Category Archives: Interim Executives

The gig economy is back — even for execs

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https://www.beckershospitalreview.com/hospital-management-administration/the-gig-economy-is-back-even-for-execs.html?origin=CFOE&utm_source=CFOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Contract or “temp” employment used to be viewed as a means of supplemental income: a side hustle to an average day job, or a way to pay the bills while searching for full-time work. Now, gig work is back in style, and more workers want in on the flexibility — including C-suite executives, Korn Ferry recently reported.

The gig economy surged when older millennials, born in the 1980s, began rejecting the one-firm careers their parents had, according to Korn Ferry. Although they are currently midcareer, older millennials have switched jobs 7.8 times on average. Baby boomers are also using temporary work to keep busy during retirement, and Generation Z appreciates the flexibility that comes with contract labor. 

As temporary work grows in popularity, its influence is spreading to the C-suite. Interim executives are becoming more likely to be tapped when a leader departs, Korn Ferry reported. This gives organizations like health systems, which urgently need leadership in a rapidly changing industry, more time to conduct their searches for full-time replacements. 

Sixty percent of executives predict that the number of interim workers at their companies will “substantially increase” within the next three years, Korn Ferry reported. In a period of economic instability, temporary labor can mean less commitment and cost than a permanent worker. But there are downsides to contract labor, too. Since they lack benefits, many contract workers demand higher pay — which can trickle down and lead their permanent counterparts to ask for matched salaries. In the healthcare industry, this is visible in travel nurses’ paychecks, and their controversial effects on health systems’ finances. 

For better or for worse, contract labor does not appear to be dying out anytime soon. Fifty-eight million U.S. workers now consider themselves “independent,” Korn Ferry reported — an estimated 36 percent of the total workforce. 

Companies mull benefits of interim CFOs

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https://www.cfodive.com/news/companies-mull-benefits-interim-cfos-competitive-executive-market/632484/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202022-09-23%20CFO%20Dive%20%5Bissue:44744%5D&utm_term=CFO%20Dive

Interim CFOs can cut through politics to help navigate companies through murky waters, experts say.

As they face financial difficulties, leadership crises or other inter-company developments, many firms have ceded their financial reins to interim executives over recent months.

Retailer Bed, Bath & Beyond quickly named their chief accounting officer as interim CFO following the death of their previous financial head earlier in September, for example, while real estate investment trust (REIT) Tanger’s chief accounting officer also recently served a stint as their interim financial head after the REIT ousted their previous CFO, a 28-year company veteran.

One of the reasons to tap an interim CFO is simply to provide peace of mind for the company and its shareholders while the search to find a more permanent candidate is ongoing, said Shawn Cole, president of boutique executive search firm Cowen Partners in a recent interview.

While some searches are as short as 38 days, the majority of executive searches can take between four to six months, a period where remaining without financial leadership is untenable. Firms seeking interims must still consider several key factors when choosing such an executive, however, Cole said.

Companies seeking external candidates, for example — which can be due to inter-company turmoil or, as is often the case, because the company may lack the bench strength to pull forward an internal candidate, Cole noted — should take care to consider “professional interims” for the position as opposed to an unattached CFO, he advised.

“I would just be very cautious that you are not just hiring an unemployed CFO,” Cole said. “There’s plenty of wonderful professional interim CFOs out there that are excellent at consulting. You don’t necessarily want to get yourself into a position where you are engaging just an unemployed CFO, that needs a job.”

Getting a fresh perspective

Bringing in an external interim can also grant companies benefits they may not see with internal candidates, for that matter, explained Mike Harris, CEO of Patina Solutions. Patina, which focuses primarily on placing interim executvies, was acquired by fellow executive search company Korn Ferry this past April.

It can help other executives, notably the CEO, to get “fresh perspectives and viewpoints,” he said.

“If someone is coming in for six months they can tell it like it is, they can come in and make a quick assessment,” he said. “Candidly, it does take out the politics if you’re in there on a limited basis.”

Similar to Cole, Harris pointed to a growing population of what Harris terms as “career interims,” who are working in that capacity because they enjoy the flexibility of movement — they get to go in and get critical projects done for the company, he said.

Turning to an external interim can also help companies execute on particular goals such as a restructuring, said Harris, nothing that what companies need from someone taking on the position for six months could be “very different” than what firms may be looking for out of a permanent CFO. Their short tenure means interims can be “very objective” and have a “big impact” at a company in a short period of time, he said.

“The reason [interims are] usually coming in there is because they have something in their background that’s going to be very helpful for the situation that company is facing,” he said.

Companies may also take advantage of an interim CFOs’ skills as a sort of mentorship for their existing CFO — the executive in the permanent seat may lack M&A or other key experience, for example, that an interim may be able to provide during their short-term tenure.

Tapping insider knowledge

Pulling forward internal candidates to fill the CFO gap can also have benefits for firms if possible, as such candidates have intimate knowledge of the companies’ status and needs that outside executives may lack.  

This may be the case for struggling payment processor PayPal, another example of a firm who recently appointed an interim CFO — moving Gabrielle Rabinovitch, their SVP of capital markets into the seat for a second time after the newly-minted CFO departed for medical leave.

In PayPal’s case, the company needs “stability” in its financial chair, which has been lacking since the departure of its previous CFO John Rainey to retailer Walmart, said Josh Crist, managing director for Crist|Kolder Associates.

“It may be time to think about a young internal player as an interim,” Crist wrote in an email regarding PayPal’s CFO woes. “Institutional knowledge should be key given strategic issues the company faces.”

Such a candidate may prove to be a permanent fit at the company, for that matter, he said.

