Leadership development programs in hsos

Leadership, Governance, Values, and Culture

Learning Objectives

After reading this chapter, you should be able to:

• Describe what strategic leadership entails.

• Compare the differences and similarities between leaders and managers.

• Discuss why strategic success depends on finding, developing, and evaluating capable leaders.

• Compare and contrast governance in for-profit and nonprofit HSOs.

• Examine the relationship between an HSO’s organization and the strategy it is pursuing.

• Analyze the importance of organizational values and culture and the extent to which they can enable or hinder strategy implementation.

• Explain how and why organizational change is inevitable and desirable if an HSO wants to improve its competitiveness and performance.

Chapter 2 Noel Hendrickson/Photodisc/Thinkstock

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CHAPTER 2Section 2.1 Strategic Leadership and Developing a Vision

This chapter focuses on the roles of power, leadership, organizational culture, values, and attitudes toward innovation as they relate to strategic planning and management (refer back to Figure 1.1 in order to see the components of the strategic management model for Chapter 2). The importance of leadership, the roles of top management and the board of directors, values and culture, and organizational change all affect the quality of strategic planning and are in turn affected by it.

2.1 Strategic Leadership and Developing a Vision In articles in the business press and the literature, the words manager, leader, executive, and administrator are often used interchangeably. Consider, however, the implied judgments in the descriptions of a person as “a real leader” versus “just a manager,” and it becomes evident that the terms are different.

One might assume the only person who creates a vision is the individ- ual at the apex of an organization, such as the HSO administrator or the president of a health system. This is certainly not the case. Leaders can be found at any level in an organization. A leader is anyone who can visualize a better state of affairs and persuade others that such a vision makes sense. A leader is anyone who is dissatisfied with the status quo, has suggestions for improvement, and is able to con- vince others of the merits and bene- fits of such changes. By contrast, managers are responsible for implementing changes and achieving performance objectives. Managers do not need to be leaders, although what they do is nonetheless critical to an organization’s success.

What makes leadership “strategic”? Strategic leadership involves creating a vision and strategy that helps the organization succeed at its mission in both the short and the long term. Whereas leadership may be required for bringing about changes or improvements to parts of the organization, strategic leadership determines the long-run survival and success of the entire organization.

Power in an Organization

All types of executives have the authority to force others to do what they want done. Executives with leadership capabilities more often use communication and a range of pro- social influence tactics (e.g., reward, rationality, and friendliness) to gain others’ coopera- tion (Lamude, Scudder, Simmons, & Torres, 2004). Leaders have the power to influence

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True leaders use influence rather than authority to get people to do what they want them to do.

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CHAPTER 2Section 2.1 Strategic Leadership and Developing a Vision

or affect the people around or under them. This is true regardless of whether they hold leadership posi- tions. There are five types of power in an organization.

Legitimate power is the authority derived by virtue of occupying a position in the organization. The higher the position a person occu- pies, the greater the authority or legitimate power that person holds. Expert power is derived from a per- son’s unique competencies, skills, and experience. For example, a group surviving a crash on a mountainside is likely to willingly follow the mem- ber with survival knowledge and skills. Referent power is derived from subordinates’ or followers’ respect, admiration, and loyalty to the leader;

it is often referred to as leadership charisma. Leaders who have the ability to give or with- hold meaningful incentives hold reward power. Incentives can be tangible rewards such as pay raises, bonuses, or preferred job assignments or intangible rewards such as verbal praise or respect. A leader or manager in a position to punish a subordinate is said to have coercive power, which could take the form of firing someone, denying a raise or bonus, or reassigning the person to an undesirable location (Jones & George, 2007).

