Why we sold the franchise

Turbulence

Almost 12 months since my last entry.

I find myself on a plane headed back to Maryland after meeting with my partners in SoCal about my short- and long-term plans now that the sale of Doctors Express has been finalized.  We announced the sale of the franchise business to American Family Care (AFC), based in Birmingham, AL a few weeks ago.

What took me away from doing what I love with and near the people I love in the place I love?  One of my best friends and Ensign partner, MikeD, started a new venture within the org. in a new sector of healthcare – urgent care.  He had already brought on a couple urgent care veterans to accelerate his learning curve as he planned to build several centers de novo.  Quickly after the venture got off the ground, their plans expanded into a couple new paths including the acquisition of the only urgent care franchise in the country – Doctors Express, based in Maryland.  Mike asked me to lead that business and they made it worth my bet.

Personally, it was a high risk/high reward proposition.  Much to my surprise (and the surprise of my family and friends and colleagues) my wife and I decided to go for it after just 4 days.

By the time I could transition my role to “the upgrade” BHulse, my new partners were already underway with Doctors Express.  10 months after I joined … at our annual conference in March in Vegas, I told the franchisees that the best word that I could think of to describe the last 12 months is TURBULENT.  Turbulent because even though there were bumps along the way, the plane kept moving forward and the system made huge improvements in terms of number of centers, patient count, and revenue.  2013 is definitely poised to continue its upward trajectory.

So why sell?

Good To Great

You have to understand Ensign’s culture to understand the answer.  The book Good to Great teaches a lot of the same values and strategies that have been part of the Ensign Way for years …

“The pivot point in Good to Great is the Hedgehog Concept. The essence of a Hedgehog Concept is to attain piercing clarity about how to produce the best long-term results, and then exercising the relentless discipline to say, “No thank you” to opportunities that fail the hedgehog test. When we examined the Hedgehog Concepts of the good-to-great companies, we found they reflected deep understanding of three intersecting circles: 1) what you are deeply passionate about, 2) what you can be the best in the world at, and 3) what best drives your economic engine.” (source)

hedgehog and fox

Mike and I (both 11 years with Ensign-related businesses) concluded that, in spite of the promising future for the Doctors Express franchise, being a franchisor was a significant departure from our hedgehog.  I found myself in the peculiar position of recommending that we sell the business I lead – making my future uncertain – b/c I believed it was the 1) right thing for Ensign and 2) the right thing for the franchisees.

A cornerstone to the culture at Ensign is the independent/interdependent nature of the facilities, agencies, and companies.  Franchising requires strong (sometimes rigid) corporate control to retain brand standards among franchisees who bring a vast range of values, motives, and competencies to the system.  At Ensign, the word “corporate” is a ‘bad word.’  I constantly wrestled with the misfit between my/our approach/culture and the approach/culture a franchise system requires.

square peg round hole

Fortunately, we became acquainted with AFC and quickly saw their huge corp. infrastructure and decades of urgent care experience AND TRADITIONAL CENTRALIZED CORPORATE structure to be a better fit for franchising.  Could we have continued the upward ramp of the last 12 months?  Yes.  No doubt.  I think many, if not most, organizations are driven principally by the numbers.  In our case, no matter how pollyannish this may sound to outsiders, Ensign’s success is largely attributed to our hedgehog-based discipline to say no to seemingly great financial opportunities that are only attractive because of the numbers but do not fit with who and what we are.

I admire many of the franchisees and staff I worked closely with and I will be cheering AFC and Doctors Express on for years to come.

Gratefully, I will be returning to what I know and love: senior care/skilled nursing. In the coming weeks & months I’ll be writing about lessons learned 1) at DRX and 2) from returning to skilled nursing.  Good to be back …

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Sister Mary Was Right

Sister Mary Jean Ryan
Sister Mary Jean Ryan

Several years ago, Sister Mary Jean Ryan, Chair/CEO, SSM Health Care spoke to a young, growing, for-profit nursing home company [see her bio here].  She leads SSM, the first Malcolm Baldrige award winner in Healthcare.

SSM’s story is impressive: The system began with five religious sisters who journeyed to St. Louis in 1872 from Germany to be of service to people in need. In their early ledgers, the sisters listed patients who could not pay for their care as “Our Dear Lord’s.” To this day, SSM ensures discounts for people without health insurance. Based in St. Louis, the system is sponsored by the Franciscan Sisters of Mary and owns, manages and is affiliated with hospitals and nursing homes in four states: Wisconsin, Illinois, Missouri and Oklahoma. In 2009, more than 2 million people came to us for care.

I was at that meeting several years ago.  She spoke for about 45 minutes.  I don’t remember what she spoke about, except for one key statement/theme.  Sister Mary said …

“No Margin, No Mission.”

Another way of putting that is “No Profit, No Purpose.”  There’s a persistent debate in long-term care about what’s better, for-profit (FP) or not-for-profit (NP).  I’ve seen arguments from the NP group that their care is superior because they don’t have to meet shareholder ROI expectations.  The implication is that FP providers will cut needed services down to the bone and sacrifice quality care in order to make more money.  I’ve seen arguments by the FP group that NP providers take care of such a low-acuity patient base that comparing the two provider types is apples to oranges.  “How hard is it to have great surveys and clinical outcomes when you’re only taking care of long-term care residents?”

