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Analysis

Advocate Aurora's Dual CEO Model Wasn't Doomed From the Start

By Steven Porter  
   July 25, 2019

The dyad isn't just a compromise between executives clinging to power in their post-merger organization. It's a viable solution that can work, at least temporarily.

Ever since the respective CEOs of Advocate Health Care and Aurora Health Care said they would co-lead the massive Midwestern health system created last year by the merger of their nonprofits, there have been questions about the workability of their dual CEO model.

Many people, including members of Advocate Aurora Health's post-merger workforce of 70,000, have wondered how co-CEOs could ever govern effectively. Who would have final decision-making authority? What would happen if the co-leaders disagree? How could they avoid stereo messaging?

All of that ambiguity over who holds ultimate responsibility for the decisions being made is precisely why some industry analysts advise against this atypical governance structure. The potential for confusion is too big of a risk, they reason.

So this week's announcement that Advocate Aurora Health has ditched its dual CEO model and picked Jim Skogsbergh to serve as its sole president and CEO moving forward—thereby releasing Skogsbergh's former co-president and co-CEO Nick Turkal, MD, to "pursue other interests"—might be viewed by some as the inevitable outcome of what is and always was an unworkable model.

To others, however, the end of this particular dyad says nothing about the viability of dual CEO models in principle.

Sarah E. Wilson, principal analyst of market access insights at Decision Resources Group in Nashville, was among those to say early on that Advocate Aurora Health might benefit from its co-CEOs, especially given the general lack of overlap between the geographic areas Skogsbergh and Turkal would oversee. And she still says keeping both legacy CEOs at the helm of a post-merger health system makes sense, in certain circumstances.

"Each consolidation agreement is unique," Wilson says. "For mergers between a larger system and smaller system, I don't think a dual CEO model makes sense. But I think in the case of large and/or multistate mergers, a dual CEO model can certainly help ease the transition of combining entities."

Related: Advocate Aurora Health Ditches Dual CEO Model, Picks Jim Skogsbergh

"Eventually, though, a dual CEO model will cease to make sense," Wilson adds. "There may be too many cooks in the kitchen, so to speak. You could have a situation where there are conflicting strategies or visions, which may do more harm than good to the organization."

Advocate Aurora Health brought together 27 hospitals and hundreds of other facilities but maintained both of its legacy headquarters: one in Downers Grove, Illinois, and the other in Milwaukee, Wisconsin. Despite moving to a single CEO position, the organization continues to have both headquarters, a spokesperson told HealthLeaders on Thursday.

Researchers See Benefits in Dual Model
 

Some academics have argued that two CEOs may actually be better than just one.

Researchers who studied co-CEO arrangements at 111 publicly traded companies across a wide variety of industries, for example, found that some CEO pairs complement each other in ways that meaningfully contribute to their company's strengths. The complementary factors generally include differing educational backgrounds or executive responsibilities, the researchers wrote in their 2011 paper.

Mergers and acquisitions were the most common factor to prompt a dual CEO model, according to the paper. "Such an arrangement can be used to accelerate merger approval and to ease the implementation of the merger," the researchers wrote.

When the Advocate-Aurora deal was announced in 2017, one of the study's coauthors, Matteo Arena, PhD, an associate professor and finance department chair at Marquette University, told Milwaukee Journal Sentinel columnist Steve Jagler that a side-by-side leadership arrangement would put Skogsbergh and Turkal in some awkward but manageable situations.

"It can work, but it doesn't always work," Arena said.

To derive the benefits of their management model, the two CEOs would need several important things, Arena said, including complementary skills, an ability to keep their egos under control, an attentiveness to the market's perception of their co-CEO arrangement, a willingness to accept a pay cut, and a temporary tenure.

Arena's research found that co-CEO arrangements last an average of four and a half years, which is pretty similar to the average tenure for all CEOs.

A different team of researchers, from the University of Arkansas and Appalachian State University, wrote that co-CEOs seem to be better equipped to increase corporate social responsibility. The top executive job, in many companies, has become "so complex that they may have outgrown their traditional one-person boundaries," the team wrote in their 2017 paper.

"Modern CEOs must address multiple escalating and often conflicting economic and social expectations that vary both within and between stakeholders over time. Our findings suggest that one way to increase the chances that CEOs may make both more responsible decisions and fewer irresponsible ones is to share the CEO title," they wrote. "Such collaboration at the top may help reduce the isolation of the solo CEO and result in better-vetted solutions."

Parallels in CommonSpirit's C-Suite
 

Advocate Aurora Health isn't the only major health system to keep both CEOs in place after a 50-50 merger—it's not even the only one to do so last year, in the Chicago area.

Englewood, Colorado–based Catholic Health Initiatives (CHI) and San Francisco, California–based Dignity Health merged last year to form CommonSpirit Health, which then established its national headquarters in Chicago. The post-merger system kept both Lloyd H. Dean and Kevin E. Lofton as co-CEOs.

Dean had been Dignity's president and CEO, and Lofton had been president and CEO of CHI.

Related: Why CHI-Dignity Settled on CommonSpirit Health as Their Married Name

How the system handles its dual CEO model in the coming months will be something for industry watchers to keep an eye on, says Wilson, the Decision Resources Group analyst.

"It would not surprise me if, eventually, one of CommonSpirit's CEOs leaves," she says.

That is, in fact, what the large Catholic system has planned, a spokesperson confirmed to HealthLeaders in a statement Thursday afternoon.

"The success of an alignment between two large organizations such as Catholic Health Initiatives and Dignity Health is a function of integration planning," the spokesperson said. "The office of the CEO—led by Lloyd Dean and Kevin Lofton, two highly successful healthcare executives—was established to ensure the success of the integration. Under their leadership, the integration effort thus far has been very effective and efficient. The CommonSpirit Health Board of Stewardship Trustees will determine the future structure of the Office of the CEO."

"Ultimately, we anticipate that there will be a single CEO for the organization," the spokesperson added.

When a health system like Advocate Aurora or CommonSpirit abandons its post-merger dual CEO model, then, the question isn't whether the dyad ever had potential. The question is whether the CEOs accomplished their plans.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

Analysts and academics alike see the co-leadership model as potentially beneficial, especially for large 50-50 mergers.

Proponents of side-by-side arrangement say it should be temporary, as part of a transition period, even if that's several years.

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