3 Hidden Benefits of Succession Planning

Building a solid leadership pipeline holds benefits for hospitals beyond the obvious ones, experts say.

Engaged employees, strong HCAHPS scores, and a gaggle of young, eager recruits are things hospital leaders dream about. Few might make the connection that the way to achieve these things is strong succession planning and ongoing training, but one B-school professor believes a strong leadership pipeline program is the key.

The benefits of a well-developed leadership program don't stop at having several candidates for top positions, says Kevin Groves, PhD, associate professor of organizational theory and management at Pepperdine University Graziadio School of Business and Management. He is also a management consultant to several health systems, who has also written about the benefits of talent management for hospital outcomes.

How Succession Planning Boosts Employee Retention Rates

Groves's research found that hospitals that have adopted talent management and succession planning best practices are associated with high scores on the Centers for Medicare & Medicaid Value-Based Purchasing metrics, which are tied to reimbursement rates for Medicare and Medicaid programs.

"We're in this situation where hospitals are transitioning from volume-based reimbursement… to value-based reimbursement. The Affordable Care Act and other legislative efforts have created an entirely new business model for hospitals," he says.

Poor succession planning can lead to decreased quality of care, which can stifle reimbursement, Groves contends. "Our revenue streams are suddenly much more dependent on the quality of our services," he says, and that time to regroup after a leader's departure is now a thing of the past—organizations need to have a plan ready.

Here are a few things that can happen when proper succession plans are in place:

1. Improved Employee Engagement
"Hospitals that want high levels of employee engagement should know that the best way to move to peak engagement is through proper succession planning," says Groves.

When employees feel valued and like their organization is dedicated to helping them develop their skills and creating a strong career path for them, they're much more likely to be engaged at work says Groves.

He cites nurse turnover as an example. Organizations with strong internal training processes have nurse turnover of about 8.74% yearly, while organizations without them can expect turnover to the tune of 13.6%. While that might not sound like a big difference, it adds up—for a large healthcare system, the financial difference between the two turnover rates can be as high as $5 million annually.

John McCabe, MD, CEO and SR VP of Medical Affairs for Upstate University Hospital in Syracuse, NY, has also noticed stronger employee engagement and increased morale when strong succession strategies were in place in his hospital. "[Good planning] can have a lot of impact on morale… and strong staff morale can lead to an improvement in patient care."

Frequent check-ins with managers, a consistent evaluation process, mentorships, and extra training are all opportunities for ongoing conversations with employees that will keep them engaged with their jobs, coworkers, and the organization itself.

How to Avoid Chaos During Leadership Turnover

2. Improved HCAHPS Scores and Patient Experience
While strong succession planning and HCAHPS scores might sound unrelated, this is simply not so, says Groves.

"Leadership stability at the top and a robust talent review process with up-and-coming leaders… drive these outcomes," says Groves. He says that experience and training in patient-centered care and outcomes are key to reaching these goals—and that strong leadership, stability, and ongoing training creates a leadership culture with long-term goals that can make patient experience a priority.

A dip in quality during leadership turnovers is a real concern that hospitals need to take seriously, says McCabe. "Leadership changes should have no impact whatsoever on patient care," he advises. If a healthcare system is structured correctly, quality of care should never be impacted by a leadership change.

HCAHPS Scoring Puts Some Hospitals at a Disadvantage

With 30% of the value-based purchasing metric attached to HCAHPS scores, patient satisfaction needs to be a major part of the plan—and something that should be a big part of a hospital's culture. A well-formed leadership training program will help create leaders who are comfortable with creating sweeping initiatives for the entire health system, Groves says. "System-wide initiatives are easier to plan and just part of the job for these candidates."

3. Millennial Appeal
As of the first quarter of this year, Millennials are the largest share of the American workforce; one in three US employees is between the ages of 18 and 34. With baby boomers retiring, it's vital that organizations find strategies to attract and retain young workers.

Groves believes that succession planning programs have a special appeal for millennial workers. "Millennials have a high need for frequent feedback. [Feedback] isn't just an annual review for them, but an entire, ongoing series of coaching conversations with one's manager. They want constant answers to questions like, 'to what extent are your contributions furthering your potential?' and 'does my organization value me?'"

For a Millennial, relationships with managers and the ability to learn new skills are vital. "The younger generation wants accelerated development opportunities. They want to get ahead and advance quickly. The presence alone of having a leadership academy or other program for employee development is an important part of engaging them. It helps them feel they are valued, and that they have the ability to advance quickly in their role."

Increasingly, hospitals are taking advantage of these strategies and developing strong internal pipelines, says Groves. He points to one of his client's, a health system with seven open CEO roles at hospitals within its affiliate network—that was able to find internal candidates to take six of those roles—with very little disruption to its business.

But McCabe cautions that strong succession planning won't mean the end of healthcare worker turnover as we know it. While the process of training workers to be the next crop of leaders should strengthen the culture of a hospital, it won't eliminate the need for building that pipeline.

And that's OK, he adds. "None of us should be irreplaceable."