Behind Henry Ford's Unusual CEO Shift

Detroit's Henry Ford Health System has named a new CEO, but he won't inherit that title for more than two years. Here's why this unusual succession plan has merit, and might not be the last such move we'll see.

News about an unusual changing of the guard in hospital leadership went down this week, when Nancy Schlichting and Henry Ford Health System, the $4.5 billion (revenue) Detroit behemoth, chose a successor after more than 10 years with Schlichting at the helm.

She guided the system through a raft of disruptive change in an economically struggling region, after working as a hospital CEO within the system for more than four years. She wants to give her successor a similar running start.

Wright Lassiter III, 51, currently president and CEO of Alameda Health System in Oakland, will take the reins Dec. 15 as president of the health system before assuming the CEO title in 2016.

Through Schlichting's tenure, Henry Ford Health System has won a Baldrige Award, spent $300 million creating a brand-new holistic health concept in West Bloomfield, MI, and managed to remain profitable for 10 years and counting.

Her tenure has been marked by these momentous achievements, but also, more quietly, by assembling and developing the talent that makes her look good (her words, not mine), and which allows the organization to remain successful in uncertain times. In some ways, choosing Lassiter was a continuation of her policy on replacing talented leaders.

After seeing Lassiter speak at a panel on a conference on the future of healthcare last year, Schlichting demonstrated her belief that as CEO, she should always be seeking talent. And that's what she saw from Lassiter, whom she did not previously know.

"I thought, who is that man?" she says. "I had not met too many people like this. He had some of the most creative ideas on managing a vulnerable population that I had ever heard. I'm always seeking to bring talent into Henry Ford, so I immediately looked him up to learn more about his background. Then I picked up the phone and called him cold."

Ready for a Change
As it turned out, the longest-tenured CEO in Alameda Health System history was interested, although at the time, no one other than the board knew that Schlichting was thinking about retirement. At 59, she is still young for a CEO.

"I've been leading healthcare organizations as either the COO or CEO level for 32 years. I started at 30 at 600-bed hospital in Akron, Ohio. And that's a long time," she says. "It's about being able to do some new and different things in my life."

The irony is that Lassiter had decided not to go to that conference, and only a last-minute plea from his PR staff to his executive assistant got that conference back on his calendar. Eventually, he gave in and made the trip.

"Ultimately, this woman [who may want to remain nameless] convinced me to do it," he says, admitting that he knew of Schlichting but had never met her. "Otherwise, our paths may not have crossed."

Unusual Search
It's lucky they did, said Schlichting, about her unusual CEO search, which didn't employ a search firm or any of the other trappings of modern executive talent searches. She says Lassiter's experience being successful at managing costs, care, and population health improvements in a Medicaid-dominated patient mix will be one of his key assets as he takes control of Henry Ford Health System.

In most such transitions, Dec. 15 would close the door on Schlichting's leadership, but Schlichting and Henry Ford aren't following that script either. Instead of making immediate way for her successor, Schlichting will stay on through 2016 as CEO to help guide the new leader through the complexities of Henry Ford's variety of service offerings.

"Henry Ford is an unusual model. We need to double down on things we do well, really pushing the concepts on managing population health, in using our health plan and medical group, and all our services to understand where the consumer is today," she says.

"Now there are so many people shopping in a retail fashion and we have to be sensitive in how they want to receive information and connect with them in different ways. That requires us to be very creative how to deliver and finance health delivery. Henry Ford has a unique opportunity in population health and we need to make sure we execute well."

The last time I spoke with Schlichting prior to this week, we happened to be chatting about her philosophy on leadership development and her leadership style, which is why my recent conversation with both Lassiter and Schlichting resonated—it's the ultimate expression of her leadership style to stay on through a "training" transition to Lassiter.

"One of the commitments I made to the board is that we would have a smooth transition in leadership and I told them I would stay as long as I could to make sure that happened," she says. "This is exactly what I'd hoped for."

'Common Values'
As noted in that previous story, much of Schlichting's leadership style is rooted in seeking out common values and providing constant feedback on how well her team is meeting its self-imposed targets—financial or clinical. She boils it all down to transparency of information, culture development, and engagement of people.

"It's critical to attract talented leaders with common values," she told me then, answering a question about teamwork in general and team-based care specifically. "I can set a tone at the top, but if you don't have the team who is able to execute on that—managing change and taking risk in an effective way—you won't make it work."

She wants to give Lassiter the same chance to learn how the organization works on the job prior to taking over the top post. This is similar to how she trained as leader of Henry Ford Medical Center for 4.5 years before she was named CEO of the system in 2004.

He'll get the added benefit of his predecessor showing him the ropes. She thinks that's necessary because of the complexity of Henry Ford, which she also sees as an attribute in the drive toward managing the health of populations.

"We have a very large, complex organization in a challenging market," she says. "Our model also has so many dimensions with a health plan, large group practice, huge ambulatory network, the full continuum of care, academic medical center, we've got it all. I know he'll appreciate getting to know the organization, knowing where all the challenges might be and how to take risk and the culture of the organization. He'll pick up on it quickly."

Shocked Staff 
For his part, Lassiter says he's dealing with a lot of shock from staff and physicians at Alameda, simply because he wasn't looking for a job, and no one outside a select few knew that Henry Ford was looking for a new leader either.

"This has happened quickly and quietly," he says. "My organization knew when I took this job nine years ago that I would not finish my career here. Some said they were shocked but not surprised."

That said, neither Lassiter nor his wife has any personal connection to Detroit or Michigan. However, one drawing point is that his daughter is a freshman basketball player at Northeastern University in Boston. The travel distance to see her play just got cut by two-thirds, he says, which is certainly a plus.

But what really sold him on the change is that he wanted to work with Schlichting and a health system that seems to have all the pieces to manage the health of populations already, while Alameda is still a work in progress in that regard.

"Really, the only thing that could have caused this kind of change is the organization and its current leadership," he says.

He notes that much of what he's been patterning Alameda's strategy on has been similar to what the much larger Henry Ford Health System has already achieved.

Market Similarities
"What's different is you start with scale. Henry Ford is already a fully integrated delivery system offering everything that it appears you need to manage population health. At Alameda, we're aspiring to get there, but we certainly don't offer everything that comprehensive health and wellness system would need to manage population health."

While every market is different, Oakland and Detroit are very similar in that they're highly competitive. But historically Alameda has focused on safety net care, and the community didn't think of that system as being able to provide care for all except for trauma services.

Conversely, he says, Henry Ford is "already well-placed in this market. I've been running what some would call the underdog system, fighting for a seat at the same table as traditional organizations. Henry Ford doesn't have to fight for a seat, but does have to evolve around healthcare reform."

Lassiter has experience in the kind of market he's entering in Detroit, with large Medicaid patient populations. He'll move into a much larger system, with more than 18,000 employees versus 4,500 in Oakland, but he has a good track record of financial success in a difficult market.

Alameda has achieved eight straight years of positive operating margins. In other areas, such as physician integration, for example, Alameda is aspiring to where Henry Ford already is, says Lassiter.

"I launched a company recently to do this, while Henry Ford has one of the longest tenured such groups in the country. Much of what I've been patterning our strategy here at Alameda is the stuff that Henry Ford has already done and already has great leaders in that respect."

For her part, after 2016 Schlichting expects to stay in the area, and says she will join more community boards with the idea of helping the area's youth.

"I'm staying for the next two years," she says. "But I've never waited to do things I have wanted to do. You never know what life is yet to be. I can contribute to the field in new and different ways and I'd like to do that."