Transactional leadership has been the dominant style in many healthcare organizations (Schwartz & Tumblin, 2002). Transactional leadership relies on interactions between the leader and follower, with followers rewarded for meeting specific goals set by leaders. For instance, hospital governing boards often set performance expectations (financial and quality criteria) by which the CEO is evaluated and rewarded. The CEO, in turn, sets performance expectations for top management, top management sets performance expec- tations for middle managers, and so on. Leaders in the hierarchical healthcare environ- ment are followed primarily because the followers benefit. For example, the relationship between hospital leadership and the hospital’s organized medical staff is transactional in that leadership relies on the independent physicians caring for hospitalized patients to assist the organization in meeting financial and quality performance goals. The physicians benefit from providing this assistance—they have a hospital in which to care for their patients that is financially strong and has a good reputation.

Mission and Vision Statements

Healthcare organizations—indeed, any kind of organization—need mission and vision statements. Like many terms in the business lexicon, these are misunderstood and often misused.

Thomas Northcut/Digital Vision/Thinkstock

A physician who has received many years of medical training and achieved a position of authority in a healthcare organization can be said to have both legitimate and expert power. Whether she has referent power will depend to a large extent on her own charisma.

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CHAPTER 2Section 2.1 Strategic Leadership and Developing a Vision

Mission Statements A mission statement is a concise statement of an HSO’s reason for being—its purpose, what it actually does, and for whom. It describes what services are provided for which tar- get market, as well as how the organization considers itself different or unique. A mission statement should not contain descriptions of values, strategies, or objectives (although many organizations make this error). It could also contain a description of what the HSO’s consumer will experience when using its services (known as the customer value proposition).

A mission statement answers the questions “What do you do?” and “What is your raison d’être (reason for being)?” For many HSOs, the answers have not changed for many years. With today’s fast-moving transitions in the healthcare industry, many organizations are revisiting their mission statements to determine if they are still valid. The ideal time to do this is at the end of the annual strategic planning process.

When crafting a mission statement, care should be taken in how broadly or narrowly the HSO is characterized. For example, an organization could conceive of itself as a primary care clinic or as a public health clinic, the latter precluding any work or involvement in the private sector. It could be a home health agency or a hospice agency, the former being broader and the latter more restrictive in the kind of services provided and the target consumers.

Suppose that in the course of conducting its strategic analysis, an organization partnered with a national health system. If its existing mission statement characterized it as being local in scope, then clearly the mission statement would need to be modified and aligned with the new reality. This is why both the mission and vision statements are reconsidered at the end of the strategic planning process.

Consider the following example of a poorly written mission statement:

Care. Trust. Heal.

You might never identify this as the mission statement of a hospital. While the statement is short, as recommended by some management consultants, it is probably more of a marketing slogan than a mission. Missing is what the organization actually does and for whom, and so on. Contrast this with the well-written mission statement of Mayo Clinic in Rochester, Minnesota:

To inspire hope and contribute to health and well-being by providing the best care to every patient through integrated clinical practice, education and research. (2013, para. 1)

It is obvious from this mission statement that patients are the primary reason Mayo Clinic exists. How it strives to provide patient care is clearly articulated. The customer value proposition at Mayo Clinic is hope and best patient care.

Mission statements are a communication device—they inform internal stakeholders (physicians, managers, staff members) as well as external stakeholders (consumers, com- munity of interest, investors) about the HSO’s unifying themes and goals that guide deci- sion making, resource allocation, and planning. Although some management consultants

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CHAPTER 2Section 2.1 Strategic Leadership and Developing a Vision

Examples of Vision Statements

Read the following vision statements, and, using the criteria discussed, evaluate each.

Accurate HomeCare (2013, para. 2): “Build the largest and most trusted home care company in the Midwest.”

The Dental Service at the Salt Lake City Veterans Administration Medical Center “will accomplish the following”:

1. Provide an integral part of the patient’s total health care 2. Provide appropriate and quality care 3. Provide a caring atmosphere 4. Provide timely and efficient care 5. Function as a team to maximize use of resources 6. Advocate for eligibility reform/equitable access to dental care 7. Provide holistic care 8. Provide quality education for dentists, auxiliaries, trainees, and the community 9. Make health promotion for patients a priority. (2013, para. 2)

discourage organizations from including value statements in their missions, HSOs affili- ated with religious groups are an exception. Hospitals in the Adventist Health System, for example, always espouse a mission that includes references to Christ’s healing ministry and Christian values.

