Should I pursue professional credentialing?

I need to start this article with a disclaimer.  I am HIGHLY BIASED in favor of professional credentialing.  If this is offensive to you, stop reading this now.  I am fairly well credentialed.  I have a Masters of Business Administration degree and a Doctorate of Science in Healthcare Administration.  I hold Fellowship certifications from both the Healthcare Financial Management Association (HFMA) and the American College of Healthcare Executives (ACHE).  I hold HFMA certifications in Managed Care and Patient Financial Services (PFS).  I am in the first class to be certified by HFMA in managed care and I was the national co-valedictorian in my HFMA PFS exam class.  I served a sentence on HFMA’s Board of Examiners (BOE) including a year as Chairman of the BOE.  The BOE is responsible for HFMA’s professional certification program.  Other than this, I have not done much to improve myself professionally or promote professional certification.

Lest this come across as self aggrandizing, you should know that I had a rough time in high school but ended up being the first in my family to earn a bachelor’s degree and that undergraduate degree was bestowed by The University of Virginia’s McIntire School of Commerce.  One of the highlights of my service to the healthcare profession is my service on HFMA’s BOE.  A number of changes to the HFMA certification process occurred during my service on the Board and as the Chairman of the BOE that I am very proud of.  Changes that were focused on making the certification process more objective and making the preparation process more efficient.

You’re damn right I think credentialing is important.

More than anything else, I think a professional credential makes a statement about you.  I discuss this in my article about getting ahead.  Holding professional credentials makes a statement  that you have shown willingness to go beyond the minimum required by a job to be recognized by your peers in your discipline as being one of the best among them and an example for others seeking career advancement and improvement.

Professional certifications usually require a combination of education, experience and ability to demonstrate mastery of a discipline.  The effort required to obtain a credential is useful in that in the process of achieving the recognition, it is impossible to not learn something or possibly a lot.  This knowledge is helpful in career development and can differentiate you from your peers in a competitive job or search situation.  Among your peers, those with professional certifications are typically held in higher esteem.

For some credentials and some disciplines, certifications are minimum requirements for certain roles.  There was a time when holding an ACHE Fellowship was practically a minimum requirement for becoming a hospital CEO.  That is not as true today because of the shortage of FACHEs and the effects of some head-hunters focused on making their own jobs easier by convincing Boards of Directors that requiring professional certification will unnecessarily restrict the pool of candidates.  My question of a Board making a decision like this is why would they want to expand their net to catch applicants that did not feel that getting certification in their discipline was important?  Ironically in hospitals, these Boards preside over medical staffs that increasingly require Board Certification of their members.  My question is if they support requiring Board Certification of their physicians, why would they intentionally establish a lower threshold for the executives operating the organization?  If the demand was higher for certified leaders, it could result in an remuneration differential and lead to more executives seeking certification.  If I was advising a Board or a hiring executive, I would and have required headhunters to build a very strong case for recommending consideration of a non-certified executive when certified executives are available.

If you are an executive that is interested in career advancement, my advice is that credentialing is one of the first things you should consider.  The type of credentialing you pursue can vary depending upon your current or desired role.  In nursing for example,  a wide variety of credentials are available.  Many nurses carry several credentials.

We have all heard the adage that if something was simple or easy, everyone would have it. This principle certainly applies to credentialing.  Credentialing can be expensive, time consuming and difficult.  Credentials require a combination of minimum education, in-role experience, examinations, service under the tutelage of another certified leader and the like.  Each discipline has a process for determining the requirements for one of their members to be recognized as the best among them.  Some are more rigorous than others.  An argument can be made that the more onerous the process, the higher the value of the credential and the greater the degree to which a credentialed executive is set off from his peers.  In the case of HFMA, the credential is a Fellowship and it is earned by less than 10% of the members.  If you are a HFMA member, start paying attention to the certified status of your peers and look at their career advancement success compared to the 90%+ of uncertified members.  It should not surprise you to discover that the type of people that pursue professional certification are the same type of people that tend to advance their careers faster than others.  Is it the credential?  To a degree, I would argue that the answer is yes.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.

The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link that usually appears as a bubble near the bottom this web page.

There is a comment section at the bottom of each blog page.  Please provide input and feedback that will help me to improve the quality of this work.

This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission and attribution.  I note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

An old epiphany AKA my Barbara Mandrell story

A few years ago, my wife and I had the opportunity to spend the better part of a week in Nashville, TN.  While there, we decided to check out the Fontanel Mansion.  Fontanel was Barbara Mandrell’s ‘cabin in the woods.’  As of this writing, Fontanel is number 4 of 209 things to do in Nashville according to Tripadvisor.  Barbara named Fontanel after her youngest child.  I will leave it to you to look up the meaning of the word and to see if you can see the inspiration.

I highly recommend visiting Fontanel if you are in the area.  It will leave a lasting impression.  Barbara’s ‘cabin’ is some 27,500 square feet in size.  At the time of its construction, it was the largest log structure on earth.  It is still in the top five.  The magnitude and scale of the mansion defy description.  As I said, you need to see it for yourself.  The mansion is so large, the Mandrell family regularly lost their children in the house so everyone had to carry walkie-talkies to stay in touch.  A huge indoor swimming pool, indoor shooting range, 5,500 square foot ‘great room’, arcade, commercial kitchen, lavish finishes and irreplaceable casework and finishes overwhelm the visitor.

At the time I visited Fontanel, I was struggling personally with what I perceived to be a lack of ability to have the degree of favorable transformational influence in the organizations I served as an interim executive.  I knew what needed to happen.  I knew what it looked like when it is right and what it looks like when it is not right.  I was frustrated by  the fact that the organizations just did not seem to be as interested in changing as I expected.  Many of my recommendations either fell on deaf ears or were humored then subsequently ignored.

You can easily spend an entire day at Fontanel.  There is a lot to see and do.  It takes a while to begin to comprehend the magnitude of the mansion.  To me it was as impressive if not more impressive in its own way than the Biltmore house.  Late in the day we had an opportunity to hear Barbara’s daughter Jamie speak.  She stayed with the new owners of Fontanel as an interpreter and her comments brought the place to life.  I was standing with a group of people listening to Jamie talk about her childhood experience at Fontanel.  She was explaining that she had to reach high school age where she started getting out into friends’ homes before she realized that her childhood experience was any different than that of any other child.  She and her brothers assumed that their childhood experience characterized by wealth, maids, butlers, chauffeurs and the like was no different than the childhood experience of other children.

