With occupancy on the upswing and recovery plans in place for the year ahead, the senior living industry’s future is clearer than at any other time during the pandemic.
But if recent trends are any indication, a substantial number of providers will be led into this new era by fresh executive leadership.
So far this year, three longtime industry leaders have announced their retirement:
- Pathway to Living CEO Jerry Finis
- Presbyterian Senior Living CEO Jim Bernardo
- Vi President Randy Richardson
And younger leaders are also going through transitions; for instance, Les Strech stepped away from being president of Thrive Senior Living to pursue a new opportunity in the industry.
I think conditions are right for even more senior leaders of large senior living companies to step away from their longtime posts in the months ahead. They will join a C-suite exodus occurring across multiple industries — a trend reinforced last week with the exit of Starbucks CEO Kevin Johnson.
Several factors lead me to expect this acceleration of leadership turnover in senior living:
- With occupancy on the rise and capital coming off of the sidelines, the industry is at a crossroads between recovery and growth, providing a natural window for leadership transitions
- The current era will necessitate new strategies, sometimes needing fresh leadership
- The forces driving CEO turnover in other industries also affect senior living
Crossroads between recovery and growth
After two years of intense challenges related to the Covid-19 pandemic, conditions look more promising for senior living operators.
Average senior living occupancy increased in the fourth quarter of 2021 to 81%, marking the second consecutive quarter of occupancy growth since the pandemic began, according to quarterly NIC MAP Vision data released in January. Large publicly traded senior living companies have reported similar gains in their portfolios in the months since.
And as operating conditions improve, some senior living operators are pivoting from crisis mode to growth mode.
With the industry at the crossroads between operational disruption and new growth, the present could be an ideal moment for senior living CEOs and other top execs to step away from their longtime roles.
In some cases, leadership transition planning was already underway at some large senior living companies when the pandemic hit in 2020, but Covid-19 put plans on ice until now.
For instance, Vi President Richardson told Senior Housing News that while he had been planning his retirement for some time, he didn’t want to step away until the company was on more stable footing in the wake of the Covid-19 pandemic.
And Richardson certainly was not the only senior living CEO considering retirement when the pandemic stuck.
A 2018 survey from specialty investment bank Ziegler showed that over 70% of CEOs at nonprofit senior living organizations planned to retire by 2028. As of the most recent annual LeadingAge Ziegler 200 report, average nonprofit senior living CEO tenure was slightly more than 10.3 years.
And while CEO turnover grabs headlines, expect other top leadership roles to also be in flux.
With the industry at the juncture between distress and recovery, many companies are seeking to “upgrade” their leadership roles, particularly at the mid-level, according to Eric Lesnock, managing director at national executive search firm Specialty Consultants, Inc.
“In 2019, you started to see or hear about senior executives that … put that in a succession plan to hire a new generation of leadership,” Lesnock told me. “What has happened is that the pandemic in 2020 has accelerated that.”
New strategies, new leadership
While there are many operators that have made progress recovering from the Covid-19 pandemic in recent months, there are also many that have not. That, too, could hasten the exit of executives as companies switch strategies or undertake a leadership refresh to improve results.
Even in cases where senior living operators aren’t struggling, many are implementing new models or technologies, or are working with partners that will help take the company in a new direction.
For example, Pathway to Living’s Finis said early 2022 presented the “right time” for his exit from the CEO role, given that the company was on better footing after the pandemic, and that it had just forged a new relationship with real estate investment trust Welltower (NYSE: WELL).
“Leadership was always going to change and grow in the organization, and frankly, Covid … kicked us into ‘senior housing 2.0’,” Finis told SHN in February. “I thought it was just the right time.”
Richardson is making his exit ahead of the company’s planned return to the rental market with a new community in Scottsdale, Arizona.
In the months ahead, more senior living operators will no doubt launch new strategies or initiatives aimed at capturing demand amid the recovery period. And as they do that, I believe some will look to new leadership to formulate and guide the efforts.
