Healthcare CEO Succession Planning Best Practices

When a CEO leaves a healthcare organization without a successor ready, the effects can reach far beyond the C-suite.

Poorly managed healthcare CEO transitions can stall decisions that reach all the way to patient care.  

A board may know that a struggling service line needs to be restructured, for example, but decide to delay the decision until the next CEO is in place. Putting that decision on hold doesn't pause the daily workload. Clinical and operational leaders still have to plan staffing and care delivery, which means allocating resources around a model that could soon change.

“People often get paralyzed when a big change in leadership is happening,” says Liz Bickley, senior client partner and COO of Korn Ferry Health.  

“We see executives and physicians become less willing to commit their reputations to multi-year initiatives when they’re unsure whether those initiatives will keep having leadership support.”

To avoid those consequences, healthcare organizations need to start succession planning early. In fact, it should be an always-on project. This gives the board time to test internal candidates against the demands of the role, and to have someone lined up for unexpected departures.

A hospital president, for instance, could be a strong operator but lack experience leading across a health system or owning a major transformation. Developing them before a vacancy opens gives the board time to see whether they’re ready for the role or whether it needs to look outside.

The board also has more control over the transition. Directors can decide whether to appoint an interim CEO and how long the outgoing CEO should remain involved.  

“Starting too late turns succession from strategy into vacancy management,” says Bickley. A clear warning sign is when the first serious succession conversation happens only after the CEO leaves unexpectedly. “By then, the pipeline is often just a list of names and titles rather than evidence of readiness,” she says.

So how can healthcare board directors build an effective CEO succession strategy? Here are five best practices for building a stronger pipeline.

1. Make Succession Planning an Always-On Activity

Even the most loyal and committed CEOs will step down at some point. That’s why succession planning must be embedded in board directors’ responsibilities, not treated as an occasional or crisis-driven exercise.

In a recent Korn Ferry survey of board directors, 43% of respondents said their healthcare boards review succession plans once a year or less.

CEO succession planning should be a standing item at every board meeting.  

Rather than wait for a crisis to create an emergency succession plan for CEO departure, smart boards are always grooming multiple potential successors, says Nels Olson, vice chairman and co-leader of Korn Ferry's Board & CEO Services practice.

It's the board chair's job to make sure succession stays on the agenda, says Olson. In practice, that means:

• Continually assessing internal talent
• Giving potential successors opportunities to take on new challenges
• Ensuring board members see them in action

The goal is to build familiarity and confidence long before a transition is necessary. That discipline can be uncomfortable, since many CEOs would rather avoid conversations about their own succession.  

“The chair needs to work with the CEO to say, ‘This is best practice, and this is what we're going to do, openly and transparently,’” says Olson.

All of this, he says, is to avoid the situation you so often see when a CEO leaves and the organization must scramble for a replacement.  

Without a clear successor or transition plan, uncertainty at the top can spread through the health system. Clinical and administrative leaders start protecting their own priorities rather than the organization's.

A strong CEO should want to secure the organization's long-term future and should be willing to help develop the pipeline. "It shows the security of a CEO and a board when they do this consistently, rather than only in a crisis," says Olson.

2. Look Inside While You Look Outside

It's common for board members to assume that the best candidates will come from outside, but it's a mistake to overlook internal successors.

"Internal candidates tend to create more value for organizations," says Lucy McGee, senior client partner in Korn Ferry's Board practice.

They understand the healthcare organization's culture and mission in ways external candidates can't. This includes knowing the medical staff structures, service line dynamics, and community commitments an outsider has to learn from scratch.

Internal appointments also send a powerful message throughout the organization. "It signals that the company values and invests in its own talent," says McGee. And that increases morale and retention beyond the C-suite, which matters in a workforce where clinical vacancies are already hard to fill.

Of course, promoting from within has its own challenges.  

The incumbent CEO, for example, may already have someone in mind, while the board sees clear gaps in that person's ability to lead the organization forward.

"There are often several internal candidates with influential advocates, but no common evidence of their readiness," says Bickley. Internal support is not proof that a person can handle the scale and complexity of the CEO role.

What the board needs to see is earned credibility with clinicians rather than familiarity with them. That means asking these four questions:  

1. Has the candidate led a change to how care is delivered?
2. Have they carried real accountability for clinical quality and safety, or the financial performance of a service line?
3. Have they made a decision an influential physician opposed and maintained the relationship afterward?
4. Can they explain a system-wide decision and show how clinicians were brought into making it work?