Vision Statements Does a strategic leader simply conjure up in isolation a vision for the organization? Do effective leaders rely on others in the organization to support the development of a realis- tic vision? Let us examine the nature of organization vision statements and the approaches used to create them. A vision statement is a concise expression of where the organization would like to see itself in the next 5 or 10 years. What makes an effective vision statement rather than one that just sounds good? At some point, the organization will want to know if the vision has been achieved.

The vision of Centura Health, based in Denver, Colorado, is “Fulfill a covenant of caring for our communities with excellence and integrity to become their partner for life” (2013, para. 5). While this vision sounds very good, how will Centura Health determine if this vision has been achieved?

Vision statements should include some type of quantitative measure. For example, the vision for University of California, Irvine, Medical Center and School of Medicine is “to be among the best (top 20) academic health centers in the nation in research, medical educa- tion, and excellence in patient care” (2012, para. 3). This is a measurable vision. Ideally, the vision statement should be concise, inspiring, memorable, and achievable—a tall order, but not impossible. (For a few samples of real-world vision statements, see Examples of Vision Statements.)

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CHAPTER 2Section 2.1 Strategic Leadership and Developing a Vision

It is imperative that a healthcare organization’s strategy and vision be completely aligned. This is why an organization should review and, if necessary, revise its vision statement after deciding on the strategy and strategic direction, in case the latter has changed.

Visionary leaders should collaborate with other top managers and their board of directors to craft a good vision statement that embodies their vision and makes sense to all of the organization’s stakeholders. Getting everyone’s agreement takes time; however, such col- laboration is necessary if the vision is to be truly shared and owned by everyone. A great vision becomes realized only when every person in the organization makes a contribution toward its achievement and does not merely rely on those at the top. Table 2.1 summarizes the differences between mission and vision statements.

Table 2.1: Characteristics of mission and vision statements

The mission statement focuses on current activities—“who we are” and “what we do”

The vision statement concerns the future path—“where we are going”

Current service offerings Markets to be pursued

Consumer needs being served Future service–customer focus

Operational and business capabilities Kind of organization that management is trying to create

Discussion Questions

1. Are most CEOs and presidents of healthcare organizations today “strategic” leaders? Why or why not?

2. Consider the following leaders. For each one, state the source or sources of their power— legitimate, expert, referent, reward, coercive—and explain the reasons for your choice:

• Martin Luther King, Jr. • Your mother • U.S. surgeon general • Michael Ellis DeBakey, world-renowned heart surgeon • The professor of your strategic management course

3. If you wrote the mission statement for your local hospital, what would it say? How does it compare to the hospital’s official mission statement?

4. Why do healthcare organizations find it difficult to develop a good vision statement? 5. If an organization has a good vision statement, why is a mission statement necessary? 6. Vision statements typically look 5 or 10 years into the future. Name an organization (or

an industry) where a vision statement might be developed for 20 or more years, and one where less than a year might make sense.

7. Many organizations have vision statements that “sound nice” purely for public relations (PR) purposes. How can you tell the difference between the “PR” vision statement and the genuine thing?

8. Should every employee in the organization be able to recite the mission statement? The vision statement? Both? Why or why not?

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CHAPTER 2Section 2.2 Leaders and Transformational Change

2.2 Leaders and Transformational Change Warren Bennis, a pioneer in the contemporary study of leadership, once said, “Managers do things right; leaders do the right thing” (Bennis & Nanus, 2012, p. i). Bennis’s words echo a common saying in business that “leaders create change while managers implement change.” The way that healthcare leaders create change is by creating a vision for the orga- nization and then “selling” the benefits of that vision to the rest of the organization. To the extent that they succeed, they create followers and motivate or influence them to put forward their best efforts for making the vision a reality. The leader’s vision then becomes their vision. One test of leadership is whether the leader actually has any followers. Who, indeed, has the leader succeeded in influencing?