It was at this second that I could have been knocked over with a feather.  I was overwhelmed by a wave of dawning realization that nearly overcame me.  In one second, I got it!  In the blink of an eye, I finally understood the problem I was experiencing.  The reason that I could not get people in the organizations to see my vision for what they and their organization could be was that the environment they were in as dysfunctional as it might be is their sense of normalcy.  They cannot see the possibility of something so much better because their view of the world is characterized by their role in their environment.  They frequently see little if anything that needs to be fixed.  It is normal for me to hear, “Everything here was fine until you showed up and starting changing everything.”

In one organization I served, the Vice President of Finance told me one day that she was there when I came and that she would be there after I was gone.  She went on to explain that she had ‘broken-in and trained’ five CFOs and had survived them all as she would survive me.  We managed to co-exist for a few months primarily because as an interim, I resist  taking personnel actions that will alter someone’s career unless I am forced into a situation where my options have been reduced to one.  In this case, the first thing my successor did was rid himself and the organization of this caustic cancer of an employee.  I have seen multiple examples in organizations that I have served of shock and awe when the degree of dysfunction, sub-optimization and loss were revealed.

The only thing worse than a dysfunctional culture is a toxic culture.  A dysfunctional culture fails to meet the needs of the organization while a toxic culture is more detrimental to the organization because it characterized by active degradation.  There are a number of characterizations of dysfunctional or toxic culture many of which are obvious to independent, disinterested observers while being transparent to the people that are a part of the toxic culture.   These phenomena are more easily recognized to the degree the observer is viewing the situation academically or clinically without personalization of the circumstances or any of the people involved in the issue.  The problem with this is that people rarely change.  In fact, most of us are extremely resistant to change.  The observation of this phenomena over a long time spent in a variety of organizations has led me to the conclusion that achieving a change in culture without changing the cast of characters is generally a fool’s errand.  Ascension Health is the largest not-for-profit healthcare system in the US.  Ascension is also the largest US Catholic healthcare organization.  Ascension places high value on the worth of individuals and in my experience errs on the side of doing the right thing by people in its employ.  I have seen the focus inspired by this culture in Ascension hospitals lead them to make substantial investments trying to salvage leaders that should have been long gone.  Sadly, more often than not, these efforts fail and the person ends up leaving the organization anyway.

How does this apply to leadership?  Every time an organization is presented with the opportunity to fill a leadership position, it needs to think about the role and function that now needs new leadership.  In the case of senior executive positions, I strongly recommend that an assessment be conducted to document the degree to which the previous incumbent and the function was meeting the needs of the organization.  Some organizations have a stronger bias than others to promote from within.  While I support this organizational value, it can be problematic.  There is no substitute or alternative that I know of for the enriching experience of working in different organizations, cultures and climates.  This experience provides insight and perspective that is un-achievable for persons that have grown up in the organization with most or all of their experience being in that organization.  They have no capacity to see things differently than how they currently exist.  In some cases I have seen, internal candidates have been victimized by poor or weak mentorship or leadership in the organization.

This is not to say that an internal candidate should not be considered.  The internal candidate does have the experience and insight to know the history of the organization and the location of every closet where a skeleton is hung and the site of every grave.  They can be up to speed immediately while it can take an outsider months to come up to their full potential.

The moral of this story is to be cognizant of your culture and the degree to which it might be impeding your ability as a leader to move your area of responsibility forward.  You need to ask yourself the very hard question of the degree to which you might be part of the problem.  This is one reason that continuing professional education is so valuable.  You need to be concentrating on improving your education and skills continuously.  In this process, you will begin to gain clarity as to how you may have been sub-optimizing.  This is also an example of how consultants can be very valuable to your personal survival probability.  Use them for their subject matter expertise but ask them questions and listen to them very carefully.  You have experience in a few organizations.  They have experience in many organizations and are uniquely qualified to help you understand where your organization might be missing opportunities to improve.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.

The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link in the menu bar at the top of this web page.

This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

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CFO Radio Interview

On October 17, 2011,  I was interviewed by Lorraine Chilvers on CFO Radio on the topic of Interim Executive Services.  The interview that lasted around 45 minutes is proceeded by some industry news.  During the course of the interview, I am asked about a variety of aspects of Interim Executive Services.  Since Lorraine has insight into the Interim Executive Consulting business, her questions were deeply probing and she did a very good job of engaging me on many of the more important aspects of Interim Engagements and the Interim Executive lifestyle.

Lorraine and I previously served together at Tatum.  Eventually, we went our separate ways.  I went on with my Interim Executive Services career and Lorraine went on to found Delaney Consulting and CFO Radio.

At the time of the interview, I was serving as the Interim Chief Financial Officer of The Central Florida Health Alliance serving Leesburg and The Villages in central Florida.  I recently listened to the interview again and it struck me that the material in the interview is just as current now as it was then.

The interview may be found here.

The people in the lobby

It was winter in the north country.  The temperature was in the low teens, the wind was blowing 20 MPH and the heavy snow was flying horizontally.  When I walked into the lobby of the hospital it was full of Mennonites.  They had come from their milking barns to the hospital and they were waiting for the business office to open so they could pay on their bills.  You see, Mennonites pay their bills – in full – in cash.  They will spend the rest of their lives paying their obligations.  I went on to the administrative suite where ridiculous debate was occurring that made me furious.  The administration was discussing sub-optimizing for the private benefit of Dr. Huff-and-Puff while the Mennonites were lining up to pay the hospital not from their excess but from their necessity.  I am very lucky I did not get fired for suggesting that Catholics in a Catholic hospital were engaging in decision making somewhere between magic eight ball and Ouija board.  I had no idea that Catholics did not like Ouija boards and I had no idea what it meant to get reamed out by a nun but I soon found out.

A couple of years later, I was invited to South Georgia Medical Center to be interviewed for the purpose of a potential interim engagement.  As I walked through the lobby, I was nearly overcome.  South Georgia has a large lobby and little space elsewhere for waiting.  The lobby almost always has people.  They are south Georgia people.  They are easy to identify by their dress and their speech.  They sit and sit in the lobby keeping vigil for their loved ones.  They wait and they pray.  They pray that their loved ones will be healed and that those of us that are responsible for their care will get it right for their family.

These people do not know who we are or what we do.  Many of them would not understand what we did if we explained it.  Shucks, some of us don’t know what we are doing most of the time.  ‘Still and yet’ (as the girl from WVA used to say), the people in the lobby wait, pray and hold vigil.  I have told my family that if I am in a hospital, I do not want anyone holding vigil over me, there is nothing they can do.

