HFMA VIEWS

Paul Frankenberg
President, CEO, and Principal, Kraft Search Associates

CFO succession planning doesn’t exist in a majority of companies. As a result, talented mid-level executives are left with considerable uncertainty about their opportunities for continued professional advancement. However, there is a way for aspiring CFO candidates to prosper and grow within this environment of uncertainty.

It’s very natural to want to be your company’s next CFO. After all, you’re smart. You’ve worked hard. Your college degrees and professional designations have provided you with the insight and skills required for success. And deep down, you know you deserve the promotion plus the recognition and rewards that go with it. As country music superstar Tim McGraw accurately sings, “Everybody wants to be the big dog;wanna wag that big dog tail.”

But to position yourself as the candidate of choice the next time a CFO position opens up (and they tend to open up rather frequently), you must do much more than shape the company’s balance sheet. You must understand the company’s business. You must understand the company’s politics. You must understand your own strengths and weaknesses. And last but not least, you absolutely must play a very active role in the long-term succession planning and candidate grooming process. 

Here are the facts. The November 2007 issue of CFO magazine reports that your company’s current CFO is not planning his successor. And, on a more personal note, neither your company nor your CFO is actively grooming you to assume the duties of the CFO. This article is based on interviews with 1,400 CFOs who were asked, “Have you identified a successor for your position,” and the results were astonishing. A full 83% of respondents indicated that they have not identified a successor for the CFO role. And further, when asked, “If not, why not,” 74% of the respondents replied, “Not planning on leaving in the near future,” and 12% answered, “No qualified candidates currently working in the organization.”

Bottom line, only 17%, or less than one in five companies, have identified a successor for the CFO position. Their reasons may vary, but CFO turnover statistics indicate that companies would be wise to have a well defined CFO succession planning process in place. And that spells opportunity for you. 

Although 74% of CFOs may not be planning to leave in the near future, the reality is that the average CFO tenure is less than five years, which is south of recent years when the average tenure was seven to twelve years. Regulatory liabilities and overall business pressures have driven CFO tenure downward simultaneously with the increased complexity of CFO recruitment. With the average executive tenure decreasing you can expect the number of internal promotions to decrease also, unless a real and robust succession planning process exists organizationally. Your career is in your hands.

Prior to evaluating your succession planning goals, answer this question, “Am I ready and capable to be the CFO of this or another organization?” Your ego and confidence will say yes. However, for greater clarity you should talk with mentors, cross-functional leaders and an executive recruiter you have developed a relationship with. They see you in comparison to the broader CFO ranks and will give you candid feedback to balance your self-perception with market demands. Once you are certain of your readiness to become CFO you can assess your company’s succession planning process.

With more than 225 executive searches behind me, I’ve identified three key areas that you can explore to help you better evaluate your personal CFO succession planning preparedness, as follows:

1. How long have the current CEO and CFO been in place and what was their previous tenure? CEOs turn over more frequently than CFOs and often, a new CEO will bring his or her own CFO. While it’s hard to predict CEO and CFO tenure, the best future predictor is past performance.

2. Does your CFO have a track record of successfully developing others into a CFO role, either internally or externally? The fact that your CFO has been there a while or looks to be settling in is not necessarily bad for your development. In fact, this can be positive situation as long as your CFO has experience developing leaders to the point they are recruited away.

3. Ask for a specific succession plan and the relative frequency and style of communication you can expect throughout the process. Lack of a plan or lack of interest to discuss a plan will give you flashing lights of caution. In addition, ask for a thorough annual or semi-annual evaluation relative to your capabilities, experiences and acumen from cross-functional leaders. These individuals will share breadth they see valuable to a successful CFO. If your company is committed to a succession planning process, these steps will be built into it and will be relatively easy to self-administer. On the other hand, if your company is not actively involved in a succession planning process, your efforts will typically be recognized and rewarded with an informal roadmap to success. Either way, you win!

It’s crystal clear that you are responsible for assessing your company’s succession planning and driving your career into the CFO suite. Answering the above questions will give you a better understanding as to whether you are in control of your career trajectory or whether others are planning the process with you.

Scott MacStravic

The vast majority of discussions on transparency for HCOs relate to some combination of quality and cost information that should be shared with consumers and businesses so they can make the most informed choices regarding health care. While the evidence is still out as to the extent to which such information will make a significant difference to either set of customers, the idea seems a logical accompaniment to calls for healthcare reform that aim to increase the extent to which consumers take responsibility for their healthcare choices.

But any such reform that is limited to only decisions on sickness care treatments and providers after consumers are faced with acute or chronic disease crises is nowhere near even half the answer. Ultimately, and most reformers agree with this, consumers are going to have to act more responsibly with respect to their health, not just their reactive sickness care needs. Ideally, this means they will choose those behaviors and lifestyles that will reduce the overall incidence and prevalence of disease in the population, not merely facilitate better decisions about where and from whom to get sickness care.

