Leadership Takes a Pay Cut When Others Don't

HealthLeaders Media Staff, September 4, 2009

I've been reading a lot about Russian history lately—especially the history that led to the overthrow of the last czar, Nicholas II, and the events of the so-called October Revolution that threw the largest country in the world into chaos. The revolution led to the murder of the czar and every member of his immediate family—and that's just for starters.

What does Russian history have to do with leadership in healthcare? Good question. Not much, really, on the surface, but if you're looking for perhaps the best example of how not to lead people, the last czar is the mother lode.

Leadership means many different things to people. To some, it means courage in the face of adversity—the ability to spur on those who are led to great acts of bravery. To others, it might mean developing a vision for the organization they lead, and the ability to inspire others to help in achieving that vision.

But perhaps leadership can't easily be captured in such grandiose situations as I've presented so far. Leadership, to me, is most often an accumulation of small acts that inspire those who are led. I came across an example of such a small act earlier this week, while reading a study about executive compensation trends at nonprofit hospitals.

Hospitals haven't been exempted from the worst recession since the Great Depression. We've run countless stories on hospitals laying off employees, cutting back on capital plans, and generally paring expenses. Showing leadership in such tough times mostly isn't about how much you cut back, but how you do it.

Here's what I mean. According to Yaffe & Co.'s most recent executive compensation report on nonprofit hospitals, some 59% of hospitals that responded to their survey indicated that they planned to freeze salaries in their organizations. However, 35% of hospitals planned only to freeze salaries of the CEO and other top executives in the organization, and 6% were freezing the salary of the CEO only. Freezing salaries across the organization is one thing, but allowing lower-level folks to continue to have increases while the CEO and other top executives experience a freeze in their pay takes true leadership.

Let's be honest. A salary freeze for the CEO and other top executives isn't a huge sacrifice for most of these people. It's not as though they're going to miss a car or house payment or have less food to put on the table. But a salary freeze for the lower-level folks might mean just that. Further, sacrificing while your underlings aren't asked to do the same is a powerful tool that more CEOs might be interested in further investigating.

For a relatively small cost, the people you lead just might be a little bit less self-interested, and a better organization could be the result.

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