Has this ever occurred to you?  When you are making decisions that are going to impact care and allocation of resources to provide care do you think about the people in the lobby?  Do you see to it that to the best of your ability to exercise control or influence that not one cent of the hospital’s resources are wasted?  Do you demonstrate this ethic by your living?  Are people around you inspired to be better by the example of leadership you are setting?

One of my favorite one-liners is the euphoria we get from drinking at our own still.  How often are we wasting time in an administrative suite waxing eloquently about how great we are while simple people are sitting a few yards away from us praying as hard as they can that somehow we will get it right for them and their loved ones in spite of ourselves?  Anyone that does not labor daily under the stress of this burden or awaken in the middle of the night worried about this does not deserve to serve in a hospital.

Just this week, I told some voluntary hospital trustees how much respect I have for them and their service to insure to the best of their ability that the hospitals they represent meet the needs of the communities they serve.  Talk about an awesome, bone chilling responsibility.  When you are in the presence of these people, you have the incredible experience of being in the same room with the giants of humanity among us.

I have at times in the past experienced fear for my job.  I meet regularly with people who have fear for their job.  One of the benefits of being in interim services and a late career executive is that I no longer have fear for a job.  I am a lot more afraid of the people in the lobby and the Board of Trustees.  Will I reach my potential to deliver what the sick, wounded and downtrodden need?  Will the blessing of intelligence and understanding of numbers and complicated governance and leadership concepts I have be enough to meet the needs of so many that are so utterly dependent upon me?  Will my ability to  get an organization functioning as efficiently as possible be sufficient to meet the needs of the people that depend upon the hospital?

One of the many unique features of a hospital is that not one of its customers (patients) with the possible exception of healthy women bearing healthy children want to be there.  Virtually every other patient would just as soon be anywhere else doing anything other than subjecting themselves voluntarily or involuntarily to medical interventions that in many cases only prolong their agony.   I have yet to meet the person that was glad they were diagnosed with cancer so they could spend days in an infusion room.  I have yet to have the marketing department introduce me to a patient that saw a billboard and woke up the next morning saying that they should spend the day in the emergency room.  Where is the first patent that drank their morning coffee from a hospital logo cup and decided as a result to come in for a MRI?  The people that we serve know very little about disease process or clinical process.  Even those among us who work around hospitals are rendered impudent when we find ourselves on our backs at the mercy of people we do not know doing things to us we never envisioned or understand.  The last time I faced surgery, the day before I had no idea that before a day had passed that I would be in an operating room as a patient.  Actually, I had some other plans that were more important in my mind.  A sharp ache and the next thing I knew, my life was turned totally upside down and out of my control.

I heard the Chairman of a Board that had undergone heart surgery say that he literally watched the seconds of his life ticking away on a wall clock in the cath lab as he was told he was going straight to a heart room.  The question that was in the front of his mind was whether or not the hosptial had what it needed to provide the care he was going to require?  He mused to himself about whether or not as a Board Chairman had he done enough because if he had not, it was a little late to start focusing on the need.

This is what we do and why it is important.  We do not know who will need our services, when or why.  The reason we are leaders in healthcare organizations or organizations providing service and support to healthcare providers is to be there for EVERYONE that needs our services in their hour of need.  The better we do our jobs, the better enabled our organizations will be to meet the vision of their missions.  If we fall short of our potential or what the organization needs, the friends and family of the people in the lobby will suffer.  Sleep with that a few nights.  Sometimes, I wonder if I should have stuck with my original career aspiration; wrecker operator.

And so I come back to familiar questions.  Are you up to the challenge?  Are you leading from the front by example?  Are you an example of what the organization aspires to become or what it needs to rid itself of?  Are you spending time, money and energy in ongoing education to improve your potential to meet the increasingly complex challenges of running a complicated healthcare organization these days?  Is your area of responsibility meeting the needs of the organization?  Have you made it better or is it impeding the ability of the organization to move forward?  Are you and your area of responsibility rising to your full potential or is new leadership needed to reach the next level?

Get off your ass, take a walk.  Go into the waiting rooms.  Look at the people there.  Speak to them.  Engage them.  Shake their hands.  Introduce yourself.  Tell them what you do.  Tell them that you are seeing to it that they or their loved ones are getting the best the organization is capable of delivering.  Give them a card and tell them to call you ON YOUR CELL PHONE if they have a problem, question or concern about how things are going.  Demonstrate interest and compassion.  Engage your patients and family you would like to be engaged if you tomorrow found yourself sitting in the lobby of a strange hospital in a strange town with no idea of what is happening.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.

The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link in the menu bar at the top of this web page.

This is original work.  Copyright is claimed by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

Are you a CEO? Have you been caught looking? Do you know anyone that has been caught looking?

I recently took part in reminisces of some of the organizations that some of my friends and I have served or known about.  One of the more common reasons for CEO turnover is an unexpected accounting adjustment.  Eight figure adjustments that go the wrong way are too common and there are few things that will get a CEO fired faster than his board learning that they are going to have to absorb a $50+ million loss that occurred on the CEO’s watch.  Like it or not, the CEO will be held accountable for hiring or retaining a CFO that could not produce accurate and timely financial reports.  He is expected to have a sufficient grasp of what the CFO is doing to control their work.

A common cause of this type of an adjustment is overstatement of the value of accounts receivable or stated another way, understatement of contractual allowances.  These understatements lead to interim income statements being overstated in terms of operating margin.  How does this happen?  Sometimes the CFO does not fully understand what he is doing, his models fail or he becomes confused by changes he cannot explain.  In other instances, CFOs are under withering pressure to produce results to meet expectations of a financial plan, corporate organization or worst of all, incentive compensation targets.

In my experience, few CEOs appreciate the degree of potential error in net revenue estimates or the degree to which their CFO may be exercising judgment in the determination of the appropriate valuation of accounts receivable.  Unless there is absolute transparency and crystal clear communications between the CEO and CFO on these issues, there is a very good chance that the CEO is setting himself up for a very unpleasant surprise.

Given this risk, what is a CEO to do?  How does the CEO manage and mitigate this risk?  How can he know his balance sheet is properly stated?

