Tag Archives: management

More examples of what not to do AKA how to stay in the frying pan and not fall into the fire.

This is the second article in the series about what not to do.  The person suggesting this article asked for examples of things that might help you save yourself from yourself.  Please send me your examples and stories of things not to do.  Your confidentiality will be protected unless you want credit for the idea.  Sharing this experience, especially with younger executives is one of the best ways to serve the industry.  I have an outline of a third article and depending upon response, I could probably keep this going for a while since like a consultant friend of mine used to say, “One idiot can keep three consultants busy forever.”

Project planning

Ben Franklin’s adage goes, “Failing to plan is planning to fail.”  I have found this profound simple statement to be true time and again.

After being appointed interim CFO in a hospital, I learned that there was a major construction project under way.  The project and the rate at which the hospital was burning money on the project did not make sense to me.  To make a long, complicated story short, no one could produce a feasibility study to support the project’s value proposition or pro-forma analysis to support the project’s underlying  financing.  When no one could produce a sources and uses of funds analysis, I spent a couple of weeks creating my own from scratch.  When I was finished, it was clear that the project was underfunded by over $20 million and the hospital did not have sufficient reserves to cover the shortfall.  When this information was provided to the Board, after they recovered from the shock and horror, they decided to stop the project that would have resulted in a problem with the bonds used to finance the project by drawing reserves below bond covenant minimum requirements triggering a technical default.  The entire organization was oblivious to this looming disaster.

Ole Abe said that, “You should spend twice as much time sharpening your axe as you spend cutting with it.”  The implication of this admonition is obvious to anyone that has ever cut wood with an axe.  Still and yet, executives let distractions and competition for their time lead them to allow ill-conceived initiatives to go forward then they are surprised when the projects blow up on them.  If you want to entertain yourself, pick any executive out at a cocktail party and ask them if they have ever seen a project go bad.  The war stories you will hear are spectacular. Better yet, ask the ‘expert’ if they have ever seen a peer do something stupid.  Apparently, they have not heard or have disregarded the advice of Einstein, “Doing the same thing and expecting a different outcome is the beginning of insanity.”

Project control

Oh boy!  The easy part of a project is the planing and approval.  The hard part is execution.  There are a lot of challenges with project execution.  One is that other unanticipated confounding priorities arise in the organization that bleed capacity from the organization’s leadership to remain focused on a critical project.  Another commonly seen problem with project execution is the loss of key leaders during the course of the project.  All too frequently, critical assumptions underlying the project’s rationalization are proven inaccurate or incomplete once execution begins.  Sometimes, a project’s success is largely dependent upon one person and if that person leaves or is incapacitated, the entire project goes into jeopardy.

To some degree, a project is analogous to a marriage.  In order for it to succeed, more than 100% commitment is required from all sides.  Every effort you make to manage your risk can be thwarted by uncontrollable changes in your business partner(s).  There is no guarantee that the people that sold a deal and made commitments on behalf of your business partner will be around to honor those commitments.  If they made commitments that were not in the contract, they may not be allowed to honor them.  More than once before a project was completed, I have found myself dealing with an entirely different cast of characters.  What about a business partner that gets acquired during implementation and none of the commitments made before the acquisition are honored?  A business failure or overcommitment by a business partner can move into your life like bad in-laws.  This is why business partner selection is so important.  Too often, a decision maker will chose a business partner based on cost alone and in the process buy himself a set of problems that turn out to be exponentially more expensive than the most expensive option that was under consideration at the time the decision was made.

A project does not have to fail to become a disaster.  Delays in a project can be as damaging.  I do not know of a delayed project that resulted in a better outcome.  Sometimes, delays cause cascading problems.  Take a construction project for example where the electrical contractor is contracted to start on a date certain and the project is not far along enough for them to begin work.  This kind of a delay can rapidly spread throughout an organization and create enough problems to overwhelm the ability of the leadership team to address them.  This is the reason you were required to study PERT in school.  How often do you see it applied in practice?

If a mistake is to be made in project management, it should be biased in favor of overcompensation for potential problems.  I am regularly criticized for being too conservative and too hard on pro-forma analysis assumptions. Never the less, time after time I see projected revenues and time lines being overstated and projected expenses understated.

Waiting too long to intervene

I have watched executives demur from engaging an issue in hopes that it would go away.  I have rarely seen this strategy work.  More often than not, a problem in an organization will get worse the longer intervention is delayed.  There are a lot of reasons that this occurs not the least of which is that addressing operational problems most often involves dealing with a personnel problem.  I do not know many executives that enjoy taking on a personnel problem.  Vince Lombardi said, “Hope is not a strategy.”  Failing or refusing to intervene can allow a problem to become exponentially more damaging until it reaches the point that the organization’s financial statements are impacted.  Time and again as an interim, I have been asked, why it was going to take so long and cost so much to address a problem?  I have seen ten or more interim executives committed to address what had been allowed to become a major business problem on more than one occasion.  My answer to this question is always the same.  Cutting costs after an organization finally decides to address a problem only prolongs the time and cost necessary for the mitigation.  All too frequently, organizations create a problem by under-resourcing an area or initiative.  When this leads to a melt-down, the leaders charged with the mitigation are frequently frustrated by the cost and time associated with fixing the resulting mess.  Sometimes, I have to tell them for their future reference that the cost associated with keeping a process or function under control is always a small fraction of the time and resources necessary to straighten it out after it goes catawaumpus.  Every executive I know can relate one or more horror stories to prove this point.  More often than not, the fiasco is related to an I/T implementation where the costs and operational consequences associated with a failed project can exceed the original budgeted cost of the project.

Fire fighters are known for over-commiting resources to a fire.  This strategy is designed to err on the side of having more resource than is needed to address the fire as opposed to running the risk that a growing fire will overwhelm the resources that are available on site.  Once, I asked an interim CEO how it was going relatively early into his engagement in a very troubled large hospital.  His answer that I have never forgotten was, “The platform is on fire.”  A platform is like a ship.  When it catches fire, getting off is rarely an option.  You must fight the fire where it is and failure is not an option.  Remember the USS Forestall?  Skimping on resources when dealing with a problem like this can lead to figurative death in the form of an unplanned career transition.  A business problem is analogous to a fire in the organization.  If you are going to make a mistake addressing a problem, your personal risk will be much lower if you respond aggressively to a problem and err on the side of over-commiting resources until the problem is resolved and the situation stabalized.  The alternative is a potential conflagration.

