- Set and reset mutual expectations for organizational performance.
- Develop the COO as the successor to the CEO.
- Determine what skills and experience is required of the CEO.
- Specify objectives for the CEO's contribution to organizational performance.
Some of the objections to setting and resetting mutual expectations in large health care organizations include: (1) the difficulty of quantifying expectations (for example, what does "good patient care” mean?); (2) conflicts of interest among managers, physicians, and trustees (for example, some hospital initiatives may threaten the revenues of certain attending physicians, or vice versa); (3) the cost and difficulty of reaching agreement on mutual expectations, especially when physicians and trustees are not being paid for their time; and (4) the lag time in resetting expectations in response to rapidly changing external pressures.
In response to these objections, I would argue that quantifying expectations may be difficult, but it is necessary. Even if expectations cannot be easily and acceptably quantified for all important aspects of organizational performance, there will be some aspects of behavior and performance that can be quantified. For example, Griffith (1987) specifies several indicators of governing board performance in a community hospital, all of which can be quantified.
Conflicts among constituencies and individuals in large health care organizations need to be recognized and dealt with in a common forum. This may result in the withdrawal from the organization of certain major players, notably physicians. I believe, however, that specifying goals will result in concentration of organizational effort, which, in turn, is likely to result in gain and retention of share in certain markets and appropriate withdrawal from others. Such concentration of effort is less likely to take place without goal specification.
I would argue that the benefits of having managers, physicians, and trustees spend time setting expectations outweigh the costs, that trustees should be chosen for their skill and experience in such activity, and that physicians and trustees should be paid for their time. Times spent formulating expectations can cut down on time spent gaining cooperation and thereby enhance the implementation of new initiatives.
Lag time between changing external pressures and agreement on expectations cannot be denied, but I would argue that time spent setting mutual expectations, including contingency planning, will result in enhanced ability to adapt to change. Line management, including physician managers, must be heavily involved in the planning process; it is too important to be left solely to staff planners.
Develop the COO as the Successor to the CEO
Some of the objections to planning managerial succession and developing the COO as the logical successor to the CEO in large health care organizations are (1) the CEO prefers the organization to remain as dependent upon his leadership as possible for the short term; (2) the best COO will not always be the best CEO; (3) planning CEO succession and COO development is costly in terms of time and conflict; and (4) other Profitability Pricing Price comparability to competing institutions Price acceptability to third-party purchasers Price acceptability to patients Costs Comparative costs per episode of service (per discharge, per visit) Current values for this hospital and competing hospitals Percent change from preceding year Community costs per capita (costs per community member for hospital care) Current values for this community and similar communities Percent change from preceding year Profitability Bond rating Debt-equity ratio
Funds available for capital and new programs Access
Changes in size and scope of service of this hospital and competing hospitals Patient Satisfaction Hospital market share By community group (age, economic, ethnic, and so on) By kind of service (inpatient, outpatient, long-term, and so on) Satisfaction surveys (issues of costs, access, amenities, quality) Current patients
Potential patients (community residents) Donor Satisfaction Responses to fund drives Wealthy individual donors Corporate donors Community fund drives Physician Satisfaction Number of doctors terminating privileges Transferring to other hospital Leaving community or retiring Number of doctors newly privileged in community This hospital Only at other hospitals Satisfaction reported by physicians Formal surveys Informal surveys Complaints received Employee Satisfaction Vacancy statistics
Turnover, grievance, and absenteeism statistics Employee satisfaction surveys managers may leave the organization sooner than they would have if a successor had not been designated.
In response to these objections, I would argue that succession planning allows the CEO more choice in the selection of a successor and therefore increases the likelihood that the CEO's initiatives will be carried out. Also, many trustees and physician leaders prefer to know in advance whom they will be dealing with when the current CEO leaves.
To the objection that the person who is most effective as COO will not always be most effective as CEO, I would respond that the designated successor to the CEO should not always be the COO (although it is likely to be); it could be someone else in-house who will be formally developed for the job. If the designation and development process results in the departure of the COO or other key managers, it is probably better that they leave while the current CEO is effectively performing his job than when the CEO position is vacant or a new CEO has been appointed.
The designated successor to the CEO should be given the opportunity to learn, through visiting and reading, how similar organizations and their CEOs respond to the types of problems his or her organization faces. The successor should also begin to develop skills in areas in which he or she may be lacking-areas ranging from financial analysis to public speaking, from evaluating information systems to development of other managers.
Determine What Skills and Experience Are Required of the CEO
Why are organization-specific skills and experience not used as criteria for designating CEO successors or recruiting new CEOs? First, the trustees, who customarily select the CEO, may not themselves have the requisite skills and experience to evaluate a potential CEO. Second, the trustees may have limited experience with large health care organizations and therefore may not see that certain requirements of the CEO position are specific to their institution. Third, CEOs may be selected or designated for reasons other than their ability to do the job, for example, their personal attractiveness, reputation, or political connections with leading trustees or physicians.
I would point out that success as CEO of one large health care organization does not predict success as CEO of another large health care organization-each organization faces a different set of problems and a different political network. A primary consideration in selecting trustees of large health care organizations should be their experience and skill in evaluating and selecting CEOs. Other traditional functions of trustees can be carried out in other ways; for example, many hospitals have established a separate development organization. More trustees should be chief executives or trustees of other large health care organizations or of business organizations. Finally-and obviously-CEOs should be selected on the basis of their ability to do the job in a particular organization, at least so long as organizational growth and survival depend heavily on the CEO's contribution.
Specify Objectives for the CEO's Contribution to Organizational Performance
Some of the objections to specifying objectives for CEO contribution to organizational performance include: (1) there is no point in specifying CEO contribution if organizational objectives are not first specified; (2) CEO contribution may be more difficult to measure acceptably than organizational objectives; (3) the CEO, or the trustees, may prefer that the CEO's contribution not be specified, because they are satisfied with current organizational performance and CEO contribution-if it's not broken, don't fix it.
In response to these objections I would argue as follows: first, for reasons given previously, the organization should measure whether specific objectives have been attained within a given time and to what extent. CEO contribution may be more difficult to measure, but some important aspects of CEO work can be measured; one of these is the time spent and the results achieved on various projects and the appropriateness of this pattern of CEO time allocation relative to organizational objectives. (If trustees and the CEO specify objectives for the CEO's contribution, the CEO is likely to focus more on those objectives than on other concerns.) Many CEOs and trustees may prefer specification of CEO contribution, particularly when external pressures are changing rapidly and there is, without such specification, considerable disagreement among managers, physicians, and trustees on what the CEO should be doing and how. (I am assuming that the organization is not in crisis-in that case, there is little time for CEOs to do anything other than respond to the crisis.)
The trustees should evaluate and reward (or fail to reward) the CEO relative to his or her attainment of such objectives. This assumes appropriateness in the formulation of the objectives, provisions for changing objectives when internal or external circumstances require, and valid and reliable ways of measuring CEO contribution.
