The board gave James K. Elrod two more years at the health system’s helm, despite the 81-year-old CEO’s retirement plans announced amid controversy.
The longtime CEO signaled in 2017, after a push for his ouster, that his likely successor would be recruited to the health system so he could retire.
The board decided keeping the same leader in place for another two years would be ‘our greatest advantage’ in the midst of change.
Eighteen months have passed since the medical executive committee of Willis-Knighton Health System in Shreveport, Louisiana, urged the board to force President and CEO James K. Elrod to either step out of his longtime leadership position voluntarily or be pushed.
The committee’s statement of no confidence in a letter to the trustees complained that Elrod failed to tolerate dissent and hadn’t responded appropriately to changes in the healthcare industry, as the Shreveport Times reported, describing the incident as “an attempted coup.”
Elrod was 80 at the time. He had worked for the organization more than 50 years and turned what was an 80-bed hospital into what became Louisiana’s largest health system. He weathered the criticism with backing from the board. Then he signaled in a letter to hospital staff that a succession planning process for his likely successor was underway.
Despite the controversy, the board announced Friday that it asked Elrod, now 81, to stay at his post for another two years.
“After taking some time to consider our vote, Mr. Elrod graciously agreed to delay his retirement plans,” board president Frank Hughes, MD, said in a statement describing Elrod as “our greatest advantage” in the face of uncertainty and change.
“This is a clear indication of his ongoing dedication and commitment to Willis-Knighton, and we are grateful for this decision,” Hughes added. “While we are pleased with the current senior leadership team assembled during the past 18 months, we felt that the greatest gift we could give them is additional time for mentoring and guidance. We made this decision in support of our physicians, our employees and the larger community.”
“WHILE WE ARE PLEASED WITH THE CURRENT SENIOR LEADERSHIP TEAM ASSEMBLED DURING THE PAST 18 MONTHS, WE FELT THAT THE GREATEST GIFT WE COULD GIVE THEM IS ADDITIONAL TIME FOR MENTORING AND GUIDANCE.”
While CEOs may be intimately familiar with their companies, their opinion should take a backseat to the organization’s board of directors, according to Stanford (Calif.) University business school professor David Larcker, PhD, and researcher Brian Tayan.
In an op-ed for The Wall Street Journal, the authors note that while it was once general practice for CEOs to pick their successors, changes to corporate governance in recent years have shifted the balance of power to a company’s “independent, professional, outside directors.”
The authors claim that allowing a company’s CEO outsize influence on the hiring of their successor is a mistake because the CEO may not have the right perspective on evaluating candidates and may intentionally or unintentionally control the information presented to the board about candidates, shaping the board’s decision about those individuals.
“At the end of a long career, many CEOs are concerned about their legacy. This can bias them toward favoring candidates who will guide the company in the same direction — and in the same manner — that they themselves led it,” they write.
Instead, the authors argue that a company’s board should be responsible for the final hiring decision and use the CEO’s input to help come to that conclusion.
“Hiring the CEO is a fiduciary duty. The board owes it to the shareholders … to get it right. A subcommittee of independent directors with previous experience in succession at other companies should manage the process, with an open invitation to all board members to participate. If the board doesn’t have depth of experience in place, it can bring in an outside adviser to help,” they write.
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The high healthcare CEO turnover rates seen over the past several years continued in 2016, according to the American College of Healthcare Executives (ACHE).
The turnover rate was 18% for healthcare CEOs in 2016, down from the record high of 20% in 2013, ACHE announced. Still, this level was approximately equivalent to those seen over the past few years, which the association notes are among the highest in the past 20 years.
Structural changes in the industry appear to be among the main drivers of this trend, according to ACHE President and CEO Deborah J. Bowen. “The ongoing consolidation of healthcare organizations, continuing movement toward new models of care and retiring leaders from the baby boomer era,” she said in the announcement, are likely influences behind the high turnover rates.
These results align with other recent reports of unprecedented turnover throughout hospitals, which are on pace to turn over half their overall staff every five years, according to previous reporting byFierceHealthcare. High turnover rates in the C-suite present organizations with problems beyond recruitment and retention, however, since changes to top leadership can have a ripple effect throughout the leadership pipeline.
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With the multiyear trend continuing unabated, Bowen urges healthcare organizations to ensure they have developed succession plans and that they keep them up to date. “Succession planning should include not only naming and preparing immediate successors to C-suite positions, but more broadly an emphasis on developing the pipeline of future leaders,” she said.
ACHE found the highest rate of turnover in the District of Columbia, which came in at a whopping 67%. That result appears to be an outlier, as the second- and third-highest states of New Hampshire and Washington came in at 38% and 30%, respectively. All other states showed adjusted turnover percentages under 30. Alaska, North Dakota and Delaware showed the most stable trends, all three in single digits.