Why would you consider engaging an interim executive?

Turnover in the healthcare industry is at a high level and increasing. According to The American College of Healthcare Executives, CEO turnover reached a record level of 20% in 2013, the highest level recorded since the survey began in 1981. (http://www.ache.org/pubs/research/ceoturnover.cfm). Unfortunately, similar data is not compiled on CFOs. A turnover event represents a transitional turning point for a healthcare organization. The turnover generally occurs when the organization recognizes that the situation with the incumbent is no longer working and a change is necessary. This is rarely due to lack of competency of the incumbent. More than likely, the reasons include loss of credibility, increasing lack of fit with the rest of the administrative team or organization, Other reasons include the failure of a significant strategy or program, unacceptable operating results or perceived incorrect strategic direction. My own dissertation research revealed that in 36% of the cases, the turnover is related to the organization growing beyond the capability of the incumbent or termination for cause.

Once the necessity of a turnover event is recognized, the organization should take several steps. The organization should consider outplacement assistance for the departing executive. If the executive has little recent experience in the job market, outplacement support will be invaluable in easing their transition. The next step in the process for many organizations is the engagement of a retained search consultant. During the search that can take four months or more, the organization should consider its transition plan. Ideally, the organization would have a formal succession plan in place but my research showed that 57% of the surveyed organizations have a succession plan that addresses the process for handling the transition.

If the organization does not have extensive depth for the role that is being replaced, it should consider interim executive services. An experienced interim executive can reduce the probability of the organization suffering a setback during the transition. The interim can also provide a thorough assessment of the current situation. This assessment can aid the recruitment process by better defining the skills and experiences that will be the best for the organization going forward. Retained search consultants conduct a site survey visit and interview a number of executives in an effort to better understand the organization’s needs. While this is better than nothing, it cannot compare with the depth of insight an interim can achieve while working within the organization. Another reason for hiring an interim is to relieve some of the time pressure associated with a search. The interim makes it possible to conduct a very thorough and deliberate search in order to insure the best possible outcome.

Some organizations will consider using an internal resource as an interim. This is problematic, particularly if the internal resource is a candidate for the position. If the organization does not select the internal candidate, it is very difficult to go backwards. In addition, the internal candidate is more likely to leave if they are replaced by an outside candidate while serving in an interim capacity.

In summary, using an interim executive during a transition adds cost. This cost brings a number of benefits that in the minds of many decision makers provides a worthwhile return on investment. In my next blog, I will discuss how to effectively engage an interim that is properly suited for your organization’s transition.

Raymond A. Snead, Jr., D.Sc., FHFMA, FACHE

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