Succession planning is one of the most important decisions a physician owner will face. It addresses the critical issues of when and how to retire from your medical practice.
Yet many physicians neglect to plan their exit. All too often, they think they can wait to sell the business until they are ready to retire. They don’t realize that they need to have their practice well positioned and ready to hand off ahead of time. Preparation can be the difference between success and failure.
There are many tried and true steps physician partners can take to facilitate the smooth transition of ownership. While succession planning has some science behind it, it is also an art.
There are indeed any number of variables that must be taken into consideration in specific situations. Perhaps one of the biggest is the physician owner’s personality. This is because it could play a significant and unexpected role in determining how the future plays out for the practice.
Personality and style can impact succession planning
Physicians who start private practice are usually very strong people who took a lot of risks to achieve success. It is not realistic to expect the next generation of ownership to fit their exact mold.
A better strategy is to determine the roles and responsibilities that give their probable successors the best opportunity to showcase their skills. Then, step aside and let them flourish using their own style.
It can come as a big surprise to some physician owners that their incoming partner’s style, even if different from theirs, is a big hit with patients and staff members.
For instance, it may represent a welcome change to move from an emotional, passionate, frenetic physician to one who is calm, thoughtful and never panics. What should never be lost, however, are the aspects of style that have made the practice successful. Responsiveness and excellence in patient care must be non-negotiable.
Squash the desire for clones
In working with numerous practices over the years, I have encountered many physicians who believe their successors must be clones of them since their way of operating has brought the business to where it is today.
This mentality is shortsighted, however. The most important thing is to align values and use unique styles of individuals to achieve these values.
Too many physician owners get frustrated if their junior partners don’t emulate them. What the owners really should be doing is taking the time to talk with them, hear their perspective, and even learn something from them. Physicians who are stuck in an unworkable model may be getting their practices stuck as well
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Be realistic about succession planning
When talking to others about succession, realism must be your foundation. This is no time for wishful thinking, hoping that an uninterested or incapable physician will suddenly become full of passion and business skills.
Objectively evaluate (ideally with the help of knowledgeable outsiders) physician candidates for their experience and potential.
After this tough decision, take the systematic steps to pass the reins of leadership. This may take some time, but remember, the best successions are those that end with a clean and certain break.
In other words, after you give up the reins, get off the wagon. Again, seek outside help. Even if you would never use an outside adviser for any other decision, consider the value that a qualified consultant can bring to this important event.
Don’t ignore succession planning. By obtaining help from a professional, you’ll be working to reap the rewards of succession in a different and smarter way.
Leadership transitions require advance planning
Leadership transitions are risky times for medical practices. When the departing lead physician has had a strong run, there is concern about his successor’s ability to maintain the momentum. When he has performed poorly, there’s anxiety about whether and how fast his successor will be able to correct the course.
Physician owners are responsible for ensuring that the practice continually has high-quality operations and employees. One of the most important elements necessary to meet this responsibility is to conduct successful succession planning.
Having a strategic plan that clearly conveys the practice’s mission and current strategic priorities is essential. The plan should include specific actions that detail who is going to do what and by when in order to address each priority.
Succession planning isn’t something you can do once and forget. It is also advisable to have at least annual meetings with key employees regarding succession planning. They should include a discussion of how to manage effectively during a transition.
Take the time to plan ahead
Succession planning can be contentious or it can be orderly. The difference depends on all participants involved in the process being willing to put the practice first and work toward the common goal of long-term sustainability.
Smart physician owners will take the time to uncover what other partners bring to the table, even if it looks different from the status quo. When values are aligned and owners back down from the belief that their way is the only way, the transition will be smoother and the future quite bright.
Succession planning gives you time to train up your successor, show them the ropes, make sure that they really understand your business.
Remember too, that transparency is crucial both internally and externally. Proactive communication about leadership changes alleviates the normal fears associated with change and uncertainty. Plan for this. Poor management of this process shakes organizational credibility and effectiveness.
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Succession planning tactics for your medical practice
A smooth succession requires, first and foremost, the ability to be honest with yourself about your goals and desires for both your practice and your life after leaving the practice. Once you have a clear and honest vision established, it’s time to implement a detailed plan that will help succession go as smoothly as possible.
Here are four succession planning tactics to consider:
Increase lines of communication
Communication is at the center of any medical practice succession plan. Always be open and always be painfully honest.
Lack of communication can cause rifts among valued employees and can cause resentment to grow. Establish increased lines of communication among all stakeholders and draft conflict resolution parameters. This will help nip issues in the bud and lead to a smooth succession.
Develop a governance structure
Lack of information and direction can sabotage a practice from the inside. In the period leading up to your succession, there will likely be confusion and fear about the future of the practice.
Long-term employees who have been instrumental in the success of your practice for many years will wonder where they fit after your departure. Some will hold strong beliefs about the future direction of the practice.
Creating a governance structure as part of your physician partnership pathways is a must. Do this years before your departure. It will eliminate confusion and clarify the practice’s structure going forward.
Create a mission statement
Much lip service is paid to having a mission statement for a business. However, as you plan to hand over the reins of the practice, a mission statement can help lay a framework. Even if you have chosen a clear successor, others may want to have their opinions heard, and often, visions will clash.
The best way to rectify business disagreements is to have a mission statement that clearly lays out the goals of the practice. This mission statement can be used as a guide to steer all decisions towards achieving the shared goals, rather than satisfying personal desires.
Establish monthly meetings
True, open and honest communication isn’t an event, it’s a fundamental practice to successful physician partnerships. Information changes, feelings change and unforeseen events happen.
That’s why it’s a good idea to establish a standing monthly meeting among physician partners. This will allow you to address concerns, communication initiatives, and deal with issues as they arise.
It will also give everyone a scheduled, open forum in which to speak their minds. When establishing a succession plan for your practice, communication should be at the center of your strategy.
The more openly and honestly you communicate your intentions, the easier your transfer of power will be. Also, it will contribute to the success of your practice (and your legacy) going forward.
Take the time to do it right
Succession planning is a serious business. You can’t just sit in a meeting for two hours and then close the book and go back to your clinic hours. Poor management of this process shakes organizational credibility and effectiveness.
Physician owners who fulfill their responsibilities and are accountable stewards take a proactive approach to succession planning. Preparation can be the difference between success and failure.
More information from this author:
Strategic Planning for Physicians in the Age of COVID-19
The bottom line for succession planning
The bottom line is that transitioning from a practice takes time and preparation. There are a variety of issues that must be considered. This is why it requires education and adequate planning to ensure the handing over of your practice is seamlessly executed.
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Nick Hernandez, MBA, FACHE
Nick Hernandez, MBA, FACHE is the CEO and founder of ABISA, a consultancy specializing in strategic healthcare initiatives.
Since founding ABISA in 2007, his emphasis has been on developing and maintaining a strong relationship with physicians and identifying areas for business opportunity and support. The company’s client list includes physician groups, hospital systems, healthcare IT organizations, venture capitalists, private equity firms, and hedge fund managers.
Nick is a graduate of the United States Naval Academy and a former Captain in the U.S. Marine Corps. He holds MBA degrees in both Operations Management and Information Technology & E-Business Management from Wake Forest University. He is Board Certified in Healthcare Management and has been named a Fellow of the American College of Healthcare Executives.
He is a frequent guest lecturer and is often quoted in the national media. He has consulted with clients in multiple countries and has over 20 years of leadership and operations experience. Nick is a Subject Matter Expert in business strategy, practice management, telemedicine, health IT, and oncology.