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‘The apprentice’: Long-term care CEO edition

February 14, 2012
by Daniel W. Farley, PhD, CNHA
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Great administrators don’t just walk in off the street; they have to be discovered

It could be said that succession is similar to a track meet. While the runners’ speed is important, the critical factor in success is the handoff of the baton. In organizations, handoff often means movement from one generation or style of leader to another. It can also mean shifting confidence and adjustment in culture, which can be critical to an organization’s ongoing success. 

This article will explore the traditional ways organizations, particularly nonprofits, have managed change in leaders and then share a different idea that might be preferable when an explicit line of succession is absent.

TRADITIONAL PROCESS

Historically, when boards of directors/trustees have been faced with changing the chief executive officer (CEO), one of two tracks has been followed. The first is a defined line of succession where persons in subordinate roles have been groomed to advance. Generally speaking, this track has led to continuity in leadership, which could be either good or bad.

On the good side, if the departing CEO was in tune with the times and, to the best of his or her ability, had strategically positioned the corporation harmoniously with stakeholders (residents, funding systems, employees, community leaders), in all likelihood, continuing what the organization had been doing would provide stability and opportunity for the new leader’s success.

On the other hand, if the departing CEO was content with maintenance and solely sought to meet the daily challenges to keep the organization alive, a successor with the same mentality could easily find him- or herself in harm’s way, thereby losing the confidence of stakeholders and position in the community. For this reason, it is critically important for boards of directors/trustees to understand where their organizations are in time, the nature of pressing needs and the leadership talent required to minimize risk in operation.

The second track provides an alternative to promoting from within the organization: employing executive search firms to find qualified persons for consideration and employment. To enable this process, directors/trustees customarily appoint a search committee to go through resumes and select applicants to interview. Ultimately, an individual is selected, an offer is made and negotiations begin. Once an agreement is reached on salary, benefits package, etc., the hiring process takes place.       

From experience, both personally and professionally, the external approach is not without hazards. Boards must be fully aware of the financial costs and, potentially more important, recruiting a person who may not fit the organization’s culture, which in itself could lead to disaster.        

Costs to employ an external executive search firm are generally based on annual compensation for the proposed CEO. As an example, fees can run the gamut of 20 percent and higher of the annual salary with limited guarantees for performance. After the guarantee period (i.e., three months), should the recruitee not work out, both the search firm fee and investment in the candidate is lost. This means the board is back to its original recruitment position with fewer financial resources and less time, which could translate into a negative outcome for stakeholders. Following traditional approaches for locating and employing a CEO are not without their challenges.

TURNING A CORNER—SOMETHING NEW              

While there is never a foolproof method for replacing a CEO, there may be a way to address the concept of succession and develop the task of recruitment from the perspective of mentorship with employment predicated on a successful period of guidance and training. 

To offer an experiential example of the process of developing a person was external to an organization, allow me to go back a number of years to discuss succession in my organization. At that time, when the subject was introduced to the board of trustees, there was little or no interest nor did I feel it necessary to pursue the subject. I was in my late 50s and, as far as I knew, in good health.

Approximately six years later, I could see retirement on the horizon and once again brought the subject of succession forward for discussion. I will not forget, during a board meeting, one of our strongest trustees saying it was my responsibility as CEO to locate and recruit my replacement, a responsibility which the board supported. In reality, the idea had not been a part of my thinking, but it did raise a new level of consciousness for finding a successor.

Within my organization, we had an experienced person who possessed the strengths to become the CEO, who openly expressed no interest in the position. Because of this decision and remembering the board’s previous comment, the process of thinking of the best way to locate a successor was mine.

SOMETHING PERSONAL: CEO APPRENTICESHIP

During the next year to year and a half, I started to prospect. Inasmuch as the pool of rising candidates for CEO leadership in our state was slim to none, contacts were made with colleagues around America for referrals. For one reason or another, little happened. Then unexpectedly in the summer of 2009, I had open heart surgery; I was brought face-to-face with my mortality. This, combined with my age, created a heightened sense of urgency to set the CEO recruitment process in motion.

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