“I believe the current interim might actually be correct for the full time gig! I believe they need an internal player who has seen the nuts and bolts/knows the operating and strategic plan and can help execute,” Crist wrote in an email. “I don’t believe they need a high-level strategist.”

The future of the CFO seat

While companies must carefully consider what it is they are seeking out of an interim — or even a permanent — CFO candidate, qualified executives also have their pick of potential options as the market for executive talent grows more competitive.

CFOs who would have potentially retired or left their current roles years earlier, but were stymied by the pandemic, have now begun to do so, contributing to a narrowing of the potential talent pool. For that matter, the list of responsibilities handed to modern CFOs has grown over recent years, but companies may not have fully adjusted their leadership structure accordingly, Cole said.   

“The CFO is no longer the chief accounting officer,” Cole said. “They really effectively should be the right hand to the CEO. While many companies have increased demands of the CFO, they haven’t necessarily brought the CFO into that light. And so I think companies that can show a CFO candidate that they will have a position of significance of their organization, be that strategic business partner to the CEO, I think that goes a long way.”

I just got Fired – 2.0

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https://interimcfo.wordpress.com/2021/04/06/i-just-got-fired-2-0/

I Just Got Fired

Abstract:  This article is the second in the series that addresses the initial stages of going through a career transition. Career management articles in the blog have been popular. A transition is a traumatic event, to say the least, especially the first time. These articles address what you should be doing BEFORE your transition occurs.

In the last piece that is the first in this series, I addressed the fact that there is little relationship between how good you are at what you do and the probability that you will end up in a transition.

This article addresses what you should be doing to prepare for an unplanned transition.

The ACHE tracks hospital CEO turnover. The average annual rate is around 18%. According to Challenger, Gray, and Christmas, hospital CEO is one of America’s most dangerous occupations measured by potential longevity or lack thereof in a position. One of my most popular articles discusses some of the many reasons for executive turnover that have little to do with performance. A lot of people are very interested in the topic.

HFMA does not track CFO turnover, but it is probably equally rampant as CFOs too often get credit for substandard organizational performance despite having little control or influence over the incurrence of operating cost or results. CFOs and other C-Suite inhabitants bear a disproportionate risk of having their career disrupted by CEO turnover.

If you start asking around, you might be surprised to learn how many healthcare executives were involuntarily ‘freed up to seek other opportunities’ at least once in their career. When I told my friend John at a reunion that I had decided to go into the consulting business, he immediately accused me (correctly) of having been fired. John went on to tell me how lucky I was because few executives that are disruptive innovators have not been fired at least once. To my friend, having been fired is a rite of passage.

John’s career goal at the time was to become the CEO of a large hospital, and he believed that a transition would strengthen his CV. As fate would have it, not too long after the reunion, I got the call from John and, you know, the rest of the story. John went on from this setback to become the long-running CEO of one of the largest Baptist hospitals in the southeast.

For those who push hard in organizations to get them to change their culture for the better and get on a better track, the risk of being let go is much higher. With one exception, every person that I have ever worked with through a transition has emerged a wiser, stronger person in a position much better suited for their skills and talents. While I would never encourage anyone to go through a transition, the process’s outcome has been both cathartic and career-enhancing.

So, given this risk, what should you be doing? Your preparation for a turnover event should start IMMEDIATELY!! If you wait until you are out, you have waited WAY TOO LONG!! If you do not have a networking database, you need to start immediately to develop this asset. My networking database commenced during my first transition. It now has over 3,000 companies and over 4,100 contacts. Most of my contacts are business-related, and most of them will respond to an email or return a call. Contrast this with the call I get too often from a newly terminated executive asking for connection assistance, that never bothered to record phone numbers or email addresses of people that may be in a position to be of help. Too many friends had contact files stored on a corporate phone or a corporate database and lost them when they turned over a phone or access to corporate systems was terminated. Frequently, access is restricted right before the victim learns of their fate as a security measure of the organization. Getting your data back if this happens is not going to be easy or fun.

For this reason, I have successfully refused to use a company-owned phone or put my networking database developed over twenty years on a computer system I do not control. The problem with having business and personal data on the same device is if you give the organization access to ‘their data, they cannot lock it selectively. When they lock or wipe the device, they are going to destroy everything on the device. My networking database is my most valuable personal asset. There is an article in my blog dedicated to networking. The time to start building your networking database and skill is before you need it.

You should start the process of thinking through the next step in your career. Get out a piece of paper. What do you like about your current situation and wish to preserve? What do you want to change? Where are you willing to relocate? What is your idea of the perfect relationship with a superior? What will the effect of a termination/relocation be on your family, and how will you manage that? In other words, what are you going to be when you grow up? A turnover event is sometimes the catalyst that causes someone to decide to start their own business. Is there a path forward in your current situation, or should you be thinking about proactively inducing your turnover event or at least beginning preparations? People that have been through transitions will tell you from experience that it is a lot easier to get a job while employed than when you are not employed.

A turnover event is a huge psychological and physical burden. Everyone around you is going to be affected. Do not delude yourself into thinking you can manage a transition without help, especially the first one. My dad had a sign in his shop,

Shop Rates

Labor – $20

If you watch – $40

If you help – $80

If you already worked on it yourself, $200

My most significant learning from consulting experience is recognizing when an expert is needed and understanding the necessity of getting my ego out of the way in the process of seeking and availing myself or my client of expert assistance. Clients and consultants do more harm than good by trying to do something they have no business doing in a frequently futile effort to save money. Sometimes, the results are disastrous. We have all heard the adages that a doctor treating himself has an idiot patient or a lawyer who represents himself has a moron for a client.

