The MBAs Strike Back: Executive Professionalism & Hospital Performance

• In Event: Performance Management and Performance Information

Abstract

Do executives’ professional backgrounds reflect organizational priorities and performance? This study analyzes the relationship between hospital Chief Executive Officers’ (CEOs) professional backgrounds and their organizations’ performance. Specifically, we compare health and financial indicators for hospitals whose CEOs are physicians with those whose CEOs hail from administrative backgrounds.

If professionalism shapes executive behavior significantly, then organizations whose executives belong to a particular profession may be expected to perform in ways that reflect that profession’s priorities. Extending theories of professional isomorphism to executive management, Teodoro’s 2014 “When Professionals Lead” found that utility organizations whose Chief Executive Officers (CEOs) were engineers enjoyed stronger water quality performance than similar organizations led by non-engineers. The first study to analyze public organizations’ performance as a function of CEO profession, Teodoro attributed the observed outcomes to the norms and values associated with professional engineering. But Teodoro (2014) analyzed a single profession (engineering) and a single dimension of performance (water quality), and so offered no evidence of differences across multiple professions or tradeoffs in organizational priorities.

This sequel—“When Professionals Lead 2: The MBAs Strike Back”—revisits the question of executive professionalism with an analysis of hospital performance. If hospital performance reflects an executive’s profession, then hospitals whose CEOs are physicians are expected to enjoy stronger health performance than those with CEOs from other professions, owing to the medical profession’s devotion to health. Similarly, CEOs with business, public, or health administration backgrounds are expected to emphasize efficiency. Our empirical subjects are 265 California acute care hospitals. Employing an original dataset on CEO profession, we find that, consistent with expectations, physician-led hospitals achieve higher average ratings on Medicare’s 5-star scale. Meanwhile, hospitals whose CEO have administrative backgrounds have lower salary and administrative costs. However, we find no evidence of correlation between CEO profession and clinical care costs. Taken together, these results offer strong evidence of a link between executive professionalism and organizational performance.

Authors

• Manny P. Teodoro, Texas A&M University

• Austin McCrea, Texas A&M University