“Fundamentally, management is about coping with complexity (control), whereas leadership is about transfor- mational change” (Schwartz & Tum- blin, 2002, p. 1421). Robert Allio also has written on the differences between leaders and managers. The key differ- ences he describes are summarized in Table 2.2. He further provides five pre- scriptions for improving the quality of leadership. Allio contends that good leaders must have good character and integrity, a personal style that balances managing with leading, a commitment to collaboration, and adaptability. Lastly, leaders are self-made, and good leadership requires constant practice (Allio, 2009).

Table 2.2: Leaders vs. managers

Leaders Managers

Take the long view Take the short view

Formulate visions Make plans and budgets

Take risks Avoid risks

Explore new territory Maintain existing patterns

Initiate change Transact

Transform Control

Empower Enforce uniformity

Encourage diversity Invoke rationality

Invoke passion Act amorally

Source: Allio, R. J. (2009). Leadership—the five big ideas. Strategy & Leadership, 37(2), 4–12. Used with permission.

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Effective leaders know how to make others feel comfortable, using nonverbal behaviors that create a sense of personal connection.

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CHAPTER 2Section 2.2 Leaders and Transformational Change

Is it difficult to be a leader? The list of attributes in Table 2.2 might appear daunting to a junior person in a healthcare organization. To someone who seeks out challenges, learns from experience, works well with others, takes the initiative, and in other ways “prac- tices” leadership, it is a natural progression to leadership positions with ever-increasing responsibility and visibility.

Communication and Effective Leadership

Although personality, business acumen, legitimate power and authority, and expertise are factors in leadership ability, communication competence is central to the practice of influence and leadership in organizations. Without the ability to relate to others at work through interactions, influence and leadership are virtually impossible. A foundation of strong relational and communication skills is critical to the ability to inspire motivation within others and to encourage the pursuit of organizational vision.

Impression Management Leadership effectiveness and communication satisfaction within organizations rely heav- ily on perceptions of individuals in formal or informal leadership positions. Thus, strong leaders are able to manage others’ perceptions and have a heightened degree of self- awareness. They must be aware of what is appropriate and expected in a given situa- tion, possess the skills to deliver it, and demonstrate the motivation for accomplishing excellence.

Effective Message Content Good leaders pay a great deal of attention to the content of their messages. They approach their leadership communication as a goal-directed activity, rather than mindlessly. They craft their messages strategically so as to provide others with a clear, concrete sense of their vision. The content of their formal and informal messages should be motivational and inspirational and succeed in convincing others that behaving consistently with the leader’s (or organization’s) vision is truly in their own best interests. Needless to say, lead- ers must also have unquestionable ethics and engage in this type of influence carefully and thoughtfully.

Strong Message Delivery Effective message delivery, often referred to as charisma, is central to leadership effec- tiveness. Numerous research studies point to the importance of message exchanges that foster a sense of connectedness among communicators. Although connection can be dif- ficult to define, studies have isolated factors such as smiling, using others’ first names in conversation, appropriate touch and diminished physical distance, making eye contact, removal of physical barriers (for example, sitting on the same side of a table or desk with the other communicator and avoiding the use of lecterns during public presentations or meetings), engaging in some degree of self-disclosure, and using animated facial expres- sions as important to reducing the psychological distance between people.

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CHAPTER 2Section 2.2 Leaders and Transformational Change

Leader Communicator Styles

An animated leader relies primarily on nonverbal behaviors such as gestures, eye contact, and facial expressions to motivate others. An individual who fits this profile but is not able to draw on behaviors associated with the other styles will lack influence in contexts other than face-to-face communication.

An attentive leader relies primarily on listening skills in relationships with others to exert influence. Through both verbal (asking questions, paraphras- ing, and validating others’ positions) and nonverbal (eye contact, head nodding, and leaning forward) means, attentive communicators illustrate that they value individuals and their ideas. Attentive leaders

must be careful to listen to others and actually incorporate their perspectives into organizational strategies and plans to maximize their credibility and impact.

