Searching for the CEO Search Firm

It insightfully is said that the most important responsibility of a board of directors is to recruit its chief executive officer. The organization can be a public corporation, a small or medium size business (SME), an elected government body, a non-government organization (NGO), such some kind of non-profit, charity, or foundation, a university, or even an industry association. Given my board experience with several types of such organizations and in being involved on the hiring side of executive search, I've come to believe in the use of two hand-in-glove resources: a search committee delegated by the board and an executive search firm. It is the search firm, usually selected or recommended by the search committee, and hired by the board, which does much of the actual recruitment work in the talent market.

Sometimes overlooked is the role of the Board's search committee, or whether to have one at all. In the big corporate world and for big institutions, for example foundations and universities a search committee is a common practice. However, in most of these cases about all the public (including the constituency involved) ever learns is that a committee has been formed, and then months latter when someone on the board makes the announcement of the new CEO. the Before getting into "searching for the CEO search firm" I will comment about the search committee. I will do this by describing the situation in which I am involved right now.

Currently, I'm a member of the search committee established by the five-member, Sonoma Valley Health Care District Board of Directors, to recruit a new President & Chief Executive Officer for Sonoma Valley Hospital. Also, I'm on the District Board, now in my 14th year and just sworn in for a fourth, four-year term. The work of the search committee, in conjunction with our executive search firm, WittKieffer is after six months, near the end of our mission. The search committee, with the assistance of WittKieffer conducted a series of vetting interviews narrowing the field. The Board members have conducted one-on-one interviews with finalist candidates. At this writing the Board, is still conferring as a body, and is about to make its decision and extend an offer.

Almost seven months ago, on July 15, the Board and the public was notified by Hospital CEO, Kelly Mather that she had accepted another position. This was almost exactly 10 years to the date from starting as President & CEO when I was the then Board Chair. Allowing for the timely departure and retirement of the CEO in the organization Mather was to join (as CEO), it was agreed mutually that Mather would go half-time with us for four months (to year-end) while likewise working half-time in her new position. We were not surprised by the resignation given her 10 years with us of many accomplishments and challenges, a tenure longer than average for most CEOs in any industry, particularly hospitals.

The Board quickly set about doing two things: forming a search committee; and then on its recommendation contracting with an executive search firm to manage the recruitment. The search committee would conduct the recruitment of the search firm and recommend its choice to the board. I don’t think there was ever any real question about whether or not to form a search committee or to engage a search firm. At least in my mind, these both were givens. I had been the Board Chair 10 years ago when a previous CEO had resigned. I recommended then to my Board colleagues and received approval for the formation of a search committee (with me heading it) and retaining a search firm on Board approval. 

In the current situation, the Board months earlier at one of our retreats had received a no-fee consultation from the executive recruiter, Don Whiteside who did the search 10 years ago. At that time, we anticipated that the CEO might leave sometime during the next year. Whiteside, years ago with HFS Consulting, recently had retired from the search business and having followed our situation, simply wanted to help out.

Whiteside's instructive session had made it persuasively clear to the Board, the need for a search committee and for a search firm. Some the Board members had not ever engaged in a CEO search process. The model was that the Board-appointed search committee would operate as an ad hoc committee so the Board itself could continue fulfilling its regular responsibilities. I have known of district boards which have conducted CEO searches themselves and this has been an all-absorbing activity for many months of closed door sessions. For efficiency sake in our case, there would be only two Board members on the search committee. The other committee members (ultimately another six) would be drawn from various stakeholders in the hospital community. My search committee of 10 years ago numbered a tight five, which I recommended again. However, this time the current Board Chair quite rightly recognized the need for a larger group for more inclusion of perspectives and engagement, and solicited names from Board colleagues, physicians, staff, and the community at large.

Initially, the group was seven, later formally enlarged to eight. The Boar Chair’s slate of recommendations to constitute the committee was approved by the Board on August 6. The initial seven included: two Board members, myself and a colleague (who was designated the search committee chair); the Chief Medical Officer of the hospital representing clinical and administrative staff (totaling over 250); the incoming Chief of the Medical Staff representing our accredited physician community (about 100); a representative of the Sonoma Valley Hospital Foundation (11 board members, six advisors, and staff); a general community representative, who is a former and highly respected school district superintendent; and the Chief Strategy Officer of UCSF Health, our affiliate, who also was President & CEO of the UCSF Affiliates Network. Two years previous, the District and UCSF Health had signed an affiliation agreement.