Non-evidence based decisions

The mantra of UAB’s Doctorate of Administration in Health Sciences program is, “Evidence based practice in Healthcare Administration.”  I have commented before on what appears to be a paradox in healthcare.  On the clinical side, most of what is done is based on evidence gained from objective, peer reviewed research.  The purpose of the research is to yield better outcomes and safer facilities for patient care.  In the administrative suites of too many healthcare organizations, decisions are routinely made based on seat-of-the-pants hunches, historical precedent, little or no analysis, ridiculous assumptions, no assumptions, flawed analysis, systematic ignorance or reckless disregard of applicable evidence and research.  More often than not, harried administrators do not even bother to see if any applicable research is available to help them make better decisions.  In other cases, decisions are made for political expediency or to appease Dr. Huff-and-Puff.  I got into trouble in a Catholic hospital for suggesting the leadership team’s decision making ranged from magic eight ball to Ouija board.  I now keep a magic eight ball on my desk as a reminder to not fall into this trap.  It is funny to have younger people ask me what the magic eight ball is.  They’re not old enough in some cases to have ever heard of the magic eight ball and they are fascinated to see how it works.  It is a wonder some organizations get along as well as they do.

Indecisiveness
I was perusing novelty signs in a gift shop in Indiana when a sign captured my attention.  It said, “Decision making around here is like a squirrel crossing the road.”  Indecisiveness can be dangerous when it is practiced in the front office.  At its least, indecisiveness can lead to project and initiave delays.  At worst, it can wreck not only projects but the credibility of executives with their Boards.  There’s a one liner that says, “The road to failure is littered with run over squirrels.”  In an earlier article I said, “If you are a decision maker, make a decision.”  Not making a decision is making a decision.
As before, I would like to thank Dr. Christy Lemak Professor and Chair of the UAB Department of Health Services Administration for the inspiration or should I say assignment that resulted in this article. I am looking forward to seeing my grade.
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.  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.
Advertisements

Further rumination on success

The Wall Street Journal’s lead editorial on June 23 featured an article by Kay S. Hymowitz entitled, “Is there Anything Grit Can’t Do?” The article is about the work of Angela Lee Duckworth.  In my article about career advancement, I talked about hard work, paying a price and the perseverance necessary for career success.  Here we have another excellent example of a researcher that has dedicated their career to the study of a specific topic.  If you do not believe a researcher in academia can become the undisputed authority on a subject, check out Dr. Duckworth’s CV.  For those of you interested in further study of this topic, the list of grants, articles and presentations in Dr. Duckworth’s CV reads like the literature review in a dissertation.   In the case of Dr. Duckworth, her expertise flies in the face of a lot of conventional ‘wisdom’ and political correctness.

The ideology of indoctrination of children in too many failed government schools and universities for that matter vacillates between victim-hood and entitlement insuring the continuing institutionalization of mediocrity and poverty.  In my opinion, public education has deteriorated markedly over the past thirty years.  The US Department of Education was founded in 1979.  In federal fiscal 1980, the department’s  budget was $14 billion.  By FFY 2015, the bureaucracy’s budget had ballooned to $73.8 billion.  Studies have shown an inverse relationship between spending per student and outcomes yet the common proposed solution to every problem is more money.  I do not know anyone that thinks that public education is any better for this spectacular increase in investment.  I have heard Eric Von Hessler and others advocate for the elimination of the Department of Education in its entirety as a means of balancing the federal budget.  I think a lot of people would agree that education is better-managed locally and not from a central federal government bureaucracy.   Too few young people are being taught that the thing that has the greatest potential to make a positive difference in their life is drive or ‘grit’ as described by Dr. Duckworth and not the narrative of the NEA.  There are probably not very many people who have done a more thorough job than Dr. Duckworth understanding how to help children and adults succeed.

If you search Dr. Duckworth on YouTube, you will find a long list of videos.  These presentations are as inspiring as they are compelling.  A lot of Dr. Duckworth’s inspiration and early discovery came from teaching elementary school math.  She became fascinated almost to the point of obsession to understand why some of the smartest students as measured by IQ exhibited lackluster performance while others who did not have the gift of rote intelligence excelled.  Those of us fortunate enough to have parents that were members of the greatest generation of Americans know what grit is.  The greatest generation got their grit honestly from the great depression, WWII and the work involved in building our country into the success it has been.  I will never forget my son’s late scoutmaster, A.H. Friel, a WWII veteran saying, “We were not worried about whether or not we would die in the war.  Our biggest concern was that it was going to be over before we could get into the fight.”   Mr. Friel’s service included a stint on the USS Indianapolis just before its fateful mission.  Contrast Mr. Friel with the current ‘run, hide and tell’ advice citizens are getting from western governments about responding to the threat of terrorism.  Many of us that grew up in these homes learned a ‘git ‘er done’, ‘suck it up’, no griping no whining demeanor.  When those of us that are products of the 60’s and 70’s got to college, we encountered a fiercely competitive environment that extended into our early careers.  Many of us have driven ourselves to the edge in relentless effort to succeed.  This phenomena inspired one of my favorite songs; Luckenbach.  Willie and Waylon lament that, “This successful life we’re livin’ got us feuding like the Hatfields and McCoys.”  They go on to sing, “We’ve been so busy keepin’ up with the Jones, got a four car garage and we’re still building on.  Maybe it’s time we got back to the basics of love.”  One of the most memorable days in my life was spent in Luckenbach, TX.  I highly recommend you put it on your bucket list.  The inspiration of the song and the ‘town’ led me to start my article on success by posing a question; what does success mean to you?