Other leaders might choose to leave their companies because they feel like this is a good time to drive innovation elsewhere in the senior living industry. One example of that trend at work was the departure of Thrive Senior Living President Les Strech, who left the operator to take the role of COO and managing principal at McNair Interests.
Burnout is another reason senior living executives might decide to step away from their current roles. After combating the pandemic, long-time CEOs might not feel up to addressing the staggering workforce challenges occurring across the industry.
This is already playing out in other industries that have similarly struggled with their workforces, with Starbucks (Nasdaq: SBUX), Domino’s Pizza (NYSE: DPZ), Wingstop (Nasdaq: WING) and Darden Restaurants (NYSE: DRI) all going through leadership transitions.
Starbucks notably is going through a unionization effort, but mitigating labor challenges is going to be a top order of business for all the new leaders of these companies, as various news outlets have pointed out. Addressing workforce practices will be a top order of business and a difficult challenge for new senior living CEOs as well.
Leaders are leaving in other industries
While the senior living industry is seeing a trend of executive turnover, it is not alone. Other adjacent industries — multifamily, commercial office, industrial — are seeing similar turnover trends, according to Lesnock. In particular, companies are looking to fill positions in capital markets, acquisitions, and development.
CEO turnover jumped 42% in the month of February as 151 top executives left their posts — the highest monthly total since January 2020, according to recent data from executive outplacement firm Challenger, Gray & Christmas. Nearly a quarter of those exits came from CEOs retiring.
Within the health care/products sector, 22 CEOs have left their posts so far in 2022. That’s just under the pace of a year ago, when 25 CEOs had left their positions. Within real estate, seven CEOs have exited so far in 2022, compared with just one at this time last year.
Like in the senior living industry, some of these departures are due to a more stable environment in the pandemic, according to Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc.
“As pandemic concerns subside somewhat with falling cases, leaders who have been in crisis-mode for the last two years may look for something new. As with many American workers, they may choose to retire or resign for other positions,” Challenger said in a press release about the company’s February CEO turnover report.
In some cases, CEOs are leaving their respective companies or industries for other positions, Challenger added.
As this executive reshuffle plays out, one upside is an opportunity to increase diversity in leadership ranks. So far in 2022, 25% of incoming CEOs have been women, which is up from 21% a year ago.
This trend may not be as strong in senior living; neither Finis nor Richardson is being succeeded by a woman, and other high-profile CEO appointments — such as at Sunrise Senior Living — also have gone to men. But at Vi, Tara Cope was promoted to executive vice president and chief legal and administration officer. And Presbyterian Senior Living is still on the hunt for Bernardo’s successor.
Senior living has a bad track record on diversity in senior leadership, and a terrible imbalance in how diverse boardrooms and C-suites are compared with frontline staff. I hope that as executive turnover occurs, providers take a concerted effort to improve this situation. This week, attendees at the NIC conference are encouraged to wear pink on Thursday to support the newly formed Senior Housing – Women’s Initiative. Such groups and gestures are important but companies must actually step up and seize opportunities to improve diversity, and I believe more opportunities are on the horizon.
With so many top executives leaving their positions across various industries, this might also be a golden opportunity for senior living providers to bring in top talent from other fields. But if providers do so, they should note that retaining this type of talent has proven difficult, with Kris Engskov, Cindy Kent and Aras Erekul recently moving on from senior living after joining from other sectors. As is the case with diversity, companies that bring in talent from other fields must make good on pledges to welcome new perspectives and innovate, rather than being tied down to typical industry practices.
And providers should recognize that wooing top talent into the industry could come at a price. Competition for CEOs is fierce, both inside and outside of the senior living industry, according to Lesnock. And companies would be wise to invest “top dollar” in new CEOs.
But despite ongoing financial pressure, ponying up for a high-caliber CEO could be money well spent, considering the industry’s challenges and opportunities in the dawning era.
“Companies need to address the labor issues, they need to address how to hire talent and how to increase their bench strength,” Lesnock said. “The next couple of years are going to be just as valuable as the last few years.”