Without going into vexing detail about how all of these calculations are done, there are a few high level indicators that every CEO should be watching as indicators that things are not as they appear.  First, the CEO should review and understand every adjusting entry made by the outside auditors during the external audit.  Each of these entries represents either the correction of an error found by the auditors or a difference of opinion between the auditor and the CFO as to how a transaction should be recorded.  In a perfect world, there would be no audit adjustments and they are sometimes symptomatic of problems in your finance department.  If you have experienced adjustments, your focus should be to see that they are eliminated.  If your finance team cannot get this done, you have a problem that will probably not improve on its own.  These errors are also symptoms of the fact that your interim financial statements were not correct.  The magnitude of the adjustments or the difference between the last interim statement and the audit indicates the lack of precision of your finance team.

The CEO should also be cognizant of the contents of the management letter.  The management letter addressees internal control matters.  Again, in a perfect world, there would be no comments.  I have seen organizations that did not even get a management letter which is almost as bad.

Another thing the CEO should be doing is meeting privately with the audit partner.  There is no one that is in a better position to evaluate the efficacy of an organization’s accounting and finance functions.  My point here is not to address the audit process but to help a CEO avoid being blind sided by a large, unexpected adjustment.

Time and again, I have seen CEOs taken totally by surprise when their auditors recommend large, unfavorable adjustments to the value of receivables, revenues and profits.  All of these items are directly linked.  Time and again, the CEO that likely had no idea what was going on in his finance department is one of the first victims of the transitions these events precipitate.  The point of this article is to explain this linkage and give a CEO a couple of VERY POWERFUL tools to identify a potential problem.

Each month, your accounting department revalues receivables and in this process recomputes the reserves needed to reduce receivables to their realizable amount.  While these calculations can be very complex, the idea behind them is simple and compelling.  The other side of the adjustment to the value of receivables is the contractual allowance on the income statement.  The contractual allowance is what reduces gross revenue to net revenue.  If the contractual is too small, net revenue is inflated which leads to an inflation of operating income.  If the contractual is too large, net revenue and operating income are unnecessarily reduced.  Unfortunately, most errors go the other (wrong) way.  Note that I am including bad debt expense in this discussion as it too is a deduction from revenue (contractual) that reduces self pay receivables to their realizable amount.

How on earth can a CEO know if all of this is right?  The answer is extremely simple.  The CEO needs to look at only two indicators.  The first is the ratio of cash collections related to patient services to net revenue.  Net patient service revenue (NPSR) is nothing more complicated than an estimate of how much of the gross revenue will ultimately be collected.  If the NPSR estimate is correct, it will be proven over time by cash collections related to that patient revenue.  In other words, if your cash collections related to patients is less than your NPSR, you have a potential problem brewing.  In every situation where I became engaged in an organization that had just experienced a large adjustment to receivables, the cash to NPSR statistic was well below 100%.

A lot of people fail to grasp the magnitude of money involved in these estimates.  One organization I served was running a cash to NPSR ratio of 93% just before it experienced a write-down in receivables of over $60 million.  Consider a medium sized hospital with $1 billion of gross revenue.  Every percentage point of $1 billion is $10 million per year.  Be understated by 7% as was the case in the example I cited and you are looking down the barrel of a $70 million accounting adjustment that will reduce (or maybe obliterate is a better word) your operating margin for years and set you on a new, unplanned career path.  If anyone had been looking at this statistic, this tragedy may have been averted.  In the cited case, both the CEO and CFO along with a few others were ‘freed up to seek other opportunities.’

Changes in the magnitude of receivables (AR Days) can affect this statistic but if the cash is much below 97.5%, you had better start getting an explanation of the cause.  Why do I say 97.5%?  To account for normal variation, it is not unusual to see this statistic vary across a 5% (+/- 2 1/2%) range.  When it gets outside of that corridor, the CEO had better be pressing for answers.  He cannot say he was surprised by a proposed adjustment if his cash to NPSR ratio was low. He (and his CFO for that matter) should have seen it coming.

The second key indicator is yield on gross revenue.  What is NPSR as a percentage of Gross Patient Revenue?  The nominal value is not particularly  important as it varies widely by organization and by region of the country.  The explanation of this phenomena is beyond the scope of this article.  If the organization raises its prices and nothing else happens, yield will decrease because all payors do not participate equally in a price increase.  For example, an organization does not realize much of a price increase charged to Medicaid and/or self pay patients.   If the yield is going up, there are two primary reasons.  The first is that revenue cycle performance is improving significantly and if this is the (rare) case, good for you. This improvement should be validated by a decrease in gross and net A/R days. The second reason for increasing yield is that the contractual allowances discussed above are inadequate and you have increasing risk of an unfavorable adjustment in your future.  As I stated earlier, the nominal value of the yield statistic is not as important as its change over time.  A change in yield can be reconciled to the dollar by someone that knows what they are doing.  If the statistic is not decreasing slowly over time, you should be asking for explanations or seeking help from independent advisors to help you understand what is happening if you do not like the explanations you are getting.

A lot of the financial pressure on hospitals has a root in yield that is declining faster than gross revenue is increasing but that is the topic for another article. 

I would be the first to agree that it is unfair to see a CEO get whacked for a problem like this developing on his watch.  Unfortunately, I have seen this happen time after time as one unsuspecting CEO after another became a victim to judgment or accounting errors in their finance department.  I had Board members in a hospital that had relieved the entire leadership team at one time express remorse for knowing something was wrong but not knowing what questions to ask.  A savvy CEO will know what indicators to watch to give himself the best possible chance of not being caught looking.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two you would find value in.  I can also help with career transitions or career planning.

The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link in the menu bar at the top of this web page.

This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

A new epiphany

I tell people that I am not all that smart.  I tell them that mostly I am not much more than a collection of experiences and epiphanies. I see profound wisdom in the simplest of things.  These epiphanies often have a profound effect on me and galvanize my thinking about leadership in ways that help me inspire others.  I tell a lot of stories and use self deprecating humor to make points.  At times, my antics will shock people which is the effect I am looking for.  In order to teach, you must have attention and recall.  If there is no recall, teaching has not occurred.  If my reaction to something, one of my stories or one liners burns an image into someone’s mind that they never forget, I have been successful in teaching them an important point about leadership or in my case finance.  The affirmation of this is when I hear myself quoted or see someone retelling one of my stories. If my experience helps them to improve what they are responsible for or to avoid a similar calamity in the future, it has been worth while.

