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    Rebekah Phillips, RN, BSN, MBA, FACMPE
    Succession planning is a critical aspect of healthcare management. For long-term practice success, there needs to be a good plan for senior leaders, both clinical and non-clinical, who will someday leave the practice.

    Succession planning takes time and effort from the administrator and the practice shareholders. Being proactive with succession planning will help ease the burden on the practice when leaders depart.

    At times, administrators may feel as though they are reactive to problems, but when looking at the strategic plan of the organization, they must be proactive in succession planning. There is a significant cost associated with hiring and training new staff members. The cost of recruiting and training a new employee is double the salary of the person being replaced.1 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 when a key member leaves or retires.

    Effective succession planning is important to an organization. When there is a gap in key staff, the effects are felt among all practice stakeholders: providers, nurses, front office, leadership, administrative and billing staff and community leaders. A gap in clinical staff is also felt by patients. When an organization has a plan, the transition in leadership is relatively smooth.

    Importance of succession plans

    Succession plans are a critical component of the practice strategic plan. Every practice regardless of size, needs a succession plan for the health of the organization. A 2018 survey of MGMA members found that 58% of practices do not have a succession plan and that 71% do not feel adequately prepared for the abrupt departure of a key team member.

    When a key leader leaves unexpectedly, the cost to find and hire a replacement can quickly grow to include the cost of the severance package, a recruitment search and onboarding/training the employee. Other costs include the uncertainty felt by other employees and the work that needs to be done in that employee’s stead.2

    It is important to bring in the successor as soon as possible. If the candidate is an employee, the organization could start training immediately. This would increase the knowledge passed on from the departing employee to his/her successor. If the candidate is external, it would still be beneficial to the organization to have some overlap with the departing employee. Without good succession planning, these key leaders could leave the organization without passing on years of knowledge. Developing leaders within the organization allows for the knowledge and years of experience to be shared with the future leaders of the organization.3

    Types of succession plans

    A practice needs 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 a long-term permanent replacement is hired and trained — for example, when the chief financial officer (CFO) steps into the practice administrator role. The practice would not want the CFO to also be the practice administrator for too long, 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 disaster can’t be predicted, but with proper planning a practice can be prepared to move forward.

    The long-term plan involves having a person on staff who is qualified and has sufficient experience to fill the role — for example, having an assistant practice administrator who could be promoted to practice administrator or a physician vice president stepping into the physician president role. This plan involves hiring the right people and training and developing them into future leaders. It also includes reorganizing and dividing up job tasks among more than one person.

    Non-clinical staff can be cross-trained and developed to move into different roles, whereas clinical staff may need more training and education before being moved to certain roles. Clinical staff 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 of the administrator, key leaders and the board of directors.

    In a survey of MGMA members, 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. However, 52.24% responded that they did not have a plan at this time. As to frequency of review for succession plans, 28.36% of respondents review their plan annually while 20.90% do not have an annual review of the plan.

    Manager or executive board member

    For management succession planning, or an executive physician board member, the replacement can be promoted from within or hired externally. These positions are administrative, 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, which helps with employee morale and shows that there is a career track for employees. Employees will also need less time for onboarding and training as they already understand the organization and culture. For some positions such as CFO or practice administrator, leaders may consider both internal and external employees to ensure they are getting the right candidate. If there is a need to hire externally, it would be beneficial to the organization to have an emergency succession plan to fill gaps.

    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 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 to hire new graduates. Networking plays a key part in finding the right people as well. Providers may know of new providers coming up through the ranks who would be a good fit for the practice. In the short term, a practice can hire locum tenens providers to fill the immediate need for patient care. When hiring a clinician, the board should 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. On the other hand, it may not be feasible due to space constraints and lack of support staff.

