Almost every CEO and Board will tell you that they believe in succession planning, but actual practice often contradicts their words. The following story is more typical than it should be. The CEO of a regional health system agreed with his board to extend his contract even though he was past the age at which he had intended to retire. He had led the organization’s recovery from a severe financial downturn, but he stayed on because the work was not yet completed. From time to time, however, he reminded the board that he would not renew his contract again. Nevertheless, succession planning never rose to the top of the board’s agenda. Indeed, there was little evidence of any serious consideration of internal development of a successor.

As the end of his contract approached, there was no internal successor in place, nor had the board initiated a formal search process. The CEO and the board failed to meet one of their basic obligations to ensure the continuity of leadership despite their observable commitment, otherwise, to the organization and the community.

We have seen similar situations repeated in multiple healthcare organizations around the country. Now the industry is entering a period when CEO turnover may ramp up even more because of the dual impact of aging boomer CEOs and a national economic recession. There is a temporary lull because many CEOs are reluctant to move or retire under the immediate economic circumstances, but this will further build demand for new CEOs in the not distant future. Therefore, boards and CEOs need to identify and address the root causes of the common failure to achieve good internal succession.

Flattened Organizations
Some of the problems in developing the next generation of leaders stem from actions that are taken for sound strategic and operational reasons. They are the unintended, negative side effects of otherwise good leadership actions. For example, healthcare organizations are leaner than they were a decade or two ago. Gone are many of the middle management positions (often including the word “assistant” in the title) that served as a training ground for future leaders. In addition, many managers, even senior managers, carry professional or technical responsibilities in addition to managerial ones. Under those circumstances, something has to give – usually important but non-urgent management responsibilities.

As managers move up the organizational hierarchy, day-to-day operational responsibilities ought to occupy less time while planning, organizing, measurement, monitoring, culture setting, and leadership development should occupy more. Managers’ time horizons should lengthen, so managers are looking further down the road, anticipating more and reacting less. However, when staff resources are cut and layers eliminated – as they may be for very good reasons – it becomes much harder for managers and executives to separate themselves from the immediate demands of the workplace.

Succeeding in a flattened organization requires advanced skill in teamwork, influencing, effective delegation, priority setting, and focus. In their absence, managers must work harder and harder to maintain current operations, but lose the ability to innovate and manage change effectively. When management development efforts give sufficient attention to the indirect collaborative skills and this is supported by top leadership modeling and reinforcement, the other management layers are less likely to get seduced into firefighting roles that limit further growth. It is a matter of the senior executive team keeping the organization pointed towards the long-term even while the short-term is threatening and uncertain. It’s not easy, and many top leaders fail to establish the right overall balance because they too surrender to the pressure of urgent demands. When that happens, it is a failure of the CEO and board who, above all, are responsible for long-term stewardship of the organization.

CEOs must build bench strength in their organizations both at the senior and middle management levels. This should be a board-directed policy. However, it would be impractical and unwise in most healthcare organizations to return to the multi-level management structures that once facilitated career growth and development. In their place, CEOs can take advantage of the opportunities presented by the multiple multi-disciplinary committees and task forces that are common in healthcare organizations today. Each one of these can be a great tool for development, but to be effective in that sense, assignments must be deliberate and be accompanied by quality supervision, focused training, and mentoring.

Diminished Responsibility in Subsidiary Organizations
Not everyone who carries a CEO or president title does CEO level work. In many healthcare systems, the CEOs of subsidiary organizations work within a narrower scope of authority and autonomy than is true for free-standing organizations. In order to ensure alignment and increase synergy, a health system may create structures such as corporate service lines and establish policies to limit the independence of member organizations and their leaders. As is true in other industries as organizations grow, power often gets centralized in corporate administration including corporate staff functions. CEOs in the subsidiaries of such organizations find themselves holding fewer of the levers of power. The job is more about operations, customer service, and physician relations than P&L responsibility.

