Succession plans: Are they really necessary?

Transcription

1 Succession plans: Are they really necessary? Focus paper Rebekah Phillips, RN, BSN, MBA, FACMPE August 30, 2018 This paper is being submitted in partial fulfillment of the requirements of Fellowship in the American College of Medical Practice Executives.

2 Introduction Succession planning is a critical aspect of healthcare management. In order to have a long term successful practice, there needs to be a good plan in place for senior leaders, both clinical and non-clinical, who will inevitably leave the practice at some point. The increasing age of the workforce means that organizations will be looking for key leaders in the near future. Succession planning takes time and effort on the part of the administrator and the shareholders of the practice, but it is a critical task that needs to occur for the health and vitality of the company. Taking the necessary time to be proactive with succession planning will help ease the burden to the practice when leaders leave. The purpose of this paper is to encourage healthcare leaders to consider the importance of succession planning among all key positions, create a succession plan, maintain the plan on an annual basis, and to understand the consequences of not having a succession plan. The research for this paper will include in depth literature review, an online survey of healthcare leaders on succession planning, and personal experience. A survey (Appendix A) was used for additional research for this paper. It was created for healthcare practice administrators and consisted of six questions. The survey was created via survey monkey and sent out to the membership in the Medical Group Management Association (MGMA) member community. This paper contains a case study that discusses how a medium size practice overcame a challenging year that consisted of losing two key leaders within a few months of each other. It will also explain what plan the company had in place prior to the departure of these leaders and address any changes that were made as a result of the departures. This paper will examine the potential options for succession planning to include the pros and the cons of each option. The options to be discussed will be: 1) Have a succession plan for providers only (physician owners and non-physician owners/provider), with at least an annual review of the plan. 2

3 2) Have a succession plan for all key positions (physician owners, non-physician owners/providers, and managers) with at least an annual review of the plan. 3) Have some kind of plan in place with no annual review of the plan. 4) Have no plan and wait until a person leaves a key position. Background According to Cambridge dictionary, succession planning is defined as the process of finding suitable people and preparing them to replace important executives in an organization when these executives leave or retire (Succession Planning, n.d.). In healthcare management, administrators are faced with many challenges throughout the day. They are tasked with staying abreast of legal regulations while ensuring the practice provides high quality, affordable healthcare. Administrators review financial data, monitor risk and compliance programs, oversee human resource management, and have a multitude of other tasks. At times, administrators may feel as though they are reactive to problems, but when looking at the strategic plan of the company, they must be proactive in succession planning. There is a significant cost associated with hiring and training new staff members. According to MGMA, the cost of recruiting and training a new employee is double the salary of the person that is being replaced (MGMA, 2017). As the baby boomers near retirement, it is crucial for healthcare leaders to determine the next leaders within their respective organizations. Succession planning allows the administrator to have a plan in place when a key member leaves or retires. Effective succession planning is important to the organization as a whole. When there is a gap in key staff, the effects are felt among all practice stakeholders; from providers, to nursing, to front office, to leadership, to administrative and billing staff, to the community leaders and any 3

4 other stakeholders not listed. A gap in clinical staff is felt by staff as well as patients. When a company has a plan in place, the transition in leadership is relatively smooth. Succession plans should be created by all healthcare leaders and shareholders and be maintained on an annual basis in order to be effective. Importance of succession plans Succession plans are a critical component of the practice strategic plan. Every practice, no matter the size, needs to have some sort of succession plan in place for the health of the organization. According to a survey conducted in 2018 of the MGMA membership, 58% of practices do not have a succession plan in place and 71% do not feel adequately prepared for the abrupt departure of a key team member (See Appendix A). Healthcare leaders are faced with the ever-changing industry requirements to offer high quality, affordable healthcare while abiding by the government rules. Currently healthcare leaders also face the issue of an aging workforce; therefore, making succession planning a critical component of the job. When a key leader leaves a company unexpectedly, the cost to find and hire a replacement can quickly grow. There is the cost of the severance package, recruitment search, and onboarding/training the employee. The costs also include the uncertainty felt by other employees and the sudden halt in work being done by the person who left the company (Favaro, 2015). Planned leadership changes still come as a cost to the company, but this cost is much smaller then unplanned vacancies. Promoting from within the company is more cost effective then recruiting externally and will also motivate other employees (Definition of Succession Planning, n.d). It is important to bring in the successor as soon as possible. If the candidate is an internal employee, the company could start additional training immediately. This would increase the knowledge that is passed on from the departing employee to their successor. If the candidate is an external candidate, it would still be beneficial to the company to have some overlap with the 4