People that know me know I like motor racing.  Two of racing’s biggest stars are Dale Earnhardt senior of NASCAR and John Force of NHRA.  Both of these men rose from very difficult childhoods.  They grew up in poverty.  They are not well educated.  Yet they became titans in their respective sports and grew massive racing enterprises.  Why?  A lot of people would say grit or drive or in the case of Force, brute force.  They have a refuse to lose, ambitious, opportunistic demeanor that dominates their personality and their performance on and off the track.  This is in spite of vicious wrecks that in the cases of other drivers permanently altered their competitive drive.  An example is Earnhardt’s 1996 wreck in Talladega that was eerily similar to and actually more destructive than the 2001 wreck in Daytona that killed him.  Force has said, “I’ve been on fire from here to Australia” and “I saw Elvis about 1,000 feet down a drag strip one day.”  I have heard a number of professional athletes say that they were not born with their talent or gifted.  Many of them attribute their success to willingness to work much harder than the people around them and to take chances others would not take.  That and a vision of success.  I heard John Smoltz say that when he was nine years old, he was pitching in the World Series in his mind.  There was never a shred of doubt in his mind that he would pitch a decisive game in a World Series.  By the time he became a World Series pitcher according to his account, the reason he was so calm and focused was that he had played the game in his head over 1,000 times.  Napolean Hill said, “Whatever the mind can conceive and believe, it can achieve.”  Les Brown said, “To be successful, you must be willing to do the things today others won’t do in order to have the things tomorrow others won’t have.”

So to sum this up, if you are not happy with how things are with you, you might want to reconsider Pogo; “We have met the enemy and he is us.”  The demons standing between where you are and where you want to be might be mostly between your ears.  All of us can cite examples of people we know and work around that are examples of what I am talking about here.  As I said before, success is not always best measured by career accomplishment.  However you measure success, if you want to increase yours, one of the best strategies might be to resolve to turn up your grit.  My hope for that you have the courage to click some of the links in this article and that you are as blessed and inspired as I have been by what the people I have referenced are saying and doing.

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.  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.

 

 

Examples of what not to do – simple mistakes you have seen that others could avoid.  AKA – How many ways can you get yourself into trouble?

One of the items of constructive feedback I have received is that some of my articles are too long.  The subject of this article resulted in an article over 2,000 words long.  I have reminisced with friends in the consulting business that have suggested that we collaborate on a book on this topic based on the experiences we have had.  As a result, this article will be posted in multiple editions.

A very highly regarded friend of mine recommended that I address mistakes that might be beneficial to others.  Nasreddin said something to the effect that, ‘good judgment comes from the experience we get from exercising bad judgment.’  Given the benefit of this insight, I will address some of the things that I have seen as the cause of extreme angst in one healthcare organization after another.  An exhaustive listing is beyond the scope of any article.  However, I welcome tips and stories from my readers addressing vivid memories of things that would be beneficial for others to know, especially those that do not have the experience of some of us.

Blind trust of systems

This is one of the most basic managerial errors and it is seen over and over.  People ‘assume’ that a system will or will not do something without proving the assumption only to be surprised when their blind faith is proven wrong in a spectacular faux-pas.  Rather than assuming that people understand the meaning of the word ‘assume’, I will define it by dissection.  All to often, people engage in assumptions leading to flawed decisions that make an ASS/out of U/and ME.  I wish I could remember how many times I have witnessed flawed assumptions wreaking havoc around me.  Sometimes, these errors result in terminations of the people involved.  Mark Twain and Ronald Regan said that, “It is not what you know that will get you, it is what you are absolutely certain of that is just not right.”

Once upon a time when I had reason to doubt the controls in the hospital’s accounts payable system right after a new state of the art, super whiz-bang accounting application had been implemented, I was assured by my Controller that there were safeguards in the system that he said would guarantee that there was no scenario under which an automated check for more than $25,000 could be produced and signed with my facsimile.  I had set this limit to insure that I had the chance to personally review large disbursements and sign them manually.  About a week later, it came to my attention that instead of keying a construction draw request of less than $25K, the A/P clerk keyed the remaining balance of over $275K to a contractor that the hospital was engaged in an active dispute with.  What do you think happened when this transaction went through the system without interruption and out to the contractor?  If you ass/u/me that he brought the check back, you would be sorely mistaken.  I am sure others can provide similar nightmare stories.

There are thousands of ways to be trapped by our own systems. The more complex the systems, the greater the number of interfaces with other systems and the higher the volume of transactions, the greater the potential for error and the larger the error will have to become before it is discovered by normal control and balancing processes.

Hiring mistakes

Another HUGE area of learning in the school of hard knocks is hiring decisions.  Jack Welsh said something to the effect of, “Getting the right people into the right jobs is a lot more important than developing a strategy.”  As an interim executive I have observed that one of the more common areas that gets organizations into trouble is hiring decisions that result in people being put into roles where they cannot succeed.  Some organizations and hiring decision makers are highly motivated to put the next person in line into a role whether they are qualified or not.  I have been criticized for bringing people from outside of town into the organization to fill crucial roles.  My response is that if  properly qualified local applicants were available, I would hire locally to save travel money if for no other reason.  I have counseled Boards and written on the subject of organizational performance being nothing more complicated than the collective caliber of the team on the field.  One of my mentors taught me by example the potential and value of getting the right people into the right places in an organization and the difference they can make.

Getting the right people is as important if not more important than avoiding hiring the wrong people by making mistakes in the vetting process.

AR valuation

I have seen so many executives brought down by incorrect valuations of their accounts receivable that I have lost count.  So many in fact, that I was inspired to address one of my blog articles to CEOs that all too often become one of the first victims of this error.  The article asks the question, ‘have you been caught looking?’  One of the biggest risks on a hospital’s financial statements is the valuation of revenue and accounts receivable and for every understatement, there are multiples of over-statements of receivable and revenue value.  In fact, I have not seen an undervaluation recorded although I have been in arguments with outside auditors about under and over valuations of revenue and A/R.  It is a lot easier to convince an audit partner to not book an undervaluation than it is an over valuation.   The executive that wishes to avoid becoming a victim of this trap needs to take the advice of my article on the topic to heart.

AR reclassifications

A reclassification of AR is potentially more dangerous and harder to catch than a simple error in calculating realizable value.  For example, consider an organization that holds self pay balances after insurance in the same bucket as the insurance.  This is considerably more common than many managers appreciate.  Suppose a commercial receivable is valued at 70% of the underlying charges and self pay receivables are valued at 5%.  When an amount like $5 million is reclassified from insurance to self pay to clean up a backlog after the insurance balances have been satisfied, the adjustment to the value of receivables will be 65% (70% – 5%) or $3.25 million.  There are other reasons for balances to accumulate in the wrong buckets on the receivable system leading to reclassification adjustments.  The receivables are not wrong, they are just valued incorrectly.  This kind of error is enough to knock an enormous dent into or potentially wipe out the operating income of any enterprise.  There are rarely adequate cushions or reserves in realizable value calculations to absorb a shock like this.

