Reflection

 

356 OctoberYDecember & 2019

Examining the impact of succession management practices on organizational performance: A national study of U.S. hospitals

Kevin S. Groves

Background: Spearheaded by the industry”s transition from volume- to value-based care, the health care reform movement has spurred both unprecedented challenges and opportunities for developing more effective and sustainable health care delivery organizations. Whereas the formidable challenges of leading hospitals and health systems have been widely discussed, including reimbursement degradation, the rapidly aging workforce, and the imminent wave of executive retirements, the opportunity to leverage succession management and talent development capabilities to overcome these challenges has been largely overlooked. Purpose: To address this key research and practice need, this multiphase study develops and validates an assessment of succession management practices for health care organizations. Methodology: Utilizing data collected from two national samples of hospital organizations, the results provide a 32-item succession management assessment comprising seven distinct sets of succession management practices. Results: The results indicate that succession management practices are strongly associated with multiple hospital performance metrics, including patient satisfaction and Medicare Spending per Beneficiary, leadership bench strength, and internal/external placement rate for executive level positions. Practice Implications: The author concludes this article with a discussion of several practical implications for health care executives and boards, including employing the succession management assessment for diagnosing development opportunities, benchmarking succession planning and talent development practices against similar hospitals or health systems, and elevating the profile of succession management as a strategic priority in today”s increasingly uncertain health care landscape.

T he hospital executive teams charged with leading our nation”s $2.9 trillion health care industry currently face a long list of daunting challenges,

including the accelerating transition from volume- to

Key words: executive development, health care leadership, hospital performance, succession planning

Kevin S. Groves, PhD, Associate Professor of Management, Graziadio School of Business and Management, Pepperdine University, Los Angeles, California. E-mail: [email protected]

The author has disclosed that he has no significant relationships with, or financial interest in, any commercial companies pertaining to this article.

DOI: 10.1097/HMR.0000000000000176

Health Care Manage Rev, 2019, 44(4), 356Y365 Copyright B 2017 Wolters Kluwer Health, Inc. All rights reserved.

value-based medical care, reimbursement degradation, and massive workforce demographic shifts, such as the looming retirement wave across key talent pools. With approxi- mately 75% of health care CEOs anticipating retirement in the next 10 years (Darnell & Noland, 2012), hospitals and health systems with underdeveloped or nonexistent suc- cession management practices incur incredibly high costs and instability across leadership teams. Given the uncer- tainty of the health care environment and limited organi- zational resourcesVfinancial, know-how, and executive team attentionVthe normative case for investing in leader- ship development and succession planning practices is insufficient. The talent management approach, defined as the integrated system of strategies, policies, and programs designed to identify, develop, deploy, and retain leadership talent to achieve strategic objectives and meet future

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357 Succession Management

business needs (Silzer & Dowell, 2010), seeks to ensure hospital organizations of a sufficient supply of capable leaders to achieve strategic objectives.

The purpose of this multiphase study was to examine the impact of succession management practices on hospital performance metrics in the current era of value-based medical care. With the notable exceptions of pioneering research by Garman and Tyler (2007) and, more recently, Patidar, Gupta, Azbik, and Weech-Maldonado (2016) and Kim (2012), the research literature lacks empirical studies that assess the impact of succession management practices on hospital performance metrics. This study seeks to address the following critical gaps in the health care research literature. First, this study examines the quality and depth of succession management practices across two national samples of U.S. hospitals. Second, this study assesses the impact of succession management practices on patient satisfaction (Hospital Consumer Assessment of Healthcare Providers and Systems Survey scores) and Medicare Spending per Beneficiary (MSPB-1). Finally, this study measures the relationship between succession management practices and several metrics that indicate the depth and quality of a hospital”s leadership talent, leadership bench strength, internal/external executive placement rate, and executive turnover.

