Lack of Succession Plan Now Hurts Many Labs

More labs find themselves short of leaders following a sudden retirement or regulatory issues

CEO SUMMARY: Throughout the past decade, laboratory administrators and pathologists have been reminded about the importance of having a succession plan in their laboratory. Now one veteran lab industry CEO says the lack of a succession plan, unexpected retirements, the discovery of serious compliance deficiencies, or failure to achieve financial targets are the reasons why a growing number of hospital labs find themselves leaderless. In such cases, these labs are forced to hire interim managers.

LACK OF AN EFFECTIVE SUCCESSION PLANNING PROGRAM for key managers and administrators is about to become a major issue for both large and small hospital and health system laboratories across the nation.

That’s the opinion of G. Robert Ainslie, Ph.D., MBS, a semi-retired former lab CEO. Ainslie has spent much of the last decade accepting interim leadership positions at hospital-based laboratories where the retirement or sudden departure of the senior laboratory administrator created a leadership void that the parent hospital could not fill in the short term.

“There are both obvious and subtle reasons why a lab CEO or senior administrator has not prepared a successor to him-or herself,” observed Ainslie. “Some administrative directors of the hospital laboratory may simply be so overburdened and understaffed that a succession plan is never developed. That means promising managers within the laboratory don’t get the mentoring and training they require in order to step up to the highest position of authority within the laboratory.

“I’ve also seen cases where the ego was involved,” he added. “In such instances, these lab directors hope that, if and when they ever leave their positions, the lab will fail without them,” noted Ainslie. “Another mindset found in some lab managers are those who see succession planning as a threat to their own job security. Ask these individuals about succession planning in their laboratory and they will answer: ‘Why would I do that? I don’t want to be training my replacement.’”

Leadership Development

Ainslie is not alone in his observation that the laboratory industry is failing to devote adequate time and resources toward succession planning and leadership development. Over the past two years, THE DARK REPORT has offered several learning opportunities on this subject in the form of audio conferences and special presentations at the Executive War College. Attendance and participation in these sessions tends to be significantly less—despite the imminent need to properly train the next generation of CEOs and senior lab administrators.

Ainslie points out that three significant reasons make succession planning and management development a critical success factor for all clinical laboratories and pathology groups. “The first reason is the most obvious,” he declared. “Baby boomers—who represent a disproportionate majority of a lab’s key leaders—are now actively retiring. Going forward, the typical lab’s staff retirement rate will be much greater each year than was true of the last decade.

“The second reason might surprise many lab administrators and pathologists,” exclaimed Ainslie. “In recent years, on-site inspectors for accreditation and for CLIA compliance have become much more aggressive in enforcing state and federal compliance regulations.

Removing the Senior Leader

“Major compliance failures at the inspected lab are a common cause of leadership turnover,” he noted. “Faced with the need to take immediate corrective action or the possibility of losing the lab’s license, hospital administrators act quickly to remove the senior leader in the lab who was responsible. But, because there was no succession plan, the lab is left leaderless at a critical moment. Going outside to find a capable replacement is a process that can take months.”

Ainslie stated that the third reason involves the growing trend for hospitals and health systems to act more swiftly to address financial underperformance in their laboratory organizations. “Nowadays, many hospital administrators are fully prepared to step up and change the lab leadership whenever the lab fails to achieve its financial goals.

“Collectively, these three factors make lab directorships much less stable then they have been in the past,” observed Ainslie. “Because most lab organizations fail to do succession planning, they have no obvious leaders ready to fill these vacancies.

“Independent of these three powerful trends in the lab marketplace, succession planning should be part of every management development program at every lab,” he commented. “Management turnover is inevitable, so it is truly a failure of leader- ship not to have a succession plan.

“My role as an interim manager only exists because the lab that invites me in has failed to prepare qualified managers who can immediately assume higher responsibilities,” he continued. “My phone only rings when the lab has that leadership vacuum.”

