Succession Success

April 1, 2005

Effective boards begin to identify and develop the CEO's replacement the moment he/she starts.

Ray Flachbart was hired by BCI on September 1, 2000, as senior executive vice president/president designee and spent three-and-a-half months working with Barnett. On January 1, 2001, Flachbart became president and CEO of the Meridian, Idaho-based BCI.

"Be proactive and give yourself plenty of lead time," Flachbart continues. "Too many organizations today don't give succession planning the proper time or importance that it deserves. Take your time and get it right. You are selecting the leader who's going to take your company to the next level."

Flachbart certainly has done just that. BCI grew by 65,000 members in 2004-a 21% increase-and was just named "the fastest growing plan in 2004 among all 40 Blue Cross and Blue Shield plans in America.

A properly executed succession plan-such as the one BCI demonstrated-should be ongoing, involve the board of directors, as well as the entire management team, and be aligned with the health plan's strategic plan. If it isn't, a CEO retirement, death or unexpected termination, all have the potential to leave a healthcare organization vulnerable.

"Without succession planning, it is doubtful healthcare organizations would have the leadership team in place to respond to these challenges," says Michael F. Meyer, Witt/Kieffer senior vice president, who leads the firm's corporate/insurance/managed care practice, and is based in Phoenix. "Identifying key internal and external talent-and grooming them for future leadership roles-are among the principal challenges for healthcare leaders today."

Paul R. Dorf, PhD, managing director at Compensation Resources Inc., in Upper Saddle River, NJ, agrees. "[Succession planning] allows for an orderly transition of knowledge and power, without losing sight of the organizational goals," Dorf says. "Executives who are in the thick of dealing with the day-to-day operations and management of their companies, many times, put succession planning at the bottom of the pile."

Similarly, boards may not want to rock the boat. "But in order to provide for the continuity and future success of an organization, succession planning is critical, and should not be put off-when it may be too late," Dorf says.

Succession planning has taken on a new and higher visibility as boards and owners recognize that they need to plan for the future, according to Dorf. "Boards are starting to recognize that they need to move forward with identifying and cultivating the next generation of management," Dorf says.

"The owner of a company who has a singular focus on growing his/her business may not have-or may not want-to think about their own exit strategy, with the consequence that nothing has been done to prepare the company for their eventual retirement," he says.