The board also risks losing contenders who don't get the role. But even with that risk, promoting from within is usually less unsettling than bringing in an external CEO who has to learn the system from the ground up.

3. Define the CEO of the Future

Every CEO transition starts with a different set of needs. Some boards want a leader who can build on existing success and increase momentum. Others need someone who can reset the strategy and rebuild trust after a critical misstep.

Whichever the case, the board still must answer the same two questions: Where does the organization need to go, and what kind of leader can take it there?  

“This is about defining what success looks like in the future and measuring candidates against that profile,” says Olson.  

He recommends that boards use rigorous assessments and realistic simulations to test leaders across scenarios, whether that’s handling a crisis, managing financial strategy, or navigating the boardroom. “That way, they gain a clear picture of both current readiness and future potential.”

Boards also need to validate that assessment with people who experience the candidate's leadership across the health system.

“CEOs play a public role, so you need to pull together perspectives that represent the entire organization and select external stakeholders where that makes sense,” says Bickley. That includes:

• ‍The board's own quality, finance, and governance committees, who can judge the candidate's strategic thinking and transparency about risk, and whether they help trustees govern rather than simply present well to them.
• ‍C-suite peers and direct reports, who can speak to whether the candidate thinks across the enterprise, delegates well, and develops other leaders.
• ‍Physicians, medical staff leaders, and the chief medical officer, who know whether the candidate understands care delivery, listens to clinicians, and can influence them without dismissing their expertise.
• ‍Nursing and frontline operational leaders, who see the candidate’s decisions firsthand and know whether concerns actually reach them.
• ‍Leaders across different geographies and care settings, who can show whether the candidate can lead beyond one hospital or market.
• ‍Patients, families, community members, and external stakeholders, where relevant, who see how the candidate represents the organization publicly.

The outcome, says Olson, is a practical roadmap for succession.  

“It highlights what experiences candidates already have, what they still need to develop, and creates a plan for building that readiness.”

4. Prepare for Both Continuity and Crisis

Succession planning for the CEO should start early and remain a standing board priority. But when a crisis strikes, boards must also be ready to act swiftly.

Too often, when companies are forced to oust their CEO, they fall back on a former board member as a stopgap, says Olson.  

With little preparation, that leader can struggle. “At some point, the credibility of the company is undermined,” he says. That risk is even greater in a health system.

Running one hospital is not the same as leading a portfolio of hospitals, outpatient sites, physician groups, and other care settings. The interim still has to make decisions that span the whole portfolio, not just one site.

In some situations, extending the current CEO’s tenure, even briefly, may buy critical time for a more thoughtful CEO transition plan. Real readiness takes time, says McGee. “Most potential successors need 12 to 24 months of targeted development before they can step into the top role with less risk,” she says.  

Boards need a clear plan for what happens if the seat opens, whether that's an unexpected resignation or a breakdown in trust. That means settling who holds decision rights and who is communicating with the medical staff.  

Onboarding also deserves as much planning as the search itself. "Finding the person is one component," says Bickley. "Setting them up for success is where we should all be investing our time."

5. Be Transparent About Leadership Planning

Employees don't need to know every detail of who will step in if the CEO departs. But they, along with the board and other stakeholders, do need confidence that succession planning is part of the long-term strategy.

Few things erode trust faster than a leadership vacuum. Giving employees visibility into the broader top team, including potential successors, can ease transitions and sustain confidence when leadership changes.

Say a regional hospital president is being considered as a future CEO. Physician leaders and nurse executives should already be seeing them take on system-wide responsibilities, not hearing their name for the first time in the announcement.

Transparency also strengthens the leadership pipeline. "Clear, long-term planning shows senior leaders that they are seen and taken seriously," says McGee. "That recognition is critical, especially in a market where retention is such a challenge."  

In healthcare where staffing shortages already put pressure on the workforce, a poorly handled CEO departure can put other senior leaders at risk of leaving.

McGee notes that employees also make constant judgments about whether leaders are credible. "CEOs have to recognize that they're being observed at all times, and that authenticity is the only sustainable approach—because pretending to be someone else is exhausting." Failing to get that right can weaken morale and the leadership pipeline at the same time.

Build a Better Healthcare CEO Pipeline

Ready to build a more proactive CEO succession strategy? Connect with Korn Ferry to assess your internal bench and build a healthcare CEO pipeline before the seat opens and speak to Korn Ferry’s Healthcare Experts .

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