While I am on this point, I will digress briefly.  Much is made of titles.  Some people obsess over whether their office meets the standards of their peers.  They engage in petty antics to cause others to have to succumb to their mind games.  Part of this is to make sure that everyone recognizes how important they (think they) are.  In some cases, this is a cover for insecurity.  Things like having to make an appointment to see your leader or being put off for no good reason.  How about the office where the level of the guest’s chair is lower than the host’s?  Or the executive that has their assistant make all of their calls.  When this happens to me, I hang up.  If someone wants to talk to me, they can dial the phone just like I do.  I am convinced that most people, even uneducated people can discern quickly whether a leader is genuine and whether or not they know what they are doing.  No title or number of degrees hanging on a wall or other trappings will convince them otherwise.  This is the reason I do not hang degrees on my wall.  If someone wants to know if I have a degree, they usually know where to find the answer.  People indulging themselves in the trappings of their role are frequently not respected.  They will be followed because of pecking order diktats but respect has to be earned.  It is not bestowed.  You will be respected if you respect others and they believe you are honorable, genuine and that you know what you are doing.  I poke fun at myself or at a situation to diffuse tension and put people at ease.  I will never poke fun at another person.  When I am poking fun, the people involved in the situation get the point.  Some people earn the title of Executive Vice President, Senior Vice President, CFO, CEO or who knows what.  When people ask me what I do, I tell them I head up the bookkeeping department.  They might not know what a CFO or an EVP is or what they do but they understand what bookkeeping is.  I do not feel a need to lay a title on someone to impress them.  People that do this often get a result that is the exact opposite of what they intended.

I had an experience recently that is haunting me as I write this.  I was on my way to a dinner.  The purpose of the dinner was to interview a Job candidate.  I was driving out of town on a four lane road.  Ahead of me, I saw what I initially believed to be a black plastic shopping bag drifting lazily across the road from right to left.  It looked strange and out of place.  As I drew closer, I realized that what I was actually seeing was a mother mallard duck with a gaggle of ducklings crossing the road.   They were about half way across the first lane of the four lane street, the lane my car was in bearing down on them at forty plus miles per hour.  The ducklings were so small they could not have been more than a few days old.  There must have been eight or ten of them.  Seeing my car approaching, the mother sensed danger and reversed course.  As I got to where they were, the mother had jumped up on the curb and was moving away from the street.  All of her brood were in a bunch bouncing off of the concrete as they attempted jump up on the curb to catch up with their mother.  They were jumping into the curb and falling back time after time.  Not one of them was big enough to get over the curb.  They had to be horrified.  It was a heart rending sight.  This scene has affected me deeply.  I pray that this family found a way to safety.  As I was watching this drama unfold over just a few seconds, it struck me that this is a perfect analogy to one of the biggest challenges we face as leaders.

How often have you seen this scenario?  The brood follows their leader from safety into uncharted deep water or a new situation.  Something occurs in the environment that introduces a problem they have not experienced before or unexpected danger.  The leader changes or reverses course.  The brood gets to a curb and runs into the wall.  The leader knows or has a sense of what they need to do.  Unfortunately, the brood cannot muster what it takes to follow and they are trapped.  The brood cannot keep up with the leader.  The leader and the brood ultimately fail together because the brood does not get the support they need or they are incapable of performing at the level the new situation demands.

Sound familiar?  Remember the old adage that the time to drain the swamp is before you are up to your ass in alligators?  As leaders, we have to appreciate that we are supposed to have insight, experience and expertise that our brood does not have.  They are willing to follow us due to faith they have that we will keep them safe and help them grow.  Sometimes, we inadvertently lead them into a situation where everyone’s ability to survive becomes an issue.

This is one of the reasons why leadership is hard.  We are called to be leaders because someone thinks we have what it takes to make a part of the organization successful however that is measured.  We cannot succeed without the full support and cooperation of our brood.  We manage the risk that our brood is up to the task by investing in them every day.

What are you doing to develop your brood?

Are you demonstrating the proper example of leadership to them?  Do they have faith in you or they just tolerating you?

Are you leading from the front?  Are you leading by example?

Are you encouraging and supporting training and continuing education?

Do you see to it that your brood has the resources they need to accomplish their objectives?

Do you take time for mentorship?  Would you advise one of your best to move on if you saw how they could better develop their skills and talents in different situation?  I recently counseled one of the sharpest young people in my charge to quit and go back to graduate school.  He has so much potential, it is a shame to see it not developed.  This person could easily grow themselves to take my job.  He was incredulous when I made this suggestion.  He did not believe that he had ‘what it takes’ to become a senior executive in a healthcare organization.  He does and he will if he will make the investment in himself.

Do you give people in your charge assignments that challenge their capacity and stretch their analytical capabilities as a means of helping them see their own potential?  Do you create an environment where it is safe for young people to make mistakes so that they can learn?  I would rather have someone more afraid that they would fail to meet my expectations for them than to have them paralyzed by fear of what might happen if they make a mistake.

Are you approachable?  Do you take time for mentorship?  This is why I engage in self deprecating humor.  I do not want anyone to fear dealing with me because they think I am too important to spend time on them or that there is nothing they can offer that will be of much interest to me.  I do not want anyone uncomfortable about approaching me about anything.  I want them to feel empowered to act within their authority and to know when to come to me for affirmation or assistance.

These are but a few of many examples of what we should be doing every day but all too often forget in the midst of the dung storm dejour.

Do not be afraid to lead your brood off the curb into danger.  Just make sure before you do that if you have to reverse course or the going gets tough you have prepared them to keep up with you because it is at this time that you will need them more than ever.  Like the mother duck, you may not be able to help them as much as is necessary at the most critical time.

My hope is that is as a result of reading this, you never forget the galvanizing image of a mother separated from her young brood and the collective fear they all experienced.  I hope that you will view your staff and your responsibilities as a leader differently as a result of my epiphany.  If you resolve to never allow yourself to get into a situation like this because of this simple story, you will become a better leader, teaching and retention have occurred and my objective in this commentary is accomplished.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two you would find value in.  I can also help with career transitions or career planning.

The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link in the menu bar at the top of this web page.

This is original work.  I have not seen content of this nature in my extensive dissertation research.  This material is copyrighted by me with reproduction prohibited without prior permission.  I always note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

How fast can you teach finance?

Sometimes, I am asked, “How did we get into this mess?”  “What did we do wrong?”  My standard answer lies in a phenomena that I have seen in one challenged organization after another and the thing that inspired me to pursue a doctorate degree in Healthcare Administration that was focused on Evidence Based Leadership.  When an organization becomes challenged, in every case in my experience, there has been a consistent pattern of questionable decision making sometimes spanning years leading up to the transition event.

Organizations that consistently do well have one thing in common.  They make consistent, disciplined, evidence based decisions that work out with a high probability of success.  Organizations that end up challenged and in transition have an equally consistent pattern of non-evidence based decisions that have a high probability of not turning out well.  Everyone makes mistakes.  The name of the game is to win more than you lose.

