As health systems continue to face the pinch of tight margins, looming health policy overhauls, and the creep of nontraditional players to the market, hiring executives to lead nonprofit healthcare organizations requires the right incentives and compensation plans to retain them.
"I think that a lot of times when [providers] finally recruit [executives] and actually hire them, they're only able to do so because they're able to show that they have a compensation and benefits program [that is] appropriately positioned [for the executive]," according to Steven Sullivan, a managing director at Pearl Meyer.
Nonprofit provider organizations are under pressure to offer salaries to prospective executives that are comparable to other industries' wages. At the same time, health systems must account for the extrinsic and intrinsic motivations of leaders when offering executive compensation packages.
Motivations to work at nonprofit health systems are complex and intertwined. Intrinsically motivated leaders are driven by their commitment to the mission of the organization and healthcare. However, extrinsically motivated leaders are driven by outside influences, such as sizable salaries and performance-based incentives, Sullivan says.
Sullivan says that nonprofit health systems and hospitals often have executive board volunteers who are intrinsically motivated to work for the mission of the organization and expect their leaders to do the same. But this arrangement has contributed to a "conservative approach" to executive pay by providers, he says.
"A big part of the battle is becoming aware of the fact that you've got people working for you who might be more intrinsically or extrinsically motivated to be there," Sullivan says. "Try to be creative in thinking ways of connecting with them and taking advantage of that motivation."
Sullivan adds that health systems are at "the beginning of a period of change" that focuses on retaining leaders with variable pay programs.
Given the cross-pollination of executives who have been recruited into healthcare roles from other industries such as tech or banking and who might have more extrinsic motivations, healthcare organizations have had to change the way they've approached executive compensation. This includes offering compensation and benefit packages that are more consistent with what is standard in those other industries and appeals to extrinsic motivations, Sullivan says.