It would be an interesting element of transparency if sickness care organizations such as hospitals and physician practices engaged in sharing with their patients not merely how much their sickness care will cost, and what outcomes they can expect from it, but how the patient could have avoided the need for such care in the first place, and can avoid a repetition of the same event or episode. Arguably, reaching patients with information when they are facing the threat of expensive and often risky sickness care is a great “teaching moment” opportunity to call their attention to proactive health management (PHM) alternatives that might work to prevent future events, or help their family and friends avoid similar problems.

Such “event-timed” contacts could contain information on the hospital’s or physician’s own PHM services, where they offer some, or referrals to other sources, where they do not. Ideally, these communications would be as transparent about the costs and average outcomes of the specific PHM interventions or providers discussed, enabling consumers to make informed choices in these matters as well.

Such communications could point out the financial advantages to consumers or reducing the risk factors that were probably active in causing the reason for their existing need for sickness care. This would enable consumers to estimate how much they would gain, in “discretionary income” by not repeating the existing illness. Examples of what has been saved by other consumers who acted to prevent getting the same and other conditions in the first place could also serve well. This could include the lost time from work or school, lost income, and out-of-pocket costs associated with the condition or other preventable conditions, as well.

After all, it makes eminently good sense for hospitals, and at least for large physician groups, to engage in or purchase PHM services for their own employees. Given the higher productivity and performance available through healthier workforces, and the notoriously unhealthy nature of most workforces in the healthcare industry, this only makes good management sense. And whether they become suppliers or purchasers of PHM services, providers should become well informed about the outcomes and costs of available suppliers.

It would clearly be against their best financial interests, in the long run at least, for providers to promote and help steer consumers toward PHM services, since they reduce the need, demand, and expenditures for sickness care, and thereby most providers’ revenue. But the future revenue prospects for sickness care payment by third parties and even consumers is pretty dismal, and “joining ‘em” rather then “licking ‘em” may be a wise strategic move. And for providers with strong mission or professional commitments to the health of communities, promoting healthier citizens is far more beneficial in that arena than is curing them after they get sick.

In the long run, it is arguably in providers best financial interests as well, since delivering sickness care where it is rare enough to be affordable will be significantly better than doing so when no one wants to pay as much as it costs to deliver. The constant grinding down of payment levels compared to costs, and pressures to reduce costs even at the expense of quality, will inevitably make sickness care a far less rewarding business, both professionally and personally.

There is no reason why most sickness care providers could not compete with specialized PHM suppliers in the PHM market, particularly in disease management, and in the lucrative employee health management parts thereof. And it offers such providers a real opportunity to get not merely “on the side of the angels”, but on the same side, as part of the solution, with all the other stakeholders who are committed to reducing the overall healthcare costs in the country, rather than remaining part of the problem.

Paul Frankenberg
President, CEO, and Principal, Kraft Search Associates

Healthcare executive leadership has gone global. As a result, a growing number of opportunities are becoming available for individuals whose career planning efforts have prepared them for the extraordinary challenges and the long-term rewards that an international assignment offers. However, the expectations are high when it comes to making healthcare executive leadership placements into a foreign market, and a prospective executive must be fully prepared to meet those challenges head-on.

“Well done is better than well said” is a quote from the New England Patriots’ Tom Brady (and Ben Franklin) and it summarizes the mindset of global investors and global operators as they recruit individuals to lead foreign or multinational business entities. In other words, a successful track record delivering superior financial and operational results will help your achieve your international leadership goals far better than merely words and potential. This is why personal global career planning pays off in the long run.

We recently helped sponsor the “2007 Strategic Investing in Healthcare Forum.” This was an invitation only, one-day conference that brought together members of the Harvard Business School and the Argyle Executive Forum, plus 150 senior operating executives from public and private healthcare firms, select private equity and hedge funds, prominent research fellows, and key senior advisors. And, as a result of these discussions, I now find myself thinking about ways that up-and-coming healthcare executives can best prepare themselves to achieve their global career planning ambitions.

I should mention that over the course of this one day event, healthcare leaders shared their focus and innovative approaches towards booming global markets, the financially-stretched domestic market, and the global demographic trends that will either clobber economies or empower businesses to solve complex issues. Speakers for the event included representatives from Apax Partners, GE Healthcare, GE Healthcare Financial Services, Bain Capital, Welsh, Carson, Anderson & Stowe, The Blackstone Group, CCMP Capital Advisors, Merrill Lynch, GTCR Golder Rauner, Ropes & Gray LLP, Bank of America, and Epstein Becker & Green, P.C.

All of the speakers were extremely candid and informative. However, here are just two examples of the broad array of globally-focused topics that were discussed:

Buddy Gumina, a Partner at US Healthcare-Apax, discussed coverage, consumerism and convergence as it relates to managed care, healthcare services, provider transparency, interactive technology, preventative medicine and outsourced pharma. Apax has a thirty-year track record as a global private equity firm with a strong healthcare presence.

Joe Hogan, President and CEO of GE Healthcare, stated that the company’s basis for growth and the focus of its global-leading $17 billion business is to continue to drive innovation and world-class dominance across IT and diagnostics. The breadth of opportunities for GE Healthcare is tremendous as a result of the exploding second and third world markets where infrastructure and utilization are the focus for the design and development of full-scale digital hospitals.