Recognizing the scope of the work involved, the search committee had staff support from three people: our Board Clerk for meeting scheduling and materials, and managing Zoom sessions; the hospital’s Chief Human Resources and Compliance Officer; and the Manager of Executive Recruitment Services at UCSF Medical Center. The latter did such a thorough job with many best practices approaches and decision tools that she soon was added to the search committee itself, with approval by the District Board, bringing our number to a committee of eight.

From the very beginning, UCSF Health as our affiliate proved to be a crucial resource in the recruitment process. The affiliation – essentially a management services agreement without a fee from Sonoma Valley and without a financial investment by UCSF – was a collaboration to provide healthcare and access on mutually agreeable service lines for our respective Sonoma region patients. As the CEO recruitment process got underway, concurrently there had been negotiations to deepen the affiliation with more integrated administrative and clinical arrangements. Significantly for the recruitment, these included that the CEO of Sonoma Valley Hospital along with direct-reports, the Chief Financial Officer and the Chief Medical Officer would be employees of UCSF. Salaries and other compensation components would be paid by UCSF, but pass-through reimbursed by Sonoma Valley. Additionally, the Management Services Agreement stipulated that the Sonoma Valley CEO could be seconded to UCSF for special projects (up to 20% of the time, as specifically approved by the Sonoma Board.) The CEO would be hired by Sonoma Valley and jointly evaluated by both, reporting solid-line to the Sonoma Board, and dotted line to the Affiliates Network CEO. 

Our incumbent CEO had a base salary of $365,000 and last year was paid a performance bonus of $60,000. The salary alone probably was the highest compensation of any executive in the area and much higher than that at any public entity or non-profit agency. It is recognized that a new CEO might require a comparable base (given healthcare industry competitiveness). For the candidates there also are important attractants derived from the UCSF connection. First, there is an overall better benefits package than at Sonoma Valley. Secondly, the successful candidate will have achieved entry to the UCSF Health system, with the potential for further career advancement.

 At its meeting on August 8 only three weeks since announcement of our CEO's resignation, the Sonoma Valley District Board formally approved the recommendation for the seven-member search committee with names developed and submitted by the Board Chair. We were off, and already running.

In taking decisive action the Board recognized that the work of recruiting a new CEO was of such depth and urgency that it needed to be done by a separate body. There were three reasons for this. First, this enabled the Board to continue its regular hospital oversight responsibilities conducted through its monthly board and committee meetings. Secondly and importantly, it recognized that this was an opportunity for outreach to and engagement with hospital stakeholders and the community of voters, philanthropists and donors. A third benefit was for a diverse group of experience to confer and share perspectives on the recruitment, not just the Board itself. Of course, the Board would make the final hiring decision based on the search committee’s recommendation, its own interviewing, and with concurrence of UCSF Health. 

Sonoma Valley Hospital, relying on considerable community support, is owned by the Sonoma Valley Health Care District, a government entity, the oldest charter of its type in California. The five-member Board is publicly elected with staggered, four-year terms. Financing of on-going operations is supplemented by an annual $3.8 million parcel tax (originally passed in 2002) which has been renewed every five years, and increased twice. A voter-approved $35 million, 30-year general obligation bond, passed in 2009 supported construction of a new wing. A hospital foundation-driven campaign (with heavy CEO involvement, especially for the “asks”) raised $21 million during 2019-2020 to construct an Outpatient Diagnostic Center (completion expected in 2021). UCSF while not providing direct operating or capital funding to the Hospital, is paying rehab construction costs for space its specialist physicians will occupy on the site delivering care to UCSF patients resident in the area as well as ours now having access to new services. 

