Interim CEOs: The Path to Creating Sustainable Change

Published: 11th July 2011
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Declining morale, worsening quality of service, decreasing volume trends, physician unhappiness, and ailing financials are all signs of trouble in a hospital. When patients vote with their feet by taking their healthcare business elsewhere, itís time for change.

Financial distress is the clearest indication that an interim CEO is needed to help turn the hospitalís situation around, but itís not the only one. If a long-term hospital executive is retiring or being let go, bringing in an interim is a strategic decision that can catalyze much-needed change. When departing leaders have served in the same position for greater than 10 years, the institutionís culture may be so rooted in "the way things are done" that a fresh, new perspective may be the kick that institution needs. Although some measure of consistency is needed to maintain stability, stagnancy often is the enemy of progress.

Interim CEOs Pave a Path for Long-Term Success

The best way to ensure the success of a permanent CEO is to leverage an interim to stabilize the operational and financial environment. Interims must be both strategic and decisive. They could be good at running meetings, but thatís not enough to get the job done Ė they also must consistently be able to make and enforce decisions.

By nature of their short-term appointment, interims typically embody transparency. They have only the goal of filling the position and solving the immediate challenges in the short term, but in a way that will set the hospital up for long-term success. On the other hand, permanent CEOs are aware of the need to protect long-term career aspirations, which could color their decisions. Consequently, interims should be able to answer any question from any audience honestly and openly, and should make a proactive effort to engage all hospital stakeholders.

The current interim CEO of one acute care community hospital, placed by Leaders For Today, described how he worked strategically to create a successful process of engagement. During his first eight weeks in his new role, he met with 300 employees and nearly 60 doctors. The meetings were conducted both informally (over lunch or dinner) and formally (in Q & A sessions). He explained to each how long he expected to be in his position and what he needed to accomplish in that time, so that expectations were set. He also chose not to use the term "interim" in his title to indicate that he was fully empowered by the trustees with the same authority a permanent CEO would have.

In addition, he reached out to the community and introduced himself to the elected officials and other local interested parties to reaffirm the hospitalís local value and clear communication channels within the district.

Our interimís mantra was transparency. If he planned to make layoffs, he informed those who would be affected up front. Although he rubbed elbows daily with the same people he would later have to lay off, his transparency made the process more bearable. During his first week on the job, at the direction of the Board, he notified the hospital executives that a permanent CEO may not retain them upon developing his or her own leadership team. The interim encouraged them to begin their own job searches. Although this information was difficult to hear, it was a possibility that all the executives had considered. When the interim later on had to dismiss the long-term COO, he felt confident he had left her in the best possible position to move on by informing her months earlier of her potential termination.

To take the transparency a step further, the interim sent out a memo to the entire hospital staff stating that he would reduce the expense base by three to five percent within the next 90 days in order to reach his mandate of improving the hospitalís profitability. But he also focused equally on initiatives to increase that institutionís volume and service quality, which helped to create a positive atmosphere in the midst of change. In the following weeks, he was frequently asked by employees about the hospitalís progress in reaching those goals.

This interimís style has been met with an overwhelmingly favorable response. Heís been able to make critical changes to the hospitalís infrastructure without worrying about how the fallout would affect his career. Working in the trenches has allowed him to separate fact from fiction. His predecessor had been CEO for more than 25 years and had been stuck in staid processes. As an energized newcomer with no long-term political concerns, the interim brought a fresh perspective.

The Length and Breadth of Interim Positions

In most cases, six to eight months is the timeframe for the right person to complete objectives and create an environment conducive to sustainable change. Often the interim will be able to determine a productive path forward in as few as two months, but will take longer to implement the changes. Operating in the role of a hospital employee concerned about the long-term stability of the institution, the interim knows heíll have to prove that the expense reductions and employee cuts he made have worked.

In actuality, many interim CEOs tend to give a great deal more output than their permanent counterparts do in the same amount of time. Because theyíre often away from their families during the workweek they are more closely focused on that hospital, even while away from the office.

The difference between an interim and permanent CEO is not in capability Ė both are equipped to tackle the same issues. In reality, through the process of accomplishing objectives and enacting massive changes, a CEO may become saddled with concerns of strained relationships. Girding against political and personal conflict can make it challenging to go forward in a permanent capacity. Since an interim is only there for six to eight months, he is focused solely on the long-term interests of the institution, and not on his own political alliances.

A CEO is delayed in pursuing future growth while dealing with cultural and system changes. Thatís why this process is usually best left to an interim professional, whose job becomes retaining the good while eliminating the bad. While occasionally it does work out best to retain the interim as the permanent CEO, there is an understandable loss of objectivity once an interim moves into a permanent position. As a result, quite often the interim serves best as an objective short-term purveyor of the issues at hand.

Interim CEOs vs. "Hospital Turnaround Specialists"

A recent trend related to financially distressed hospitals has been the concept of hospital turnarounds. Aside from this conceptís negative implication, specialists brought in to "turn things around" may operate with a slash-and-burn mentality, giving little or no thought about the long-term health of the organization.

Turnaround specialists brought in strictly for the purpose of quickly and expediently improving the hospitalís bottom line donít have the same goal of open and honest communication that an interim CEO has. For the former, the situation is nothing more than a financial transaction; they often donít look at the situation in the same way an interim would.

