A company’s organizational structure is more than just a framework for establishing who does what and who reports to whom. Ultimately, it can make or break a company’s ability to deliver on its promises to customers. Senior living executives weigh in on what’s working for them.
Leading providers agree that to be effective, the focus of the senior living model must be local. The flatter the organization, they say, the better. Although the corporate structure necessarily evolves as a company grows, the unwritten legend on the organizational chart remains the same: Keep it flat and keep it local.
Different Sizes, Same Roots
“Whether five communities or 500, we are a group of local businesses built upon the foundation of our frontline team members. That’s critical to realize,” says Daniel Schwartz, senior vice president of field operations for McLean, Virginia-based Sunrise Senior Living.
Staying flat is easy when the business involves a single community with an operator who doubles as the administrator. As a senior living company grows, however, the task becomes more complicated. Build or acquire a few communities, venture into other markets, and soon a regional function is born. Merge with another company, and suddenly the corporate office is three states away.
Like any executives, senior living providers revise the organizational chart to accommodate growth or a new product line. Most would agree that the basic form of organizational structure for many large companies (involving a regional layer with a triad of directors for operations, sales/ marketing, and clinical quality) works sufficiently well. But every so often, it pays for any company to stop and rethink: What, if anything, has been lost along the way?
Tale of Two Companies
It’s important to have the right people in the right positions at all levels of a senior living company to ensure the organization operates effectively. But recent research indicates that it may be even more critical to ensure the right channels run between them.
“Our research shows that the fundamentals of good execution start with clarifying decision rights and making sure information flows where it needs to go,” reported Gary L. Neilson, Karla L. Martin, and Elizabeth Powers of Booz & Company in the June 2008 issue of Harvard Business Review.
Certainly, the flow of information and clarity of decision-making authority can become more challenging as a senior living company expands and adds layers. Companies report different strategies for overcoming that challenge…
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The question is more than simply academic. According to a recent study on organizational effectiveness in more than 1,000 organizations, researchers found that companies often reorganize too quickly, instead of first diagnosing what’s really needed.
“In efforts to improve performance, most organizations go right to structural measures because moving lines around the org chart seems the most obvious solution and the changes are visible and concrete,” wrote management consultants Gary L. Neilson, Karla L. Martin, and Elizabeth Powers of Booz & Company in the June 2008 issue of Harvard Business Review.
“Such steps generally reap some short-term efficiencies quickly, but in so doing address only the symptoms of dysfunction, not its root causes. Several years later, companies usually end up in the same place they started.” Alternatively, it could be argued that organizations sometimes change the structure in a gradual, piecemeal way without keeping a careful eye on how it all comes together to serve the end user. “People don’t really think about it until there’s a problem,” says Joel Goldman, partner at the San Francisco-based law firm Hanson Bridgett.
That said, what are some typical strategies for developing and changing the structure of senior living companies as they grow, and how do leading companies navigate these changes? How do providers seek to preserve a local focus as they evolve? Community-Level CEOs
Like providers of all sizes, The Arbor Company, based in Atlanta, depends on its executive directors to run its communities as if they were small companies of their own.
“They are the CEOs of their operations,” explains Judd Harper, COO of The Arbor Company.
Harper’s organization is considered mid-sized, and—organizationally speaking— there are some advantages that come with that, he says.
“In a company of larger size, you’ve got to be very policy focused. It’s ‘our way or the highway,’” says Harper. The Arbor Company returned to being a mid-sized independent operator a few years ago after a brief merger with a much larger company.
The goal for Fanwood, New Jersey-based Chelsea Senior Living has been to stay flat even to the point where each community runs its own financial services. Whereas larger companies centralize their finances for more efficiency, Chelsea believes something gets lost when a customer with a billing complaint gets bumped to a stranger at a corporate office. To Chelsea, staying local means offering personalized customer service in the financial department, too. Unless and until there’s a unifying software package that can truly do it all, the company plans to stay decentralized in most aspects.
“We’re not cookie cutter,” says President and COO Roger Bernier. “Because we run decentralized, every building is unique, with unique clientele.”
But there are drawbacks to being midsized, too. Both Arbor and Chelsea stress the importance of having a stable, experienced management team in place. “In a large company, people come and go more fluidly,” Harper explains. “If one of us five were to drop out of the management team it would be a major setback.”
Therefore, mid-sized companies typically find themselves on a cusp. If the goal is to sell or merge with another company, it pays to stay as flat as possible. If the goal is to grow larger, the company will eventually need a certain amount of depth and infrastructure.
“You’ll move faster the flatter you are,” says John T. Peters, vice president of operations for San Juan Capistrano, California-based Silverado Senior Living, another mid-sized company. “The problem is your growth is stymied if you stay flat. It’s always a balance of growth and efficiency.”
Put another way, Bernier poses this question: “At what tipping point do you need another regional marketing person because she’s so busy?”
Core Values and Commitments
When a senior living company grows to the point where it starts to acquire entire regions at a time, its organizational challenge turns from how to grow intelligently to how to think small—something it must do to continue providing quality, resident-focused care.