Summary

As can be seen, a text-book could easily be written on the topic of what not to do.  There are plenty of texts that are written on what to do, they are just all too regularly ignored.  Some leaders seem to not have the ability to connect academic learning and practice. These are but a few examples of things that I have seen go wrong in healthcare organization’s business operations.  This discussion is a good example of the value of experience.  Experienced executives operating on evidence based practice have a far better potential to avoid these pitfalls and others.  Sometimes the value of an executive in an organization is more related to what they know than what they do.  Once a patient in an outage accosted a surgeon  over his fee.  The patient took the position that the fee bore no relationship to the time spent on the procedure.  The surgeon replied that 5% of his fee was for the cutting and the other 95% was for knowing where to cut and what not to cut.

My plan is to publish another article on this topic with more examples of what not to do. If you have any stories to contribute, I would love to hear them.

I would like to thank Dr. Christy Lemak, Dean of the Health Administration program at the University of Alabama at Birmingham for inspiring this article.  I am looking forward to seeing my grade.

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.  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.

What is the value proposition of an Interim Executive?

Interim Executive Services as defined in my ‘About‘ page is not as common in the US as it is in Europe.  On the continent, in order to practice as an interim executive, a person needs to have a certification similar to a CPA in the US.  In the US, it is still the wild west when it comes to interim executives.  A few years back, a private enterprise in NC attempted to establish a credential for interim executives but the effort failed so now it is a buyer beware market.  There are firms providing interim services but in my experience these firms do very little in terms of either training or providing oversight for their interims.  The interims are placed and they are usually on their own from that point.  This raises the question of the value proposition of an interim executive because the proposed pricing is usually higher than the hourly rate for the employee being replaced.

In my experience dealing with buyers of interim services, the first and often most heavily weighed consideration is the cost of the interim resource.  The less sophisticated the decision maker, the more likely that they will be motivated primarily if not exclusively by cost.  This is because they do not get or choose to ignore the value proposition.  This has happened to me time after time.  Each time, I held my ground and demanded a fair premium for my services.  In each case, I told my client that if they did not find value in my services, they could terminate me without cause or notice.  Once they had a chance to experience what a sophisticated interim executive could provide, the cost issue was not raised again.  A decision maker that seizes an opportunity to buy interim services at a small or no premium should be worried about what they will be getting for their money.

I am aware of interim firms that prey on executives in transition that are desperate for income.  Some of these interims will take any job at any price.  The interim firm then sells their services based on price alone and is successful getting a markup of 30% to 50% while providing a price sensitive decision maker just what they paid for.

What would rationalize a premium for a sophisticated interim executive?  There are many considerations that a decision maker should contemplate in addition or in lieu of rate.  I am making repetitive use of the adjective ‘sophisticated’ when referring to interim executives.  There are differences in the sophistication of interim executives and the decision makers that engage them.  These differences are discussed in an earlier article.

The criteria below while useful in understanding the value proposition of a sophisticated interim executive may be equally if not more valuable in evaluating potential interim resources for fit in your organization.

I would advise against hiring the first interim you see unless you have a recommendation from a source that you highly trust.  When I worked with Tatum, they made it a habit to present at least two resources on each project so that the decision maker would have the ability to see more than one alternative and make their own choice instead of letting the interim firm sell them on whoever happened to be currently sitting on their bench with nothing better to be doing at the time.

Experience – One thing worth paying a premium for is experience.  The typical sophisticated interim executive is a late career individual with a lot of experience, usually in a number of organizations.  The depth and breadth of this experience allows them to assimilate quickly an organization and to begin creating value almost immediately.  This is particularly true if the interim has on-point experience, something you should always look for.

In addition to career experience, it is worth paying a premium for an interim executive with multiple interim engagements on their CV.  The approach to a position as an interim is radically different from what one would take as an employee.  It is worth paying a premium for an experienced interim unless you already have another interim in the organization that can serve as a mentor.

Credentials – In addition to being highly experienced, sophisticated interims tend to carry above average credentials.  Things like advanced degrees, CPA certifications, ACHE, HFMA  and/or fellowships.  These credentials may or may not specifically make one person better than another but the probability that a credentialed executive is going to have a higher level of cognitive capability and an innate drive toward personal excellence is a pretty safe bet.  Another consideration is that no one requires executives to seek advanced education and professional credentialing.  In a situation where everything else is equal, I will always favor a credentialed individual because the very fact that they have obtained a credential is proof of their drive to go beyond the minimum required to get by.  In my experience, credentialed executives are always superior for this reason alone.  As most of us that are credentialed know, you do actually learn something in the credentialing process that might come in handy once in a while.

Expertise – Knowing what you are doing should count for something.  I have seen more than one decision maker hire the first resource they could find that had a heart beat only to make the situation infinitely worse when the interim executive failed.  Most decision makers I have met do not know how to supervise or manage an interim executive.  For example, I would argue that most CEOs do not have the ability to manage a CFO from a technical or risk management standpoint.  I discuss this phenomenon in an earlier article.  The risk for the decision maker is that if the interim fails, the decision maker will usually be held accountable.  The interim will go on to the next gig while the decision maker that may not have been considering relocating finds himself hanging paper from home.

MentorshipSophisticated interims are invaluable in the potential they present to mentor rising executives in an organization.  A sophisticated interim executive that knows how to mentor properly can help turn younger leaders into rising stars.  In addition, interim engagements frequently lead to demand for additional interim resources that were not anticipated at the beginning of an engagement.  In this situation, an interim that has the capability to manage and/or mentor other interims can bring a very high value to an organization.  I have engaged a number of interims while serving as an interim myself.  I can say from experience that I believe I have delivered substantial value by making sure that the other interims were doing what they are supposed to be doing.

Judgment – You have probably heard the one liner that says, “Good judgment comes from the experience we get by exercising bad judgment.”  I would argue that having the ability to bring above average experience and judgment to bear on a problem is worth paying for.  Experienced executives, especially interim executives can be expected to have better judgment than a decision maker might be accustomed to.