In contrast, when interim CEOs are hired, they work as rooted hospital employees to create an environment of sustainable change: they get to know other hospital staff to learn their strengths and weaknesses and they work in the trenches so they can learn about what really makes the institution tick. This level of understanding better prepares them to make recommendations and take actions to improve the overall health of the organization for years to come by creating sustainable change, rather than seeking the quick fix.

Interim Positions Engage the Right Individuals Who Have the Necessary Skill Set

Many CEOs who prefer interim to permanent placements enjoy working in healthcare and feel they can add value to an organization in a highly intellectual capacity, leveraging the skills and knowledge theyíve developed over the years. Often, theyíd like some flexibility in their schedule. Most enjoy a challenge and appreciate the opportunity to enter a new environment with an extremely high degree of energy and curiosity; they can easily and enthusiastically work long days, contributing their all to the institution while theyíre at their best. They know that, when the assignment is completed, they can then take a mini sabbatical to reenergize, recharge, and prepare themselves for the next assignment.

There canít be too much communication when it comes to the complex relationship between the interim CEO and the Hospitalís Board of Trustees. At the onset, the interim needs to find out how often and by which method of communication the chairman wants to be updated. Whatever crisis brought the interim onboard requires that the trustees receive real-time updates, especially considering that his tenure will be measured in terms of days and weeks, not months and years.

A subtle, but important distinction is that the interim reports to the Board as an employee, not as a consultant, yet heís able to offer a perspective similar to a consultantís, accurately educating them about what heís learned. A consultant gives a report, and goes off to his next job Ė he always remains a guest in their eyes. But an interim is seen as the CEO reporting to his employers.

Another critical relationship is between the interim and the hospital physicians; this must be based implicitly on honesty. The CEO wonít be able to agree to everything the physicians want; neither can he consistently say no. He must be able to negotiate and suggest alternate solutions. The doctors want to know where they stand with the CEO, and disagreement is preferred to lies or avoidance.

In addition, the interim can push the envelope to position the staff for change. This can become a helpful tool in the eyes of the trustees.

Following the Trends

When U.S. hospitals received non-profit status, trustees were told to manage these assets for the community and were given both fiduciary and stewardship obligations. Today, fiduciary concerns are usually at the forefront of a hospitalís actions. But an interim professional also helps bring balance as an objective, rooted employee who will look at both finances and stewardship.

Undeniably, the physician enterprise soon will merge with the hospital enterprise, ceasing to be an independent function. Hospitals then will face two imminent challenges: financially absorbing physicians onto their balance sheet; and, culturally adapting to the entrepreneurship of the physician enterprise.

Physicians operate as sole proprietors, providing their own benefits and working apart from the hospital infrastructure. In contrast, hospitals are monolithic organizations renowned for being process-oriented. Hospital staff go home when their shift is over; physicians cannot.

Due to the onslaught of Accountable Care Organizations (ACOs), hospitals will absorb physiciansí practices with lightning speed over the next two to three years, initiating a clash of cultures. Now is the time for hospitals to learn what this will mean for them:

How can we accumulate the financial capital that will be needed? How can we begin to develop cultural acumen to incorporate entrepreneurship into a monolithic institution?

With the trends of healthcare reform, ACOs, electronic medical records (EMRs), and new technological innovations, healthcare is changing at warp speed. But the industryís mission remains clear: to deliver highquality care at the lowest possible cost.

The job of an interim CEO is to help look at and plan for the bigger, longer-term picture. Hospital executives might rationalize that plummeting financials and decreasing volumes are due to healthcare reform, or complain that transitioning to EMRs is time-consuming and costly. These are valid points; adapting to current trends does affect performance, but that is no excuse for poor performance. Hospital executives are paid to overcome these very types of obstacles.

Hospitals need to continue to prepare and adapt. ACOs and EMRs both need to be financed. Hospitals are in the science and knowledge business, not just the service business. Technological advances will continue to change the way service is delivered. The complexity of financing new knowledge will be with us for years to come. American consumers always will expect to receive the most current technology.

Sealing the Case for Interims

Intense pressures surrounding cost controls and decision-making have led to a recent spike in hospital CEO turnovers. In addition, trustees ó who have been more tolerant ó are beginning to hold CEOs accountable for faulty decisions or lack of performance. Stock-based businesses have had higher performance standards than hospitals for years, but it would appear that hospitals are beginning to mimic them.

As the hospital models have evolved to adapt to healthcare reform and its initiatives, an interim provides a solid transition period, unattached to the old ways, and unfettered by the need to impress people for long-term political stability. With the right person as an interim, this short-term investment brings a wealth of on-point experience to take the institution to the next level.

About Jeff Souza, BSN

Jeff Souza brings to Leaders For Today a 28-year track record of leadership with successful start-ups. His experience covers both healthcare and life sciences, across roles that include medical, clinical, nursing, laboratory science, human resources/staffing and consulting.

Jeff has a Bachelor of Science in Nursing, as well as training in executive management and quality service. In addition, he is a Panel Member at the Massachusetts General Hospital Institute and Public

Relations Chair for the New England Chapter of the Association for Clinical Research Professionals.

About Leaders For Today

Leaders For Today ( is a leader in healthcare interim and permanent executive placement. The Company works with top hospitals and healthcare institutions across the country to find, place, and support healthcare executives and directors on an interim and permanent basis. These organizations hire interim and permanent executives from Leaders For Today to provide leadership during times of transition, help improve current operations, deliver superior expertise, and mentor junior staffers.

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