By Steve Moran
The discussion touched on who is really responsible for the quality of the operations in senior living. Way back when it was pretty simple, someone owned a senior living company and using their own money and maybe some investor money, they got a mortgage and bought or built a community. The owner/operator controlled everything, taking little if any input from their investors or mortgage holders.
This is why operations are so difficult. Today you, more often than not, have a mix of players who have an economic stake in the operations of a community and frequently get involved in operations a little bit to a lot. So who the operator is becomes a complex equation.
My simple view is that the operator is ultimately the person or people who determine the operating priorities for a senior living community or company. It is often a mix of the economic owner (private equity firm or REIT), the debt holder, and the management company. In theory, they all want the same three things:
- A good bottom line profit
- A great program
- A great work culture
Then there is one other player, the executive director. And if you want to be more precise, you need to factor in regional leadership.
At the highest level “management/operations” sets the operating tone, and that tone turns into execution at the property level. And what makes it so complex is that any of these 4 things can occur:
- Great operational philosophy (tone) and great execution at the property or community level. When this happens, you have great financial results, happy residents, and happy team members.
- Mediocre operational philosophy (or worse) and mediocre execution (or worse). This often means barely surviving financially (or sometimes not surviving), lots of staff turnover, lots of resident unhappiness, and great regulatory risk.
- Great operational philosophy and poor execution which equals mediocre or worse results. This typically means management is slow to recognize and deal with poor local leadership. The results will not likely be quite as bad as scenario 2, but they will be ugly.
- Mediocre operational philosophy and great local leadership, which leads to better than average results. You might ask why great local leadership would stay with a mediocre company. It turns out there are lots of reasons. A spouse’s job, they love the town they live in, they have figured out how to work the mediocre management system, or something else.
Ultimately what our industry needs more than anything else is an investment in upping the leadership game. This means investing in expensive PROFESSIONAL leadership training and coaching at all levels. It means creating great leadership tracks and recruiting college graduates into those programs. It sounds expensive but it is the cheapest dollars one can spend. If serious leadership development at all levels increases your occupancy from 85% to 95% what does that do to the capital value of that asset? This is worth thinking about.