Stability – A transition situation is unstable by definition.  My practice has shown me that the only thing you can be certain of in a transitory situation is that you cannot be certain of anything.  Some people have difficulty dealing with unstable, unpredictable situations.  After or arguably before a decision maker initiates a transition, they should be thinking ahead about their next steps and high among them should be an effort to stabilize the situation so that a business interruption or a bad outcome may be avoided.

Morphing deals – Some people need predictability and stability in order to function effectively.  They are unnerved by constantly changing circumstances and seize up.  An experienced interim executive knows that as a project progresses, things will happen and changes will become necessary that were not initially expected.  The project morphs from one set of circumstances to another.  It is worth paying for experience that can not only help stabilize a situation but experience that can adapt to unforeseen challenges.

Easy to sever – I have seen interim engagements fail.  There is no way that I know of  to accurately predict in advance if the interim executive will be what was expected or whether or not they will be effective in your organization.  In the event that the engagement is not working, you should have the ability to have the interim replaced immediately without cause or notice.  I discuss this in my article about contracting.  If the interim deal is not working, it is highly unlikely that it will improve.  I have had to terminate an interim before the end of their second week in an organization.  In the event that something like this occurs, the sooner you act, the less the potential for damage.  The other side of this is that the issue may not be anything worse than a bad fit.  I am happy to be the easiest person in the organization to get rid of but if I am expected to bear this risk, part the premium I receive justifies me taking this risk.

Interim services firms will endeavor to mitigate this risk by asking for minimum engagement time periods.  My advice would be to pay the premium and refuse to accept a minimum term as explained in my contracting article.

Velocity – In my article about contracting, I talk about the importance of velocity as it relates to interim engagements.  Frequently, decision makers procrastinate about making a decision but once they make up their minds, they want the resource TOMORROW.  Providing this kind of flexibility is worth paying a premium for especially if the resource you want has been waiting for you to make a decision.  If you want a resource to sit around waiting for you make a decision and be at you beck and call at any time, you need to be prepared to pay a premium for this luxury.

Rapid acclimation – When I was at Tatum, the firm’s mantra was ‘Velocity.’  The connotation is that the firm focused on rapid response.  What I have learned from the stages of an interim engagement is that once a decision maker decides to bring an interim executive in, they want them tomorrow.  Part of the premium a decision maker pays is to get  an interim executive  to get to their site quickly,   Sophisticated interim executives also know how to assess a situation quickly.  This skill and experience allows them to become productive much faster than would be expected of an employee.  Decision makers tend to vacillate and procrastinate about a decision to bring in interim resources.  They should not be unhappy about paying a premium for a resource that can help them compensate for the time it took to get the interim on their site.

No benefits – An interim deal is simple from the perspective that it usually only involves the professional fee and out of pocket expenses.  Unsophisticated decision makers will compare the salary rate of the departed employee with the billing rate of the interim and conclude that the interim is expensive without taking into consideration that the employee had benefit cost somewhere in the range of 25% of their compensation.  Not having an interim executive on the organization’s benefit plan is clean and can be a cost saving aspect of the engagement.

Living and travel burden – If you don’t think an interim executive deserves a premium, try living in a hotel and traveling every week.  Not only does this create an expense that substantially adds to the cost of an interim engagement, it is very hard on the interim executive.  The longer the engagement lasts, the harder this becomes on the interim.  It is too easy for decision makers to forget the interim executive as they are going home a warm meal and the privilege of going to bed with their spouse while the interim is separated from their family, eating out and going to sleep in a cold bed.  This aspect of interim executive consulting by itself warrants a premium.  I accept that the burden of travel goes with Interim work but I wonder if the price my family and marriage have paid for me to do this work has been worth any amount of money.  I have lost my sensitively about what I ask for my services primarily be causes of the burden that the interim lifestyle places on the consultant.  I discuss this in detail in my article about becoming a an interim executive.

While I could take the position that it is not a problem of mine, I deeply resent the cost associated with being an interim executive.  Travel, food, temporary lodging and other costs associated with an interim executive is a significant proportion of the total cost of an interim resource.  It drives me crazy to pay these costs or incur them on behalf of a client.  This is one of the strongest reasons for making sure that you are getting your money’s worth from any interim you engage.

Hired independently or via a firm – My experience is showing me that there is a growing population of ‘free agent’ interim executives.  Firms that place interims will take somewhere in the range of 30% – 50% of the total professional fee for their overhead and profit.  In addition, because of what I would describe as oppressive government overreach, most if not all firms now require their interims to work on a W-2 instead of a 1099 or K-1.  This can result in the interim losing tax benefit in the best case and paying tax on out-of-pocket expenses in the worst case.  While free agent interims can be harder to find because you have to know how to network to find them, they can be less expensive because they are not taking a hair cut in a direct deal.  In my experience, a free-lance interim is likely to be much better than interims that come from firms for a variety of reasons that are beyond the scope of this article.

Summary – I could go on but I trust that as a decision maker or an interim for that matter, you can see that there is plenty of justification for a premium for interim executive services.  The premiums I have seen run 50% or more over the base salary of the executive being replaced.  If you are a decision maker, you should not be afraid of paying a premium to get superior skills and resources brought to bear quickly on complex or dangerous business problems and or transitions.  Quibbling over rate can slow down the process of getting the right resource and can prevent you from getting the best possible skill in place.  One of the most profound value propositions of an interim executive is their ability to raise the probability that the decision maker that hired them will not also become a victim of the transitions that created the need for the interim in the first place.  In my experience, decision makers routinely discount this aspect of an interim engagement’s value that is in  my opinion one of the strongest reasons for paying a premium for the right interim.

If you are an interim executive, you should not ever sell yourself short.  I took a haircut on a deal that was only supposed to last 3 months to mitigate on behalf of the firm something that I had nothing to do with.  After three months, the firm would not get my rate corrected and the engagement ended up lasting thirteen months.  I will not work with that firm again because they have demonstrated in more than one case involving me that they cannot be trusted.  As an aside, from my perspective in this case, the firm detracted significantly from its value to me while adding insignificantly to the client’s value.  If you have experience as an interim, you know that one certainty is that you are probably going into a situation that will turn out to be significantly different from what was described and invariably more challenging.  You also know that there is a very high probability that you are going to be in the organization much longer than the decision maker assumes at the onset.  In my  experience once you have proven your value, decision makers will take considerably more time getting you out than they took getting you in.  I have helped decision makers over the cost hump by reminding them that hiring me is a no risk proposition.  They can send me packing the day that they decide that the engagement is not working or that I am failing to produce more value than they expected.  I am happy to take this risk as long as I am being appropriately compensated.  I have yet to be sent packing.  In every case, I have remained much longer than initially expected or planned.  Some interim firms prey on unsophisticated executives in transition by buying them at or below what they were receiving as an employee and reselling them at a market consulting rate.  If you allow yourself to be prostituted in this manner it is your own fault.