Alarming Succession Management Trends in Health Care

Several troubling health care industry trends are intensi- fying the business case for succession management capabi- lities in hospitals and health systems. The convergence of several critical trends has created a sort of Bperfect storm[ for the $2.9 trillion health care industry, which represents approximately 18% of gross domestic product (Health Research Institute, 2015). For health care executive teams, these trends paint a vivid picture of the high costs and risks associated with underdeveloped succession management and talent development practices. The IBM Institute for Business Value and Human Capital Institute (Ringo, Schweyer, DeMarco, Jones, & Lesser, 2008) concluded that, by comparison with other industries, the health care industry is BIa laggard in developing human resource and talent management innovations. Hospitals and health systems have devoted too little time to creating a legacy of leadershipImany have no formal plans to identify and develop individuals for future roles, nor do they have a transition strategy should leaders make a planned or unplanned departure[ (Schweyer, 2009, p. 10). In a sobering analysis of the IBM/Human Capital Institute research findings, Schweyer (2009) offers the following conclusion:

The healthcare industry may be unique in the enormity of the talent challenges that confront it. If there ever were a Bperfect storm[ related to talent

management, it is most acute in healthcare. While it is true that the aging population restricts talent for all industries, it is only in healthcare and life sciences that it so profoundly impacts demand at the same time. (p. 13)

Recent survey results confirm the overall lack of pre- paredness across hospital organizations for the expected surge in executive team transitions due to workforce demo- graphic shifts. The results of a 2014 American College of Healthcare Executives (ACHE) survey of community hospital CEOs indicate that only 52% of hospitals routinely conduct succession planning for the CEO position (Healthcare Executive, 2014). The 2014 ACHE survey results also show that only 43% of the responding CEOs had one or more successors identified for their positions. Mirroring the increasing complexity of the health care industry and the challenges posed to senior leadership teams, hospital CEO turnover remains historically high with daunting projections of a surge in CEO transitions over the next 10 years. An ACHE annual survey of hospital CEO turnover reported an elevated hospital CEO turnover rate since 2009 (ACHE, 2016). Hospital CEO turnover was 18% in 2015 and a range of 16%Y18% over the last 7 years (2009Y2015). Underscoring the implications of these trends, ACHE”s President and CEO, Deborah Bowen, identifies succession management capability as a funda- mental need for today”s health care organizations. BThe high level of change taking place in hospital C-suites underscores the importance of organizations having well- developed succession plans to ensure success in today”s environment,[ says Bowen (ACHE, 2016).

Conceptual Framework and Hypotheses

The conceptual framework guiding this study is the resource- based view of the firm (RBV). Originally developed by Wernerfelt (1984) and subsequently extended by other scholars (e.g., Barney, 1991; Wright, Dunford, & Snell, 2001), RBV theory postulates that an organization”s sustained competitive advantage derives from a range of resources and capabilities that (a) it controls, (b) are valu- able and rare, and (c) cannot be imitated or substituted (Barney, 1991). The RBV theory proposes that internal resources and capabilities, including senior leadership talent (Hitt, Biermant, Shimizu, & Kochar, 2001) and strategic human resource (HR) management (Wright et al., 2001), are fundamental drivers of a firm”s strategic direction and ability to achieve efficient and effective performance out- comes. A firm”s ability to select, onboard, develop, and retain executive talent represents a key source of HR capital that is difficult to substitute or imitate by competing organizations. Overall, RBV theory and research clearly identify effective senior leadership and the internal human capital capabilities that allow a firm to identify and develop

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358 Health Care Management Review OctoberYDecember & 2019

leadership talent, as key sources of competitive advantage (Finkelstein & Hambrick, 1996). Given that hospital organizations operate in a highly dynamic business environ- ment marked by unprecedented reimbursement changes, the ability of senior leadership teams to effectively utilize firm resources to drive clinical and operational performance represents a sustainable competitive advantage (Kim & Thompson, 2012).