5 departing employee. Without good succession planning, these key leaders could leave the organization with years of knowledge not being passed down. Building up leaders within the organization allows for the knowledge, and years of experience to be shared with the future leaders of the company (Grundy, 2017). Types of succession plans The practice needs to look at two types of succession plans; an emergency plan and a long-term plan. The emergency succession plan looks for a person who could take charge for a short time, while the long term permanent replacement is hired and trained. An example of this would be the Chief Financial Officer (CFO) stepping into the Practice Administrator role. The practice would not want to have the CFO in the role of the Practice Administrator long term, but the CFO could fill the role in the interim. The short-term plan could also include multiple people dividing up the tasks until a replacement is found and trained. It is important to have an emergency plan in case a leader is out unexpectedly due to health reasons, retiring early, or is fired. A practice cannot predict a disaster, but with proper planning they can be prepared to keep the company moving forward. The long-term plan involves having a person on staff who is qualified and has sufficient experience to fill the role. An example of this is having an Assistant Practice Administrator who could be promoted to Practice Administrator or the Physician Vice President stepping into the Physician President role. This plan involves developing the internal talent continuously and is a product of good succession planning. This plan could also include reorganizing and dividing up the job tasks among more than one person. A good long-term plan starts with hiring the right people and continuously training and developing them into future leaders. 5

6 Succession plans for providers and key management personnel have similarities and some subtle differences due to the nature of the job. Non-clinical staff can be cross trained, and developed, to move into different roles. Clinical staff may need more training and education before being moved to certain roles, depending on their scope of practice. A clinical staff person can easily be trained for front office or administrative work but would need more training to move from a registered nurse to a nurse practitioner. Clinical staff can also be trained to move into management roles. Both types of succession plans require due diligence on behalf on the administrator, key leaders, and the board of directors. Executive board member or manager For management succession planning, or an executive physician board member, the replacement can be promoted from within or hired externally. These positions are administrative in nature; affecting patient care indirectly. The qualifications can be determined by the leadership team and board of directors. If possible, it is best, and more cost effective, to promote from within. Promoting administrative supervisors from within, helps with employee morale and shows that there is a career track for current employees. Internal employees will also need less time dedicated to onboarding and training as they are already in the company and understand the culture. However, for some positions such as Chief Financial Officer or Practice Administrator, the company may choose to consider both internal and external employees to ensure they are getting the right candidate. The company wants to be sure they have the right person doing the job. If there is a need to hire externally, it would be beneficial to the company to have the emergency succession plan to fill the gap if needed. Clinical provider When looking for a replacement for a practicing provider (non-shareholder or midlevel), the practice must look externally for a candidate. The practicing provider role involves direct 6

7 patient care and the qualifications are mandated by the state government. For these positions, it is a good idea to have connections with local schools and hospitals and look at hiring new graduates. Networking plays a key part of finding the right people as well. Current providers may know of new providers coming up through the ranks that would be a good fit for the practice. In the short-term, a practice can look at hiring locum tenens to fill the immediate need for patient care. When looking at hiring a clinician long-term, the board should also keep in mind and always be looking for the next executive clinical leader. If it is feasible for the practice to have overlap with the clinical providers, it would be beneficial due to the need for training a new provider. Some reasons that it may not be feasible include space constraints and lack of support staff. Steps to create a succession plan Creating an effective succession management plan is more than simply populating an organizational chart. The practice needs to be thoughtful about the succession plan and keep the vision and mission of the organization in mind. The practice needs clear mission and vision statements and to understand how this complements the practice s strategic plan. There are key steps that one must take in order to have an effective and useful succession plan. The first step, in creating a succession plan, is to involve shareholders. By engaging the board first in setting the criteria and then in refreshing them each year, you create buy-in and alignment in the eyes of the jury who will select the next leader (Miles, 2009). At this step, the practice will decide the skills, education, qualities and experience needed for each key role keeping in mind the differences between administrative roles and patient care roles. This is more then simply reviewing a job description. It will truly define the type of leader needed for a particular role to keep the company moving in the direction of the mission and vision of the company. The board of directors is the governing body of the company and needs to be the ones responsible for selecting the next leader (Favaro, 2015). Having an effective succession plan is 7

