Cohealth splurged on a recruiter. Then it chose an internal applicant

Four months after the federal government pledged $1.5 million in emergency funding to help the crisis-laden community health organisation stay afloat, cohealth paid a recruitment firm more than $65,000 to find it a new interim chief executive, before ultimately hiring an existing employee who was the only applicant interviewed.

The prominent local health provider operates general practitioner, counselling and pharmacy services for low-income residents across Collingwood, Fitzroy and Kensington and has been plagued by severe financial and management issues. Free medical services and its Collingwood clinic were on the chopping block last year, but were saved following extreme community backlash and a last-minute federal funding pledge.

Further spending can now be revealed during the recent search for the organisation’s interim chief executive, Kate Gillan.

A confidential proposal from Melbourne-based recruitment agency Watermark Search International – seen by The Age – was prepared for cohealth in March.

In a projected breakdown of costs, Watermark offered cohealth a discount from its standard fee of 25 per cent of the chief executive’s first-year remuneration package (which it estimated to be between $112,500 and $122,500 in this instance) to a fixed fee of $65,000 plus GST – bringing the total proposed bill to $71,500.

Watermark’s 51-page-document cites the reduced fee as an acknowledgement of the organisation’s recent financial difficulties.

“We understand the critical nature of this appointment and have a genuine commitment to excellent healthcare leadership. We would welcome the opportunity to be a long-term partner to cohealth,” the Watermark proposal reads.

A cohealth insider with knowledge of the recruitment process, but not authorised to speak publicly, said that the fee was far too expensive for a company experiencing significant financial issues.

“In the middle of a crisis, they paid a recruiter $65,000 to appoint an internal candidate. That is poor stewardship of our money,” they said.

A spokesperson from Watermark confirmed that the firm was engaged to conduct a search on behalf of cohealth, but declined to confirm their fee.

“The appointment process was supported by market insight and a thorough interim search process conducted with appropriate diligence,” they said.

Internal cohealth documents indicate that Watermark initially scheduled interviews with three approved candidates on behalf of the community health organisation. But following the resignation of the then-chair Sam Sondhi, the recruiter scrapped these applicants and instead recommended the “strongest immediately available candidate” – Gillan.

According to internal documents seen by The Age, Gillan – who was already employed at the organisation – was the only candidate put forward by the recruitment firm.

The Victorian Department of Health – one of the external bodies consulted throughout the appointment process – indicated its preference for an alternate candidate to Gillan.

However, the cohealth board cited immediate leadership requirements and appointed Gillan to the interim position in July, with a nine-month contract and a $488,000 total annual remuneration package (the top end of the salary range outlined by Watermark).

A cohealth spokesperson declined to answer questions regarding the recruitment fees or appointment of an internal candidate. They said that Gillan was an experienced executive with a strong track record in reform, governance, strategy and operational performance.

“Cohealth engaged [Watermark] to recruit an interim chief executive officer to provide experienced and stable leadership for nine months while recruitment for the permanent CEO position is undertaken,” they said.

A Victorian Department of Health spokesperson said it “remains focused on supporting cohealth as it implements the recommendations from the independent review”.

A spokesperson for the federal Department of Health, which was also consulted regarding the interim executive search, said decisions were ultimately a matter for the board.

The search for a permanent chief executive will commence next year, with Gillan’s contract due to end in April.

Gillan was approached directly for comment.

The high recruitment fees are the most recent accusations of overspending at the well-known health organisation.

The Age previously reported that across the last eight months, the not-for-profit was spending over $1 million on senior staff salaries and crisis communication fees.

Last month, cohealth’s board also underwent a significant overhaul when, on September 23, three directors officially vacated their positions and six new people were appointed onto the nine-person board to create “an entirely renewed executive leadership team”.

The board was previously on the precipice of being replaced by a state administrator following an independent review that chastised the organisation for severe financial and management failures.

Board monitor Chris Altis was also appointed by the government to the organisation in August for an initial 12-month term.

Internal cohealth communications indicate that a gift from the luxury Danish designer Georg Jensen was suggested as a potential thank-you present for the outgoing directors. A cohealth spokesperson declined to answer questions asked by The Age about gifts provided to the outgoing directors.

“All [directors] are committed to guiding a refreshed cohealth through its next chapter as the organisation continues to respond to the recommendations of the Independent Review into its GP services,” they said.

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