I am used to hearing, “Everything was OK then all of a sudden, we went off the track.”  They want to know if it can be fixed.

I always say, “Absolutely.”

The next question is inevitably, “What will it take?”

To which I respond, “One thing,” as I hold up a single finger.  Remember the movie City Slickers?

Of course, they want to know what the one thing is to which I reply, “I cannot tell you.”

When they want to know why, I say that if I tell you the ‘one thing’ there will be no further need for me.

After letting them stew for a few minutes, I relent.

The ‘one thing’ is to start making disciplined, evidence based business decisions. That is all.  See to it that this happens in your organization and we will never have a chance to work together.

Decision makers have told me, “I understand this concept but I don’t understand all of this finance stuff”.  I tell them that is not a problem because I don’t understand much of it myself.  A lot of people try to impress others by putting the razzle-dazzle on them. They use big words and arcane concepts in an effort to prove they are smarter than me and to convince me I cannot get where I want to go without their help.

In my opinion, it is easy to make something hard but infinitely more complex to make it simple.  I would argue that you do not understand a concept very well yourself if you cannot put it into terms that a lay person can understand.  All too often, complicated presentations sound like so much BS to lay people.  This is a severe problem if the lay people happen to be members of a Board of Directors.  Spouting BS instead of being clear, understandable and transparent has caused more than one executive I know to end up on the job market creating a gig for me in the process.  It almost always leads to a loss of credibility even when it is technically correct.

I had finance committee members in one organization express concern about ‘Voodoo arithmetic’ and ‘Cookie Jar Accounting.’  The prior CFO that was very good in my opinion had managed to lose credibility by failing to be sufficiently clear and transparent with the Finance Committee and Board of Directors.

I like to tell my clients that I can teach you everything you need to know about finance in a couple of sentences.  This never ceases to galvanize their attention.  You mean that you can learn everything you need to know about corporate finance in a couple of sentences?  The answer is an emphatic YES.  Here we go.

The financial performance of any organization is nothing more or less complicated than the weighted average return on investment of each of its many assets.  Collectively this return is generally described alternatively as return on equity or cost of capital.  Except for operating expenses, every commitment of funds the organization makes is an investment in an asset other than cash.  If the return on this investment is greater than the organization’s cost of capital, the effect of the investment will be to improve the financial performance of the organization.  If the return on an incremental investment is lower than the organization’s cost of capital, its effect on operating performance will be detrimental.  A series of bad investments will lead any organization into trouble. From a finance perspective, it doesn’t matter what the investment is.

There you have it.  Corporate fiance in a few sentences.  Everything you need to know to be successful financially and to lead an organization to improved financial and operating results.

Now, I have some questions for you.

Do you know what your cost of capital is?

Do understand how the cost of capital is derived?

When was the last time you considered the effect of what you were planning was going to have on the organization?

When was the last time you got this question in the Board Room?

What did you do the last time you were present when a politically motivated decision or a decision of expediency was being debated?

When was the last time you included in your project plan a mitigation strategy for a proposed investment that was not accretive in its own right?

Have you done a sensitivity analysis to understand the degree to which your project’s assumptions bear on the expected outcome?

Do you understand from your sensitivity analysis the threshold at which you would not recommend that the project go forward?

When was the last time you did an evaluation of asset returns in your existing portfolio to gain a better understanding of which of your investments are accretive and which are not?

Do you understand the difference between return on equity and return on investment?  If you want to get fancy, you can undertake a study of the effects and considerations of leverage on return on investment.

I frequently hear executives say that it is the business of the CFO to know all of the ‘finance stuff.’  My response to this is that if you call yourself an executive and you plan to advocate for anything (especially in a Board room) that requires an investment and you do not have a reasonable command of these concepts, you are an idiot.

Someone might read this and conclude incorrectly that this is all about money and not much else, a complaint I have often heard.  I have a fair amount of experience working in Catholic healthcare.  Every Catholic hospital I have worked in claims to be the one that housed the first nun that uttered the words, “No margin, no mission.”  It is about money but it is about more, the mission.  Unless the organization is financially healthy, it cannot sustain itself and if it loses the ability to sustain itself, it will find its ability to continue to carry out its mission compromised.

This is original work.  I have not seen content of this nature in my extensive dissertation research.  This material is copyrighted by me with reproduction prohibited without prior permission.  I always note and  provide links to supporting documentation for non-original material.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two you would find value in.  I can also help with career transitions or career planning.

There are only two problems in any organization

After my assessment, I am frequently asked, “How many problems do we have?” Or the question might take the form of, “Can this be fixed?”  I generally get a shocked reaction when I respond that this is easy, “You only have one or both of two problems.”  After the initial surprise subsides, I explain that my practice has shown me that organizations  have only two problems.  Of course, my relieved client wants to know what the two problems are to which I answer, “Your problems are governance, culture or both.”  I look forward to the puzzled look this answer brings.

Organizational leaders tend to be problem oriented.  They frequently act in a reactive mode to the crisis de jour.  Organizations experience executive turnover when the leaders are overwhelmed with problems faster than they can be fixed leading to a decline in performance that inevitably leads to executive succession.  I explain that focus on the ‘problems’ is not the correct response.  The correct response is to focus on the governance or culture that allowed the problems to develop, exist and persist in the organization.  When the issues related to the governance and culture are addressed, the ‘problems’ usually go away.  This is why it is so important to get the leadership team focused on the right things during the confusing cloud of uncertainty that surrounds a succession event.

Governance is the tone and direction for the organization set in the Board Room.  If the course of action for the organization emanating from the Board Room lacks direction, is insufficiently supportive,  if the Board is divided and lacks resolve; the leadership team does not stand a chance.  Their activities will be diluted by controversy over taking the organization in any direction without affirmation from the Board they are on the right track.  I worked in a hospital system that had a Board that had been constructed in a representative fashion.  Instead of these Board members representing their fiduciary duty to the mission of the organization, they represented diverse factions and were frequently at cross purposes.  The factions of the Board were divisive and they could not understand why they could not recruit and retain executive leadership.  The organization was ‘recognized’ by a rating agency for having the highest CEO turnover problem in the US healthcare industry.  Any time an organization has individuals in leadership positions in the organization that are pursuing their self interests instead of the organization’s mission, there are going to be problems.