Other speakers focused on the current strategies that healthcare investors and operators are pursuing as providers, payers, investors, patients and technology converge. And, through this convergence, I am fortunate to play an active role in finding the outstanding healthcare executive leadership talent that international healthcare organizations will require to achieve their aggressive business goals.

As a result of my ongoing involvement in the healthcare leadership arena, I have three career planning suggestions that aspiring international executives would be wise to adopt as they strive to develop the knowledge and skills to lead a global healthcare business.

1. Use Coaches and Mentors. Tiger Woods has used multiple coaches over the years to help improve his game.  Similarly, you need to identify two or three senior individuals who are interested in taking an active role in your executive leadership development.  Whether as coaches or mentors, these individuals can provide you with invaluable insight and global career planning guidance. In addition, you can select your own informal mentors by watching healthcare executive leaders who are currently successful in the roles you are striving to achieve.  Study their successes and their mistakes. In completing more than 225 healthcare retained searches, those who have achieved the greatest corporate success have aggressively pursued mentoring relationships throughout their career. 

2. Be Seen and Be Known. Financial investors and operators who are deploying tens and hundreds of millions of dollars in new capital are consistently looking to hedge their bets through the recruitment of experienced, well-referenced and well-known executives. Show a keen interest in your industry, in your businesses fundamentals, and in your opportunities and obstacles in order to deliver stellar results and develop relationships with influencers. Through your efforts and success you will find interest from those within your industry to invite you to speak, present or join an industry panel on key issues and trends. The value of your business success can lead you to exceptional personal contacts, which in turn can significantly improve future business opportunities. Your business acumen and success can take you to the door of a global healthcare executive leadership opportunity. Having strong industry relationships can be what actually opens that door and allows you to enter.

3. Do Your Best Work Today. Without a doubt, ambition is required for the level of success you desire.  However, focusing too early on your next opportunity can cause you to lose sight of your current business goals and responsibilities. This can negatively impact your trajectory. Outstanding performance is recognized and should always be your primary objective.

Establishing yourself as the winning executive for a global healthcare executive leadership opportunity requires strong foundational skills, a successful track-record, solid relationships, keen industry insights, and much more.  Global career planning presents new opportunities. Therefore, keep pushing yourself forward in your professional growth and remember, “Well done is better than well said.”

Robert Fromberg
Editor-in-Chief, HFMA

Watching the candidates speak after the 2008 Iowa caucuses was completed, I began noting how health care featured in each speech. Following are healthcare-related excerpts from speeches by the top two finishing candidates in each party, along with links to the speech transcripts and each candidate’s healthcare position statement.

Mike Huckabee
No explicit reference to health care in Huckabee's Iowa caucuses victory speech, but the following passage might be construed as relevant to health care:

G.K. Chesterton once said that a true soldier fights not because he hates those who are in front of him, but because he loves those who are behind him. Ladies and gentlemen, I recognize that running for office, it's not hating those who are in front of us. It's loving those who are behind us.

Huckabee speech transcript.

Huckabee healthcare position.

Barack Obama
Healthcare-related excerpt from Obama's Iowa caucuses victory speech:

I'll be a president who finally makes health care affordable and available to every single American, the same way I expanded health care in Illinois, by bringing Democrats and Republicans together to get the job done….

Hope is what I saw in the eyes of the young woman in Cedar Rapids who works the night shift after a full day of college and still can't afford health care for a sister who's ill. A young woman who still believes that this country will give her the chance to live out her dreams.

Obama speech transcript.

Obama healthcare position.

Mitt Romney
Romney’s Iowa caucuses speech did not refer to health care.

Romney speech transcript.

Romney healthcare position.

John Edwards

Edwards’ Iowa caucuses speech excerpts related to health care:

[J]ust a few weeks ago in America, Nataline Sarkisian, a 17- year-old girl who had a -- needed a liver transplant, and whose insurance company decided they wouldn’t pay for her liver transplant operation.

Finally, her nurses spoke up on her behalf. Her doctors spoke up on her behalf. Ultimately, the American people spoke up on her behalf by marching and picketing in front of her health insurance carrier. And, finally, the insurance carrier caved in and agreed to pay for her operation. And when they notified the family just a few hours later, she died. She lost her life. Why? Why?

James Lowe was born 51 years ago in the United States of America with a severe cleft palate, which kept him from being able to speak. And he lived for 50 years in the greatest, most prosperous nation on the planet, not able to speak because he didn’t have health-care coverage and couldn’t pay for a simple operation. Why?...

And this is what I see in America today. I see an America where last year, the CEO of one of the largest health insurance companies in America made hundreds of millions of dollars -- in one year....

Tonight, 47 million Americans will go to bed knowing that if their child gets sick, they’ll have to go to the emergency room and beg for health care. Tomorrow morning, women will go to their doctor and be diagnosed with breast cancer, just like Elizabeth was. But unlike Elizabeth, they’ll have no health care coverage. And as a result, they know that they can’t go to the emergency room and get chemotherapy. What are they supposed to do? What are they supposed to do? You can literally see the fear and terror in their eyes.

Edwards speech transcript.

Edwards healthcare position.