Succession management has been defined as the formal processes through which successors are identified for key leadership positions and development activities are plan- ned and executed for the identified successors (Garman & Tyler, 2007; Ip & Jacobs, 2006). The succession manage- ment process includes both leadership assessment activities aimed at evaluating employees” potential to advance in the organization as well as planned development activities to groom high-potential employees for vacancies in leadership positions such as mentoring, coaching, multisource or 360- leadership assessment, internal executive leadership devel- opment programs, team-based action learning projects, and job rotations (Groves, 2011; McAlearney, 2010). The theoretical and empirical research findings to date indicate that strong succession management practices have the potential for strong impact on key hospital performance outcomes (Groves, 2015; Kim, 2012; Kim & Thompson, 2012; Patidar et al., 2016). Prior research indicates that succession management practices limit the instability and inertia that often accompanies unexpected vacancies in top leadership positions (Patidar et al., 2016). The absence of a robust succession management process can increase the likelihood of organizational inertia and leadership turbu- lence that negatively impact organizational performance outcomes. For example, an ACHE-sponsored study (Khaliq, Walston, & Thompson, 2006) concluded that hospital CEO turnover spurred incredibly high turnover of senior leadership team members within 1 year of the CEO”s departure, including 77% of chief medical officers, 52% of chief operating officers, and 42% of chief financial officers. Hospital CEO turnover and consequential departures among the senior leadership team contribute to an organizational inertia that halts advances in patient care and quality. Overall, the turnover of top leadership team members not only is costlyVconservatively estimated at $1.5 million for the departure of a hospital CEO (Thrall, 2008)Vbut also creates a void in the hospital”s strategic direction while diminishing the hospital”s ability to maintain high levels of patient care.

Additional key benefits of strong succession manage- ment practices are the enhanced individual and organiza- tional performance outcomes associated with internal successors to key leadership positions. Once identified via high-potential assessment processes, internal successors for key leadership roles benefit from on-the-job training, mentoring, job shadowing, and other learning activities that allow leadership talent to gain value experience

performing executive level duties before assuming top leadership roles (McAlearney, 2010). The performance benefits of succession management practices are partic- ularly salient in health care organizations given the impact of clinical leadership roles on hospital performance out- comes. Hospital organizations that execute robust succes- sion management practices, including planned transitions in both administrative and clinical leadership roles, cul- tivate a climate of stability that allows frontline staff to maintain their focus on hospital operations and patient care outcomes (Garman & Tyler, 2007). On the basis of the research findings discussed above, the following hypotheses are presented:

Hypothesis 1: Hospitals that utilize succession manage- ment practices are more likely to show higher patient satisfaction scores.

Hypothesis 2: Hospitals that utilize succession manage- ment practices are more likely to show greater operational efficiency measures.

Prior research findings also suggest that leaders who are developed and promoted from within the organization (a) are higher performers and (b) generate higher levels of organizational performance compared with externally sourced leaders (Collins & Collins, 2007). Numerous studies of CEO successors placed into their roles across various types of selection methods (e.g., promotion, external placement) illustrate the many benefits of promot- ing internal candidates. According to Zhang and Rajagopalan (2010), internal candidates who had been identified and purposely developed for the CEO position are far more effective in their CEO roles compared with both outside successors and internal candidates who were selected via a Bhorse race[ that pits multiple insiders for the CEO position. A Booz & Company analysis of multiple industries conducted by Favaro, Karlsson, and Neilson (2010) showed that, compared with external CEO candidates, internal CEO candidates (a) delivered significantly higher market- adjusted shareholder returns, (b) remained in their CEO roles for 2 years longer, and (c) were substantially less likely to be involuntarily terminated. The many benefits of developing internal leadership talent for CEO successions extend to health care organizations, as top performing hospitals are 35% more likely to promote an insider CEO compared with hospitals with average performance on clinical and financial outcomes (Wilson, 2005).

Health care organizations with formal succession manage- ment practices also benefit from greater staff engagement and productivity and reduced voluntary turnover (Darnell & Noland, 2012; Kim, 2012). The presence of high-quality succession management practices, including robust annual talent review sessions (Rothwell, 2016) and organization- wide executive development programs or Bleadership acad- emies[ (McAlearney, 2010), signals the organization”s

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359 Succession Management

strong commitment to the development and career ad- vancement of executives and high-potential leaders. Or- ganizations with strong succession management practices cultivate a strong culture of leadership development that enforces process transparency and avoids heir apparent designations or Breplacement planning[ approaches that simply fill open executive positions with the immediate direct reports. Executives are less likely to voluntarily separate from an organization that makes significant investments in the identification and development of internal leadership talent while maintaining a culture of openness and trans- parency concerning access to critical development and advancement opportunities (Zhang & Rajagopalan, 2010). Organizations with robust leadership assessment and devel- opment practices also benefit from much stronger leader- ship bench strength (percentage of key leadership positions with Bready now[ internal candidates; Leonard & Krider, 2014), lower annual turnover (Huselid, 1995), and higher leader and employee engagement (Leonard & Krider, 2014). Organizations with deep leadership bench strength also benefit from significantly lower costs associated with the recruitment, onboarding, and training of external candi- dates, particularly for specialized leadership roles in hospital settings (Bolton & Roy, 2004). On the basis of the research findings summarized above, the following hypotheses are presented:

Hypothesis 3: Hospitals that utilize succession manage- ment practices are more likely to show deeper bench strength for key leadership positions.