It’s not about For-Profit or Non-Profit

At times the NP vs. FP providers seem worlds apart.

They think they’re so different.

But, they’re not.  In order to be built to last, both NP/FP operators need to follow Sister Mary’s guidance:

  1. Be committed to quality care (MISSION)
  2. Make money (MARGIN)

I now see two types of operators.  The two types are not FP and NP.

The two types are the ones who are Built to Last (Margin & Mission) and those who are being purchased by the Built to Last operators.

Pat Lencioni: Stooping to Greatness

I’m a fan of Pat Lencioni.  I’ve used his ‘5 Dysfunctions of a Team’ and ‘3 Signs of a Miserable Job’ many times over the years.  While he certainly points to ‘things’ to watch and focus on as a leader, he also subtly makes the point that the influence of the leader is great.  His December newsletter (below) makes that same case — without blatantly making it.  The leader(s) of the organization’s personality (passion, measurements, values) has a direct impact on the organization s/he leads.

I’ve become far less worried about having ‘secret sauce’ stolen b/c, at the end of the day, it’s the people living and executing that secret sauce that really makes it happen.

It’s this SOFT stuff that separates the good from the great.  Anybody can grow census.  Anybody can manage expenses.  Anybody can provide adequate care.  But, to become great takes a concerted effort to synthesize the values & desires of a leadership team into a common mission and way of work.  And then … to stick to it no matter what.

Pat’s December newsletter:

Stooping to Greatness

Earlier this year I had the opportunity to spend time with the CEO of one of America’s most successful companies, a legendary organization known for its employee and customer satisfaction, as well as its financial performance. I attended their company’s management conference, listened to various presentations about their culture, and the extraordinary, homey and sometimes slightly wacky practices that distinguish them from their competitors.

Overwhelmed by the organization’s simple and powerful behavioral philosophy, I asked the CEO a semi-rhetorical question. “Why in the world don’t your competitors do any of this?” The CEO thought about it for a moment and said, “You know, I honestly believe they think it’s beneath them.”
And right away, I knew he was right.

After all, every one of those competitors, the vast majority of whom are struggling, knows exactly what this company does, how it works, and how much it has driven its financial success. The company’s cultural approach has been chronicled in more than a few books. And yet, none of them tries to emulate it. In fact, based on numerous interactions I’ve had with employees who work for those competitors, I’d have to say that their attitude is often dismissive, even derisive, toward this company and its enthusiastic employees.
And this dynamic exists in other industries, too. A fast-food company I know has remarkable customer loyalty, as well as unbelievable employee satisfaction and retention, especially compared to the majority of their competitors. The leaders and employees of the company attribute most of their success to the behavioral philosophy and attitude that they’ve cultivated within the organization, and the unconventional yet effective activities that result.

One example of that philosophy is the action of the CEO, who shows up at grand openings of new franchises where he stays up all night with employees, playing instruments and handing out food to excited customers. Few CEOs would be happy, or even willing, to do things like this, but this executive relishes the opportunity. These, and other activities that most MBAs would call corny, are precisely what makes that company unique.

This happens in the world of sports, as well. There is a well-known high school football team where I live that is ranked near the top of national polls every year. They play the best teams in the country, teams with bigger and more highly touted players, and beat them regularly. The secret to their success, more than any game strategy or weight-lifting regimen, comes down to the coach’s philosophy about commitment and teamwork and the buy-in he gets from his players. That philosophy manifests itself in a variety of simple actions which speak to how the players treat one another on and off the field. For example, players pair up every week and exchange 3×5 cards with hand-written commitments around training and personal improvement, and then take responsibility for disciplining one another when those commitments aren’t met.

And yet, whenever I explain this and similar practices of the team to other coaches who are curious about their success, I encounter that same sense of dismissiveness. They get a look on their face that seems to say, “listen, I’m not going to do that. It’s silly. Just tell me something technical that I can use.” As a result, few teams actually try to copy them.

Some skeptics might say, “come on, those companies/teams are successful because they’re good at what they do.” And they’d be right. Those organizations are undoubtedly and extremely competent in their given fields, and they have to be in order to succeed. But plenty of other organizations are just as competent and don’t achieve great levels of success, and I honestly believe it’s because they’re unwilling to stoop down and do the simple, emotional, home-spun things that all human beings — employees, customers, players — really crave.

What’s at the heart of this unwillingness? I think it’s pride. Though plenty of people in the world say they want to be successful, not that many are willing to humble themselves and do the simple things that might seem unsophisticated. Essentially, they come to define success by what people think of them, rather than by what they accomplish, which is ironic because they often end up losing the admiration of their employees and customers/fans.

The good news in all of this is that for those organizations that want to succeed more than they want to maintain some artificial sense of professionalism (whatever that means), there is great opportunity for competitive advantage and success. They can create a culture of performance and service and employee engagement, the kind that ensures long term success like no strategy ever could. But only if they’re willing to stoop down and be human, to treat their customers and one another in ways that others might find corny.