In closing, I believe there is substantial justification for paying a premium for interim executive services.  I postulate that the time usually lost by decision makers that struggle with the decision to bring an interim in can quickly create costs and/or losses that far exceed any premium.  As I said in an earlier article, if you are a decision maker, make a decision.

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.

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.

 

 

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.

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.

The stages of an interim executive engagement

I have come to realize in my practice that an interim engagement follows a predictable pattern.  I have seen this happen time and again.  I understand the process that a decision maker goes through during the course of an interim engagement.  A majority of decision makers dealing with transitional situations have little or no experience with interim executives.  I asked about this as a part of my dissertation research.  A small proportion of my respondents (35.7%) reported having experience engaging and managing interim executives.  Another 33.6% of my respondents said they were knowledgeable about interim executive services but had not engaged an interim executive.  Similar to Elisabeth Kübler-Ross‘ five stages of grief, I have observed one organization after another going through a similar process during an executive transition.  The primary difference between organizations and decision makers is their exit point from this process. Some never get around to making a decision or decide to avoid the use of an interim.  In order of their occurrence, here are the stages of an interim engagement that I have experienced.

We do not need an interim – When faced with a transition situation, organizations employ a variety of strategies.  Some use internal resources, some leave the position open and others resort to consultants.  In a future blog, I will address the difference between an interim executive and a consultant.  Organizations will frequently initially resist the fees associated with engaging an interim executive.  They will search for any possible alternative to engaging the interim.  They will spend weeks or months struggling with the interim decision.  I have seen the passage of over six months between the time first contact was made with a decision maker regarding an interim position and the time the engagement actually started.

Acceptance of an interim – All too often, once the decision is made to employ an interim, the client wants the interim TOMORROW!.  Generally, the client communicates their desire to accelerate the interim engagement as a means of managing the cost of the interim engagement.  Sometimes, too much time passes between the time the decision maker meets an acceptable interim and the time they make a decision.  Then they are frustrated when they call to find that the interim they wanted is now engaged.  I once had a potential client get upset with me for ‘putting pressure’ on them to hire me.  All I had done was to tell them that I was being proposed by the firm I represented on multiple jobs and if they wanted me, they needed to make a decision.  In this case, one of the reasons they wanted me was perceived cultural fit.  They wanted someone that would fit into a rural eastern North Carolina culture and I had been a hospital CFO in that area.  Two weeks later, I received a desperate call.  They wanted to know how fast I could get to their site to address what had become a big problem.  I told them that I was literally on my way to Milwaukee.  I had been engaged a few days earlier by one of the other clients that had seen me.  The potential client that had let me ‘get away’ was not happy.  Ultimately, the firm lost the gig because they did not have any other resources that this client liked and I got to spend the winter in Milwaukee instead of eastern NC.  If you are a decision maker, MAKE A DECISION.

 
Recognition of the value proposition – I start my engagements with an assessment.  The purpose of the assessment is to determine the degree to which the function I am filling is or is not meeting the needs of the organization.  During the assessment, it is common to find a number of significant opportunities for improvement.  My experience has been that when a client sees the difference between the interim and what they had before or when they see the magnitude of opportunity revealed by the assessment, the value proposition ‘clicks.’  There is no easy way that I have found to tell a prospective client before an engagement that my experience might be valuable to their organization .  It comes across as self serving.  Once they understand the potential of working with a professional interim that is capable of being transformational in their organization, they want to get as much as possible out of the the engagement as fast as they can because they understand that the potential value is multiples of the cost.  This frequently reduces the client’s focus on getting the engagement over as fast as possible.

 
Employment overtures – Somewhere along the line, usually in the six to nine month period of an engagement, the client decides that the interim is highly desirable and recruitment overtures start.  Sometimes, they come to doubt that a recruitment would result in an equal or better permanent solution. According to my dissertation research, 25% – 40% of the time, the overtures result in employment even if it was not the initial intent of either party.  Tatum called this a ‘conversion.’  The respondents to my dissertation research survey stated that they had converted their interim 35.9% of the time.  If the interim is sophisticated, they will generally resist converting as they see consulting preferable to employment.  The challenge to this part of the process is to get through it without the client becoming concerned that they or their organization are not good enough for the interim.

Diminishing returns – If the interim does not convert, they ultimately begin to experience difficulty in achieving transformational gain in the organization.  Initially, they were a novelty full of energy and fresh ideas.  They are generally very impressive compared to their predecessors.  They are humored by the bureaucracy in the organization and their harvest of low hanging fruit is impressive.  Sooner or later, the resistance of the organization to engage in increasingly difficult change and increasing resistance on the part of the bureaucracy reduces the ability of the interim to produce transformational change.  One day the leadership is evaluating their situation and they conclude that the consultants are not earning their keep and the transition(s) start.  I will discuss the topic of culture and change in organizations in a future blog entry.

Recruitment – During this stage of the process, the interim participates in the recruitment by performing a number of key tasks.  They spearhead the development of a revised job description, they develop a specification for the recruiter, they participate in the interviewing and vetting and ultimately in the selection of the permanent candidate.  I have cast the deciding vote on my replacement more than once.

 
Transition – The transition occurs when the interim is replaced by a full time employee which can be the interim.  If it is not to be the interim, the interim generally assists the organization with the recruitment and on-boarding process.  When the on-boarding process is complete, the interim moves on to their next challenge usually leaving their client organization in much better shape and thankful for their service.

I have personally experienced this progression of an interim engagement time after time. I have also seen every one of my engagements run longer than initially discussed.  Before a client appreciates the value proposition, they are very highly motivated to get the engagement over as fast as possible.  I have been told time and again to not expect more than ninety days, 120 days at the most.   My average engagement is nine months and I am currently twenty months into an engagement  was initially mutually understood to be limited to an assessment only.

