As you probably heard last week, George Halvorson announced his plan to retire in December 2013 as CEO and chairman of Kaiser Permanente. According to the company's press release, Halvorson announced his retirement a full year ahead of time "to ensure an effective transition to his successor." The board will reportedly be considering internal and external candidates.

Replacing someone of Halvorson's stature is no small task. He took over the integrated health system in 2002 and during that time it has grown to serve more than 9 million members. Kaiser is constantly referenced as a model for the future of care delivery. Halvorson has played a prominent role on the national scene on both the policy front and advocating for overall delivery system transformation. So, it's not like the Kaiser board can just put an ad on LinkedIn and hope for the best.

The fact that the board will take a year to assess candidates is a pretty strong indication that it has a solid succession plan in place, which would actually be a bit of a rarity in health care. Half of the CEOs responding to a Witt/Kieffer survey earlier this year said that they've worked with senior management to identify potential successors. However, and this is maybe more significant, just 39 percent said that they've worked with their board to develop a formal succession plan. It is, after all, the board's responsibility to assess and hire the top executive, not the outgoing CEO, Elaina Spitaels Genser, managing director, of Witt/Kieffer's western region told me yesterday. Also of note in the survey, 34 percent said they've mentored a successor and only 17 percent of CEOs said that their successor is "ready to step into my role."

Although succession planning has been talked about in health care circles for a while now, Genser says that the practice has only taken root in the last handful of years. The downturn in the economy didn't help matters either, as the field saw ready- or about-to-be-ready-to-retire executives opt to stay on a bit longer in hopes of, among other things, seeing their retirement portfolios rebound. As my colleague Haydn Bush reported last April, some CEOs pushed off retirement because they felt the need to stick around and respond to the challenges of health reform. In some cases, the board wanted them to stay on longer. According to the Witt/Kieffer survey, 73 percent of CEOs said that the board doesn't want them to retire. Genser speculates that succession planning often gets pushed to the back burner as more immediate needs arise.

Still, she says that CEOs and boards need to map out a succession plan at least five years ahead of an executive's potential retirement. Once a CEO notifies the board of his or her intention to retire, that should put a series of events into motion:

  • Develop a strategic plan looking at where the organization wants to go.
  • Within that context, look at your human capital and conduct an assessment of your leaders.
  • Once potential successors have been identified, develop individual work plans for each of them that will help fill any skills gaps that exist.
  • Provide opportunities for project-based growth. For instance, if a candidate hasn't had much interaction with the board, allow him or her to make a series of presentations at board meetings. If candidates haven't recruited physicians, give them the opportunity. Let a candidate develop a joint venture agreement, and so on. Depending on the current CEO's time frame, Genser suggests that candidates be tasked with three to five projects a year.
  • Conduct regular assessments of the candidates. This goes beyond the yearly review and takes a close look at the new projects and stretch goals that they've been assigned. "The board must be involved in this," Genser stresses.