By Jack Cumming
Senior housing is a cause – the sheltering of the elderly – but it’s also a business. These twin realities sometimes conflict with each other. But, if senior housing is to accomplish its primary mission, it has to be financially attractive. Even tax-exempt enterprises, aside from any philanthropy they attract, are dependent on customer revenues to stay in business.
The Business Side of Senior Housing
For a moment, let’s set aside the positive role that senior housing plays in the lives of the aged and focus on the business side. The one constant that I hear from successful operators is that investments in senior housing must be “patient.” They mean that an enterprise can require ongoing investments for many years before results turn positive.
Patience is difficult for publicly traded companies to achieve. Investors follow stock prices from day to day, some even more often, and trading with microsecond timing has now intruded into our public capital markets. This is a challenge for large enterprises like Brookdale, which are pressured by investors to lift share prices even at the expense of the principal business purpose – i.e., better lives for seniors.
Learning from Family-Owned Businesses
Many senior housing businesses are family-owned and operated, and they are a model for how patient capital can thrive. Still, little has been written to help guide such enterprises. Family businesses also tend to foster deep bonds of loyalty among the family, those they serve, and those they employ. Moreover, the family’s reputation is bound up in the reputation of the business. These are desirable attributes for any business, though the intensity is greater when a family is involved.
Board members and executives of more dispersed ownership businesses have similar responsibilities but without the intimate associations that come with family ownership. The business and financial lessons that apply to senior housing are found in other industries, so it’s helpful to look beyond the obvious. I’ve been reading a book about such a business, Back to Beer… and Hockey: The Story of Eric Molson,” by Helen Antoniou, and there are lessons throughout the book from which any business can benefit.
For instance, on not micromanaging a CEO, “As [family] chairman, I am CEO-centric. It’s one of my basic principles. But what do I do when the CEO is driven by his personal agenda and letting hubris cloud his better judgment?” (Page 183) This is not a judgment that only families need to make. Any Board of Directors has to know when to counsel, when to support, and when to pull the plug.
What Beer Can Teach Senior Housing
One of my peripheral friends in college came from a family of brewers. I say “peripheral” because, while I admired him for his modest wisdom, I doubt very much that he remembers me today. The book I’ve been reading is a book about him. It’s a book of love, written by his very perceptive daughter-in-law, but most importantly, it’s a guide to good business leadership.
The author is a student of human behavior, what works and what doesn’t. The principles articulated in the book apply directly to senior housing as to most any business that looks to the long term. Grab a flagon of beer, settle into a comfortable chair, and prepare for a good read about lessons learned and how to thrive.
Here are five lessons that I deduced from my reading: (1) Business requires patience but patience is not infinite; (2) Don’t let the family (with its commitment to integrity, quality, and performance) be pushed out; (3) Don’t sell out your family; (4) Stay with the business you’ve mastered; and (5) Keep the long view. Here are some quotes from the book to whet your appetite for more.
- “He would hear out all the opinions around the table, first, waiting to see if his idea was expressed by someone else, and only then, if it wasn’t, would he speak up.” (Page 19)
- Asked, what are the basics to be a good owner: “One, you understand and closely monitor the business. Two, you make sure you have the right CEO in place, you support him – or her – and you let him do his job. You can’t interfere. Three, you help define the company’s mission and approve the strategies to reach its objectives. Four, you promote the highest standards of ethics and integrity. And you do that by setting the right example. No taking advantage of your control position, no nepotism, no crazy and unjustified compensation schemes, none of that . . . decisions should be made in the interest of all the company’s stakeholders.” (Page 98)
- On management style: “Observe attentively, thoroughly digest information, scrupulously analyze the options, and only then, act . . . this way is not very glamorous. It is, however, powerful.” (Page 110)
- He knew the impact of his family position. “An offhand remark by him would send troops running: ‘Oh,' [the family head] said, 'we should do it this way.’ It could be very disruptive. Worse, if taken too far, it could stifle others’ initiative and creativity – the entrepreneurial spirit would be lost. So he often chose to stand back and not say a word.” (Page 138)
- “’We used the word “clones” in those days,’ he says. ‘We kept replacing the CEO with a clone of the previous CEO, so we got nowhere.’” (Page 153)
- “The job of a CEO is complex (to say the least). Not only do you need to excel at building the company’s future through vision, strategy, deal-making, and capital allocation but you also have to manage its present success by handling multiple stakeholders, exercising outstanding team leadership, and ensuring the flawless execution of operations.” (Page 193)
That’s just a sampling. Despite these excerpts, this is not a book with adages for excellence. It's a book about the people and politics of business and that's what makes it fascinating. Mastering the art of enlisting people in a common cause is the secret for organizational success. There’s much wisdom embedded in the story of this family’s experience with its core business. It’s a pleasant read. It’s also a valuable read for everyone who loves business and the contribution that business excellence, innovation, and integrity make to our society.