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Great Organizations | Great Leaders

Seeing the Next CEO

Gundersen Health System employed a comprehensive process to identify its next CEO.
Seeing the Next CEO

If there is a point when an organization finds itself at a crossroads, it’s when it must select a new CEO. Replacing a successful chief executive whose vision, leadership style, and ability are known quantities represents a high-stakes decision. As such, there is tremendous pressure for the organization to make the right choice about who should lead it into an always-uncertain future.

La Crosse, Wisconsin-based Gundersen Health System, which encompasses five hospitals and more than 50 clinics, faced this challenging situation in 2015, upon the departure of Jeff Thompson, M.D., who had been CEO of the physician-led organization for 14 years. Dr. Thompson helped build an organization with a strong record of results, connections to the community, and a legacy of quality patient care and clinical excellence, which included the system’s designation by Healthgrades as one of America’s 50 Best Hospitals for three years running.

Like many healthcare organizations when their top administrative role is about to become vacant, Gundersen could have engaged a search firm to identify quality external candidates who ultimately may or may not end up being the right fit.

Gundersen had another alternative. It was able to avoid the risks associated with the external search option because it had a set of advantages not all healthcare organizations in a similar situation share: Gundersen had multiple highly qualified internal candidates, it had a board of trustees and an HR function that had begun working together for years to prepare for an inevitable CEO transition, and it could draw on a comprehensive selection process that provided a wealth of relevant information about each candidate and that, in the end, led to the identification of Gundersen’s next CEO.

A Six-Year Journey

While it was 2015 when Gundersen needed to name a new CEO to replace Dr. Thompson, the process was set in motion in 2009. Gundersen’s HR team, led by chief learning officer Mary Ellen McCartney, working closely with the board of trustees, began ramping up the organization’s succession management efforts. These efforts were informed by a recognition that the organization desired to promote from within, instead of looking outside for the next CEO.

As a high-performing, physician-led organization, Gundersen felt that hiring from the inside would be the best way to ensure organizational stability and continuity, and preserve its culture of success.

“We knew it was critical to focus on WHAT competencies were needed in the future CEO, not WHO should take the helm. We needed a robust succession plan that was development-oriented, and designed and driven to meet both the organization’s complex business challenges and the challenges healthcare faces daily,” McCartney says. She also says Dr. Thompson supported these efforts because the organization needed to be prepared should he, as he liked to joke, “run off to Tahiti with my wife.”

In 2009, with Thompson’s departure was not yet on the radar, Gundersen’s HR team partnered with Development Dimensions International (DDI) to develop a Success ProfileSM for the system’s CEO. This Success ProfileSM identified the mix of competencies, experience, knowledge, and personal attributes required for the CEO position. To ensure alignment and connection with the business, the Success Profile was purposely matched to the organization’s strategic plan, reviewed annually during talent review discussions, and updated whenever the strategic plan changed.

While having the Success Profile was important, what mattered even more was how Gundersen used it to build a strong pipeline of internal candidates and accelerate their development.

“We believe in investing in leadership development, and we knew we had a pipeline of people who potentially could be considered for the CEO role,” says McCartney.

The annual talent reviews, which included C-level executives, members of Gundersen’s board, and a senior HR executive to facilitate discussion, served to identify the relative readiness of each individual leader. To pinpoint strengths and development needs, Gundersen began putting its succession-track leaders through a DDI executive assessment center. This assessment center drew on a variety of job-relevant simulations, inventories, and interviews, to provide a data-rich picture of each leader. The extensive data gathered through the assessment center were then presented back to the individual leaders and a CEO-led talent development review group to guide detailed development planning.

Working the Process

While Gundersen had a strong pipeline, containing multiple senior leaders who had benefited from accelerated development and about whom the organization had a wealth of assessment data, once the time came to select the next CEO, a rigorous process was needed to drive the right decision about whom to elevate to the role. DDI helped to design the six-month process.

Mary Ellen McCartneyMary Ellen McCartneyAt the outset, candidates went through an initial screening after which five candidates moved to a more-advanced screening step and a panel stakeholder interview. After those interviews, three candidates advanced to an assessment at DDI’s Acceleration Center in Pittsburgh. As with the assessment centers the candidates had gone through previously, the assessment center was customized to address Gundersen’s current and unique business challenges. The assessment centers included interviews and “day-in-the-life” simulations that provided an opportunity to observe how each candidate would perform in tasks and responsibilities associated with the CEO position. The output of this assessment was a comprehensive report on each leader specifying his or her strengths and development opportunities, and providing critical insights and data about the leader’s readiness to ascend to the organization’s top job. In addition, as the leaders had been through a DDI assessment previously, the results could be compared to results from the previous assessments, revealing how much development progress they had made in the ensuing years.

Each candidate then was invited to give a SWOT analysis presentation to the board of trustees, which allowed the committee to observe the candidate in action applying critical executive-level skills around strategic thinking and communication.

Additional candidate interviews with members of the search committee and medical and administrative leaders rounded out the data-gathering portion of the process. Afterward, the search committee met to integrate and evaluate the wealth of data collected on each candidate and make a hiring recommendation to the board.

“Having an outside resource like DDI was valuable at each step of the process. Their consultation and guidance helped keep objectivity and our business needs in the forefront of the discussions. This was particularly helpful when having long-tenured internal candidates, any of whom could have been successful,” McCartney says.

In the end, the board selected Scott Rathgaber, M.D., who had previously held multiple leadership roles within the organization. Most recently, he had served for three years as medical vice president of Gundersen’s hospital operations, neurosciences, general surgery, anesthesiology, emergency services, occupational health services, and pharmacy.

The selection of Dr. Rathgaber as the health system’s new CEO was a decision the board of trustees made confidently because of the robustness of the selection process, and the quantity and quality of the data they could access.  But, as McCartney emphasizes, it was also a decision borne of a long organizational commitment to accelerating Gundersen’s leaders.

“Dr. Thompson had been in the role for 14 years, and one of his platforms was to develop physicians as leaders. During his tenure, there was a significant investment in the systems and structures needed for that to occur. In the end, it proved to be a smart investment.”

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