The other interesting phenomena that I have seen is that the process can be exited at any stage given circumstances unforeseen initially.  This is one reason that I go the extra mile by making it very easy for my clients to exit an engagement should it become necessary.

One of the factors that lead to engagements dragging on is that the client becomes comfortable with the interim and they allow distractions to degrade their focus on moving the organization beyond the interim engagement.  The next thing they know, the engagement is approaching its first anniversary.

If you are a decision maker considering an interim, my hope is that this material will enable you to better manage the engagement and get the most from it for you and your organization.  If you are considering interim services, and if you are any good, you should expect that your engagements will nearly always run longer than initially discussed with the clients.  Therefore, as an interim, you need to be careful making forward commitments that assume the engagement will be over by a time certain.

This is original work.  I have not seen content of this nature in my extensive dissertation research.  This material is copywrited 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.
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.

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.

Why do CEOs get fired or leave organizations anyway?

In my previous post, I made reference to comments written by ‘TiredofTheOverpaidFailures’ in response to a Becker Review article.

Among other things, this writer said, “As a healthcare staffer for 35 years from entry-level employee to Director, I’ve literally never seen any CFO or CEO leave our organizations for any reason other than to “spend more time with my family”.  It’s true, because in every case they collected an inflated golden parachute for the next 2-3 years and indeed manage to take off time to spend with their family or most of the time do part-time consulting at some other organization where they have no idea the horrific failure they were in the previous position. For that matter, what shape they left the organization in.  They usually consider them “the expert” because they are from somewhere else.”

Clearly, he or she  was very bitter about what they had observed in the front office of their organization over a long period of time.

It is true that some of the folks occupying C-suite offices are not that stellar but more often than not, when they leave it is rarely because they are an idiot.  The system does a pretty good job of weeding out idiots before they can reach positions of such power and influence although I have seen a number of suspects among the casts of characters I have dealt with in healthcare administration.  So if the CEO is not an idiot, why let him go?  I will discuss a variety of situations that I have seen that I believe explain in part why CEO turnover in healthcare is so high.

I frequently hear complaints about what a Board is and is not doing with respect to the organization and the CEO.  A healthcare organization is not much different from a professional sports team.  The Board is the owner and the CEO is the coach.  In the end, like a sports team, the Board only has one switch or lever to use to guide the organization; hire the coach or fire the coach.  As long as the Board has not decided to fire the coach (CEO), by default they are supporting or at least tolerating him.  He is still their guy until the notice is delivered which can happen on the same date that an incentive award is given.  If you do not like what you see the CEO doing, it is not necessarily his fault.  Look to the Board for responsibility for the actions and results of their CEO.

The CEO is taking the organization in the wrong direction.  This does not mean that the direction is actually wrong.  Usually, it is very different from the predecessor’s course of action.  Sometimes, a new CEO will read that the reason for his predecessor’s failure was that he had the organization on the wrong track and the new CEO over compensates and sure enough, in two years or less, the Board concludes the new guy is on the wrong track.  This bad outcome is the fault of the Board.  Strategy and organizational direction is NOT the responsibility of the CEO.  It is the responsibility of the Board.  The CEO can facilitate the process but it should be a Board initiative so that the guidance to the CEO is clear and that the strategy transcends different CEOs should turnover occur.  In fact, a smart Board will insure that a candidate CEO concurs with their strategy BEFORE he is hired.

The leadership of the medical staff comes into the Board room.  I have counseled many CEOs on this phenomena that I believe to be one of the most common reasons for CEO turnover.  Name one case where the leadership of the medical staff went into the Board room and said “The boy is done,” and the Board fired the medial staff.  IT DOES NOT HAPPEN.  Every CEO lives in fear of this phenomena and he has seen many of his peers fall to this situation.  Therefore, CEOs are always constrained in what they can accomplish in the organization because if they push the medical staff too far, even if it is for the right reason, they are done when the vote of no confidence comes.  The CEO typically is hired from out-of-town and relocated to the hospital.  The Board rationalizes that the CEO can find another job elsewhere while doctors are ‘rooted’ in the community.  Whether this logic holds or not, the end result is the same in every case.  If anyone is aware of any case of a Board firing the medical staff and keeping their CEO, I would like to know about it.

A major project fails.  Even projects conceived or started before a CEO’s run starts can fell him.  Major construction projects or I/T projects that are not on time, not on budget or fail to come up flying on both wings represent major risks to a sitting CEO. The CEO does not do the project but he will be held accountable by the Board for failing to put the correct staff, resources and controls in place to ensure that the project is successful and to prevent a medical staff revolt if the medical staff is impacted by the project.

The results are just not there.  A financial plan or a strategic plan should be the result of a process or negotiation undertaken between the Board of Directors, their CEO and his management team.  The plan outlines the intended course of the organization over the coming period.  Once the plan(s) are approved, it is the responsibility of the CEO to execute the plan and deliver the results.  Frequently, the CEO is constrained by limitations of his team and in order to accomplish the organization’s objectives, the team has to be changed.  Sometimes different skill sets or different levels of capability are required than what is present on the incumbent team.  If the CEO fails to deliver the agreed results, the Board is justified in considering removing him for failure to execute.  If the failure is due to weakness of the management team, the CEO still owns the problem.  This is what provokes a lot of the collateral turnover discussed in a previous blog.

Speaking of results, a common error of new CEOs is their failure to get an independent, objective assessment of the organization or conduct their own upon arrival.  A Board tends to be more tolerant of issues that are documented and associated with the prior regime.  A CEO that fails to deliver a thorough assessment to the Board in the earliest part of their run in an organization will discover that after a few months, they will ‘own’ all of the problems in the organization whether they created them or not.  Documenting the initial state of the organization is a good way to establish a base line and clearly delineate what existed at the inception of the CEO’s employment.  An assessment is also a good way to facilitate and support requests for incremental resources to quickly address initial problems.

An Illness or accident interferes with the CEO’s ability to execute.  Sometimes, a CEO is beset by an uncontrollable illness that renders them incapable of continuing their duties.  Boards do not do as good a job of succession planning as they should and when something like this happens, the organization is thrust into an unexpected transition situation.  Sometimes an interim whether internal or external can bridge the gap but if the CEO is permanently disabled, a transition becomes inevitable.  WellStar Health System in Atlanta suffered such an incident in a widely publicized accident when their CEO was riding a motorcycle that he bought at a charity event was struck by an automobile and killed.