A contentious leader is argumentative and challenging in communication with others. These lead- ers may enjoy playing the devil’s advocate and will often challenge others to prove or support their positions. Although the contentious communicator can be challenging to work with, this style can enable transformation by encouraging others to think outside the box. This leader’s communica- tion style and interactions with others focuses on asking questions, raising the bar, and being intel- lectually stimulating.

A dominant leader is similar to a contentious leader, but instead of questioning and challenging others, dominant leaders take charge of conversations and speak in a strong manner. They tend to communicate more frequently than others in meetings and conversations. This style suits the authoritative leader but can be precarious for leaders operating in more democratic environments.

A dramatic leader communicates both verbally and nonverbally in flowery and exaggerated ways. These leaders use narratives and expressive language to convey their positions. They may even rely on poetry, literature, or dramatic quotations from others to drive home their point.

A friendly leader influences others through frequent delivery of positive feedback and praise.

(continued)

Communicator Style Communication researcher Robert Norton (1983) identified nine primary communicator styles that nearly 30 years of research have consistently supported (see feature box Leader Communicator Styles). When applied to leadership, they give some insight into the reper- toire of communication behaviors available to foster leadership and encourage influence. As you read about each, consider the situations in which they would be most appropriate. Remember, although an individual may have a primary communicator style, people can “borrow” habits from each of the styles. The most competent communicators are flexible and adaptive in their approaches to different situations.

© Ed Kashi/VII/Corbis

A leadership style that is facilitative, rather than authoritative, is preferable for a home model of healthcare delivery.

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CHAPTER 2Section 2.2 Leaders and Transformational Change

Leader Communicator Styles (continued)

An open communicator leader expresses emotion and self-discloses personal experiences (both positive and negative) as a way of inspiring and influencing others.

An impression-leaving leader finds ways to deliver memorable messages that others think about after the conversation is over.

A relaxed leader is calm and understated in his or her approach. These leaders rarely reveal anxiety or nervousness and react unflappably under pressure. They exude confidence and composure.

Effective leaders understand that impression management, strong message content, and effective delivery are central to their ability to influence others. Further, they recognize that there is not one perfect communicator style for a leader. Strong leaders are adept at analyzing people and situations and selecting a message, delivery approach, and personal style that best fits the circumstances.

Beckhard and Pritchard (1992) note that high-performing organizations have a strong sense of purpose with a team-driven model of management that involves shared, knowledge-based decision making. Continuous learning and improvement are encour- aged, and employees are considered valued partners in these efforts. Paul O’Neill, former chairman and chief executive officer of Alcoa, suggests people working in a healthcare organization should be able to answer “yes” to these three questions every day:

• Am I treated with dignity and respect by everyone, every day, in each encounter, without regard to race, ethnicity, nationality, gen- der, religious belief, sexual orientation, title, pay grade, or number of degrees?

• Do I have what I need—education, training, tools, financial support, encouragement—so I can make a contribution to this organization that gives meaning to my life?

• Am I recognized and thanked for what I do? (Lucian Leape Institute, 2013, p. ES2)

Discussion Questions

1. What are some strategies leaders can use for managing how other people perceive them? What are some specific ways in which you already practice these perception-management strategies in your personal and professional life?

2. Consider each of Norton’s communicator styles as they relate to leaders and leadership. Identify at least two situations in which each style would be appropriate, and two situations in which each style would probably be ineffective. Explain.

3. What is the difference between a goal-directed message and a mindless message? Explain your perspective. Why is goal-directed communication more desirable for leaders than mindless communication?

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CHAPTER 2Section 2.2 Leaders and Transformational Change

Leadership Traits

It is well known that experience is the best teacher of leadership. An Accenture study of leaders in all fields found they agreed that real work and life experiences had taught them more about leadership than any classes they had taken (Thomas & Cheese, 2005). When interviewed about the making of healthcare leaders, one hospital vice president recounted that he had not learned leadership skills in his graduate program: “We received technical education on finance, operations, accounting, policy and policy development. Even with my degrees, I still needed a lot of mentoring in terms of executive expectations” (Witt/ Kieffer, 2007, p. 3).