Contact me to discuss any questions or observations you might have about these articles, leadership, transitions, or interim services. I might have an idea or two that might be valuable to you. An observation from my experience is that we need better leadership at every level in organizations. Some of my feedback comes from people who are demonstrating an interest in advancing their careers, and I am writing content to address those inquiries.

The easiest way to keep abreast of this blog is to become a follower. I will notify you of updates as they occur. To become a follower, click the “Following” bubble that usually appears near each web page’s bottom.

I encourage you to use the comment section at the bottom of each article to provide feedback and stimulate discussion. I welcome input and feedback that will help me to improve the quality and relevance of this work.

This blog is original work. I claim copyright of this material with reproduction prohibited without attribution. I note and provide links to supporting documentation for non-original material. If you choose to link any of my articles, I’d appreciate a notification.

If you would like to discuss any of this content, provide private feedback or ask questions, you can reach me at ras2@me.com.

The Sudden Departures of CFOs

Posted on by • Posted in Bankruptcy, Chief Financial Officer (CFO), Interim CFO, Interim Executives, Interim Resources, Liquidity, Pandemic, Recruiting, Talent Identification, Talent Imperative, Talent Management, Uncertainty • Leave a comment

https://www.kornferry.com/insights/articles/the-sudden-departures-of-cfos?utm_source=marketo&utm_medium=email&utm_campaign=2020-08-twil&mkt_tok=eyJpIjoiWlRFMk16bG1OamczTVRrdyIsInQiOiI5aitPUVlWMjlGbDlWTDhneWpcL0VCeEMyNzAzMjErNVd4SUtSNkRFaktCTkg0SEs3RHg5M0RteVhkd2FyZVAxWUpXZGhBNERwNldZRUd4Y2R3XC9tekcrOG1pRjBXWTcrbkZkMEg3SVN2Y0htV3dSY1A4NGhBWEM4T1wvanp0WWJ4aSJ9

The Sudden Departures of CFOs

Though critical to operations, chief financial officers are finding new roles or retiring at a blistering pace. What that means to firms.

Rewriting corporate budgets seemingly daily. Bargaining with banks over broken loan covenants. Answering constant calls from investors and board directors. And, in extreme cases, figuring out how to make payroll. All while working with no colleagues around. Is it any wonder now that so many chief financial officers have recently said, “It’s time to do something else”?

The number of CFOs—usually the second in command at a corporation—who are leaving their current job or looking for something new has surged over the summer. In just one week in early August, the high-profile CFOs at General Motors, Cisco Systems, and Avis Budget Group announced they were departing. According to one survey, 80 finance chiefs of S&P 500- or Fortune 500-listed firms left their positions through the start of August, compared with 84 at this point last year–a remarkable figure, experts say, because there was a period of about six weeks during the spring when there were almost no CFO changes.

It’s a trend that experts believe will likely continue as the pandemic continues to disrupt the finances of organizations in every industry everywhere. “This crisis will create a demand for radical, creative thinking that has often been lacking from finance leaders,” says Beau Lambert, a Korn Ferry senior client partner in the firm’s Financial Officers practice.

Experts attribute the surge in movement to a variety of reasons. Some CFOs, after helping their companies get through the period where lockdowns crippled revenues, have decided they’ve had enough. “They’re saying, ‘I have an amazing career—I’m taking the chips off the table and going home,’” Lambert says.

The lockdown period was a time when CFOs were working nonstop just to keep their organizations afloat, or if that was impossible, guide them into bankruptcy. Now these top finance leaders have had a chance to self-reflect, something they may have never done before because they’ve always been “knee-deep in the mess,” says Barry Toren, leader of Korn Ferry’s Financial Officers practice. The process has left some energized and looking for a new challenge at a different organization.

That recent career decision hasn’t always been in the CFO’s hands, however. Some company CEOs, recognizing that the financial road ahead is not going to look like it did before the pandemic, are looking for new financial talent they think is better suited to the task. “We see seasoned CFOs stepping down—of their own volition or otherwise—in order to allow a new, perhaps better-equipped, generation of finance leaders to navigate through the uncertain present and future,” says Katie Gleber, an associate in Korn Ferry’s Financial Officers practice.

Experts say the pandemic has accelerated some trends impacting CFOs that were already in place. Organizations were already looking for CFOs who could do more than just sit in the back office and handle the money. Modern-day CFOs need to be as well or more skilled in business partnering as they are in financial engineering, Lambert says. Today’s CFOs also need to have a much higher tolerance for ambiguity and the ability to inspire others.

One of the offshoots of the pandemic pushing millions to work remotely is that it has made it easier for CFOs to explore the job market. In the past, CFOs usually had to travel for a couple of days to their prospective employer to meet the senior leaders of the organization. Now, Toren says, those job-hunting CFOs can talk to CEOs and directors at two organizations in one day without leaving their house. 

 

 

 

 

Outsourcing A Hospital Turnaround And The Team Involved

Posted on by • Posted in Board, C-Suite, CEO, CFO, Execution, Health System, Honesty, Hospital, Hospital Industry, Integrity, Interim CFO, Interim Executives, Interim Resources, Judgement, Leadership, Objectivity, Outsourcing, Trust, Truth, Turnaround, Turnaround Plan • Leave a comment

Outsourcing A Hospital Turnaround and The Team Involved

Outsourcing A Hospital Turnaround and The Team Involved - HealthTechS3

Hospitals are constantly faced with challenges that require them to reassess how they deliver care to their communities.  Continuous improvement is necessary as expense inflation consistently outpaces reimbursement gains.  However, more fundamental issues threaten hospital fiscal viability such as payor mix deterioration, population or market share declines, and utilization changes. Amplify this environment with a difficult EMR installation and a “perfect storm” creates a fiscal crisis that necessitates a turnaround.