8 critical to the company s ongoing success. The administrator needs to ensure that the plan is reviewed on an annual basis at a minimum. This will ensure that the plan is still accurate and up to date. Changes should be made as needed throughout the year as well. A good plan of attack would be to add a standing agenda item to the board meeting to discuss succession planning (Favaro, 2015). The next step is to consider the current employees; are there any employees who could be next in line for certain positions? This would give current employees promotion opportunities within their career track; enhancing employee retention. During this step, the practice could look at creating career tracks. For example, a floor nurse could be in line for becoming a nurse supervisor and then nurse manager. Depending on the nurse s qualifications and education, after being in the nurse manager position, they could be moved to the office manager role or another management position. Lateral moves are part of the career track and should not be looked at negatively. If promoting an employee into a supervisor role, the company needs to consider additional training for the employee. Going from a co-worker to a supervisor is a difficult step to make. The new supervisor needs to learn skills and adjust to being in charge instead of being a friend. The company could look at formal training sessions or conferences that would teach an employee to go from being a co-worker to a supervisor. An employed physician could have a career track of being a shareholder and being voted to the board of directors; then have a chance to become an executive member of the board. Each employee of the organization needs to be looked at with a critical eye to see if they have the required qualities and experience. The practice needs to be careful at this stage to avoid showing favor to the favorite employee, but rather keep in mind the criteria needed for that leadership role. If there is no internal candidate that would fit the role, the practice needs to determine how and when they will start recruiting for a replacement. 8

9 Step three in the process consists of investigating if an internal employee would have an interest in other positions. Then consider if that internal employee would be used for a short-term emergency fill in or if could they be a long-term replacement. There needs to be a plan in place for recruitment and training in the event that there is no internal candidate able to take the position. There are many external options for finding a suitable replacement such as job boards, word of mouth, partnership with fellowship programs for providers, recruiting companies, and networking. Relationships and networking are important components of succession planning. Sometimes the best candidate can come from direct referrals of current employees or their network. Cross training should be provided to high performing staff members to allow them to fill in should a need arise. The final step is to ensure the new candidate has the right training and mentorship. Any person who takes the new role will need to be trained. An internal candidate will need time to adapt to their new role and learn new tasks while potentially covering their old position until a replacement is found. Even the most experienced external candidate will need to learn the culture and ways of the new company. The new leader needs to have support from others, mentors in place, and feedback both positive and constructive. Options to be considered There are four potential options to consider when a practice looks at succession plans. Practice need to consider the pros and cons of each option and determine which one is the best for them to implement. According to the survey of the MGMA member community, 37.31% of the respondents have a succession plan for physician owners, 7.46% have a plan for non-physician owners, 7.46% have a plan for midlevel providers, and 20.90% have a plan for managers. This question was a select all that apply therefore some practices may have a plan for each of these positions. There was a response, on this question, of 52.24% stating they did not have a plan in 9

10 place at this time. A question was also asked on the survey about an annual review of the succession plan. The results showed that 28.36% of respondents review their plan annually while 20.90% do not have an annual review of the plan. Option One Option one to consider, is to create a succession plan for clinical providers, nonleadership positions, with at least an annual review of the plan. This succession plan will be beneficial in the event that any provider leaves the organization. Pros Continued patient care in the event of a provider leaving An annual review ensures that the plan is always up to date and accurate Cons No plan in place for key staff members or executive board members who may leave; therefore, leaving a potential gap in administrative staff Time consuming to create and review the plan Staff morale will be impacted due to the uncertainty of the future administrative leadership Plan could be costly if involving hiring temporary providers to fill the gap Option Two Option two considers a succession plan for all key management positions, to include clinical providers, with at least an annual review of the plan. This plan will be beneficial in the event of a provider or manager leaving the organization. This option is similar to option one mentioned above, but includes management succession planning into the full succession plan. Pros 10

11 Continued patient care in the event of a provider leaving An annual review ensures that the plan is always up to date and accurate Continued indirect patient care (financial, operational, and management) in the event of an administrative person leaving Increased staff morale as the future of the leadership is known and potential growth opportunities are present Cons Time consuming to create and review the plan Option Three Option three is to have a plan in place for either providers, all key management position, or both, with no annual review of the plan. Pros Continued patient care in the event of a provider leaving Continued indirect patient care (financial, operational, and management) in the event of a key administrative person leaving Increased staff morale as the future of the leadership is known and potential growth opportunities are present Cons The plan can be out of date and no longer relevant if not reviewed at least annually Time consuming to create the plan 11

12 Option Four Option four is to have no plan and wait until a provider or key management person leaves the company. Pros More time is available to devote to other tasks Cons Patient care will be impacted due to a decrease in patient access, in the event of a provider leaving Provider morale will be impacted due to the need for additional appointment slots to accommodate the demand Staff morale will be impacted due to the uncertainty of the future leadership Operations will be impacted (financial, operational, and management) in the event of a key administrative person leaving Potential of selecting the wrong candidate due to desperation In order to avoid a bad business decision, practices need to begin working on a succession plan for all providers and key leaders and devote the necessary time to the plan. The worst thing is for practices to have no plan in place and wait as that is setting up the practice for disaster. Not planning for the future of the company through succession planning can put the company at risk unnecessarily. There is the potential loss of knowledge that would leave with the employee, the uncertainty of the future may cause other employees to leave, and there is a also a financial risk to the company. 12