While experience is certainly valuable to leadership development, some key personal- ity traits can typically be found in people with leadership positions at various levels. The first of these is vision—the ability to see the big picture, imagine likely futures, and infuse that vision with passion. Integrity is a requisite trait because it is impossible to influence others without gaining their trust. Communication skills, compassion, and charisma are needed to articulate the vision and persuade others to embrace it. Leaders demonstrate strong moral and ethical principles. Attention is given to all stakeholders, not some at the expense of others. A commitment to collaboration encourages everyone to work together to achieve a vision. A less obvious trait of leaders is humility. Effective leaders typically give others credit for an organization’s success but will accept responsi- bility for poor results. These traits can be summed up in the phrase emotional intelligence, which Goleman (2004) asserts is the indispensable ingredient of effective leadership. Five domains constitute Goleman’s definition of emotional intelligence: self-awareness, self-regulation, motivation, empathy, and social skills.

Robert K. Greenleaf introduced the servant leadership philosophy in 1970 and defined servant leaders as those who achieve results for their organizations by attending to the needs of those they serve (Greenleaf, 1970). Max de Pree, the longtime chairman and CEO of the Herman Miller office furniture company, personified the concept of servant leadership in business. He characterized the art of leadership as “liberating people to do what is required of them in the most effective and humane way possible” (O’Toole, 1989, pp. xviii–xvix). This puts the leader as the “servant” of his followers by removing obstacles that prevent them from doing their jobs, thus enabling them to realize their full potential.

The importance of humility also figures prominently in the concept of Level 5 leadership, developed by Jim Collins. Collins’s research examined how companies were able to tran- sition from being merely “good” to “great.” He concluded that a leader builds “endur- ing greatness through a paradoxical blend of personal humility and professional will” (Collins, 2001, p. 20). Table 2.3 further elaborates on humility and will as these traits per- tain to leadership. So where might you find a Level 5 leader? According to Collins, “Look for situations where extraordinary results exist but where no individual steps forth to claim excess credit. You will likely find a potential Level 5 leader at work” (2001, p. 37). Level 5 leadership is transformational. Leaders in high-performing HSOs inspire and motivate followers to achieve greatness. Studies have shown that healthcare leaders who promote innovation and change are critical to the success of implementing “best practice” patient care (Aarons, 2006).

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CHAPTER 2Section 2.3 Developing and Evaluating Leaders

Table 2.3: Summary of the two sides of Level 5 leadership

Professional will Personal humility

Creates superb results, a clear catalyst in the transition from good to great

Demonstrates a compelling modesty, shunning public adulation; never boastful

Demonstrates an unwavering resolve to do whatever must be done to produce the best long-term results, no matter how difficult

Acts with quiet, calm determination; relies principally on inspired standards, not inspiring charisma, to motivate

Sets the standard for building an enduring great company; will settle for nothing less

Channels ambition into the company, not the self; sets up successors for even greater success in the next generation

Looks in the mirror, not out the window, to apportion responsibility for poor results, never blaming other people, external factors, or luck

Looks out the window, not in the mirror, to apportion credit for the success of the company—to other people, external factors, and good luck

Source: Based on Collins, J. (2001). Good to great: Why some companies make the leap . . . and others don’t. New York, NY: HarperCollins Publishers.

Many primary care providers, particularly those practicing in rural settings, are poorly trained in leadership skills (Markuns, Culpepper, & Halpin, 2009). With primary care pro- viders being asked to transform to patient-centered, medical home models of healthcare delivery, leadership skills that are facilitative in nature, as opposed to the more common authoritative approaches, will be needed.

Discussion Questions

1. What leadership traits, if any, have you learned in your work experiences? What traits may be more difficult to learn on the job?