Indiscretion.  Don’t ask me why indiscretions occur.  Clearly they arise from CEOs that fail heed the adage of keeping their pen out of the company inkwell.  I know of a case where a CEO fornicated with a physician in a hospital stairwell under the watchful eye of a security camera.  The physician was impregnated and the resulting scandal thrust the organization into an unplanned transition.  A CEO’s position in an organization is very powerful and they have a lot of groupies.  Some of them allow it to go to their head and before they know it, they are felled by their own ego,.

Illegal activity.  The same is true of illegal activity.  Why an otherwise intelligent person with a living standard well above average would engage in illegal activity is one definition of insanity.  This behavior is a living example of Lord Acton’s adage that power tends to corrupt; absolute power corrupts absolutely.  Illegal activity within an organization frequently involves collusion and the fallout can result in collateral turnover and losses of time and resources while the organization is forced to focus on remediation of the crime and the resulting transitions.  A GA hospital CEO ended up in prison following convictions related to government programs.

Fit.  Sometimes, there is a fit problem that was not detected during the interviewing and vetting process.  This lack of fit could be based on personality, skill set or interaction/management style.  Whatever the reason, the hire was a mistake and it will not end well.  Sometimes, family fit is discounted and the CEO’s engagement ends up failing because the family did not relocate or did not tolerate the relocation.

Culture.  A friend quoting his Italian mother liked to say, “The fish stinks from the head.”  Indeed, the culture of an organization emanates from the office of the CEO and the Board room.  The longer a CEO’s predecessor has been in place, the more deeply ingrained the culture he will inherit.  The harder or faster he pushes to implement cultural change, the greater  the risk that he will be come a victim of his efforts.  Organizations resist cultural change and pushing too hard or too fast has more than once resulted in a CEO leaving an organization sooner than he planned.  This is true even if the CEO is acting at the DIRECTION of the Board.  I know of a case where a Board ordered a CEO to take a course of action that resulted in a serious conflict with the medial staff.  The Board had decreed that, “this will not stand.”  Never the less, when the leadership of the Medical staff showed up in the Board room, the CEO was done.  The Board had such remorse that they prepaid over five years of severance but the CEO still left the organization.  By the way, the first successor did not last very long either.

The CEO decides to move on.  It would be nice if organizations created an environment where career advancement transitions could be more open and managed in such a way as to create less turmoil as a result of the transition but this is frequently not the case.  Usually, the first notice a Board has of this situation is when their CEO announces his resignation and thirty-day notice.

Retirement.  Sometimes, the CEO survives until retirement.  If the retirement is handled properly, an orderly succession takes place.  If not, even a retirement can lead to a difficult transition.

The main point of this discussion is to lay groundwork to address the question referenced in my previous blog about the wisdom of severance packages and why I think they are generally the right thing for an organization to do.  My goal in this blog is to illustrate how risky it actually is to be a CEO.  There are a lot of things, many of which are out of the control of a CEO that can lead to CEO turnover.  Part of the reason for a severance agreement is to mitigate risk on both sides of an executive employment deal.  While much of the discussion here has focused on the CEO, the same principles apply to every C-Suite executive generally defined in each organization as the executives reporting directly to the CEO.

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.

How do you find an interim executive?

My last blog addressed why you would consider engaging an interim executive. In this blog, I will address the process of finding the correct interim for your need.

During the course of my dissertation research on “The Contribution of Interim Executives to Healthcare,” I inquired about how decision makers find interim executives. Part of this inquiry was directed at understanding the value proposition of firms that provide interim executive services to the healthcare industry. I will deal with the question of the value of interim executive firms in a future blog article.

My questions about sourcing Interim Executives gave several options and the ability for respondents to enter their own response. The summary of responses appear in the table below.

Answer                                                            Percentage of Responses                Cumulative Percentage
Recommended by a colleague(Networking)                          28.3%                                 28.3%

Recommended by a firm                                                        24.6%                                 52.9%

Recommended by a trusted advisor                                      17.1%                                   70.1%
The Interim Executive had been used by the firm before        9.6%                                   79.7%
Recommended by the hosptial’s management company       7.5%                                    87.2%
The interim was internal (already in the organization)              5.9%                                   93.0%
All other                                                                                    5.3%                                   98.4%
Recommended by the Board                                                   1.1%                                   99.5%
Recommended by the GPO                                                     0.5%                                  100.0%

The most common course of action when faced with the need to find an interim executive is to ‘phone a friend.’ Indeed, most of us routinely reach out to friends as we have questions and want to discuss a situation with someone that has traveled that road before.

The next most common solution to this problem was to contact an interim firm with nearly 25% of the respondents stating that they had contacted an interim firm for a recommendation regarding an interim executive. The difference between the colleague and firm courses are statistically significant meaning that the colleague recommendation is clearly preferred to all other methods of finding an Interim Executive.

One of the most common errors decision makers make when searching for either an interim or permanent candidate is failure to assess fit. This is a subject I will also address in the future but in the interim, keep in mind that all interims are not alike and the firms that place them are equally different.

If you choose to do what most people do and ‘phone a friend,’ the first question you should ask is whether they have engaged an interim executive before. If the answer is no as it was in the case of 49.5% of my respondents, keep looking. Executives counseling each other on something they know nothing about is analogous to middle school children teaching each other about sex.  You want to find someone that actually has experience with interims and can tell you what to look for and how to go about the process.

Another very important consideration is to align the type of executive being sought.  In other words, reliance upon an individual or firm that is experienced in the C-Suite may not lead to the best result if you are looking for a second or third tier manager. Organizations and networks of interim executives tend to coalesce around the interim’s career path.  I made this mistake when I went looking among my usual cadre of resources for an interim I had never engaged before, a materials manager.  The process was very painful until I started networking among individuals and firms that have a presence in this area.

Once you decide to look for an interim, how you go about it can make a big difference in the difficulty of finding a resource and the ease of the search for the correct interim, the quality of the interim and the success of the interim engagement. Happy hunting!

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 living human being 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.

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.