When a new CEO joins a hospital or health system, the CFO should be a part of new solutions, rather than a legacy to past problems.
In today’s dynamic healthcare environment, new leadership at the top is not uncommon. When new CEOs step in, there is a period of adaptation for the entire workforce, including CFOs. Such change presents opportunities for CFOs to understand the expectations and style of their new bosses and become valuable team members within the culture of their healthcare organizations.
“Hospitals are facing unprecedented challenges today,” says David Friend, MD, managing director and chief transformation officer, The BDO Center for Healthcare Excellence and Innovation.
“If a new CEO is arriving, it is more likely than not that the CEO has been brought in to help mitigate a difficult situation. Smart CEOs understand that they will ‘own’ any of the inherited problems that aren’t uncovered within their first six months.”
Being Part of the Solution
Friend emphasizes the importance of transparency up front and being frank about any concerns the incumbent CFO might have. “The CFO wants to be part of the solution, not a legacy to the problem,” he says. “It’s therefore incumbent upon the CFO to be able to accurately disclose to the incoming CEO the challenges that are being inherited. If I am the CFO and I know a new CEO is on the way, I would proactively bring in an independent firm to audit the financials, clinical care, compliance, reimbursement, and other hospital matters so I can inform the CEO on the status of the hospital on day one and help him or her going forward.”
It’s important to be aware that different CEOs likely have differing philosophies regarding healthcare finance, and often those philosophies may differ from the CFOs, says Chuck Alsdurf, director, healthcare finance policy and operational initiatives, HFMA. CFOs should not only be aware of this, but also seek to understand the incoming CEOs governing philosophy and approach to finance.
“The role of finance is quite different for each CEO, so understanding that can help CFOs gain insights about their new bosses. Some see finance as a strategic function, which is the trend, but others see CFOs more as operational leaders,” says Alsdurf. “Depending on the skill set of the CFO, the CEO may modify the role they’ve historically played. For example, the CEO may shift the reporting relationship to the COO or add the strategy function to the CFO’s responsibilities. At the end of the day, it’s important to have a candid conversation early on—potentially during the interview process—so both parties can adapt to the new relationship.”
Understanding the New CEO
Alsdurf adds that it’s also important to know and understand the backgrounds of new CEOs as well as their management styles. For example, did the incoming CEO begin as an administrator or a physician? This could greatly shape the outlook of the new boss.
“As hospitals and other healthcare organizations move toward physician CEOs, CFOs may notice a change in mindset. Historically, CEOs were more of an administrator type with a business background,” Alsdurf says. “A change to a clinically focused CEO may involve communication style changes, as well as additional responsibility as the physician leader could rely more heavily on the CFO as their primary business adviser.”
Inevitably, CFOs will be faced with a common dilemma: Should they speak up about what they believe is correct financial management if it differs from the new CEO? Or should they keep such sentiments quiet, go along with their new CEOs, and gently unveil best practices and policies?
Knowing the answers to such questions helps CFOs understand how to act and engage new leadership without compromising ethics and best practices. David Friend says CFOs must ensure they promote what is right, compliant, and proper without worrying about whether a new CEO might disagree.
“In my experience, CFOs who take proactive roles in identifying challenges and helping solve them have very successful transitions with new CEOs,” he says. “The CFO’s job is to make sure CEOs understand the truth about their organizations. Modern hospital CFOs are the keepers of the truth regarding financial, clinical, reimbursement compliance, and other issues. Their jobs are to call balls and strikes fairly—not to try to appease opinions.”
Alsdurf advises CFOs to tread carefully if there are differences and be careful to not cause friction, or worse, alienation.
“This is a balancing act. Pushing too hard can often lead to a conflict,” he says. “And while change is hard for everyone, learning from each other can be beneficial, so being open to different ways of doing business is important. This is especially true in the current healthcare environment.”
Collaboration is key when new leadership arrives. That means fostering a team approach by demonstrating willingness to participate as team players and colleagues—someone CEOs can trust and look to for meaningful guidance. This synergy should be complementary.
“One recent situation that comes to mind was a system that hired a first-time CEO to replace an interim CEO,” says Michael Raddatz, a consultant with Witt/Kieffer. “The system sought to build out the leadership team around the CEO with individuals that had similar styles and complementary skills. They wanted a CFO to serve as a strategic adviser to the CEO—someone who had the requisite financial operations experience but also a background in mergers and acquisitions, business development, and strategy. Maybe most importantly, the CFO needed to be someone that the CEO could trust and receive guidance beyond what may typically appear on a CFO job description.
“This example demonstrates that compared to the past, CFO hires are done with more team awareness. CFO searches will reflect what CEOs want in their leadership teams and the chosen candidates will be people who complement their strengths and compensate for CEOs’ areas of need,” says Raddatz.
Listen to a related podcast: Michael Raddatz on working with a new CEO
Managing Change and Sensitivity
Rick Gundling, senior vice president of healthcare financial practices, HFMA, concurs that sensitivity is a watchword in dealing with new leadership. With new leadership, comes a new outlook and new management tenets that must be respected. Staff must understand new CEOs’ needs and demands and do their best to collaborate and accommodate.
“The CFO should be sensitive to the different focus and perspective of the CEO. CFOs may be stronger than their CEO bosses in financial acumen and in processes that drive things like decision quality, strategic mindset, and execution alignment,” says Gundling. “But CEOs may have the advantage in the influence and leadership arena. The CEO may be better at building relationships and at influencing, engaging, and inspiring others and at being optimistic and could have a stronger customer focus.”
In the end, it’s a balancing act and it’s why collaboration is so important. It takes teamwork to pull together everyone’s strengths to lead a very complex organization.
CFOs are responsible for one segment of healthcare operations. CEOs are responsible for many. For a smooth operation, it’s important to understand this and to help the CEO’s effort. At the same time, it’s important to defend the practices that could lead to success or failure—not just for the CFO—but also for the institution and the CEO.
“CFOs need to be nimble when grasping CEOs’ agendas and working with CEOs on how best to execute,” says Erik Shannon, national healthcare industry leader, Grant Thornton. “CFOs can be invaluable here because they have a broad view across their organizations and can give great advice on how best to accomplish CEOs’ agendas. The art is in being able to provide information to CEOs that helps them to be successful, while pointing out risks seen from CFOs’ insider views.”
Jim Romeo is a freelance writer with a focus on business and technology topics.
Interviewed for this article:
David Friend, MD, MBA, is managing director and chief transformation officer, The BDO Center for Healthcare Excellence & Innovation.
Chuck Alsdurf, CPA, is director, healthcare finance policy and operational initiatives, HFMA.
Michael Raddatz is a consultant with Witt/Kieffer.
Rick Gundling is senior vice president of healthcare financial practices, HFMA.
Erik Shannon is national healthcare industry leader, Grant Thornton.
Forum members: What do you think? Please share your thoughts in the comments section below.
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