Hypothesis 4: Hospitals that utilize succession management practices are more likely to promote internal candidates into key leadership positions than external candidates.

Hypothesis 5: Hospitals that utilize succession management practices are more likely to retain executive level staff.

Methods

Research Design

Overall, this article presents a two-phased research project that drew from several qualitative and quantitative data sources over the course of 3 years (2014Y2016). The first phase of the study (Phase 1) consisted of developing an original assessment tool that measures succession man- agement practices (Bsuccession management assessment[ [SMA] hereafter) for health care settings. Phase 1 involved the construction of a model and corresponding assessment of succession management practices based on prior research findings, semistructured interviews with subject matter experts in hospital organizations, and a 2015 survey of hospital organizations. Phase 2 consisted of cross-validating the SMA tool via a 2016 survey of hospital organizations

that also included analysis of multiple hospital performance and executive workforce metrics. The hypothesized model of succession management practices, hospital performance outcomes, and executive talent management metrics is presented in Figure 1.

Phase 1: Developing an SMA

Given this study”s focus on succession management, two existing models of succession management practices in health care were identified for review (Garman & Tyler, 2007; Groves, 2011, 2015). Each of these models specifies both talent assessment practices, including processes for identifying or assessing high-potential leaders and succes- sors for key positions as well as formal processes for socializing and developing successors for such roles. As an initial step, these two models were utilized to create an original list of 45 Likert-type scale items that measure the frequency of succession management practices (5 = always, 4 = usually, 3 = sometimes, 2 = rarely, and 1 = not at all). This initial list of items was presented to a 15-person inde- pendent panel of subject matter experts who specialize in health care or are employed in hospital organizations, which included senior HR executives, executive devel- opment and search consultants, and academics. The panel was asked to provide feedback, item revisions or additions, suggestions to improve item clarity, and their assessment of the items” face validity. On the basis of the panel”s feedback, the original list of items was revised to 40 items to promote clarity and eliminate redundancy.

Sample. A national sample of hospital organizations was identified for testing the 40-item SMA. The sample consisted of senior HR professionals (chief HR officers, senior vice-presidents, vice-presidents) at national and regional hospital systems. Hospital systems were targeted for participation in the study given recent research showing that hospital size and system affiliation are positively associated with succession management activities (Kim & Thompson, 2012). The sample for Phase 1 was specified according to Modern Healthcare”s list of (a) the top 200 largest systems by annual revenue and (b) the top 200 integrated health systems. After obtaining the names and email addresses of the top HR officers at each organization via the American Hospital Association, an email invitation with a survey link was sent to the sample in March 2015. Because of invalid email addresses and outdated records (e.g., retirements), the final survey sample size was 366. Overall, 142 executives completed the survey on behalf of their respective health system for a 38.8% response rate. The sample consisted of 51% nonprofit organizations (n = 72) with a mean of 18,811 employees as measured by the number of full-time equivalent employees. The mean net patient revenue for Fiscal year 2014 was $3.70 billion, whereas the average number of medical centers was 8.87.

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360 Health Care Management Review OctoberYDecember & 2019

Figure 1

Hypothesized model of succession management practices, hospital performance outcomes, and executive workforce metrics

Notes: Solid lines indicate that Hypotheses 1-4 received strong support; the dashed line indicates that Hypothesis 5 was not supported by the study results.

Most survey respondents consisted of chief HR officers (n = 61, 43%) and vice-presidents of HR (n = 43, 30%).

