Preparing for transition
Senior Living Executives: Trends in Succession Planning and Incentives
CLA has recently completed the 2015 LeadingAge-Chief Executives of Multi-Site Organizations (CEMO) Leadership Compensation Survey© that tracks trends in multi-site aging-services organizations. Over 129 multi-site organizations were surveyed representing a broad geography and size. The purpose of the survey was to provide multi-site aging-services organizations with data on executive compensation levels, trends, and practices. Succession planning and incentive compensation emerged as two areas of immediate interest to the boards of health care organizations. The following is a brief summary of some of the findings related to these issues.
Learn more in the full report, Trends and Best Practices in Succession Planning and Incentive Compensation.
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Like all planning endeavors, a well thought out succession plan should consider how the organization will achieve its goals. For example, one of the tasks of the CEO may very well be to help identify and mentor one or more potential successors early in the process. Even though most organizations will also evaluate external candidates when the time comes, having internal candidates will only improve the odds of a successful transition. Developing incentive pay or other criteria to measure the development of the talent pool may be helpful to boards exploring their succession options.
Recommendations on incentive pay
- The fundamental basis for any incentive compensation program is simple — it should equitably and consistently recognize and compensate employees for superior performance.
- Incentive‐based compensation is becoming more common because of the increased emphasis on performance and competition for talent.
- Government is using pay‐for‐performance to redirect reimbursement under health care reform, making it more popular and acceptable within health care and continuing care.
- Setting up an incentive‐based compensation program requires the same research into the industry as the base pay program. It may work best when it serves as a component of a board approved/managed compensation plan.
- An individual incentive program motivates staff to exert more effort because extra compensation is paid only to those who perform above the established metrics.
- A well-crafted incentive compensation program must direct individual behavior toward achieving established organizational goals.
- An effective incentive program should be designed to affect favorable change within your organization.
- A thoughtfully designed incentive program should allow a substantial portion of compensation to be a variable cost. Ideally, the plan should reward results rather than actions.
- To be fair and equitable, an incentive plan should cover all members of a group, i.e. senior leadership.
- Plans that cover the CEO only may be designed by the board. Under the assumption that the CEO develops the annual operational plan and directs the use of resources, human and financial, the goals are generally operational but may also be strategic.
How we can help
CliftonLarsonAllen has many years of experience in the health care industry. Although incentive compensation programs are attractive, organizations need to carefully plan and implement them. The IRS has provided some guidance to nonprofit organizations known as Intermediate Sanctions, which explains that discretionary bonuses are generally not acceptable because they are not objective, nor based on results.