I just got Fired!

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I went out on a social event with a hospital CFO. During the course of the day, it seemed that all I heard was griping about the CEO. Then I heard that the organization was ‘giving back’ most of the last year’s gains, how most of the leadership team were idiots, and on and on. Finally, I told my friend that I thought he was in burn-out and that if he did not do something to alleviate the stress he was bearing, things were not going to end well. A couple of weeks later, I received a call from my friend. The conversation started with, “You will not believe what just happened.” My answer was, “How many guesses do I get?”

In hindsight, it was easy to see this transition coming. I know. It has happened to me – more than once. The circumstances, emotions, and process leading up to a transition event are relatively consistent in my experience. People stop listening to you. You start feeling out of touch with the rest of the organization. Your relationships with peers begin to cool, especially the relationship with the boss. You learn that you are increasingly not invited to important meetings or summoned to participate in matters that are clearly within your scope. You begin to sense divergence of political and or philosophical views with the core leadership of the organization. Your boss and others start going around you to approach your staff directly.

These processes continue until you get invited to an unscheduled meeting where you learn that you are about to be freed up to seek other opportunities.

First, a disclaimer. I am assuming that the termination is not for cause, i.e., violation of policy, violation of the law, or behavior unbecoming. The majority of separations and terminations I am familiar with have little if anything to do with cause and occur primarily because of lack of fit or growing disagreement between the incumbent and their manager regarding the organization’s course. Sometimes, the incumbent’s area of responsibility is no longer meeting the needs of the organization. Too often, internal corporate politics are responsible for deals that started well souring. Sometimes, a transition follows an executive, usually but not always the CFO, digging in over their interpretation of the organization getting too close to crossing a compliance red line. Instead of greasing the squeaky wheel, the organization decides to address the problem by getting rid of the irritant. I have been in a situation more than once where I had to decide whether my integrity was for sale and what a fair price might be. In every case, I elected to avoid the disaster that has befallen executives that flew too close to the OIG’s flame, and in one case, it led to a separation from the organization.

One of my favorite Zig Ziglar quotes is, “Failure is an event; it is not a person.” Just because someone ends up in a transition does not mean by definition that they are a terrible person. Time and again, in these blogs, I have stipulated that for me to follow someone that was ‘bad’ in some way is extremely rare. In these articles, I address termination from the view of the ‘victim.’

I am speaking from experience writing this as I have been through an unplanned transition more than once. I know my problem; I get frustrated with politics, BS, sub-optimization, the toxicity of culture, and eventually lose my sense of humor or ability to eat crap without gagging. Not too long after I start telling people what I really think and, . . . . well, you know the rest of the story. What I believe is a growing risk of being an employee is why I decided to leave permanent employment and become a career Interim Executive Consultant. Regardless of the cause of a turnover event, it is gut-wrenching. Even if you sense it coming, it is no easier to bear. In a matter of a few minutes, you go from someone whose expertise and perspective are in high demand to someone that has no reason to get out of bed. The pain is increased exponentially by those that used to dote on you refusing to return phone calls or answer emails.

More than once, I have received a call from someone looking for help because their deal either has gone bad or is in the process of deterioriation. Invariably, a few weeks later, I get the call. Upon answering the phone, the conversation starts, “You aren’t going to believe what just happened to me!” My first thought is not again! It pains me almost as much to witness someone else go through a transition as it is to go through it yourself. As I said before, my response is, “How many guesses do I get?” I ask this question with a high degree of certainty that the answer is a forgone conclusion.


Sadly, people going through a transition process do not fully appreciate what they are facing, especially the first time. The first problem is the amount of time the executive is going to be unemployed. When this happened to me the first time in the ’80s, I was shocked when a mentor told me to expect a month for each $10,000 of pre-transition compensation. I could not believe this was possible, but I have seen it happen time after time. With the inflation that has occurred since then, a good rule of thumb is probably a month for each $20,000 of pre-transition compensation. Thinking back to my principle that the time to start planning for a transition is now, one of the things to be prepared for is up to a year of interruption in income unless you are fortunate enough to have a severance agreement.

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.

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.

