Press Room

NCAA Men’s Basketball Finals and Healthcare Executive Search – What Do They Have in Common?

Posted on May 12, 2008

I work in the healthcare executive search arena and have the opportunity to recruit outstanding executive leadership for the country’s leading healthcare organizations. Outside of work, I am an avid sports fan, especially those big games when championships are on the line. Despite my best efforts to separate work and pleasure, my brain draws parallels that connect these two arenas, which happened Monday night.

Perhaps you watched the final minutes of the Memphis / Kansas game unfold. Despite having a nine-point lead with only two minutes remaining, Memphis failed to close the game. They could have and should have won. But, something happened in the final two minutes, which led to a Kansas victory.

ESPN analysts immediately speculated about the reasons for the game’s outcome. They concluded it was attributable to poor coaching, a failure among the players to properly execute or that Memphis failed to effectively communicate their plan. It hit me.

I saw the parallel between the championship game and the healthcare executive search arena. Just as Memphis let down their guard during the final two minutes and lost, I have seen a business executive prematurely let his guard down following the completion of their recruiting process.

Business plan execution is what matters and retention is critical to overall success. The first twelve months are when newly hired executives will voluntarily or involuntarily leave your organization due to a poor fit, strategic assessment or inability to execute. Parting with the newly hired executive within the first twelve months defines a costly financial term, ‘mis-hire’. Author Bradford Smart, PhD, Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People, concludes that “With an average base salary of $114,000, the average total cost associated with a ‘typical” mis-hire is $2,709,000 – greater than 24 times the person’s base compensation”. Losing the national championship in the final two minutes will stick with the players throughout their lifetime. In business, costing your company or your shareholders millions of dollars can ruin your career.

If you’re trying to rationalize these amounts, think about the long-term opportunity costs that can result from sub-standard service, failed marketing campaigns, missed sales targets, flawed accounting or investment strategies and much more. In addition, you recruited the employee at considerable expense, managed & assisted through their learning curve, and, adding insult to injury, you paid a severance to stop the pain. And finally, you incur all of the “hard” executive recruiting costs for the replacement employee and you absorb various additional costs during the ramp-up of the new leader.

3 Steps to Develop a Winning Retention Strategy:

1. Define & Measure

You control what you measure and avoiding the 12-month retention calculation is a mistake. Many organizations measure hiring cycle time, number of open positions, diversity candidates in the process, internal versus external hires, etc but fail to measure what truly drives your business, retaining the critical leaders within your organization. Based on more than 13 years of healthcare executive search experience, I believe the cost of a mis-hire to be close to 24X. For discussion sake however, let’s agree that the numbers are inflated and we will take the numbers down to a mere 25%, which means that you’re still looking at a $1.2 Million cost for a mis-hire involving a $200,000 salaried executive! My experience shows to things, first, most companies do not have a retention strategy and secondly, a company’s mis-hire costs can be materially reduced.

2. Involve C-Suite & Board

The business and financial risks of executive mis-hires and misalignment can be as threatening to the viability of an organization as an operations failure or a major data security breach. Once you know your retention performance and costs you will be able to accurately define the issues and develop communication and strategies for optimal success.
In their Harvard Business Review article, “Growing Talent as If Your Business Depended on It,” Jeffrey M. Cohn, Rakesh Khurana, Laura Reeves argue that corporate boards have traditionally underestimated the role of a robust leadership development and executive succession planning system in risk management. They suggest that the steady attrition in talent that occurs leaves companies vulnerable to making poor decisions in any number of commonplace business scenarios such as an acquisition or sharpened competition.

3.Execute

Managing the individual’s integration into your company for the first 100 days will provide a strong foundation towards achieving long-term objectives. Ensuring success requires defining a 100-day and twelve-month plan, communicating regularly in the beginning weeks and knocking down obstacles to assist in plan execution. Following the first 100 days, monthly and quarterly communication through the first twelve months further develops relationships, provides clear strategic direction and reinforces cross-functional interaction and discussion.

While baseball, football, basketball and other sports are a great escape from work, we often find parallels between our sports and our work. Retention strategies will have a direct impact throughout your organization. Defining a retention process, measuring the process and weaving it within the framework of operations will deliver results. The 2008 NCAA Men’s Basketball Championship Game shows us that in both sports and work it is important to keep your guard up and play through the entire process before you celebrate and realize victory.

Paul Frankenberg is President, CEO, and Principal in Kraft Search Associates, a retained Executive Search Firm specializing in the recruitment of high-value Executive Leadership throughout the Healthcare Industry. Paul has completed more than 225 Senior Executive and Corporate search assignments during his 12-year career and is known for search process thoroughness, commitment to project success, focus on client business plan achievement and candidate retention rates that are among the highest in the industry. Modern Healthcare magazine has ranked Kraft Search Associates one of the nation's Top 25 Healthcare Executive Search Firms. Clients consist of Fortune 500, Fortune 100 and Fortune 25 businesses, mid-cap growth companies, Private Equity and Leverage Buyout firms and related portfolio companies, turnaround and restructuring firms and entrepreneurial Venture-Capital start-ups.

Paul is a frequent writer, guest speaker and panelist on leadership, executive development, entrepreneurship and recruiting industry topics. Paul can be reached at Kraft Search Associates, LLC. The company's website is at http://www.KraftSearch.com and Paul can be reached by email at Paul@KraftSearch.com or by telephone at 615-782-4276.