talking about working a few days a month in a consulting role, or transferring your title to the next rising star inside our outside your system, and taking your place on the board of trustees. I'm talking about really retiring, and going away, and not meddling in the affairs of your former hospital or health system unless somebody asks you to. Maybe not even then.
I'll bet not so many heads are nodding now. Not many of you would find this type of retirement fulfilling. Most of you have spent so many years and hours working the daylights out of your position that not having anything to do with the hospital or system you so recently led would be out of the question. But it's probably what you should do—at least for a couple of years. Why? Because your involvement could be damaging.
That's the take of the Conference Board, anyway. Their data, however, is drawn not only from the world of healthcare, but from publicly traded companies, so take their wisdom with a grain of salt. Their conclusions come from analyzing 358 cases of CEO turnover at S&P 1500 firms over a three year period (1998-2001). So the data's old, but it has to be in order to draw long-term conclusions from the effect of former CEO involvement.
In short, it finds that companies that retained former CEOs on boards have relatively lower stock returns than companies whose CEOs continued as chief executives.
"Retention as a board member has important consequences for subsequent board decisions and post-turnover firm financial performance, since delayed departures often appear to restrain the maximization of shareholder value," the report says.
Fine, so is it applicable for healthcare? I think it can be.
Granted, hospitals and health systems most often aren't about maximizing shareholder value. So I'll grant that point, although I argue it's a semantic one, to a large degree, because what are they about? Fulfilling their mission to provide care for those who don't have the means. Providing great patient outcomes, hopefully. Providing great patient experience too, so those patients will tell others about their great experience. Isn't that a form of maximizing shareholder value?
CEOs at nonprofit hospitals and health systems still have to run their institutions like a business. The old saw "no margin, no mission," didn't come from nowhere, after all. In fact, at nonprofit hospitals and health systems, it might even be more important to maximize the margin, because you are pretty much required to lose so much money every year on a certain group of patients, or a certain group of services.
So what does that have to do with whether you should stay on in some sort of leadership role after you retire?
I think it depends on the person. If the former CEO is gone, there's no worry about whether he's overstepping his bounds by having weekly chats with his successor. There's no worry on the outside of the organization that he or she is really pulling the strings behind the scenes. There's no concern that the physicians or others in the organization won't see the new person as the "real" leader.
It seems there are fewer opportunities for problems like this if the old guy leaves everything up to the new one.
Ride off into the sunset. It'll probably better for everyone involved.
Philip Betbeze is the senior leadership editor at HealthLeaders.