| Executive succession planning should be an | | | | Khurana, Laura Reeves argue that corporate |
| ongoing Board function. Best practices | | | | boards have traditionally underestimated the role |
| organizations are moving executive succession | | | | of a robust leadership development and executive |
| planning and leadership development from the | | | | succession planning system in risk management. |
| human resources department into C-level suites | | | | They suggest that the steady attrition in talent |
| and the Board Room in their pursuit of elevated | | | | that occurs in the absence of an effective |
| business continuity planning. This is because the | | | | executive succession planning system leaves |
| business and financial risks of executive mis-hires | | | | companies vulnerable to making poor decisions in |
| and misalignment can be as threatening to the | | | | any number of commonplace business scenarios |
| viability of an organization as an operations failure | | | | such as an acquisition or sharpened competition. |
| or a major data security breach. Given the | | | | In lieu of the stand-alone, ad-hoc activities used |
| challenges faced by hospitals today on many | | | | by human resources departments, these experts |
| fronts - and because only 30% of hospital | | | | recommend Board-level direction of smart, |
| executives routinely consider succession planning | | | | integrated, talent development and executive |
| and take stock of who's on the leadership bench1 | | | | succession planning initiatives that are aligned with |
| - senior management should consider | | | | strategic priorities. Their ideal organization is one in |
| institutionalizing a Board-level function to oversee | | | | which HR provides development tools and |
| leadership development and executive succession | | | | facilitates their use, senior executives are deeply |
| planning and implementation. | | | | involved in sourcing and growing talent and |
| Quantifying the Costs | | | | business leaders are evaluated on their |
| Using a formula put forth by Bradford D. Smart, | | | | contributions to the organization-wide talent |
| Ph.D., in his book, Topgrading: How Leading | | | | development and executive succession planning |
| Companies Win by Hiring, Coaching and Keeping | | | | effort. |
| the Best People, I have calculated that the cost | | | | Hospitals' Particular Vulnerability |
| of a bad hiring decision ranges from $2.4 million | | | | According to the 2007 survey by the Association |
| for a $100,000-per-year employee to a staggering | | | | for Healthcare Executives, 32% of hospital CEOs |
| $12 million for a $500,000-per-year executive. | | | | say that their hospitals' approach to CEO |
| Based on my 13 years of executive search | | | | succession planning was effective or very |
| experience and completion of more than 225 | | | | effective - which means that a whopping 68% of |
| assignments, I believe these numbers are close to | | | | hospital CEOs acknowledge some concern about |
| the mark. For discussion sake, let's agree that the | | | | processes for identifying and selecting the person |
| numbers are inflated and we will take the | | | | who will fill their shoes. Moreover - and no surprise |
| numbers down to a mere 25% of the researched | | | | here - only 16% of hospital CEOs said their |
| amount, which means that you're still looking at a | | | | hospitals' approach to communicating about |
| $3 million cost for a bad hiring decision involving a | | | | executive succession planning to hospital staff |
| $500,000-per-year executive! Executive mis-hires | | | | was effective or very effective. |
| and poor executive succession planning will cost | | | | In recent years hospitals have been taking pages |
| you. | | | | from the corporate marketing handbook. Now it |
| Million dollar mistakes are costly to your business, | | | | may be time for them to take a closer look at |
| shareholders and possibly your personal career. | | | | effective corporate approaches to leadership |
| The lack of executive succession planning | | | | development and executive succession planning. |
| methodologies allows for mis-hired and misaligned | | | | Cohn, Khurana and Reeves point to Tyson Foods, |
| executives to incur costs for their company | | | | Starbucks and Mellon Financial (now The Bank of |
| related to sub-standard customer service, | | | | New York Mellon) as forward-thinking companies |
| inadequate research, missed deadlines and sales | | | | with smart, integrated, talent development and |
| targets, failed marketing campaigns, flawed | | | | executive succession planning initiatives. |
| accounting or investment strategies and so much | | | | Inside Information |
| more. Additionally, there are the up-front costs of | | | | Whether or not executive succession planning |
| recruitment and training, the severance you may | | | | gets promoted to the Board Room, senior |
| have to pay to get an employee to leave and the | | | | hospital management would do well to review the |
| costs of recruitment, training and ramp-up time | | | | work of Harvard Business School professor |
| for the replacement employee. The absence of | | | | Joseph Bower, who has studied 1,800 successions |
| executive succession planning spotlights that poor | | | | across all industries. Bower looked at the results |
| hiring decisions and the lack of a strong bench can | | | | of companies that promote insiders through |
| be a significant drain to a department's and | | | | executive succession planning to senior leadership |
| company's income. With business continuity and | | | | positions and found that they perform significantly |
| shareholder value in mind, Board-level oversight of | | | | better when measured over more than three |
| recruiting, leadership development and executive | | | | years than companies that do not look inside first. |
| succession planning will result in better overall | | | | By many measures, the stakes for hospitals are |
| human resource allocation and improved | | | | high. Hospitals who cast leadership development |
| competitive positioning. | | | | and executive succession planning will be better |
| From Costs to Business Risks | | | | positioned for risk management success, |
| In their article published in the Harvard Business | | | | increased profitability and shareholder value and |
| Review, "Growing Talent as If Your Business | | | | operational continuity in the 21st century |
| Depended on It," Jeffrey M. Cohn, Rakesh | | | | healthcare environment. |