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Good News, CEOs: You Really Do Matter

A recent Wall Street Journal article describes several studies linking the success of companies to the personal lives of their chief executive officers. Not that we didn't already know CEOs matter, but this study shows a leader's influence reaches well beyond his presence in the corner office.

One Denmark study found a link between reduced profitability and CEO-family deaths; another study showed a dip in stock performance after CEOs purchased exceptionally large homes. Although the studies focused on the performance of large public companies outside of healthcare, healthcare leaders weren't immune to researchers' scrutiny.

Tenet Healthcare CEO Trevor Fetter reportedly purchased a 10,000-square-foot mansion in 2005. Since then, Tenet's stocks are off more than 60 percent, according to one report (Tenet's spokesperson had no comment for the Journal). Researchers don't know why a company's profitability drops after the CEO buys a big home, but some theorize that these leaders spend more time writing checks than scrutinizing company financials.

Regardless of the explanations, this type of research hits a number of healthcare leadership hot buttons: executive compensation, peer monitoring, leadership development, succession planning. For example, companies across all industries have clamped down on lavish executive compensation packages. Hospital CEOs' raises actually went down in 2006, and even some executives have asked the question, "Do I get paid too much?" If the above findings are true, however, then the answer to that question might be no. If leaders matter this much, they should get paid for it. (The trade-off, of course, is that those leaders give up their personal privacy to receive a bigger paycheck.)

Leaders tend to think they're superhuman in the ability to shut off emotions, but maybe they're not as good at it as we thought. How can a leader effectively monitor his executive team's personal lives without treading all over their privacy? How do you ensure the emotional well-being of your staff? If, for example, there is a death in the CFO's family, does she have adequate time away from the office--and Blackberry--to cope? More important (from a business standpoint), have you trained a capable No. 2 to make decisions in her absence?

There's a fine line between concern and nosiness, but "What happens at home, stays at home" may not be the smartest mantra for business. If executives' personal lives really do affect the bottom line, you may want to know what your leaders are up to.

-Molly Rowe

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