Culture is defined as “the attitudes and behavior characteristic of a particular social group.”  The culture in an origination is its values and mores.  A mentor of mine described the culture in an organization we worked in as ‘toxic.’  At first this did not make sense to me.  Then as I gained experience working in challenged organizations, I came to realize that toxicity of the culture was at the root of most if not all of the operational problems we found.  A lot of things start happening when the culture begins to become toxic.  A toxic culture in this context is a culture that has become dysfunctional to the point that the dysfunction has become the organization’s sense of normalcy.  Work ethics decline when employees see tolerance of substandard performance and bad outcomes among peer leaders.  “If the organization is not going to hold anyone accountable for anything, why should I take risks and work above the minimum requirement,” they ask?  I tell leaders and Boards that the performance of an organization is nothing more complicated than the aggregate performance of every person in the organization, especially the leaders.  If the performance of this group goes into decline, eventually the performance of the entire organization will begin to exhibit symptoms of decline.  The symptoms of decline include the manifestation of increasingly complex and expensive problems like material, unfavorable accounting adjustments and restatement of audits.  The decline will also show up in JCAHO citations and reductions in employee, patient and physician satisfaction, not to mention poorer clinical outcomes.  Ultimately, decline leads to the turnover events that cause organizations to have the opportunity of meeting people like me.  A CEO that fails to recognize this dynamic has a predictably short future.

Another aspect of culture in my experience is that it develops momentum.  When the culture is good, the momentum builds upon itself as leaders in the organization perform at improving levels and are challenged by their peers and the organization to continue their improvement.  The organization increasingly becomes a place where people want to be.  People like to win and they like to be on a winning team.  A winning team will cleanse itself of losers because they poison the organizational culture well and drag the entire team down.

My unfortunate experience in dealing with toxic culture in organizations is that I have learned that changing the culture without changing the cast of characters in the organization is a fool’s errand.  In order for culture to change, people must change.  My practice has led me to the conclusion that the most change resistant organism created by God is the human being.  All of us for better or worse are pretty much who we are and most of us naturally resist change.  The TV character Adrian Monk said, “I don’t mind change, I just don’t want to be there when it happens.”  Along these lines, I highly recommend a book by Alan Deutschman titled, “Change or Die.”  This book documents the research of Dr. Dean Ornish that found that even when faced with a virtually certain prognosis of death, only a very small proportion of people will change destructive lifestyle habits.  The question I ask leadership teams is that if a human being will not change their ways when faced with a death sentence, what right do we have to expect that they will change their ways when the only thing involved is a job?

The take-away from this is to stop chasing problems.  Look at what is coming from your Board Room and leadership team.  What is the level of accountability in the organization?  Fix the governance and culture in the organization and you will find that the problems will ‘magically’ go away.  How can I make this assertion?  It is easy.  Get the right team on the field, support, encourage, hold them accountable and watch them fix all of your ‘problems’ on their own.  As this occurs, you will see the performance of your organization improve as if by magic.  Not only that, you will likely get credit for engineering a turn-around. 

I have mixed feelings about this article.  The downside is that I am revealing one of my most powerful ‘secret’ tools for effecting transformational change in an organization.  If you adopt this mantra, there is a very good chance that we will not have the opportunity to meet in a business situation.  However, I am not too worried because of the caliber of governance and leadership I have seen in many organizations.  I am reasonably confident that things will continue to evolve in such a way as to insure that I remain as busy as I like for as long as I wish to work.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two you would find value in.  I can also help with career transitions or career planning.

The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link in the menu bar at the top of this web page.

This is original work.  I have not seen content of this nature in my extensive dissertation research.  This material is copyrighted by me with reproduction prohibited without prior permission.  I always note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

If the executive is going to get fired anyway, why do they need a contract or severance?

In my last blog, I said I would address the topic of severance packages.   From the perspective of a lay person, a severance deal can be seen as an undeserved reward for failing in an organization.  The severed employee goes on an extended company paid vacation while the minions are left to slave away for months or years cleaning up the mess.

I should clarify my terminology.  I am making a lot of references to CEOs in these commentaries but the principles I am describing apply equally to all of the ‘O’s.  In fact, either the CEO is setting the tone for the organization or what happens to him has a collateral effect on the other executives in organizations.  While I am on this subject, I should also acknowledge my  use of the male gender.  This is not intended to offend anyone or indicate bias.  I am tired of the political correctness that is killing our society.  If you see me use male gender, you can feel free to read him/her in its place.

I covered a number of reasons why an executive might leave an organization in my last article.  The overwhelming majority of causes of executive turnover are not controllable by the executive and sometimes are symptomatic of issues beyond the control of the executive or possibly even the Board.  This is the fundamental reason for a severance package.  In an earlier blog, I covered the risk that other executives are exposed to in the event of CEO turnover.  You can become eligible for turnover by just being in the wrong place at the wrong time.

A severance package has two basic goals.  The first is to ease recruitment by reducing the risk associated with turnover.  An executive is more likely to join an organization if they believe they are putting themselves or their family at less risk.  The second primary reason for a severance package is similar to the first.  The only way an executive is going to put the needs of the organization ahead of his own is if he does not care whether a course of action results in him losing his job.  An administrative assistant in a hospital once told me that the best CEO the organization had ever had was independently wealthy and did not need the job.  As a result, his focus was always on what was best for the hospital without regard to whether it put his job in jeopardy.   I not have seen other situations where an executive was sufficiently independent that his only goal in every situation was the best outcome for the hospital, especially in the absence of a severance agreement.

Even with a severance package, the executive still has fear of loss of his job.  Without severance, a Board is delusional to believe that their executives are going to engage in material personal risk on behalf of the organization.  They can be expected to pursue the more pressing objective of job preservation.  This type of paralysis will always lead to sub-optimizaton in the organization.   This phenoma explains one reason that interim executives can be transformational in an organization.  They are generally not running for the job and they have nothing to lose by focusing on the best for the organization.  If an organization wants the best from their executives, they must be willing to insulate them from as much risk of repercussion of the politics of their activities as possible.

On the other hand, severance packages can add sting to a bad outcome that results from a bad hiring decision in the first place.  If an organization makes a mistake in recruitment and the executive has a short tenure as a result, the severance package adds insult to injury and makes the turnover even more expensive than it would be otherwise.  Unfortunately, it is difficult if not impossible these days to recuruit a CEO without a severance package and I believe it is becoming increasingly difficult to recuit other well qualified executives without severance packages.  An organization unwilling to offer a severance package may be excluding itself from some of the best qualified candidates in a search.

