By Jack Cumming
Brookdale is struggling, and so the senior living industry may be as well. The industry is struggling to maintain its past while the customers are seeking something new. Brookdale, too, is entrenched in self-destructive practices with little imagination.
Right now, Brookdale’s owners are deciding between one team of directors and another. They’re both claiming to be the path to shareholder value. The squabble has lifted the share price somewhat, as some market makers believe that greed will prevail to benefit those with shares. Forgotten in all this avarice are the customers who pay the bills and fund the shareholder value.
Brookdale’s Visibility
Brookdale is a publicly traded corporation whose value can be tracked from day to day. Most of the senior living industry is not-for-profit. Its value is hidden from view except for a glimpse through a firm’s IRS 990 Form, which often appears years after the fact. The simple truth is that investor-funded enterprises are more accountable than not-for-profits, and not-for-profits are more accountable than government enterprises.
If you work for a not-for-profit, or even if you’re the CEO or CFO of a not-for-profit, you probably don’t have current information about where money is going and what value the beneficiaries are receiving for the expenditure. A for-profit corporation is run to bring value to customers. A not-for-profit organization is run to bring value to its beneficiaries, who, in the case of market-priced senior housing, are the residents.
You may think that residents can’t be the beneficiaries because they aren’t financially distressed if they can afford market-priced housing. Good point. But Revenue Ruling 72-124 found that old age in itself was distressing and was, therefore, charitable enough to warrant IRC 501(c)(3) not-for-profit classification and tax exemption. Not-for-profit qualification doesn’t have to be what you might expect. It’s whatever the government rules it is.
The New Resident
It’s common for industry pundits to write and speak of the new consumer. The message is that the baby boomers are coming, and their sheer numbers will bring prosperity no matter what, but that they also have different notions of what they want. That’s a run-on sentence that reflects the run-on thinking of many industry executives and boards.
Anecdotal information often precedes quantitative, after-the-fact statistical data. Anecdotally, Baby Boomers are much more skeptical than preceding generations. That should be expected. After all, this is the generation that overthrew moral condemnation of premarital relationships; objected to the nation’s leaders’ pursuit of a war in Southeast Asia; and changed forever the world of the conforming Man in the Gray Flannel Suit. Boomers don’t like to conform except to each other.
Slow to Adapt
Like many other organizations offering senior housing and communal living, Brookdale has not kept up with the preferences of this new generation. Ironically, though, it appears that before her ouster by a questionable board, Cindy Baier was making progress. She appeared to have recognized the reality of the generational change, and her efforts were beginning to pay off in a reduction in the entry age for new residents, not to mention gradual occupancy improvement and imaginative new programs to attract younger residents.
One has to suspect boardroom intrigue that favored individual pretensions and ambitions over positive leadership. It’s hard to find truthful accounts of board malpractice, though history offers much wisdom, including the intriguing account of Talleyrand at the Congress of Vienna. Whether the interim CEO will prove to be Talleyrand or something more sinister remains to be seen. The quest for corporate success can be no less demanding than the quest for a new world order when the old order collapses. There is much to be learned from history.
A New Generation in the Boardroom
Brookdale is very public about everything. As a publicly traded corporation, it has to be. The question, therefore, is whether Brookdale is a bellwether for the industry as a whole. Most of the industry is less transparent than Brookdale. If Brookdale is so unstable that it needs recurrent changes in the C-suite, maybe no one is safe from intrusive outsiders. That’s alarming. The Brookdale Board pulled Cindy Baier from her position instead of supporting her with guidance. That was precipitous and may have been unwarranted.
I suppose that it’s simply an extension of the common-sense reasoning about a new resident culture for a new generation, to conclude that the management culture is also changing. After all, today’s managers and board members are boomers themselves. That may require responses to ensure that a tendency to be meddlesome doesn’t produce negative unintended consequences.
When a corporation faces the kind of disruptive critique that has deluged Brookdale, to whom can we look for the steady hand of maturity? Brookdale’s residents, employees, and shareholders deserve better than what they’re being given. Is this the same spirit dominating the industry in all its forms of organization? Where are the grown-ups to put mission and customers first?