2. When managers are promoted to more senior positions with substantial leadership respon- sibilities, what problems might they encounter in their first year in the new position?

3. What is more important to a leader’s success: high intelligence and solid technical skills, or high emotional intelligence? Or are these traits equally important?

4. Do you have what it takes to be a Level 5 leader? Why or why not? 5. Recount an experience you have had that shows you have leadership potential.

2.3 Developing and Evaluating Leaders Leadership development in HSOs involves identifying future leaders, giving them opportunities to function in leadership roles, and providing feedback and mentoring. Many healthcare organizations fail to develop and groom talent. In a survey of 200 healthcare provider CEOs, almost half indicated that no potential successor to their orga- nization’s top management spot had been identified, and only 17% felt that someone in the organization was prepared to step into the top spot (Witt/Kieffer, 2012). As the health- care environment becomes more complex, the development of leadership talent is becom- ing more critical.

© Jetta Productions/Blend Images/Corbis

There are considerable advantages to developing leaders internally rather than hiring from outside.

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CHAPTER 2Section 2.3 Developing and Evaluating Leaders

Studies have shown there are con- siderable advantages to developing leaders internally instead of hiring from outside (Brant, Dooley, & Iman, 2008). While the talent pool of exter- nal applicants can be impressive, leaders hired from the outside are less successful. By contrast, the lead- ers of 10 out of 11 “good-to-great” companies studied by Collins in his book of the same name came from inside the company. Companies that failed to achieve great results hired outsiders six times more often.

In addition to having a higher risk of failure, recruiting external candi- dates for leadership positions is more costly. Direct costs include search fees, interview costs, signing bonuses, relocation, and severance packages, among others. There are also indirect costs and post-hiring costs. One study suggests that replacing a chief nursing executive could cost a hospital upwards of $1.5 million (Sredl & Peng, 2010). By contrast, developing people in the organization to assume leadership positions is much less costly. Internal development costs are associated with training, education, mentoring, and job rotation.

Finally, an organization that practices internal promotion is more likely to retain high- potential talent. Executive retention is positively correlated with formalized succession programs. In companies having an executive turnover rate of 1–5% annually, 84% had formal development programs. At companies reporting turnover rates of 6–10%, 24% had succession programs. Of businesses experiencing turnover rates of 11–20%, only 11% had succession programs.

Developing the next generation of leaders is a difficult challenge for an HSO. Organi- zations committed to promoting from within can take certain measures to increase the prospects of success (Allio, 2009). First, they must have a good talent pool, which means hiring people with leadership potential in the first place. The organization must have a leadership development program that intentionally puts these people in challenging situ- ations and as members of cross-functional teams. A good development program obtains feedback about them and their performance from those who see them in action (Fulmer, Stumpf, & Bleak, 2009).

A 2007 survey of 104 health systems found that 52% had executive leadership develop- ment programs, and programs were under development at another 12% (McAlearney, 2008). Healthcare leaders suggest that some organizations getting into leadership develop- ment are “just going through the motions” and not implementing a substantive program (McAlearney, 2006). However, several healthcare organizations, including the follow- ing, were recently recognized as having outstanding leadership development programs and practices:

2.3 Developing and Evaluating Leaders Leadership development in HSOs involves identifying future leaders, giving them opportunities to function in leadership roles, and providing feedback and mentoring. Many healthcare organizations fail to develop and groom talent. In a survey of 200 healthcare provider CEOs, almost half indicated that no potential successor to their orga- nization’s top management spot had been identified, and only 17% felt that someone in the organization was prepared to step into the top spot (Witt/Kieffer, 2012). As the health- care environment becomes more complex, the development of leadership talent is becom- ing more critical.

© Jetta Productions/Blend Images/Corbis

There are considerable advantages to developing leaders internally rather than hiring from outside.