If covenants are breached, bond agreements often require an external and independent consulting firm that is engaged to help create and oversee the implementation of a turnaround plan.  Otherwise, a CEO must make a value judgment on whether to outsource the turnaround balancing cost considerations with an honest assessment of (1) their management team’s bandwidth, and (2) ability to prepare and execute a turnaround.

There are multiple models for outsourcing a turnaround.  In a complete outsourcing, an engagement letter with the “performance improvement” consulting firm would include an assessment phase and the preparation of a comprehensive plan that covers all areas of operations followed by implementation support services.  The firm may require an on-site presence of one year or more to assess, validate, and assist in the implementation of recommended interventions.  This can be effective, but the fees can easily reach seven figures even for modest community hospitals.  In addition, even in a complete outsourcing there is still a major demand on the time of senior leadership.  As a result, management sometimes chooses to limit the scope of a performance improvement engagement, which results in a partial outsource.  The limitation may be to only outsource the plan development in the form of a report.  This would detail the operational interventions and the implementation steps, but it would leave the heavy lifting of implementation to existing leadership.   Alternatively, the scope may be limited by excluding certain areas of review.  While there may be valid reasons for the latter approach, limiting the areas of review can be counterproductive to a turnaround plan because many issues are systemic such as patient throughput or revenue cycle.  Further, restricting certain areas for review may create the appearance of “untouchables” or “sacred cows,” which should be avoided in a turnaround.

While the CEO should always be the ultimate leader of the turnaround, the CFO is indispensable in the process whether it is fully or partially outsourced or done completely in-house.  These abilities are not always in the CFO’s skill set; some executives are most effective in a steady-state as opposed to a turnaround environment. The CEO will be relying on the CFO to demonstrate the following traits, which require a large degree of emotional intelligence:

  • Delegate some responsibility to their lieutenants but communicate the financial imperative and manage overall execution of the turnaround
  • Appropriately raise the alarm when progress is not being made. Too much alarm can be seen as crying wolf and too little can add to complacency.
  • Do not be averse to confrontation but do not create it where it is not necessary. Only use the CEO for those most difficult situations where it cannot be avoided to ensure execution remains on point.

Human nature dictates that self-interest may compromise the CFO’s objectivity.  There will be times when the best interest of the organization and the individual are in conflict.  If the incumbent CFO is not up to the task, replacing them with an interim CFO with turnaround experience is a better option.

An experienced interim CFO in a turnaround situation has several advantages.   First, it can afford the CEO the opportunity to underscore the urgency of the situation by making an example. The experienced interim CFO understands their primary role is to be a key asset in the execution of the turnaround.   They are not there to make friends but to influence people (although the best ones do both).  Because they are not angling for promotions or favor for future consideration from the board, they are apolitical, and their intentions are more transparent.  Having been through turnarounds before, they possess the tools to assist the CEO and the board navigates the ups and downs.  Perhaps most importantly, the interim CFO is in the best position to tell the CEO and the board things they may not want to hear such as the need to give up independence or consult bankruptcy counsel if the situation warrants.

Obviously, it is necessary that the hospital must continue to operate safely, securely, and legally during a turnaround.  This can be a difficult balancing act, not just for the CFO but for all senior management.  The CFO must continue to safeguard the assets of the organization.  Likewise, other members of senior management must push back if a turnaround plan may imperil patients, visitors or staff, or violate the law.  Consequently, it may be beneficial to bring in other interim C-Suite leaders who are able to effectively manage the multiple critical priorities during a turnaround in addition to, or instead of, an interim CFO.  However, this must be carefully weighed against continuity of management and the organization’s ability to attract and retain talent.  Senior management turnover creates stress on the organization and is ultimately a reflection on the CEO.

There is not a one-size-fits-all approach to creating and executing a turnaround plan.  Outsourcing to consulting firms can infuse new ideas and analytical talent, but it is expensive and still often leaves management with the bulk of the responsibilities.  Experienced interim management can add independence and objectivity to create a glidepath for execution.

 

 

 

 

EVERY HOSPITAL BOARD NEEDS A CEO SUCCESSION PLAN. HALF ARE FAILING.

Posted on by • Posted in Board, CEO, Executive Session, Health System, Hospital, Hospital Industry, Interim CEO, Interim CFO, Interim Executives, Interim Resources, Leadership, Leadership Continuity, Leadership Unplanned Departure, Succession Plan, Talent Management • Leave a comment

https://www.healthleadersmedia.com/strategy/every-hospital-board-needs-ceo-succession-plan-half-are-failing

The organization needs to have a strong sense for who will lead next. That’s ultimately the responsibility of the board, not the incumbent. This article appears in the July/August 2019 edition of HealthLeaders magazine.

The departure of a CEO can severely disrupt an organization’s progress, especially when the leader leaves suddenly without a clear successor. Despite the well-known need for succession planning, an alarming number of healthcare provider organizations are chugging along without a plan in place, just hoping that their top executives stick around for the foreseeable future.

Forty-nine percent of hospital and health system boards lack a formal CEO succession plan, according to the American Hospital Association Trustee Services 2019 national healthcare governance survey report. That leaves them vulnerable to the disruptive gusts of a CEO’s sudden departure, and it can inhibit their ability to pursue longer-term strategies by leaving them overly dependent on one leader’s vision.

