OPTIMIZING ORGANIZATION TRANSITIONS

The health care environment remains turbulent, causing many organizations to continue to experience "transitions". Transitions take several forms, including mergers and acquisitions, loss of key executives and financial turnarounds.

Board members and leaders tend to view transitions as neutral to negative. Often they have put much time and energy into making taught decisions that have precipitated the change. They view the implementation of the change, e.g. hiring a new leader, completing the merger, etc., as the point in time when positive change begins. However, the transition period itself is a critical time for organizations and must not be overlooked. The person(s) chosen as the interim leader(s) can determine the effectiveness of the transition period.

If the transition is not properly handled, there can be negative consequences. Without good leadership during this period of time, the organization can be harmed by the fast moving external market, often, critical strategic initiatives are put on hold. Internally, the staff can experience lower morale, prompting many key employees to leave. A leadership void can also allow staff to go in multiple directions, destroying the cohesiveness of the organization.

Conversely, there can be significant positive results from a well run transition. This can be a good time to take care of issues which need addressing but are politically sensitive, and which the permanent management and governance team have been unwilling to "take on." In some cases, the right decision can be a career shortening decision for the permanent CEO. Interim leaders who are not planning to stay will be in the best position to make these tough decisions. In cases where transitions involve mergers and acquisitions or change in ownership, interim leaders can focus on making the best transition for the good of the community served and for the organizations. By definition, the interim leader does not have a long-term job to protect. He/she can be more objective in decision making and focus on the goals established by the board.

How should transitional leadership be established?

First, the board and senior leadership team need to clearly define the major goals to be accomplished during the transition. These vary widely. If poor financial performance has precipitated the transition, then the focus will most likely be on beginning implementation of or achieving an economic turnaround. A merger and acquisition demands significant attention to negotiating, planning and implementing the new organization. Other focuses could be improving morale of staff, improving service and quality of care, etc. There should be no more than three goals.

Second, the interim leadership should be selected based upon the goals for the transition. Historically, internal persons have often been tapped, but an emerging trend is to identify outside personnel to guide the organization through the transition period. Before deciding whether to use external candidates, several issues should be addressed:

• Does the organization have the talent to achieve the goals established for the transition?

• Even if the talent exists within the organization, can these individuals be stretched without severely harming their other important responsibilities?

• What role should the internal person play in the longer run and will assuming an interim position have any negative consequences for this role?

• If there are politically difficult issues which must be addressed during the transition, can an internal person handle the consequences?

• Can the rest of the organization accept an individual performing a different, usually more responsible position, on an interim basis?

The alternate approach is to identify qualified leadership from outside the organization. There are individuals who provide interim management, and there are also several companies which do this. When selecting an interim management company, it is reasonable to expect the company to offer more than one candidate for immediate consideration. This gives the organization the ability to interview and select the person who will be the best match. External candidates can often be found who are overqualified for the interim role. While this is usually considered a disadvantage when selecting people for permanent positions, it is an advantage for interim work. An overqualified interim leader can use his/her experience and expertise to maximize capability with minimum downtime.

What are the critical functions that interim leadership should perform to ensure a successful transitions?

First, the interim leader must clearly identify and implement the goals in conjunction with the board and other key leaders. No more than three goals should be established. The interim person needs to clarify the expected outcome of these goals during the transition period. Often, full accomplishment of the goals will occur over a longer time period, so the degree of progress expected during the transition is important to identify upfront. All parties need to recognize the need for flexibility during the transition. Given the volatility of health care markets, it is not unusual to be faced with new challenges during transition, which may require "shifting gears."

Second, communication with the employees, physicians and other key stakeholders within the organization is critical. On one hand, a message of reassurance is needed. People want to know that the situation is under control and moving forward. On the other hand, the interim leader should be very direct and straight forward about his/her role. The individual is not there for the long run, but is committed to making improvements for the organization during the transition. The three original goals should be reiterated frequently.

Third, the interim leader's working relationship with the staff should be different from that of a permanent leader. Permanent CEOs and senior management generally want to create a bonding and positive relationship with the staff. Building successful relationships both internally and externally is an important success factor for a CEO of an organization over the long term. While the interim person should establish a positive working relationship with all constituents, less focus should be placed on this. Why? To the degree that tough decisions need to be made and implemented, the interim leader can carry them out in a more objective, dispassionate manner. Also, since the interim leader will not be there in the long run, it is not prudent to create too much identity and support for him/her, as this may increase the difficulty for the organization to move positively under the new permanent leader. If the interim person is internal and wants to continue with the organization in the long run, this type of relationship may not be possible to achieve.

Fourth, the interim person should be assisting the organization in creating the future leadership of the organization. This occurs in several ways. The interim person has in-depth knowledge and experience with the organization and can advise on the qualifications and skills most needed by future leaders. Also, he/she is in a position to frankly assess the existing management staff. This assessment will help ensure the future success of the organization by providing valuable input into the design of the new management team.

Fifth, the interim leader should create a smooth hand-off to future leaders. This includes providing a comprehensive orientation of issues to new leaders and preparing the employees, physicians and all key stakeholders for the changes.

A positive transition should not only move the organization forward, but allow for the acceleration of positive change when the permanent arrangement is in place. Also, once in place, the external interim person can leave as quickly as needed without the negative implication of having another change in leaders.

Health care organizations prefer that they change positively over time while maintaining continuity of leadership. However, the turbulent environment and the rapidity of change in health care often result in disruptions or "breaks" in leadership. A focused board working together with skilled interim leaders can make the transition period a time for advancing the organization.

April 28, 1999
Michael J. Peterson