Analysis and Results. Given that the SMA”s psychometric properties and multidimensionality had not been established, the factor structure of the instrument was evaluated using exploratory factory analysis. The factor structure of the SMA was determined based on eigenvalues of greater than 1 and solutions that explain approximately 60% of the total variance (Hair, Anderson, Tatham, & Black, 1998). Principal component analysis was used for factor extrac- tion, and the varimax rotation method was utilized to transform the final factor solution into a simple solution. The exploratory factory analysis results revealed a clear seven-factor solution from the principal component anal- ysis, as evidenced by (a) significant change in the extracted eigenvalues at seven and eight factors and (b) significant improvement in the total percentage of explained variance. Following Gorsuch”s (1983) guidelines, the following cri- teria were utilized to evaluate whether an item sufficiently represented a given factor: (a) a factor loading of greater than 0.45, (b) item cross-loadings on other factors that were less than 0.30, and (c) the theoretical contribution of the item to the model of succession management practices (Garman & Tyler, 2007; Groves, 2011). The eigenvalues across the seven factors ranged from 1.99 to 6.39, which collectively explained 69.51% of the total variance. Over- all, 32 items representing seven factors met all three of these criteria and were retained for further analysis.

The first factor (top management team engagement) contained six items and generally reflected the extent to which the senior leadership team formally describes succession management as a strategic priority and actively participates in leadership development and succession planning pro- cesses. A sample item included BThe senior leadership team describes succession management as a strategic priority.[ The second factor (performance feedback practices) included five items and reflected the quality and consistency of per- formance feedback provided to high-potential leaders and successors. A sample item included BManagers annually receive 360-degree feedback that is development-based.[ The third factor, talent assessment practices, also contained five items that described the formal processes through which high-potential leaders and successors to critical leadership roles are identified via standardized assessment instruments, nine-box grids, and other tools. A sample item included BFormal assessments (e.g., nine-box tools) are utilized to plot employees in key positions according to job performance and leadership potential.[ The fourth factor (leadership devel- opment culture) contained five items that describe an organizational culture that values fairness, enforces transpar- ency, and seeks to maximize employees” leadership potential. A sample item included BManagers are trained to formally communicate high potential designations to employees.[

Role-based leadership development, the fifth factor, was rep- resented by four items that describe the range and quality of leadership development experiences assigned to high-potential leaders across management levels, including job rotations,

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361 Succession Management

action learning projects, and assignment-based learning pro- jects. A sample item included BOur organization encourages managers to Frelease_ high potential employees for develop- mental assignments elsewhere in the hospital or across our health system.[ The sixth factor (selection and onboarding) contained four items and generally reflected the quality and depth of practices aimed at selecting and socializing leaders into leadership positions. A sample item included BEmployees promoted into managerial positions or roles that are new to our organization complete a formal onboarding program.[ Finally, the seventh factor (succession management return on investment [ROI]) included three items that describe uti- lizing clear metrics and ROI analyses to evaluate succes- sion management practices and ensure such outcomes are reviewed by the governing board, leadership teams, and other key stakeholders. A sample item included BOur organization”s talent management metrics are reviewed by the governing board.[

The means, standard deviations, reliability coefficients, and intercorrelations among the seven factors are presented in Table 1. The SMA showed acceptable internal reliability as evidenced by Cronbach”s alpha coefficients that exceeded .70 across all seven dimensions. The intercorrelations among the seven dimensions ranged from .22 (p G .05) to .43 (p G .01), which indicates that the seven factors are each posi- tively related to the succession management while not showing redundancy via high covariance. Overall, hospital organizations report utilizing top management team engage- ment (mean = 3.75) and succession management ROI (mean = 3.70) most frequently, whereas role-based leadership development (mean = 2.86) and selection and onboarding practices (mean = 2.93) were the least utilized succession management practices.

Phase 2: Validating the SMA

Sample. A follow-up survey (Phase 2) was conducted with a second independent sample of hospital organizations

to cross-validate the Phase 1 results and test the hypotheses. Utilizing the same sampling process as Phase 1, the Phase 2 survey included the SMA and an additional section of questions pertaining to several operational and workforce performance metrics. Because of invalid email addresses and outdated records (e.g., retirements), the final survey sample size was 376. Overall, 133 executives completed the survey on behalf of their respective health system for a response rate of 35.4%. The sample consisted of 64% (n = 85) not-for-profit health systems, a mean of 16,714 full- time equivalent employees, and a mean of 10.35 medical centers. The mean net patient revenue for Fiscal year 2015 was $2.58 billion. Most survey respondents consisted of chief HR officers (29%, n = 39), vice-presidents of HR (20%, n = 27), and chief administrative officers (16%, n = 21).

