More Senior Living CEOs Receive Incentive Pay

A large percentage of executives in the senior living industry will soon be retiring, meaning that succession planning and incentive compensation is more important now than ever, according to a survey recently completed by health care financial consulting and accounting firm CliftonLarsonAllen (CLA).

The survey, titled the 2015 LeadingAge-Chief Executives of Multi-Site Organizations Leadership Compensation Survey, provides data on executive compensation levels, trends and practices. It includes responses from 129 multi-site senior services organizations of various sizes from across the country.

Of those surveyed, 43% of the CEOs are already or will reach age 65 in less than five years, according to the report. The average ages of COOs and CFOs, the most likely candidates for succession, mirrored those of CEOs, meaning they would serve only a few years before their own retirements.


“This information suggests that now would be a good time for boards to focus on the evaluation of succession plans,” the report states.

As such, CLA outlines four courses of action that senior living providers can take to ensure smooth transitions.

Internal Succession: Developing programs meant to rotate people through different roles in an organization and promote leadership skills can help to establish internal succession.


External Hires: Carrying out an executive search would be the next logical step, if an internal candidate isn’t readily available. However, the process is time-consuming and challenging, not to mention competitive.

Outside the Industry: Though not ideal, leaders can be found outside of the senior living industry. This method would prove especially effective if the organization already has strong board leadership and efficiencies in place.

Strategic Affiliation: Rather than appoint someone new, many organizations are now exploring strategic affiliations as an option for transitioning leadership. Succession planning shouldn’t be the main reason for such a move, but it does stand to solidify executive ranks and build succession.

As part of succession planning, retaining current leaders proves crucial, and one way more organizations are doing so is through incentive pay.

“Effective succession planning depends, in part, on retaining top talent in a very competitive environment, while ensuring that the goals of the organizations are met,” the report states. “Incentive compensation can help boards achieve these goals, as well as provide concrete ways to evaluate performance.”

In fact, 46% of CEOs at the organizations surveyed received an incentive in 2015, according to the report. Generally, organizations garner the most value from executive compensation investment when labor costs are low and profit margins are high, but they also derive value when both factors are deemed high.

“It is clear that top performing organizations pay incentives more frequently and in larger amounts,” the report states.

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Written by Kourtney Liepelt

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