13 Case Study Annual discussion among the providers and practice administrator about succession planning has value. The discussion needs to focus on the question how long the provider plans to continue patient care. The subsequent dialogue helps shareholders, the practice administrator, and non-partner physicians to understand the potential needs for provider staffing in the future. This plan has been successful to the practice for patient care. The practice also needs a strategy in place in the event of departure of non-provider key staff. A midsize private practice had the senior partner, and company president, leave unexpectedly due to health reasons. Fortunately, the practice has an informal succession plan in place for providers who may leave or retire from practice. The plan is reviewed annually at the company retreat. The practice had been preparing for the senior partner to retire in the next two to four years. The successor had been informally selected and was in training for the presidential role. The practice was not as prepared for the abrupt departure, but they were able to overcome this challenge by already having a plan in place. The successor was in the process of being trained to step into the executive role of president and was able to step in due to short notice. At the next board meeting, the executive board voted for the company vice president to assume the long-term role of president. This helped to fill the void of the position from an administrative standpoint. There was still a position to fill, from a patient care provider role, to hire another physician. In the short term, patients were seen by other providers in the practice as needed until a new physician could be hired and trained. The current succession plan, does not include non-clinical key staff members. At the annual retreat, the board always asks the practice administrator how long he/she plans to continue to work, but other management roles are not addressed. The practice also lost their accounting manager, within three months of the senior partners departure, due to unanticipated retirement. 13

14 They found themselves with no set plan to fill the role. The practice administrator stepped in to learn the job duties and complete the tasks in the interim. Fortunately, in this case, there was an internal candidate who had the experience, skills, and desire to step up and learn the job as well. Ultimately this person took over the role which allowed the practice administrator to go back to her normal duties. This gap and lack of planning of all key positions left a void that had to be filled. The accounting manager position is not one that can be left vacant. The disadvantage to not having a succession plan in place for this role were, staff morale was affected at the unknown of new leadership, some job duties were pushed aside or put on the back burner in the interim, and stress levels increased among those doing multiple jobs. Going forward, the practice has chosen to implement option two as discussed above; have a succession plan for all key management positions with at least an annual review of the plan. This option is the best business plan for this practice, according to their past experience. The practice administrator is always looking for new leaders in the organization and discussing these ideas with the board of directors. The practice administrator will add succession management for all key administrative staff to the next annual retreat. Discussion at the annual retreat needs to be expanded to include all positions and a clear leadership track. The executive team needs to come up with a plan to formally develop potential leaders in the organization. Conclusion Practices need to become educated on succession planning and the pitfalls to not having a plan in place. All practices need to seriously consider the options above when looking at the strategic long-term success of the company. In order to avoid a bad business decision, practices with no plan in place should create a plan immediately and maintain the plan annually. If a practice has created a plan in the past, but have not updated it, they need to review this plan and update it immediately. Practices should start looking at their staff now and create career tracks 14

15 and internal training. Strive to hire people better then you. Hire employees who will challenge you. Then challenge them, grow them and give them meaningful work (Holder, 2017). Not being adequately prepared for the departure of key management staff can be detrimental to the overall health of the company. 15

16 Appendix A Survey Questions and Graph Results 1. Practice Demographics a. Single specialty b. Multi-specialty c. Academic d. Other 16

17 2. Practice Size a. 5 or fewer providers b providers c providers d. More than 15 providers 3. Do you have a succession plan in place? a. Yes b. No 17

18 4. Which of the following key positions do you have a succession plan in place for? (select all that apply) a. Physician owners b. Non-physician owners c. Midlevel providers d. Managers e. N/A (we do not have a plan in place) 18

19 5. Do you review it at least annually? a. Yes b. No c. N/A (we do not have a plan in place) 6. Are you prepared for the potential, abrupt departure of a key staff person? a. Yes b. No 19

20 References Barss, C., Rothwell, W. J., & Zaballero, A. (2016). Making the case for success planning in healthcare. Retrieved from Definition of Succession Planning. (n.d). In The Economic Times. Retrieved from Favaro, K., Karlsson, P., & Neilson, G. (2015). The $112 billion CEO succession problem. Grundy, C. (2017). The importance of succession planning. Retrieved from Holder Jr., Ronald W. (2017). Staying power: The important work of retention in a medical practice. MGMA Connection, 17. (6), 7-8. Medical Group Management Association. (2015). Human Resource Management (3 rd ed.). Englewood, CO: MGMA Miles, Stephen A. (2009). Succession Planning: How to do it Right. In Forbes. Retrieved from Strategy-business, summer 2015 (79). Succession Planning. (n.d.) In Cambridge Dictionary. Retrieved from 20