The failure of these boards to formalize CEO succession plans is outrageous and unacceptable, says Jamie Orlikoff, president of the Chicago-based healthcare governance and leadership consulting firm Orlikoff & Associates Inc. and board member of St. Charles Health System in Bend, Oregon. “Whatever the reasons are, it’s just a fundamental and inexcusable abrogation of a basic governance responsibility, so I am nothing less than shocked that the figure is almost 50%,” Orlikoff says.

Why Plans Aren’t Made There are typically a few basic reasons why an organization may be slow to finalize a CEO succession plan. Perhaps the current CEO just doesn’t want to talk about it, Orlikoff says. Some executives are more comfortable talking to their families about their own life insurance plans than they are talking to the board about what to do in the event of their sudden departure, he says. Or perhaps it’s the board members who don’t want to talk about it. Orlikoff says at least four board chairpersons for various organizations have told him in the past seven years that they don’t want their current CEOs to leave and that they don’t want to think about succession planning because the recruitment process is too burdensome. Or there could be an unhealthy power dynamic between the CEO and the board, with the CEO asserting control over tasks that should be handled by the board members, Orlikoff says.

What makes the relationship between the CEO and the board so tricky is how it ties together two distinct relationships. On the one hand, the CEO and the board are strategic partners defining and executing a shared vision. On the other, they are an employee and an employer. “Those are two very, very different and very important functions,” Orlikoff says.

“Some boards have great difficulty envisioning the distinction between those two roles.” A board should lean on the CEO as a strategic partner because the CEO is likely to know more about the industry and more about the local market than the board members do, Orlikoff says. But when the board neglects to assert its proper place in the employer-employee relationship, the CEO may be given free rein over a broader scope of issues than is appropriate, and that can impede the CEO succession planning process, he adds.

In other words, while it’s perfectly appropriate for a CEO to groom a potential successor, the board should not defer to the CEO’s selection, and the CEO should not insist that the board do so. How to Fix This The existence or nonexistence of a formal CEO succession plan is often a symptom of whether the relationship between a CEO and the board is healthy, Orlikoff says.

Notably, the task of devising a succession plan is one exercise that can improve that relationship, he adds. While the detailed steps each organization should take will vary from one situation to another, there are two specific items that Orlikoff recommends: 1. Ask about the mundane threat of a bus.

Whether you’re a CEO or board member for an organization without a formal succession plan in place, there’s one straightforward question you can ask to kickstart productive dialogue on the topic: What do we do if our CEO gets hit by a bus tonight? The question is nonthreatening. It doesn’t signal a CEO’s possible intent to resign or retire. It doesn’t suggest the board members are thinking about giving him or her the boot.

It simply asks, as a matter of fact, how the organization will maintain continuity in the event of an unplanned CEO departure, just as parents would speak with their families about life insurance, Orlikoff says. The CEO should tell the board, without any other senior leaders present, whom the CEO would pick to step into the interim CEO role, Orlikoff says. That will inevitably prompt follow-up questions: Would the interim CEO be a good permanent replacement? Which of the requisite skills do they lack? How well do they align with our long-term needs and vision?

The conversations about an unplanned CEO departure will flow naturally into questions about a planned departure. Where are we in the current CEO’s contract cycle? When does the CEO want to retire? What skills and traits will our next CEO need to lead the organization into the future of healthcare?

Conversations about an unplanned departure should begin on the very first day of a new CEO’s contract, Orlikoff says. Conversations about a planned departure should begin at the end of the CEO’s first year, he says. For a CEO with a five-year contract, the board should start asking halfway through contract whether the CEO wishes to renew a contract or leave the organization, and the board should know three years into the five-year contract whether the CEO wants to stay, he says.

Hold executive sessions without the CEO present. An increasing number of hospital and health system boards are routinely listing executive sessions on their meeting agendas, and that’s a good thing, according to the AHA Trustee Services survey. A slight majority, 52%, of all respondents routinely included an executive session in the agenda of every board meeting, according to the survey report. But 26% of system boards, 59% of subsidiary boards, and 48% of freestanding boards still don’t.

Even if a board has an executive session, though, that doesn’t mean members are able to fully discuss the topics in their purview. The survey found that CEOs participate in the entire executive session for a majority, 54%, of all boards. That includes 41% of system boards and 57% for both subsidiary and freestanding boards. That deprives trustees of an opportunity to discuss the CEO in his or her absence and might impede the CEO succession planning process, Orlikoff says.

Related: 4 Steps for Planning CEO Succession Boards should think of their meetings in three stages, Orlikoff says. The first stage includes everyone in the room, including board members, the CEO, senior executives, and invited guests. The second stage is a modified executive session that includes the board members and CEO only, which is where the majority of the meeting should take place. The third stage should be an executive session with the board members only. “Confident, secure CEOs know that their boards need to go into executive session without them present occasionally in order to perform certain governance functions. They encourage it,” Orlikoff says. “Insecure CEOs or those who are attempting to control and manipulate the board are very uncomfortable with executive sessions and don’t want the board going into an executive session.”

It’s Mutually Beneficial While it may be difficult to prompt board members to think about a future under different leadership, CEOs who do so are not only investing in the organization’s long-term success but also signaling that they are the sort of leader willing to make investments in the organization’s long-term success. “When a CEO goes to the board and says, ‘You guys need to do this,’ … it demonstrates an incredibly high degree of confidence.

It also demonstrates an incredibly high degree of commitment to the organization,” Orlikoff says. “It shows that you’re thinking beyond yourself,” he adds. “You’re thinking about the best interests of the organization, that you’re willing to have difficult conversations for the good of the organization.”

