By Steve Moran
Partly inspired by a panel on employee engagement at the NIC 2024 fall conference and conversations with senior living owners and operators, I am more and more convinced we are largely mismanaging the role of executive director in senior living.
There is a near absolute truth that when you have an outstanding executive director, you have outstanding performance by pretty much any metric you want to look at. Occupancy, length of stay, staff retention, and that all-important operating margin. It is also true that if you accidentally put a not-so-good executive director in a great community, they can run it into the ground in a shockingly short period of time.
You Get What You Pay For
I have long believed that if we paid executive directors more money, we would have more higher performing communities. The pushback is that right now, there are outstanding executive directors leading high performing communities at today’s rates.
Those high performing executive directors can improve annual cash flow by hundreds of thousands of dollars per year, most of which flows to the bottom line. This in turn means a massive increase in the asset value of the community.
I would argue that just because you can get a few outstanding executive directors to work for more or less the same pay as run-of-the-mill executive directors, that does not mean wages don’t need to go up. In fact, it may mean you are simply taking advantage of people who are creating tremendous value for their owners because they love the work or do not really understand their value.
The Case for Higher Pay
I know a couple owners/operators who do not use a traditional management company and instead pay their executive directors crazy amounts of money. I am talking $300,000 to $400,000 per year. Numbers that make your head hurt.
The most obvious reason it works is they are skipping the management fee, but it is more than that. They also don’t need a bunch of regional and corporate specialists that serve as additional resources and checkpoints for the local staff. They will also decrease staff turnover, create more viral word of mouth marketing, and increase length of stay. While harder to quantify, those mean higher margins.
It also makes it a lot easier to not tolerate ineffectiveness at $300,000 a year. You will be a lot more careful in hiring practices, and you will be more aggressive about firing or helping a leader get better. Most importantly, you will simply get better people. They will, at least at first, need to mostly come from other industries.
A Word for Executive Directors
As I write this article, I realize it has great potential to insult a bunch of you who really want to be great executive directors, who feel like your organizations are not supporting you the way they should (which may be true) or that it is a market or a building problem (which could also be true).
But I also know that nearly every one of you has the potential to be one of those outstanding executive directors by working on being better. Learning everything you can about leadership. Finding an outstanding executive director to model or mentor you.
Then when you hit that “outstanding” status, you can and should demand more money — a lot more money — and if your existing company won’t give it to you, then go find a company that will pay you what you are worth.
And if you have decided that’s not you, hmm … maybe you should find another job. Regardless of all that, most senior living organizations will stick with status quo, and so you should be fine.