It is curious to me that two other nearby jurisdictions overlapping with us in Sonoma are conducting executive searches without the benefit of a search committee: the Sonoma Valley Unified School District for a new superintendent, and the City of Sonoma for a new city manager. They each have hired interim executives from the outside. To their credit in conducting their searches, an executive recruiter and a "consultant" will be involved in each situation. However, apparently there is no search committee as such. The governing bodies themselves – the school district board and the city council, each of five members – have taken on those potentially heavy and time-consuming responsibilities. I admit to not knowing if it is routine for school district boards and city councils not to have “search committees” especially, if the jurisdictions are relatively small. The school district superintendent who was “dismissed” – at a hefty severance cost - had been making $215,000 annually. The incumbent city manager (retired 12/31/20) had been making $191,000.

Each of the above two executive search situations might have benefit from a community-oriented search committee. Some background and detail on one of these situations might suggest the need for a search committee.

The school district board has been under growing criticism from various quarters of the community on a number of issues relating to transparency and governance best practices, as well as a perceived bait-and-switch on two bond-funded, capital projects. There are three

school bond issues on our real estate tax bills. Academic performance scores consistently run below state averages. At the school board’s meeting before last, it was severely criticized by two prominent community leaders, one of whom is its former interim superintendent (Charles Young, pictured), previously a UCLA Chancellor. The original hiring of the now-dismissed superintendent was badly bungled at the time and against the wishes of teachers and its union. This district board is probably the government body least trusted by its constituents in Sonoma County. As stated by newly elected Board member Anne Ching (who defeated an incumbent), “There’s a lot of mistrust in this community around the school board...I think we have to be very careful and thoughtful about how we move forward.” 

One would think that an important move for community engagement and to build trust would be the formation of a search committee to conduct the search for the search firm and continue to liaise with the board for the recruitment of the superintendent. As the risk of getting into the weeds of another jurisdiction, I'll have my say as a private citizen and taxpayer (and with grandkids in the schools) about a search committee to illustrate my point. The committee could be composed of two of the five board members (at least one of the two, should be one of the two newly elected trustees), a member of the teachers’ union, someone or two from the Sonoma Valley Education Foundation, and one or two others from the community in general (maybe a former admired superintendent).

 School Trustee Anne Ching, at her first meeting when she was sworn in, tussled with the Board over specifications for the search firm RFP and the hiring process for the firm. As reported by the Sonoma Index Tribune: “Ching said she is uncomfortable with the timeline established for hiring a search firm, and wants to vet the firm, do reference checks, see a successful placement rate, and add some specificity to the request for proposal (RFP). She referenced that the past two superintendent hires were conducted by the same search firm, and those didn’t work out, she said. She asked if more time could be given to developing the RFP, but Cathy Coleman and other trustees pushed back. “I think we just need to move forward,” Coleman said. “A search firm is a search firm … unless you are turning over all of the power to them, I don’t think that it is so essential to do lengthy reference checks.”

Getting back to the search for the Sonoma Valley Hospital CEO, at our Board meeting on August 8, the next agenda item at the session was discussion of actions already undertaken informally to search for an executive search firm, with the implied mandate for the search committee to recommend a search firm to the Board no later than the date of our next regular meeting, September 3. During the discussion, it was reported that Requests for Proposals (RFPs) already had been sent to the following six firms: Spencer Stuart; Korn Ferry; Heidrick & Struggles; WittKieffer; Rokos Group; and Some & Associates. UCSF Health’s Manager of Executive Recruiting (Maritess Hochderffer, later on the committee) had been key in identifying and contacting the first four firms (all of national and healthcare industry stature), certain of which had quickly replied with proposals. The latter two firms were my recommendations in order to get proposals from smaller firms which specialize in healthcare in California and with a focus on district hospitals. It was understood by the Board, that the search committee was to make selections and actually interview two or three of the firms from which a final would be recommended to the Board for the engagement.

The search committee held its first meeting less than a week later on August 11 to get organized and set a timeline. Leading off the agenda, we brought back Don Whiteside, the retired executive recruiter who had briefed the Board at its retreat 10 months earlier, to brief the search committee on the ins and outs of its responsibilities. (We informally agreed that our compensation to Whiteside for this second session, simply would be a bottle of Sonoma Valley wine.) Again, there were committee members who had never participated in an a CEO executive search, but they had done hiring in the course of their own careers.

Essentially, the process which was adopted by the search committee to recruit a search firm and which in effect was already in process is illustrated by the exhibit below. This exhibit, and the others to follow, is from the presentation later made to the Board at its September meeting when the recommendation to contract with WittKieffer was made. As shown, the search committee at only its second meeting - moving right along - interviewed three firms, and made a final selection.