“INSECURE CEOS OR THOSE WHO ARE ATTEMPTING TO CONTROL AND MANIPULATE THE BOARD ARE VERY UNCOMFORTABLE WITH EXECUTIVE SESSIONS AND DON’T WANT THE BOARD GOING INTO AN EXECUTIVE SESSION.”

KEY TAKEAWAYS

Not having a formal succession plan may be a symptom of an unhealthy relationship between the CEO and the board.

When CEOs prompt the board to think about who will lead next, it demonstrates self-confidence and commitment to the organization.

 

 

 

CFO Retirements Climb as Good Times Roll On

Posted on by • Posted in Chief Financial Officer (CFO), Interim CEO, Interim CFO, Interim Executives, Interim Resources, Recruiting, Talent, Talent Drain, Talent Management, Turnover • Leave a comment

https://www.wsj.com/articles/cfo-retirements-climb-as-good-times-roll-on-11563355800

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Market watchers say the surging stock-market could be prompting finance chiefs to hang up the abacus before a downturn hits.

Bill Rogers had climbed the corporate mountain, ascending to the finance chief role at CenterPoint Energy Inc. He had just guided the Houston-based utility through the $6 billion purchase of natural gas and electricity supplier Vectren Corp. And he was approaching an important milestone: his 60th birthday.

So, in March, Mr. Rogers retired. “The timing was right,” he said.

It is an increasingly familiar refrain. CFOs are retiring at the fastest pace in at least a decade—a generational changing of the guard that experts put down to factors including the increasing complexity of the role and the booming stock market.

One in six executives who left the CFO position at a U.S. public company in 2018 did so to retire, the highest share since at least 2007, according to an analysis of 12 years of regulatory filings by Audit Analytics for The Wall Street Journal.

Many CFOs leaving the role are simply reaching retirement age. Others point to new pressure from expanding job descriptions, which now often encompass oversight of human resources and information technology. Meanwhile, a rich array of advisory opportunities for seasoned executives may be tempting some into early retirement.

The market also plays a role: CFOs’ compensation often includes restricted equity grants, which in some cases can only be cashed out in full after retirement. A hot stock market has made that option more enticing. The S&P 500 stock index, which recouped losses suffered during the 2008 global financial crisis by 2013, has reached record highs this year.

Warning sign

Campbell Harvey, a professor at Duke University’s Fuqua School of Business, said the uptick in retirements could show that the executives overseeing American companies’ finances increasingly believe the long bull market will soon come to an end.

“It’s an intriguing market timing signal by people that are well able to assess the pulse and direction of the U.S. economy,” he said. “These executives are sitting on a pile of stock and it’s difficult to sell that stock as an insider, so when do you want to retire? Do you want to retire when the stock market is near an all-time high, or do you want to retire in the depths of the inevitable correction that might be a recession?”

A surge in deal activity has also been a factor. Last year was one of the busiest on record for mergers and acquisitions. Deals can trigger contract clauses that accelerate vesting requirements of restricted shares, giving CFOs an incentive to walk away, said Rhoda Longhenry, co-head of the financial officers practice at executive recruiter True Search.

The robust economy allowed Kenneth Pollak to retire from the CFO position at women’s apparel company Eileen Fisher Inc. in 2017 at the age of 66. “If the stock market didn’t come back, then I would say there was a good chance I would have worked a few more years,” he said.

Under pressure

CFOs are also tapping out because of escalating demands, recruiters said. CFOs once focused on regulatory compliance, accounting and reporting of financial results. Today, they are increasingly involved in setting strategy, finding and executing deals, and overseeing operations, technology, cybersecurity, talent management, human resources and risk.

Comparing the turnover rate for CFOs and CEOs provides some support for the idea that financial executives in particular are facing increased pressure at work. In 2009, the departure rates for CEOs and CFOs—for all reasons, not just retirement—were roughly the same, at 13.5% and 13.4% respectively, according to Audit Analytics. By 2018, the exit rate for CFOs had risen to 17.5%, compared with 15.2% for CEOs.

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“The role has become increasingly more sophisticated,” said Peter Crist, chairman of executive recruiting firm Crist|Kolder Associates. “The pressure on a public company CFO is very high.”

Neil Edwards said his once-high blood pressure has eased to a normal range since 2014, when he retired at 59 from his role as CFO of internet-access company United Online Inc. “In the early days I really looked forward to getting into the office,” he said. “The last 18 months were very hard work. I was tired at the end of it.”

Retiring executives are also presented with more options, as consulting and outsourcing has permeated into more fields, recruiters said.

“We don’t believe anybody at this level ever retires, they are looking for flexibility,” said Gail Meneley, co-founder of Shields Meneley Partners, a Chicago firm that helps executives find their next job.

Mr. Edwards saw retirement as a second act, not the final scene. He does some consulting. He also puts his skills to use as a volunteer, helping impoverished schools in Cambodia with their finances.

Once Mr. Pollak was satisfied with his nest egg, his next priority was keeping busy. In his first year of retirement from Eileen Fisher, he traveled to Europe with his wife and secured a seat on a company board.

Downshifting from his hard-charging schedule was still a challenge. “When I was doing the board work and consulting, I was busy,” he said. “But there were times when I woke up on a Monday morning and wondered what I was going to do with the week.”

For Mr. Rogers, the aim of retiring from CenterPoint before age 60 was to leave time for his postwork goals. Since retiring, he has walked the Camino de Santiago in Spain with a group from the University of St. Thomas in Houston, one of several organizations that Mr. Rogers advises.

“You really can’t be sure what your health is after age 70,” Mr. Rogers said. “I have other interests, I want to make sure I have some span of time to see what I might do with them.”

 

 

 

Will you get your Money’s Worth?

