Mergers, Acquisitions, and Hospital Leadership Styles
National healthcare expenses continue to rise and are expected to reach 18% of the US GDP in 2020 (Mikulic, 2020). To reduce costs and improve efficiencies, mergers and acquisitions have become quite prevalent, and in some cases, forcing leaders to move between profit sectors. For instance, a nonprofit hospital may be purchased by a for-profit system resulting in the leader transitioning to a new profit model. As these transitions are occurring, does the leader need to adapt their style? Is there any difference in leadership styles between nonprofit and for-profit hospital administrators? That is the question I sought to discover with my research entitled Exploring Leadership Styles in Nonprofit and For-Profit Acute Care Hospitals. Hospital leaders were asked to complete a survey that focused on identifying their tendency towards transformational, transactional, and passive avoidance behaviors with 146 leaders responding. While I learned a lot about hospital leadership, this article will focus on the impact on leadership styles due to a merger or acquisition.
Overall, the research revealed while there were subtle nuances and differences in the leadership styles, there was no statistically significant difference in the nonprofit or for-profit leader’s tendency towards transformational leadership. Regardless of the profit model, healthcare tends to attract people who want to help people, which may lend leadership behavior towards a more transformational style. There was a slight difference in transactional leadership tendencies with the for-profit leaders having a slightly stronger tendency to this style. Regarding passive avoidant behaviors, there was a statistically significant difference with nonprofit leaders scoring themselves the lowest, for-profit leaders scoring the highest, and those with experience in both sectors scoring in between the nonprofit and for-profit leaders.
Focusing on survey data related to mergers, 46% of the respondents had not experienced a merger, 7% had been through a merger within the last year, 26% had been through a merger within the last 1 - 2 years, and 21% had been through a merger 3 or more years ago. Most of the respondents scored near the survey norm in each category except for passive avoidant behaviors, which showed there was a statistically significant difference in their leadership tendencies based on the leader’s merger and acquisition experience. Leaders who experienced a merger or acquisition in the past year scored lower in passive avoidant behaviors indicating they are more likely than their peers to address issues or concerns as they arise. While not statistically significant, this same group scored themselves higher than the survey mean in transformational and transactional behavior. Perhaps the merger or acquisition heightened their focus on their leadership behaviors overall. However, it was equally interesting to learn the group that scored the highest in passive avoidant behaviors, indicating they were less likely to address deviations in performance (and it was statistically significant), were the leaders who had been through a merger or acquisition within the last 1 – 2 years.
The question is why. Why do leaders with very recent merger and acquisition experience focus on demonstrating a stronger focus on transformational and transactional behavior while reducing their tendency toward passive avoidant behavior? After a year or more of an acquisition, why does a leader focus less on passive avoidant behaviors and less on addressing issues quickly? To find the answers, I interviewed 20 healthcare leaders and discovered thoughts on the trends but no real answers. Some believe when leaders are going through a merger, they are unsure of the new expectations and try to excel in every element of leadership demonstrating a strong commitment to inspiration while obtaining operational results. Some believe it takes a strong transformational leader to successfully bring a team through a merger, and those leaders who have transitioned successfully, demonstrated their ability to lead. While others believe once a merger or acquisition is complete, often there are clear accountability measures in place where the “system” identifies and addresses the challenges or performance quickly, making addressing the issue from a leadership perspective much more automatic. Hopefully, there will be more research on the impact of a merger or acquisition on leadership styles as there is still much to learn.
If you are interested in receiving a summary of the research to include the similarities and differences in leadership styles between profit models, click here. If you are interested in receiving a full copy of the dissertation on Exploring Leadership Styles in Nonprofit and For-Profit Acute Care Hospitals, click here.
Mikulic, M. (2020). U.S. health care expenditures as a percentage of GDP 1960-2020.