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CHAPTER 2Section 2.3 Developing and Evaluating Leaders

• HCA Healthcare, Nashville, TN • Parkland Health, Dallas, TX • Northwestern Memorial Hospital, Chicago, IL • Nebraska Medical Center, Omaha, NE • Baylor Health Care System, Dallas, TX • William Osler Health System, Ontario • Mayo Clinic, Rochester, MN • St. Peter’s Health Care Services, Albany, NY • Griffin Hospital, Denver, CO • St. Jude Children’s Hospital, Memphis, TN • Children’s Healthcare of Atlanta, Atlanta, GA • Christiana Care Health System, Wilmington, DE • Alexian Brothers Med Center, Elk Grove Village, IL (Leadership Excellence, 2012)

Physicians are a critical source of new leadership talent for healthcare organizations. One would think that physicians seek executive leadership positions because they are not happy with taking care of patients. That is not necessarily true, says Richard Afable, M.D., M.P.H., president and chief executive officer of Hoag Memorial Hospital Presbyte- rian in Newport Beach, California. Dr. Afable believes that “the best physician executives are doctors who care so deeply about patients that they have chosen to take that need to care for people to a higher calling and lead organizations in caring for communities” (Witt/Kieffer, 2011, p. 4). Some healthcare organizations are actively training physicians to assume leadership roles. For example, Stanford Hospital & Clinics has a strong leadership development program for faculty physicians. Each year, 25 to 30 participants are selected to participate in training and projects that prepare them to lead small divisions, sections, or teams within the academic medical center (Stanford School of Medicine, 2012).

While there are clear advantages to promoting from within and signaling to current man- agers that the career path in the company goes right to the top, there are circumstances in which hiring a CEO from outside makes more sense. For instance, there are occasions when an HSO requires a transformational leader to shake up a hierarchical health system or to revitalize an organization that needs to expand into a completely new service area.

Hiring People With Leadership Potential

Hiring future leaders is not as easy as it sounds. Imagine you are interviewing someone for a middle management job, such as project manager for your clinic’s new electronic billing system. The person could be very well qualified for the position, but how do you assess his or her leadership potential? There are a few things that almost every employer looks for in an applicant when recruiting potential leaders.

Obvious indicators are experiences in the applicant’s resume where he or she made a dif- ference. Having achieved something tangible is important, but just as important is the way it was accomplished. Did the applicant lead the initiative, manage a group, or otherwise demonstrate leadership qualities? References can provide information about what the per- son was assigned to do and whether delivered results met or surpassed expectations. They can also reveal whether teammates would work with that person again. In other words,

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CHAPTER 2Section 2.3 Developing and Evaluating Leaders

a reference is a source who can help ascertain if the candidate has a record of successfully completing assignments and being unafraid to take on more challenging ones.

During the formal interview, some employers put applicants into various calculated situ- ations to see how they would respond. For leadership positions, an applicant may be asked questions such as: How do you motivate your staff? Deal with poor performers? Handle patient complaints? “Mock situations” used to elicit answers to these questions can provide insight into the applicants’ leadership potential. These types of behavior- based interviews are common in healthcare organizations. Candidates for a position are asked to recount specific situations where they have used behaviors or skills necessary to the position. For example, a person applying for a management position may be asked to describe an incident that involved a lot of pressure to meet a deadline and how this situ- ation was handled (time management behavior). An applicant may be asked to tell about a situation that involved talking with consumers or colleagues during a difficult circum- stance (communication skills).

Finally, following the old adage “It takes one to know one,” several people currently in leadership roles can interview the applicant to provide a balanced and complete picture before actually hiring the person. Allio advises that candidates for future leaders pos- sess three attributes: (1) motivation and a need to achieve, (2) attitude and the ability to inspire even when facing adversity, and (3) morality—the possession of positive values and benevolent motives (Allio, 2009).

By no means should all hiring decisions take into account leadership potential. Some peo- ple are more interested in playing a supporting role in the organization. Not everyone has the motivation or interest to lead. In healthcare organizations, there are many positions that do not require leadership competencies. One important purpose of recruiting, how- ever, is to keep the potential leadership pipeline—the cadre of highly developed leaders capable of filling slots in the organizational hierarchy—full.