As in the flattening of organizational hierarchies, the lessening of CEO autonomy has a good purpose but also creates unanticipated, negative side effects in terms of succession planning. Being a CEO is like a high-wire act, but being a CEO within a system often means operating with a safety net. The final accountability lies not within the subsidiary but within the system. The system exerts pressure on the CEO to perform but also provides financial backing and staff support. Subsidiary board and management typically do not develop their own long-range strategic plans but rather create plans within the overall framework directed by the system. Because of these factors, CEOs of subsidiaries are often less well prepared to move to the chief executive role in larger organizations than were CEOs in the past.

System boards and CEOs interested in succession planning must take steps to prevent the “dumbing down” of leadership positions within their organizations. This requires a careful balancing of subsidiary independence and system control. Synergy and coordination are important for system efficiency and success, but system management should be careful not to strip away all meaningful autonomy from the subsidiaries. In addition, subsidiary leaders should wear two hats. They should also hold leadership roles within the system and be part of the team accountable for system success. If organizations create structures and processes with these principles in mind, the position of subsidiary CEO will be strengthened as a developmental step and the organization will have another tool for building bench strength.

The Lost Art of Mentoring
In the history of science, it is well known that the great scientific discoveries and intellectual breakthroughs are generally made by young scientists, early in their professional careers. If that is true, what value do older scientists provide? They continue to do research, but they also teach, edit the professional journals, serve as department chairs, write the text books, and supervise the research of their students. In other words, in addition to their own work, they create and sustain the settings in which younger scientists can learn and perform.

With the exception of new industries and business models (as exemplified by Google and Microsoft, for example, whose founders were in their 20’s), the learning curve in business is generally longer and the years of greatest contribution is later than in science. Nevertheless, senior organizational leaders should still adopt the model of senior scientists, i.e. actively mentoring the next generation of leaders, setting the stage for their development and success. However, just as with the flattening of organizations, we have observed a reduction of leadership mentoring over the past couple of decades. Time pressures are one obvious cause for the decline, but another may be the lack of acceptance or understanding of mentoring as a core leadership responsibility.

By mentoring, we do not mean participation in formal organizational matching programs that pair senior and junior executives. We refer instead to those professional relationships where a senior executive demonstrates a sustained personal and professional interest in the development and advancement of a junior colleague. Such relationships are marked by sharing, mutual learning, and pleasure in the success of others. Ideally, mentoring relationships start early in a new manager’s career as they do in the case of young scientists. In those cases, the opportunity to influence development and the potential benefits that accrue to mentor, mentee, and organization are all greater.

Mentoring is not only a practice, it is an attitude, and it needs to be modeled from the top. CEOs and other senior managers in healthcare must readopt the orientation towards mentoring that many of their predecessors displayed. They cannot view it as a luxury, an option, or a responsibility of someone else, like the HR department. It is a fundamental obligation of leadership.

Senior leaders must become talent scouts, connecting with their organizations to spot emerging leaders early on and to reach out to them with recognition and support. When young managers begin to exercise initiative and take risks to grow, a few words of timely advice and appreciation can reinforce their efforts and also keep them aligned with organizational values and priorities. A relationship built this way benefits senior executives in four ways:
• they increase organizational loyalty;
• they build strength in their management team;
• they gain a first-hand sense of the emerging leadership talent and deficits; and
• they grow themselves by associating with people who are in their most active learning phases.

Most senior managers possess the aptitude to mentor but may need guidance, direction, and encouragement themselves to do it. The task of the leader in planning for succession is to help others to learn and grow because attention to individual development, more than any program, will position the organization for both continuity and change.

Other Factors
Three additional factors often come into play as hidden problems in succession planning:
• leadership insecurity or defensiveness;
• ego-centeredness vs. other-centeredness;
• the decreased use of, or satisfaction with, lateral moves.

Defensiveness
Although many top managers claim, and may even believe, that they want to hire the smartest people available to work for them, we have observed a practical limiting factor in some cases. That is, organizational leaders sometimes suffer from the common human desire to be the smartest person in the room. As one recruiter put it, “People don’t hire people who are smarter than they are.” Junior executives learn early on not to outshine the boss.