Posted on by • Posted in C-Suite, Compliance Issues, Financially Distressed, Health System, Hospital, Independent Contractor, Interim CEO, Interim CFO, Interim Executives, Interim Resources, Leadership, Recruiting, Talent Management, Unexpected Problems, Value Proposition • Leave a comment

https://interimcfo.wordpress.com/2019/06/03/will-you-get-your-moneys-worth/

InterimCFO

All about Interim Executive Services in healthcare administration.

Will you get your Money’s Worth?

Abstract: This article is a continuation of the series on the value proposition of Interim Executive Consulting.  In this article, I look at the value proposition from the consultant’s perspective.

Recently, I was discussing an interim opportunity in a smaller hospital with a referral source.  The prospective argument was that the client did not have the capacity (did not want) to pay a market rate fee.  You never hear hospitals argue with their lawyers or other consultants on this point, but I digress.

Based on my experience, there are two things that you can be sure of in any interim engagement.  One is that as soon as you think you have an idea of what is going on around you, you had better get ready for a big and sometimes very nasty surprise.  The other is that you are going to find challenges and problems in the situation that the client either intentionally withheld or that the client had no idea of in the first place.  Some clients have told me after skeletons started falling from closets that they harbored the fear that if they were fully transparent that an interim consultant would refuse the gig.  What they do not know is that as professional Interim Executives, we usually do not get the call until the situation is challenging and that if we are distressed by the surprises and uncertainty that characterize Interim Executive Services, we would have found something else to do.  Remember, firefighters run toward a fire when everyone else is running away.

Another principle of doing interim work in my experience is that there is no correlation between the size of the organization and its capacity to produce drama, challenges, and vexing problems.  An argument can be made, and my on-point experience confirms that the risk is higher the smaller the organization because smaller organizations do not have the intellectual and bandwidth resources necessary to avoid creating or falling into serious problems.  If the issues have anything to do with compliance, the potential risks to the interim executive increase exponentially, especially if they are going to be executing documents or making representations on behalf of the organization.  Compliance related signatory authority risk is a risk that cannot be insured by either the consultant or the client. I told the referral source that if anything, there should probably be a significant premium associated with going into a smaller place.

What is a client to do?  I try to mitigate this risk for my client by offering a no-notice, no-fault termination clause in my contract.  The day that the client decides that I am not providing value, I am out of there.  I do not wish to become a perceived burden to an organization during what is already likely an awkward transition.  I have not been released from an interim engagement.  To the contrary, the opposite is true.  In every one of my interim engagements, the timeline has been extended, extensively in some cases once the client appreciates the value proposition.  My average ’90 – 120′ day gig lasts around nine months, and my longest has been over two years.

I have stated repeatedly in these articles that I do not follow bad people and I stand by that contention.  However, this does not mean that there will not be serious problems in an organization.  I followed a CFO that was compelled to resign among other things for digging in over what he believed was a non-compliant acquisition of a physician practice that had millions of dollars of goodwill baked into the deal along with lavish estimates of the value of furniture, fixtures, and equipment.  In another situation, the CEO had been overridden on multiple occasions by a Board that was determined to do non-compliant deals with physicians.  I could go on and on about these types of challenges.

Problems do not have to be compliance related to be challenging and of high potential value.  During the course of every engagement, I am routinely asked, “Is this the worst you have ever seen?”  Most of the time the answer is no, and in every case, it is situation specific.  I was engaged by a hospital to assess the revenue cycle.  Other than the AR being currently fairly valued following multiple unfavorable audit adjustments, about everything else in the revenue cycle process was broken as the client had expected.  The resulting intervention increased cash collections more than $10 million in the next year on around $300 million of revenue.  As an aside, in an organization of this size with a typical operating margin in the 3% range, this intervention more than doubled operating income so, in context, it was a pretty big deal.  This organization was trying to save money by doing things like buying thinner tongue depressors and cutting the amount of soap housekeeping could put in mop buckets while it threw away all of the savings and more in the revenue cycle.  It was the worst revenue cycle operation I have seen measured by results or lack thereof.  This same organization had some of the strongest and highest performing functions in other areas that I have experienced.  Even in the revenue cycle, I got to meet some of the smartest, most dedicated people I have ever known.  They were handicapped by a dearth of leadership and decrepit systems.  None of this supported a conclusion that the organization was terrible or on balance, it was the worst I have ever seen although the revenue cycle concerns did have something to do with the prior CFO being ‘freed up to seek other opportunities.’

What is a consultant to do?  My advice is to the degree possible and reasonable, stand your ground on your professional fee.  It would be nice if you knew you were going to a cake-walk that would mainly be a paid vacation and that you could confidently offer a come-on rate to land the gig.  You know the reality is that you are probably going into a complicated, high-stress situation that is going to tax all of your physical and mental capacity.  This situation is exacerbated by desperate or ignorant consultants and firms that will take any gig at any rate when they have an unsophisticated buyer or just to have something to do.  I have considered offering such a price based on not finding any problems.  For example, I could offer a 30% – 50% discount for a lush sabbatical that would be reversed if (when) issues begin to emerge.  Maybe I could even bargain to double my rate upon discovery of the first compliance problem.   Unfortunately, the world does not work this way, and if you are up against an unsophisticated or ignorant potential client, there is an excellent chance you are going to be undercut by an equally ignorant potential consultant.  You have to decide for yourself how much risk you are willing to take on.  How much is it worth to you to put yourself, your net worth and your family’s livelihood into play in a situation where you may be exposing yourself to the risk of becoming the target of a government compliance investigation?  In a bad case scenario, you could become a witness in a hostile position vis-a-vis the client. The government is currently pursuing multiple felony charges against John Holland (look him up on the internet) even though he alleges and there is apparently little evidence that he benefited directly or indirectly from compliance problems that occurred in organizations he served.  By the way, John may and probably did inherit some of the issues that resulted in criminal charges, i.e., the problems were present in the organization when he started.  Tell me again Mr. cut-rate consultant or firm how anxious you are to get yourself into a situation like this?  By the way, if you are placed by a firm and compliance problems emerge, you are going to be on your own.  Do not forget this.