Measures. Succession management assessment. The survey respondents completed the 32-item SMA developed in Phase 1. The Cronbach”s reliability estimates for the six SMA dimensions ranged from .76 (selection and onboarding practices) to .87 (leadership development culture).

Hospital performance measures. Five hospital perfor- mance metrics were selected to test the SMA”s predictive validity. The first two metrics, patient satisfaction and MSPB, are hospital performance outcomes provided by the Centers for Medicare and Medicaid Services (CMS). Patient satisfaction was assessed by the 10-item Hospital Consumer Assessment of Healthcare Providers and Sys- tems Survey. MSPB assesses the cost to Medicare for ser- vices performed by hospitals during a Medicare episode or covered health care service. Assessed as the ratio of a given hospital”s MSPB to the weighted median MSPB across all hospitals, the MSPB metric captures the efficiency with which health care services are provided to Medicare pa- tients relative to the efficiency of the national median hos- pital during a given performance period. A hospital with an MSPB ratio of less than 1 is providing more efficient care at a

Table 1

Succession management assessment descriptive statistics and correlations (Phase 1)

Mean (SD) 1 2 3 4 5 6 7

1. Top management team engagement 3.75 (0.69) .78 2. Performance feedback processes 3.15 (0.83) .42** .82 3. Talent assessment practices 3.30 (1.05) .33** .43** .90 4. Leadership development culture 3.00 (1.20) .34** .39** .27* .89 5. Role-based leadership development 2.86 (1.06) .40** .34** .40** .25* .80 6. Selection and onboarding practices 2.93 (0.89) .36** .30** .35** .34* .43** .77 7. Succession management ROI 3.70 (0.91) .20* .24* .26* .25* .22* .33** .84

Note. N = 142. * p G .05. ** p G .01.

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362 Health Care Management Review OctoberYDecember & 2019

lower cost to Medicare than those at the national median MSPB level across all hospitals during the same period.

Executive workforce measures. The survey respon- dents were asked to report their respective health system”s Bannual rate of voluntary turnover for executive-level (vice president and above) employees.[ The final two performance measures included leadership bench strength, which assessed as Bthe annual percentage of key leadership positions with at least one Fready now_ internal candidate[ (Leonard & Krider, 2014), and internal/external executive placement rate as measured by Bthe annual percentage of open executive-level positions (vice president and above) filled by internal candidates[ (Rothwell, 2016; Silzer & Dowell, 2010). Prior research indicates that leadership bench strength and internal/external placement ratios for open executive positions are effective metrics for evaluating the impact of succession management practices (Scott, Rogelberg, & Mattson, 2010).

Control variables. On the basis of prior research (Kim & Thompson, 2012; Patidar et al., 2016), the hypothesis testing analyses included the following control variables: (a) ownership status (for-profit/not-for-profit), (b) hospital size (total number of licensed beds), and (c) teaching status (member of the Council of Teaching Hospitals and Health Systems of the Association of American Medical Colleges).

Analysis and Results. Preliminary analyses. Confirmatory factor analyses using AMOS 22.0 were conducted to establish cross-validation support for the SMA factor structure results of Phase 1. A measurement model was created to assess the construct validity of the seven SMA dimensions by postulating that each assessment item would load significantly onto its associated scale. This measurement model was tested

Table 2

Succession management assessment descriptive statistics and correlations (Phase 2)

according to the following conventional indicators of fit: goodness-of-fit index (GFI), adjusted GFI, root mean square error of approximation, incremental fit index, and com- parative fit index. On the basis of these conventional standards (Hair et al., 1998), the model showed a strong level of fit: GFI = 0.95, adjusted GFI = 0.93, root mean square error of approximation = 0.05, incremental fit index = 0.92, and comparative fit index = 0.92. Overall, these results suggest that the SMA”s factor structure derived in Phase 1 shows strong stability across a second national sample.

