What kind of leader are you? If you are a governing board member the question is what type of CEO works for you?

In a recent New York Times column, conservative Bret Stephens made reference to a wry Warren Buffet observation from 2008 as Wall Street and Main Street witnessed the beginning of a great economic near miss that produced a painful, devastating great recession, as opposed to a catastrophic great depression.

leadership“Warren Buffet likes to talk about the natural progression, the three I’s — the innovators, the imitators, and the idiots. One creates, one enhances and one screws it all up. Then, presumably, the cycle starts afresh,” Mr. Stephens wrote

However, before the process recycled, millions of Americans lost their jobs. Many lost their homes and their future financial security.

As the healthcare industry prepares — or braces itself — for the next round of who-knows-what “reform”, there is a great risk that Mr. Buffet’s law of natural progression will wreak serious havoc on healthcare providers and the communities they serve. This is a time for governing boards to avoid finding themselves in that third “I” group with a leader who cannot, or will not adapt, to changing business conditions. While no one knows how the GOP’s attempt to govern will play out when it comes to healthcare, there should be no doubt that hospitals will continue to experience declines in reimbursement, including Medicare, commercial payers and Medicaid. So if you have doubts about whether your organization is properly positioned, now is the time to act.

If you think you will have plenty of time to react when the issues become clear, think again. Community Health Systems (CHS), the Franklin, Tennessee investor hospital management company, once the darling of Wall Street with a healthy balance sheet, an impressive share price and a seeming invincible future, is now frantically shedding assets to reduce debt and, hopefully, survive. There are more than a few examples of organizations that have transitioned from the first “I” to the last “I” with the same CEO and governing board in a relatively short period of time. Apparently there is no immunity against this phenomenon when industries experience periods of transformative change.

Executives who find themselves in the third “I” category are not necessarily bad executives. Differing market, regulatory and operating conditions require different types of leadership skill sets and styles. Some leaders who thrive in stable situations, are ill-suited to run an organization in distress; some executives are builders, others are improvers or maintainers, and a third group excel in turnaround situations. In fact, one of the brightest CEOs I know falls into this third category. His demonstrated record of accomplishment shows that he is a great builder, a savvy operator but his genius is in his ability to solve systemic problems for hospitals whose future is far from certain.

So here is the challenge for governing board members, especially those who serve their communities by overseeing the local hospital, one of the most important assets a community has. The CEO who seems to be doing a good job today, may not have the knowledge, skills or the personality/style necessary to successfully navigate through a more difficult set of challenges. If the board waits too long, they could do irreparable harm to the enterprise and to their community. This is particularly challenging when board members, most of whom have day jobs and a busy family life, do not invest the time it takes to become knowledgeable of the issues and the implications the changes will have on their hospital. Not being up to date or not taking the time to become informed will be a weak excuse if things go south.

These challenges and the changing market conditions also have serious implications for the CEO recruitment process. Aside from the month-to-month governance oversight that the board provides, their single most important duty is to recruit a CEO. For many members of rural and smaller community hospitals without a clear understanding of changing market and regulatory conditions, this becomes a very difficult duty. This is why we are publishing an eBook on CEO recruiting. This book will be distributed free of charge to board members and other interested parties.

This as yet untitled publication, will summarize our Firm’s detailed evidence-based candidate search and vetting process that over the past 20-plus years as yielded impressive results.

When a publication date is set, we will let you know.