If you are a decision maker and you are getting resistance to rate discounting from interim executive services providers, it is probably because of their prior experiences and bias about potential problems in your organization.  Instead of dismissing them for something cheaper, you might want to understand better where they are coming from and how that might translate into risk you are bearing that you might not even recognize.  You have to accept the fact that you would not be seeking interim services if you did not have a significant challenge on your hands.  Your best defense against getting into a deal that could make the situation worse is to negotiate an agreement that can be exited rapidly and without recourse. You may have problems that are as yet undiagnosed.  Your run in your current situation could be riding on the ability of the interim executive you choose to pull your bacon out of a fire and potentially save many of your direct reports’ jobs in the process.  What is that worth to you?

Contact me to discuss any questions or observations you might have about these articles, leadership, transitions or interim services.  I might have an idea or two that might be valuable to you.  An observation from my experience is that we need better leadership at every level in organizations.  Some of my feedback is coming from people that are demonstrating an interest in advancing their careers, and I am writing content to address those inquiries.

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, click the “Following” bubble that usually appears near the bottom of each web page.

I encourage you to use the comment section at the bottom of each article to provide feedback and stimulate discussion.  I welcome input and feedback that will help me to improve the quality and relevance of this work.

This blog is original work.  I claim copyright of this material with reproduction prohibited without attribution.  I note and provide links to supporting documentation for non-original material.  If you choose to link any of my articles, I’d appreciate a notification.

If you would like to discuss any of this content, provide private feedback or ask questions, you can reach me at ras2@me.com.

 

 

 

Healthcare Industry Consolidation Raises New Workforce Challenges

Posted on by • Posted in Best Practices, Contingent Workforce, Differentiation, Economies of Scale, Expert Workforce Partners, Health System, Hospital, Interim CEO, Interim CFO, Interim Executives, Interim Resources, Market Consolidation, Mission, Population Health, Proactive, Quality of Care, Reactive, Recruiting, Standardization, Talent Imperative, Talent Management, Workforce Shortages, Workforce Solutions • Leave a comment

https://www.amnhealthcare.com/healthcare-industry-consolidation-raises-new-workforce-challenges/?utm_source=email&utm_medium=pardot&utm_campaign=story-3

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When health systems consolidate, one of the major challenges they face is integrating, managing, and optimizing their much larger workforce. The newly integrated workforce must deliver on the value promised by the consolidated enterprise, which is why healthcare industry consolidations need the most advanced workforce solutions available.

The mission of every sector in the consolidation — whether it’s in enhancing the patient experience, improving care quality, realizing economies of scale, expediting the shift from volume- to value-based care, implementing new population health strategies, improving revenue cycle management, or launching new technology — is dependent on the effectiveness of its workforce.

Most healthcare organizations already face workforce problems in the form of shortages of nurses, physicians, technicians and technologists, coders, leaders, and others. Consolidation doesn’t relieve shortage problems, because most organizations’ workforces are already stretched very thin. The paramount challenge may be that the new organization must integrate workforces that have entrenched and often widely different quality standards, procedures, training, values, and cultures. Consistency across the newly consolidated organization must be attained through standardization and adoption of best practices.

Consolidation is producing sophisticated regional enterprises of vertical services and facilities stretching across multiple states, including some emerging as Fortune 500 companies. Solutions to workforce challenges need to become more sophisticated to match this growing organizational complexity. A continuum of effective workforce innovations, many of which have been in use in other industries, are now available in the healthcare industry, though they have been largely untapped until recently.

The talent imperative in healthcare can be effectively addressed through these innovations. Comprehensive managed services programs that optimize the contingent workforce are becoming mainstream. Radical new credentialing innovations can be leveraged to improve time-to-revenue and productivity for physicians and other clinicians. Predictive labor analytics can accurately forecast patient volume months in advance and then match scheduling and staffing practices to the forecasts. Workforce solutions also are available to help find the best talent for leadership roles, which are critically important to guide an industry undergoing fundamental change to revenue based on value instead of volume. The vital realm of health information management is another area where workforce solutions can raise performance in quality, efficiency, and revenue generation.

However, when it comes to workforce solutions, many healthcare organizations remain in a reactive mode, with managers scrambling to fill holes in staffing needs on a daily basis. And many still rely on inadequate paper-based and other outdated systems to manage workforce challenges. Such practices do not fulfill the needs of the sophisticated healthcare organizations emerging from the wave of consolidations. Modern healthcare workforce solutions are needed, but many healthcare organizations don’t have the resources, capacity, or bandwidth to develop and operate these solutions on their own. Or, they are unaware that advanced, technology-enabled workforce solutions are available.

The bright spot is that new entities emerging from consolidations can often leverage combined resources to invest in advanced workforce solutions that will ensure that their enterprise-wide workforce is optimized and performing at its highest level.

Expert workforce partners who are entirely focused on solving healthcare workforce problems hold the key. Such partners are found outside the walls of hospitals and healthcare systems, and the best ones can quickly integrate with patient-care organizations to customize solutions. Since the healthcare workforce is the greatest differentiator in the success of a healthcare enterprise, the services of an expert workforce solutions partner are critical during and after consolidation.