Table 2 presents the descriptive statistics and correlation coefficients among the primary variables for Phase 2. Consistent with Phase 1, the seven SMA dimensions showed intercorrelations that ranged from .20 (p G .05) to .43 (p G .01), providing further support for the distinctiveness of each of the assessment”s subscales. Talent assessment practices was associated with all five performance measures in the predicted directions (range of r = j.18 to r = .31), whereas selection and onboarding practices showed significant relationships with each performance outcome (range of r = .19 to r = j.30) except executive staff turnover (r = j.12, ns).

Hypothesis testing. Table 3 illustrates results from a hierarchical regression model predicting each of the five hospital performance measures by testing the direct effects of the SMA dimensions. The direct effects of the seven SMA dimensions were entered in Step 2. Overall, the SMA dimensions explained a significant amount of variance in patient satisfaction (¸R2 = .27, ¸F = 4.68, p G .05) beyond the control variables. In the final model, selection and onboarding practices (” = 0.38, p G .01) emerged as the strongest predictor of high patient satisfaction scores. The SMA dimensions were negatively associated with MSPB (¸R2 = .21, ¸F = 4.21, p G .05),

Mean (SD) 1 2 3 4 5 6 7 8 9 10 11 12

1. Top management team engagement 3.67 (0.76) .80 2. Performance feedback processes 3.30 (0.86) .39** .83 3. Talent assessment practices 3.36 (0.95) .31** .41** .86 4. Leadership development culture 3.21 (0.96) .33** .40** .26* .87 5. Role-based leadership development 3.06 (0.98) .41** .28** .38** .26* .78 6. Selection and onboarding practices 3.56 (0.99) .38** .29** .33** .33* .40** .76 7. Succession management ROI 3.18 (1.01) .19* .22* .28* .26* .22* .28** .83 8. Patient satisfaction 68.00 (6.88) .25* .24* .34** .16 .22* .37** .20* Y 9. Executive staff turnover 8.67 (4.85) j.24* j.04 j.18* j.09 j.16 j.27* j.07 j.06 Y

10. Medicare Spending per Beneficiary .98 (0.05) j.33**j.31**j.18* j.17 j.12 j.24* j.18*j.31**j.05 Y 11. Leadership bench strength 29.15 (6.86) .22** .11 .21** .09 .17* .19* .14 .31* j.23*.14 Y 12. Internal/external executive 42.30 (11.79) .22* .16 .34** .17 .35** .28** .14 .10 j.08 .08 .58** Y

placement rate

Note. N = 133. * p G .05. ** p G .01.

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363 Succession Management

Table 3

Multivariate linear regression analysis of relationship between succession management practices and performance measures (Phase 2)

Patient satisfaction

Medicare Spending per Beneficiary

Executive staff turnover

Leadership bench strength

Internal/external executive placement rate

Step 1 Ownership status .21 j.13 j.10 j.02 .16 Hospital size j.04 .05 .02 .12 .24 Teaching status j.19 j.15 .10 j.05 j.07

Step 2 Top management team .23 j.30** j.23 .23* .22

engagement Performance feedback processes .20 j.29** j.02 .09 .15 Talent assessment practices .36** j.19 j.19 .24* .33**

Leadership development culture .15 j.16 j.10 .10 .16 Role-based leadership .21 j.13 j.15 .18 .36**

development Selection and onboarding .38** j.26** j.26* .21* .29**

practices Succession management ROI .19 j.18 j.06 .10 .14

¸R2 .27 .21 .12 .24 .30 Total R2 .36 .30 .20 .37 .40 ¸F 4.68* 4.21* 1.86 4.17* 5.05**

Total F 5.85* 5.07* 2.43 5.13* 6.24**

Note. N = 133. aStandardized regression coefficients are shown. * p G .05. ** p G .01.

as top management team engagement (” = j0.30, p G .01) produced the strongest final beta weights. Overall, Hypotheses 1 and 2 were supported. For Hypothesis 3, the SMA dimensions explained a significant amount of variance in leadership bench strength (¸R2 = .24, ¸F = 4.17, p G .05), whereas talent assessment practices (” = 0.24, p G .05) produced the strongest final beta weight. The strongest overall relationship between the SMA dimensions and hospital performance outcomes (¸R2 = .30, ¸F = 5.05, p G .01) was for internal/external executive placement rate (Hypothesis 4). Talent assess- ment practices (” = 0.33, p G .01) and role-based leadership development (” = 0.36, p G .01) produced the strongest relationships with internal/external executive placement rate. Hypothesis 4 was strongly supported. The SMA dimensions did not explain unique variance in executive turnover beyond the control variables (¸R2 = .12, ¸F = 1.85, ns). Overall, Hypothesis 5 was rejected.

