Each year as a best practice health systems conduct a total executive compensation review, most often with an external consultant, to assure that compensation for each individual executive is competitive and reasonable.
But most health systems don’t assess the cost of the executive team as a whole, and they don’t make comparisons to other peer organizations regarding their “total spend” on executive talent. Peer group benchmarking data on the size and cost of executive leadership has not been readily available, and so it has been hard for organizations to answer “how does our executive team compare to our peers?”
In this time of decreasing volumes and reimbursement levels, board members and executive leaders, as careful stewards, are now asking for these kinds of comparisons to aid in:
· Planning for changes in organizational structure
· Assessing the need for adding executive positions
· Right-sizing after mergers and acquisitions
As margins get smaller, organizations with executive team sizes that exceed those found among peers might be at a disadvantage. Comparisons on team size and cost, when combined with assessments of performance relative to peers, can be instrumental in evaluating the return on a system’s investment in executive leadership.
Until now, data to provide guidance on executive team size and cost trends has been scarce. Gallagher Integrated has compiled a data set from a sample of large organizations with net revenues of $1B or more. We’ve quantified the total cost of, or spend on, an executive team, along with a set of proprietary ratios that normalize that total cost per measures of size or volume. Organizations submitting data for this analysis can use these ratios to assess their executive team structure efficiency through the comparisons of their ratios to the peer group ratios.
A complete customized ratio analysis is available upon request. For this, or for further information or questions, please contact Senior Consultant, Paula Robinson at firstname.lastname@example.org