Actually the first step in the search for the search firm was the drafting of the request for proposal from interested parties. The RFP had been sent out to six firms we knew who might be interested. However, it was publicly available to any firm interested. And, I believe it was informally circulated. The RFP consisted of three parts: questions for the responding firm (the responses to which, we would make our selection for interviews); and secondly and thirdly, the CEO position summary, and required candidate qualifications (so the applicant firms would know the nature of the recruitment).

The RFP questions for the responding firms were:

1.   What experience (firm and individual) do you have in recruiting chief executive officers of community/rural hospitals? How many of these have been completed recently? In the past year?

2.   What is your success rate for placing CEOs of community/rural hospitals?

3.   Please describe any experience you have recruiting CEOs to community/rural hospitals that have an academic affiliation.

4.   Who within the firm will be responsible for conducting and leading your search? Who will be supporting the search? Please include team bios in your response.

5.   Describe an example of a recent search for a similar organization.

6.   How many candidates will you provide?

7.   Do you have any conflicts of interest /off -limits that you need to disclose prior to starting this assignment? How will this affect the outcome of this search?

8.   What is a reasonable timeline for completing the search and what are the key milestones? What kind of compensation do you think we will need to offer to be attractive to outstanding candidates?

9.   Provide a fee estimate including expenses and guarantees for the search.

10. Provide three references.

The search committee reviewed six proposals and decided on three search firms to interview. The interviews were conducted by Zoom. As like in most interviews, professional presence and personal engagement planned a role in addition to the content and story presented.

The CEO search committee in considering the three firms interviewed for its recommendation to the Board utilized an evaluation form it had devised to rate each firm. There were four criteria for the 1 to 5 ratings: 1) experience (results) past and most recently with CEO searches for including community / district hospitals; 2) work with academic medical center affiliates; 3) communication style, personal synergy, emotional intelligence, and professionalism; and, 4) capacity to understand and work with the Sonoma Valley community, and take community input. Plus, there was free-form space for an overall evaluation for each committee member to express the perceived competency, strengths, and any concerns. The (1 to 5) quantitative ratings were tallied and totals compared, along with review and discussion by the committee, including the interviews, of comments made in the overall evaluation.

The results of the committee's search process for a CEO search firm are displayed below. As a courtesy all the firms were thanked for their proposals.

As mentioned, the above process was presented to the District Board of Directors at its regular monthly meeting, September 3. What follows below are five additional slides which informed the Board of Directors of the reasons for selecting WittKieffer, the first three slides; fourthly, the expected milestones for the CEO search (the object of all of this); and finally the learnings for the overall search process from the search firm recruitment. Though some of this information might be regarded as proprietary (especially the pricing which from all the firms was geared to our particular situation, and the WittKieffer "approach"), this information was presented at a "public" meeting as defined by California law. Therefore, it is in the public domain. At this juncture, I will say that the expected milestones largely have been met, though we're behind only about two weeks because of covid-pandemic constraints.

The pricings offered - with minor variations - as displayed below were fairly comparable, including those from the three firms not selected for interviews. I would not recommend simply taking the lowest bidder in this kind of professional engagement.

A multi-phase approach is taken by most firms (with somewhat similar contact numbers), with the intensity of market coverage (recruitment) dependent on a firm's in-house capabilities and data-bases, and the client's interest in a nationwide or regional search.

Again, most firms indicated a six months project, and were not ready to say they could do it any faster. I know that this is the conventional and realistic expectation from other executive searches that I've been involved in. The search I conducted (with Don Whiteside), 10 years ago with a rigorous push on the search committee from me, took six months.

Below are the important learnings for the overall CEO search as of the Board meeting on September 3, 2020. It did turnout that Kelly Mather's last day was December 31. By Board action, CFO Ken Jensen was appointed Acting CEO. Early on and with Mather's four months over lap, we decided more by consensus discussion to try to get the new CEO on board no more than two months after her departure. Thus, we hoped to avoid hiring an outside "Interim CEO" which would have required its own vetting process.

When the recruited CEO is on board, there will be another article: Searching for the CEO.

Bill Boerum - [email protected] - +1-707-766-4329