Discussion

The purpose of this study was to develop an assessment of succession management practices and offer initial validation

evidence showing their impact on hospital performance metrics. This study sought to develop an evidence-based model and assessment tool that health care executive teams and board members may utilize to enhance the critical capabilities of assessing and developing executive leadership talent. The study”s results provide initial validation evidence for an assessment of multiple succession planning and talent development practices that are positively associated with hospital performance outcomes. This study also offered val- idation evidence showing the positive impact of succession management practices on a pair of key executive workforce metrics, the depth of executive leadership talent across critical leadership positions and the propensity to hire internal talent for executive positions across the hospital or health system. Addressing an increasingly important gap in the health care research literature, these results offer health care executives and boards an evidence-based argument for examining succession management as an important orga- nizational capability in the current health care environ- ment (Leonard & Krider, 2014; Rothwell, 2016).

This study also highlights the types of succession planning and talent development practices that are likely most pivotal across a set of hospital performance and

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364 Health Care Management Review OctoberYDecember & 2019

executive workforce metrics. Talent assessment prac- tices, including the quality and consistency of the formal processes through which high-potential leaders and successors to critical leadership roles are identified, were strongly associated with patient satisfaction, leadership bench strength, and the percentage of open executive positions filled by internal candidates. However, the results also illustrate that talent assessment practices are one of the least utilized succession management practices across hospitals and health systems. Similarly, selection and onboarding practices were strongly associated with hospital performance and executive workforce metrics, which underscores the importance of formally supporting the processes through which leaders are socialized and assimilated into new leadership positions. This finding is consistent with prior field research illustrating the strong impact of leader selection and onboarding practices in health care contexts, such as the Cleveland Clinic Health System”s comprehensive onboarding process for employees, managers, and executives (Groves, 2016).

Limitations and Future Research Directions. The findings from this study should be evaluated in the context of several limitations. First, the study”s focus on succession management practices aimed at executive leadership talent neglects hospital talent pools that are nonetheless critical for enhancing hospital performance. As such, future research should examine succession management practices geared toward additional talent pools that are strategically critical in the current health care environment, including physician leaders and roles driving physician alignment. Second, although the data for this study were collected from two national samples of health care organizations and hospital performance metrics directly from CMS, the study”s cross- sectional design precludes causal conclusions concerning succession management practices and hospital perfor- mance. Future empirical studies should track the quality and consistency of a single set of hospital organizations” succession management practices over multiple intervals and test hypotheses using CMS hospital performance data.

Practice Implications

Health care organizations may utilize the results of this study for numerous applications related to the execution of succession management practices. First, hospital execu- tive teams and board members may assess their respective organization”s succession planning and talent development practices with the SMA as an initial diagnostic exercise. By comparing their hospital or health system”s scores with the mean industry scores presented in this study, health care leaders may begin to benchmark the quality and consis- tency of their succession management capabilities. Second, hospital executives may apply the SMA as a tool for identifying their organization”s primary development oppor-

tunities. For example, hospital organizations struggling to identify internal candidates for critical leadership roles and surging costs associated with the selection and placement of external hires may enhance their talent assessment practices according to the SMA”s best practices. Finally, health care executives may utilize this study”s results to raise the profile of succession management as a strategic priority for compet- ing in an increasingly complex and uncertain health care landscape.

Conclusion

Health care organizations face an incredible set of chal- lenges regarding the identification and development of future leadership talent. Although several alarming indus- try trends have greatly intensified the business case for succession management capabilities, the empirical research on succession planning and talent development practices in hospital organizations has been limited. This study devel- oped a model of succession management practices and a practical assessment tool that may assist hospital executive teams and boards with overcoming the extraordinary work- force demographic changes and mitigating the high costs of the looming surge in executive turnover.

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