This becomes especially challenging in the cases where a potential successor has been identified. The number two person must establish presence, credibility, and authority without detracting in any obvious ways from the presence, credibility and authority of the current leader. The balance proves too difficult to maintain in many cases leading to disillusion and turnover before succession occurs. This is one place where good executive coaching often pays great dividends for the individuals and the organization. The goal is to get both parties to act in concert with their professed beliefs.

Ego-Centeredness
Another challenge, and one that is more difficult to manage with coaching, is the issue of ego-centeredness vs. other-centeredness. These behavior patterns and values are often built in much earlier in life. In addition, there is often significant confusion regarding the desirable level of ego drive. People do not achieve some level of leadership stature without a sufficiently strong ego for them to consider themselves as capable and worthy of leading others – and being followed. Thus, an apparent absence of ego is either misleading or undesirable.

However, the best of leaders also carry themselves with a degree of personal modesty that often seems startling in people of such accomplishment given the “CEO as Hero” model often described in the business press. See, for example, Jim Collins’ description of Level 5 Leaders in Good to Great.

Even more than a developmental issue, this may be a selection issue. As boards and top managers consider succession, they must achieve greater clarity about how they view this issue in their organization and assess carefully where potential candidates fall on the spectrum. This demands good judgment both in the identification of the criteria and in the identification of candidates. Very often, the criteria in this respect are unstated, and interviews seldom test these issues in depth.

Lateral Moves
The final hidden problem is succession planning, the decreased use of or satisfaction with lateral moves, is a cousin to the first problem discussed, flattened organizations. Lateral moves are among the best of developmental tools because they create much greater breadth of managerial competence than is achieved in a straight-line progression up an organizational hierarchy. In addition, lateral moves create some of the best network development opportunities that exist within an organization. Moreover, lateral moves can be used deliberately and strategically to fill in important knowledge, skill, and experience gaps that might otherwise exist in a manager’s resume.

The only disadvantages to lateral moves stem from the negative connotations that both individuals and organizations may attribute to them. Look at the typical hiring profile for a senior executive. More likely than not you will see a phrase very much like the following: “must display a consistent track record of increasingly responsible positions.” Think how different it would be if the phrase was replaced with something like the following: “has taken advantage of learning opportunities through leadership positions in multiple functional areas with a record of successful performance across a broad spectrum of organizational responsibilities.”

An organization that establishes a positive culture around lateral moves will find that it has many more opportunities to groom and test future leaders. It also creates multiple developmental ladders and pathways for managers who wish to advance their careers. This serves the needs of both the organization and future executives. If such a practice is sustained successfully over time, it helps keep high potential people inside the organization and also facilitates external recruitment when needed.

Conclusions
To summarize:

Issue: Flattened Organizations
Recommendation:
• Development as a board-mandated activity
• Targeted use of project management opportunities

Issue: Subsidiary Organizations
Recommendation:
• Increased subsidiary independence
• Increased role of subsidiary leadership within system

Issue: Mentoring
Recommendation:
• Coaching and training senior leaders to be talent scouts

Issue: Insecurity
Recommendation:
• Coaching

Issue: Ego-Centeredness
Recommendation:
• Attention in selection process

Issue: Lateral Moves
Recommendation:
• Culture of multiple developmental pathways

Succession planning is one of those important leadership and governance tasks that is best handled before it becomes an urgent problem. Most CEOs and boards understand this, in theory, but fail to follow-through, in practice. There are more than enough other issues that are both important and urgent that succession planning gets pushed to the side despite good intentions. In addition, as summarized above, succession planning is undermined by hidden problems. These represent trade-offs that are made with little awareness of the ultimate impact on top leadership development and readiness. Given the temporary lull in CEO turnover, however, this may be an opportune time for organizational leadership to assess these issues and begin to put counterbalancing practices into effect.

Co-written by:
David Shabot is a Senior Client Partner in Korn/Ferry International's Healthcare Services Market. He is also the Office Managing Director of the Firm's Philadelphia Office.

Peter McGinn, Ph.D., is the founder of Leadership Impact, whose mission is to help leaders and their organizations excel by bringing out the best in people and aligning their talents with the goals of the organization.