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

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INSIGHT: Health-Care M&A Post-Pandemic—Opportunities, Not Opportunism

https://news.bloomberglaw.com/health-law-and-business/insight-health-care-m-a-post-pandemic-opportunities-not-opportunism

INSIGHT: Health-Care M&A Post-Pandemic—Opportunities, Not Opportunism

The Covid-19 pandemic has devastated the health-care industry. In addition to the tragedies that the pandemic has brought, health systems have universally experienced severe and rapid deterioration of their bottom lines due to plummeting patient volumes, pausing of high margin elective surgical procedures, and increased expenses.

By some estimates, health system losses will be around $200 billion by the end of June and revenues have dropped by around 50 percent. As a result of the financial uncertainty caused by the pandemic, many hospital and health systems terminated or delayed potential transactions as they focused on managing the crisis and protecting their workforces and communities.

But this may just be the calm before a big M&A storm.

Rise in M&A Activity

Through our work as legal and communications counselors, we have seen preliminary M&A activity rise in recent weeks, with providers exploring and negotiating transactions, including several that have not yet been publicly announced.

Some systems are looking to capitalize on the time between the end of the first wave of Covid-19 and a potential resurgence in the fall to get letters of intent finalized and announced. This coming M&A activity presents legal and communications challenges when the national spotlight is firmly on health systems.

Providers are starting to resurrect deals that were paused during the initial period of the Covid-19 crisis, including Community Health System’s sale of Abilene Regional Medical Center and Brownwood Regional Medical Center to Hendrick Health System.

Some systems are seeking new strategic partners, such as Lake Health in Ohio, and New Hanover Regional Medical Center in North Carolina, which resumed its recent RFP response process after a pause.

Still others are looking for new opportunities consistent with pre-Covid growth strategies, as adjusted for pandemic-related developments and challenges.

More Consolidation

Larger and more financially robust health systems are expected to weather the crisis, whereas smaller systems and hospitals with less cash and tighter operating margins, including rural and critical access hospitals, may be facing insolvency, closure, and bankruptcy. This creates a scenario where one party is financially distressed as a result of the pandemic and needs to partner with or join another system to survive. These circumstances will likely fuel increased consolidation in the health-care industry.

For a struggling provider, joining a larger system can offer much-needed financial commitments, access to capital, disciplined management structure, economies of scale for purchasing and improved IT infrastructure, among many other strategic benefits. A well-positioned system, even if financially weakened due to pandemic challenges, will be able to negotiate favorable deal terms if it has significant strategic value to its prospective partner.

Communications Strategy is Important

As providers explore and execute partnerships, they must implement a stakeholder and communications strategy that focuses on benefits for each side given the new financial reality. Doing so will minimize criticism of opportunism by the acquiring system—and best position a definitive agreement and successful deal.

An effective communications strategy will emphasize how the proposed transaction will maintain or improve quality or affordability, ensure access to care for communities and address financial challenges faced by health systems as a result of the pandemic.

Health systems should articulate how their M&A activity will stabilize affected health systems, allow them to manage the Covid-19 crisis and future pandemics, and continue to meet the overall care needs of the community. It can also highlight how these partnerships will facilitate continued care in a market, which otherwise might lose a valuable health-care resource, as well as the positive economic benefits the transaction will bring for local communities.

Communications that support the vision, rationale and benefits of a deal will also need to be relevant to the regulatory bodies whose approval may be required.

Public perception and support of health-care providers have been extremely positive during the pandemic to date, as evidenced by homemade banners, balcony tributes, and praise on social media. Health systems and their staffs have borne personal risk and financial pain by focusing on patients and public health at the expense of all else. This goodwill can be valuable as health systems seek stakeholder and community support for their transactions.

That goodwill can also quickly be forgotten.

As health systems race to the altar to beat out competitors for M&A targets and other strategic relationships, it is critical that they are thoughtful in structuring their deals and justifying the activity.

For example, acquisitions and partnerships involving substantial outlays of capital and lucrative executive compensation or severance packages will be viewed negatively if undertaken by a system that instituted large compensation reductions across the system or even furloughed or laid off employees during the pandemic.

As the dust begins to settle from the first wave of Covid-19, it is clear that there will be drastic changes to how health systems do business. The pandemic will also create financial winners and losers. Hospitals and health systems must think proactively about a strategy for growth as opportunities with willing transaction partners arise.

But being proactive must be balanced against appearing to be opportunistic or taking advantage of the worst health crisis in our lifetimes. To maintain their goodwill and reputations, health systems should continue to do deals for the right reasons and for the benefit of their communities.