“I can recall when we acquired our first community in Renton, Washington. I could drive to the community and in 15 minutes be sitting down with staff and talking to each one of them about our vision for the community,” says Raymond Brandstrom, CFO of Seattle-based Emeritus Senior Living. “Today, [with] 289 communities, 16,000 employees, and 24,000 residents, communicating the vision and philosophy is more complicated and takes more time to find traction. We do rely on our mission statement and core values with the expectation that everyone buys in and supports these commitments to our residents and employees.”
To carry out its mission, Emeritus relies on a structure typical among large providers. The company has six divisions, each consisting of about five regions with roughly 10 communities each. Every division and region has a three-person leadership team covering operations, sales/marketing, and quality services that serves as a resource for the communities.
For the most part, Brandstrom says, the model works well. Although the operations person is “first among equals” in the regional and divisional office, all three disciplines are at the same level on the organizational chart and there must be unanimous agreement on a course of action or the issue is raised to the next level of management.
“So, on the one hand, we believe that if all three different disciplines, with their own priorities and responsibilities, agree, then it must be a good decision. On the other hand, where there is disagreement, this process allows everyone’s voice to be heard and best practices to be developed,” explains Brandstrom. “We have felt that this has worked well for our company, empowering individuals at the community level within the organization, first, and trusting in their judgment with involvement and oversight as necessary.”
For his part, Sunrise’s Schwartz warns against building too many layers between the community and leadership levels, a tendency to become too top-heavy, and the risk of adding too many specialists and resources at the national level. In large companies, some value-added specialists can be very effective and efficient, such as a company-wide memory care specialist, while others lead to redundancy.
“Too many specialists dilute the ownership and accountability of the community level leadership,” Schwartz says. To avoid these pitfalls, he advises placing resources as close as possible to the residents, setting clear and measurable goals and objectives, minimizing the layers, and scrutinizing the role of specialists to ensure they truly add value.
Another challenge is to champion the partnership between a company’s communities, regional teams, and the corporate office and ensure the relationship is clearly defined.
“One doesn’t serve the other, but rather overlaps and complements each other in service to the residents,” Schwartz says. In his view, the entire organization must be structured around supporting the community leadership and frontline teams.
Employee Empowerment
Perhaps the most important aspect of how any organization is structured is how the various boxes on the organizational chart interrelate, formally and informally. According to Booz & Company’s research, employees at the most effective companies tend to know which decisions are theirs to make and feel empowered to make them. The free flow of information up, down, and across an organization, too, is rated as particularly important for making an organization effective.
Holding executive directors accountable is a proven model within assisted living. But what happens when an organization starts adding new product lines that operate separately from the assisted living component? When Silverado Senior Living added hospice and home care product lines to its core business line of assisted living—each with a separate COO—the clashes between nurses and other staff sometimes would escalate to the executive level. Outcomes would literally depend on who got to their boss first.
“It was very time-consuming, and not particularly trust-building,” says Peters. The company solved that problem by pushing down the decision-making authority to the community level and offering social events and training sessions between divisions, including sessions on conflict resolution. Now, Peters says, “it has evolved to the point where most likely the staff associates will resolve it themselves.”
To cultivate a culture of open communication, Brandstrom of Emeritus asserts that employees are more likely to treat residents as important if they are treated that way, themselves.
“Within our organization, anyone— whether resident, resident family member, employee, or investor—can pick up the phone and call any one of our senior executives, and they will talk to them. This is uncommon for a company of our size. And that sets the tone for everyone down the line. You can imagine what a regional person feels like if he doesn’t respond to an inquiry and the next call is to the chairman, who takes the call.”
Sometimes, what’s required to optimize operational effectiveness is to think outside the typical organizational chart. At Hershey, Pennsylvania-based Country Meadows Retirement Communities, sales and marketing staff report directly to the regional vice president of marketing in- stead of to their community’s executive director. This serves as an early alert system for problems in a community that may ultimately undermine sales.
“It guarantees the marketers can say what’s on their minds without worrying about retribution,” says COO David Leader.
Country Meadows does not share other providers’ hesitation about having national specialists. The company has seven “program directors” in specialty areas such as Alzheimer’s care, community life, and so on. The program directors work out of the company’s home office and are more than simply resource managers or “servant leaders” for regional executives or community-level associates.
“We want them to be ‘unifocused.’ We want them to eat, sleep, and breathe what’s on the cutting edge” of their respective disciplines, explains Leader, who credits the Alzheimer’s care program manager with leading the company toward using the validation philosophy of care for dementia.
“That’s something I probably wouldn’t have found, but our team found it, went to Scandinavia to explore it, and became the first authorized validation organization in the United States,” says Leader.
There’s a culture of sharing accountability upward to the program directors that results in a more collaborative management style, Leader adds. Still, the organization goes back to a flat structure in the case of a local crisis; regional executive authority trumps national program managers.
The somewhat complex model at Country Meadows works because of the strength of communications and the information flow, Leader says.
“We absolutely believe we have to have constructive conflict to be successful.”
— Whitney Redding is a contributing writer to Assisted Living Executive.
Who’s Who Contact information for members in this article.
- Roger Bernier
- Raymond Brandstrom
- Joel Goldman
- Judd Harpe
- David Leader
- John T. Peters
- Daniel Schwartz
Content originally published in the October 2008 issue of Assisted Living Executive.
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