Need for Interim Manager

His phone rings much more often these days. “In the past year, I have fielded twice the number of calls with offers of an interim management assignment,” Ainslie commented. “A look at the reasons behind these calls is instructive.

“A couple of those calls involved filling in for managers who reached mandatory retirement age,” he noted. “In my view, there is no reason why a laboratory should need an interim manager when a lab director reaches the age of mandatory retirement. If a lab has mandatory retirement, it should also have mandatory succession planning.

“At least three other calls to me were the result of serious problems that were not being addressed in the lab,” continued Ainslie. “These were either compliance problems that were a direct result of the more intense inspections these days, or the failure to meet the productivity and/or financial expectations of the organization.

“By the way, senior lab managers are getting more intense pressure by hospital administration to fully meet financial and performance goals,” he explained. “This is a direct result of the need to contain health care costs and maximize productivity.

Lab Labor and Productivity

“Another reason for turnover among senior lab administrators is that hospital and health system managers are evaluating the labor component in every department,” Ainslie continued. “Personnel costs are a favorite target among cost-conscious executives. They are measuring the value of personnel against productivity standards.

“Today, labs and hospitals are much smarter about using productivity measurement tools and comparing their lab’s performance against national benchmarks,” he added. “Some hospitals use the same productivity tool throughout the facility. Other hospitals will use a lab-specific productivity tool. Accordingly, where these tools are in use, lab managers need to know where their labs stand in relation to national benchmarks.”

Ainslie says that implementing a succession plan is not only essential, but it is actually rather easy. “A simple way to start is to identify those candidates who might be appropriate for leadership positions,” he recommended. “Performance appraisals for these individuals should include an evaluation of their potential for promotion. This is one way the laboratory can spot those staff members who would benefit from more development of their management skills.

“In most of the labs where I’ve worked, the staff is hungry for a succession plan,” he commented. “When I talk to the staff, I can find out right away whether the lab is loosely managed. Employees will be quick to let you know if this is the case.

Career Development

“In such labs, there will be no clearly-defined path for promotions and no succession planning,” he added. “The lack of each leaves employees frustrated. This situation has a big downside for the laboratory.

“Lacking defined paths for career development and promotions, your lab’s best candidates for succession planning often decide they have no opportunity for advancement,” emphasized Ainslie. “So they go elsewhere. The result? Your lab ends up losing its most capable people and you never find out why they left.”

THE DARK REPORT observes that the lack of succession planning and well-defined career paths in many laboratories and pathology groups is going to be a significant factor during the next 24 months. Market forces indicate that a shortage of capable leaders will develop during that time.

Tougher Inspections Result in Deficiencies

THERE IS NO MYSTERY AS TO WHY compliance and accreditation inspections of clinical laboratories are much tougher now than in past years.

“Compliance is a bigger concern today because of the widely publicized deficiencies that surfaced in 2004 at Maryland General Hospital in Baltimore,” explained G. Robert Ainslie, Ph.D., MBS, a semi-retired former lab CEO. “Inspections at this laboratory had failed to identify serious failures in lab test accuracy and other issues. Only after a whistleblower in the lab got the attention of the Maryland Department of Health, and the local newspaper, did correction action take place.

“Since then, regulators have intensified their oversight of labs,” he noted. “Today, regulators are less forgiving about failures to comply and are prepared to hold lab directors accountable for compliance failures.

“This increases the number of labs that are cited for deficiencies,” said Ainslie. “When a hospital finds that its lab director is lax in ensuring that the lab is compliant with all state and federal regulations, it may act quickly to remove that director.

“It doesn’t matter if the licensure or accrediting agency is CLIA, the College of American Pathologists, the Joint Commission, or the state department of health,” stated Ainslie. “When inspectors arrive in labs nowadays, they demand more accountability to the requirements. They have much less tolerance for failure, and are fully prepared to write up the deficiencies that they identify.”

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