Why Healthcare CEOs Make Sense for Corporate Boards
They lead complex organizations with highly skilled workforces, manage extensive physical plants, and may oversee billion-dollar budgets. They are tuned in to technology and well-versed in planning, compliance and regulation, crisis management, and even corporate social responsibility. Increasingly they are aggressive business strategists.
They are today’s not-for-profit healthcare executives and, I believe, they represent a largely untapped resource for corporate boards. There are certainly examples of nonprofit healthcare leaders serving on boards – outgoing Henry Ford Health System CEO Nancy Schlichting is a long-time director for Walgreen Co., for instance, while Dignity Health CEO Lloyd Dean sits on the boards of Wells Fargo and McDonald’s. (Dean’s position as an advocate for healthy communities and his extensive rebranding expertise are key attributes he brings to these consumer-directed industries.) Directors like these tend to be the exception rather than the rule, however.
Corporate execs from related industries such as pharmaceuticals and insurance are more common board targets: Ford added Eli Lilly CEO John Lechleiter to its governing ranks in 2013, and GM added Novartis CEO Joseph Jimenez in 2015 and Microsoft recruited Sandra Peterson, group worldwide chairman for Johnson & Johnson, late last year. Cargill’s board has ex-Wyeth CEO Bernard Poussot and last year recruited UnitedHealth Group CEO Stephen Hemsley into the fold. Angela Braly, former board chair and CEO of WellPoint (now Anthem), has served Walmart’s board since 2009.
Bias Real or Perceived
Why might executives from the care provider side as a group remain largely overlooked? Nonprofit healthcare executives I have talked to feel that they are not always given full consideration; they are not perceived as “serious” executives who have the mettle for for-profit board work. Or perhaps it is that they are not considered a good fit for corporate governance. Hospital administrators have traditionally been pillars of their communities but not necessarily major players on the regional or national stage, where corporations tend to operate. Some healthcare leaders that I talk to admit that they could have been more aggressive in pursuing corporate governance roles.
Whatever the reason, these real or perceived biases should disappear as healthcare costs rise as a percentage of corporate budgets, health reform continues, and corporate employers try to get a handle on stable, affordable health and wellness programs for their ranks.
Let’s consider some of the sophisticated expertise that today’s healthcare leaders have:
• Market savvy: It is important to dispel the notion that hospitals and health networks are naturally less competitive than for-profit companies. Healthcare leaders have been doing nothing less than transforming their organizations over the past 10 years and venturing into increasingly competitive markets. With the Affordable Care Act and massive reform sweeping in the industry, healthcare is a hard business to be in.
Further, today’s U.S. health system is starting to think in terms of consumers, not just patients. Traditionally, healthcare providers have been viewed mostly as hospitals and clinics where the sick go to get better. Now the focus is on building relationships with consumers and promoting health and well-being. This shift from a “volume-based” to “value-based” model is somewhat revolutionary. Healthcare CEOs and executives are discovering ways to make change happen, and corporate boards need this kind of expertise.
• Innovation: With the business challenges they face every day, healthcare executives have had to “go big or go home.” They’ve stepped up their games by expanding their businesses, reaching new consumers and markets, navigating mergers and acquisitions, spearheading for-profit initiatives, establishing corporate partnerships, implementing advanced IT platforms, and much more.
Healthcare leaders understand disruption and its worth. Anyone can see industry disruption at work in medical kiosks, outpatient storefronts, telehealth visits and even Fitbit-type things of the Internet. More people want the transparency and convenience of care outside of primary care facilities offices, and healthcare providers are answering that call.
• Reform-era healthcare expertise: Of course, healthcare executives like Schlichting and Dean bring a well-informed perspective on a new healthcare landscape. Health insurance costs for private employers, for example, have roughly doubled in the past two decades, according to the Bureau of Labor Statistics.
Now, when employers are looking for innovative ways to trim health expenses, they are turning to the providers themselves. Lowe’s and Cleveland Clinic, for example, negotiated an advantageous bundled payment rate for specific procedures, including heart surgeries. Meanwhile, some providers are creating their own insurance plans that compete favorably against even the strongest national plans. Since healthcare constitutes an expanding cost (and risk) center for many companies, it makes sense to have a healthcare insider as a board member.
It’s Their Day
Boards of directors – from Fortune 500 companies to startup firms, from finance to consumer goods to manufacturing – are diversifying their memberships. This includes adding diversity of expertise. Thus, nonprofit healthcare executives represent intriguing board candidates. They are a very different, more sophisticated breed leading complex organizations in a rapidly changing environment. In many respects, it is their turn to contribute to corporate governance in the for-profit arena.
by Jena Abernathy - managing partner and chair of the Board Services practice with the executive search firm Witt/Kieffer.