    Steps to create a succession plan

    Creating an effective succession plan requires thoughtfulness about the vision and mission of the organization. The practice needs clear mission and vision statements and to understand how they complement the practice’s strategic plan. There are key steps for developing an effective and useful succession plan:
    1. Involve shareholders. By engaging the board of directors in setting the criteria and refreshing them each year, you create buy-in and alignment among those selecting new leaders.4 Practice leaders will decide the skills, education, qualities and experience needed for each key role, which includes defining the type of leader needed. The administrator will ensure that the plan is reviewed on an annual basis, at minimum, with a standing board agenda item for succession planning discussion.5 Changes should be made as needed throughout the year.
    2. Consider employees. Are there any employees who could be next in line for certain positions? This would give them 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 to become a nurse supervisor and then nurse manager. Depending on qualifications and education, after being in the nurse manager position the nurse could be moved to the office manager role or another management position.
    A 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 needs to be looked at with a critical eye to see if he or she has the required qualities and experience. The practice needs to be careful at this stage to avoid favoring one employee, but rather keep in mind the criteria needed for that leadership role. If there is no internal candidate that would fit the role, practice leaders need to determine how and when they will start recruiting for a replacement.
    1. Gauge employee interest in other positions. An employee could be used for a short-term emergency fill-in or be a long-term replacement. If no internal candidate is suitable, have a plan for recruiting and training an external candidate. This recruitment plan may include job boards, word of mouth, partnerships 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 by employees or from their network. Cross-training should be provided to high-performing staff members to allow them to fill in should a need arise.
    2. Provide 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 his or her new role and learn new tasks while still doing the current role until a replacement is found. Even the most experienced external candidate will need to learn the culture and ways of the new organization. The new leader needs to have support from others, have mentors in place and receive feedback.
     

    Case study

    Annual discussion among providers and the practice administrator about succession planning has value. The discussion needs to focus on the question of 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. The practice also needs a strategy in the event of departure of key non-provider staff.

    A midsize private practice had the senior partner and company president leave unexpectedly due to health reasons. Fortunately, the practice had an informal succession plan for providers who may leave or retire from practice. The plan is reviewed annually at the company retreat.

    The practice had prepared for the senior partner to retire in the next two to four years. The successor had been informally selected and was being trained for the presidential role. The practice was not prepared for the abrupt departure, but it was able to overcome this challenge by having a plan.

    At the next board meeting, the executive board voted for the vice president to assume the long-term role of president. This helped to fill the void of the position from an administrative standpoint. Although there was still a patient care provider position to fill, 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 key non-clinical 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 its accounting manager within three months of the senior partner’s departure, due to unanticipated retirement. 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, there was an internal candidate who had the experience, skills and desire to step up and learn the job as well. This person took over the role and 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. Not having a succession plan for this role affected staff morale, some job duties were pushed aside or put on the back burner in the interim and stress levels increased among those doing multiple jobs.

    As a result, the practice chose to create a succession plan for all key management positions with at least an annual review of the plan. The practice administrator is always looking for new leaders in the organization and discussing candidates with the board of directors. The practice administrator then adds succession management for all key administrative staff to the next annual retreat. Discussion at the annual retreat is expanded to include all positions and a clear leadership track, followed by the executive team creating a plan to formally develop potential leaders in the organization.

    To avoid a bad business decision, practices without a plan should create one immediately and maintain it annually. If a practice has created a plan in the past but has not updated it, it needs to review this plan and update it immediately. Practices should start reviewing their staff now and create career tracks and internal training. As past MGMA Board Chair Ron Holder writes, “strive to hire people better then you. Hire employees who will challenge you. Then challenge them, grow them and give them meaningful work.”6 Not being adequately prepared for the departure of key management staff can be detrimental to the overall health of the organization.

    Notes:

    1. Medical Group Management Association. Human Resource Management, 3rd edition. MGMA: Englewood, CO.
    2. Favaro K., Karlsson P. & Neilson G. “The $112 billion CEO succession problem.” Strategy+business, summer 2015 (79). Available from: https://www.strategy-business.com/article/00327?gko=8dfe1.
    3. Grundy C. “The importance of succession planning.” APSCo. March 9, 2017. Available from: https://www.apsco.org/article/the-importance-of-succession-planning-3069.aspx.
    4. Miles S. “Succession planning: How to do it right.” Forbes. July 31, 2009. Available from: https://www.forbes.com/2009/07/31/succession-planning-right-leadership-governance-ceos.html#474a3eee3733.
    5. Favaro.
    6. Holder R. “Staying power: The important work of retention in a medical practice.” MGMA Connection, August 2017, 7-8.

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