Michael Rindler writing for Trustee Magazine produced an excellent article on Use and abuse of golden parachutes.  In this article, Mr. Rindler makes a number of observations about how severance packages have been abused and argues for performance based severance.

While I generally agree with Mr. Rindler, I have a somewhat different view.  If an organization wants the best from a CEO or any other ‘O’ for that matter, it must insulate them from the risks that their actions will result in their termination.  If an executive is indifferent regarding whether or not they maintain a job in an organization as long as they are doing the right thing(s), they will get superior results.  It is when they have fear of the repercussions of their activities that they start to sub-optimize or prioritize their self preservation interests above the intents of the organization.

Another reason for severance is that it enhances the recruitment process.  Being an ‘O’ in healthcare these days is among the most unstable, high risk jobs among similar executive positions in any industry.  This risk makes it difficult for an otherwise highly desirable executive to leave a comfortable situation to go into an unknown situation that might offer greater opportunity at unknown risk.  If the executive already has a severance package, they generally will not even consider another situation that does not offer the same ‘safety net’ regardless of the appeal of the new situation.  Therefore, severance packages are often necessary from a competitive perspective if the intent is to recruit the best talent available under the circumstances.

Where does this leave us?  Are severance packages a good idea?  I would say yes on balance.  Is is proper to reward executives for taking risks in an organization that may result in them leaving.  It is also justifiable to use severance packages to ease transitions when the fit is no longer right.  I do agree with Mr. Rindler’s argument that severance packages should be performance based.  I have not seen this done and I expect that many organizations would have difficulty with these arrangements because it is so hard to quantify the performance being measured and the effect of an executive or lack there of in influencing that performance.   The severance packages I have seen for the most part do the exact opposite of what Rindler is suggesting.  In order for them to not be honored, the executive would have to be CONVICTED of a felony related to the performance on their job.  This is also know as the Clinton defense where undisputed perjury does not constitute a crime as long as it is not related directly to the job.

Most of this has been written from the perspective of the Board of an organization.  I would advise a prospective executive to always seek a severance agreement. You have no way of knowing what you are really getting  yourself into and it is a reasonably safe bet that you will learn things that might have changed your mind had you known them before signing on.  Whether you are the CEO or not, you are exposed to a great deal of risk you cannot control and may end up on the street as collateral damage related to the failure of some other executive.  The time to get the severance deal is during the job negotiation.  It will become infinitely more difficult if not impossible after the fact.  I know executives that felt they were promised severance packages that never materialized.  The operative principle here is the same one applied by practitioners of the world’s oldest profession.  They know the perceived value of a service is always higher before it is delivered than after the fact.

In conclusion, severance packages are tricky and frequently they do not work as intended for either party.  Excellent executive talent is in very short supply and severance agreements are minimum requirements in most executive recruitments.  The best an organization can hope for is a package that encourages longevity and enhances the probability of desired outcomes.  Getting this for an organization is the trick.   As is the case in most complicated situations, an astute organization will seek the guidance and counsel of experts in negotiation, employment law and recruitment to obtain the best talent possible at the best cost with mutually beneficial employment arrangements.  Failure to do this can result in the spectacularly bad outcomes Rindler and others complain about.  Whether the complaints are justified or not, the organization can still end up in the media defending their actions handicapped by the fact that the complainants have the benefit of perfect hindsight.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two you would find value in.  I can also help with career transitions or career planning.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

What happens following CEO turnover

On 18 December 2014, an article written by Tamara Rosin was published by Becker’s Review about CEO turnover.  You can see the article here:  beckershospitalreview.com/hospit…

There is excellent discussion following this article about the sorry quality of some of the people in healthcare leadership positions and allegations of questionable practices related to severance agreements.  There are plenty of situations where severance packages are a very good idea and I generally recommend them.  I will address this topic in a future blog.

There is also debate regarding the statistical validity of Ms. Rosin’s analysis.  Setting all of that aside, one fact is clear; there is a LOT OF CEO turnover in healthcare.  This is not the first time I am aware of  Challenger, Gray & Christmas  (CGC) publishing information about Healthcare turnover.  Writing for FierceHealthare News on 28 FEB 2012 Karen Cheung-Larivee cited CGC while asserting that healthcare turnover was the highest of all industries.  Healthcare CEO turnover higher than other industries – FierceHealthcare

To me the salient question is not so much about what industry has the greatest degree of turnover but what happens within an organization when leadership turnover occurs?  The answer according to research conducted by Amir Khaliq Perceptions of Hosptial CEOs About the effects of CEO turnover is that the rest of the C-Suite would be well advised to start hanging paper.

Dr. Khaliq’s research demonstrated higher rates of turnover among all of the rest of the C-Suite following CEO turnover than the CEO turnover rate itself.  The only exception was the CIO.  The rates of turnover were calculated based upon the probability that the incumbent executive would still be in the organization a year following CEO turnover.

Title of Position turning over	Probability
AVP, Assistant Administrator	77%
CMO	77%
COO	52%
CFO	42%
CHRO	37%
CNO	26%
CIO	14%

From a career planning standpoint, the moral of this story is that you probably have a lot less control of your future than you believe.  In fact, the probability that you might be leaving the organization during a regime change has a lot less to do with the length and quality of your service than it does with the prerogative of a new CEO to select his own team; a situation that seems to be occurring a lot more than is publicized.  I have generally found this phenomena to be true among my friends and acquaintances.  Think back a little.  What is your observation of what has happened in organizations you are familiar with when the CEO goes?

It is a sad but clearly well proven fact that the closer you get to the front office of an organization, the more your future livelihood depends upon what happens to the CEO than your contribution(s) to the organization.  Moreover, the new CEO is going to be oblivious to your ‘value’ to the organization, perceived or otherwise.  Their self-centered objective will be to assemble what they believe will be a winning team as fast as possible.  They know their own life expectancy as a CEO is generally three years or less and the faster they move to get what they believe will be a higher performing team in place, they better.  This reinforces that old adage that no one will ever take as good care of you as you will of yourself.

Higher ranking executives in healthcare organizations should be prepared for disruption, career transition and relocation.  This is one of the ways they can actually end up advancing their career.  The learning from all of this is to not get enamored with your current organization.  All you have to do is to look around and see how the organization has treated executives forced into transition before to see how you can expect to be treated.  There is no evidence to suggest otherwise unless it is codified in an employment (severance) agreement.  Your best course of action is to never stop personal and professional development to maintain as many options as possible on an ongoing basis and to ease your transition when it occurs.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two you would find value in.  I can also help with career transitions or career planning.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.