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Paul Willging Says...

March 1, 2005
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It's All About Leading and Managing People

It's all about leading and managing people A guest lecturer once described seniors housing and care to my students at Johns Hopkins as the business of "capacity utilization." We build buildings. We have to fill them to be profitable (or, simply, to generate enough of a margin after expenses in the nonprofit sector so as to continue to pursue our mission). This is true but a bit limited in scope.

The real issue is "how." Certainly, the curb appeal of the building is not enough to sell it to prospective customers as their primary residence. Whether service-enhanced housing, assisted living, or nursing care, it is the service provided to the resident that eventually will determine the community's success. Buildings do not deliver services. People deliver them. Sufficient numbers of people. People with the necessary knowledge and skills. And people possessing an attitude oriented toward service, an attitude that focuses initially, continually, and ultimately on the customer's needs.

Last month I suggested that personnel issues present the greatest ongoing challenge to the delivery of effective long-term care. Communities that fail and communities that succeed invariably can be differentiated based on the manner in which they recruit, motivate, and manage their staffs and on the type of culture within which they perform those functions. As I suggested last month, staff turnover just might be the most critical indicator of a community's success.

More than enough research suggests a direct link between an employee's basic attitude about the job and the company where he or she works and the workgroup's productivity (and, ultimately, profitability). While, individually, the single employee can't make an appreciable difference in a company's bottom line, there are not many single-employee companies in seniors housing and care. The typical community, even if independent living or active adult, will have many employees. And, in aggregate, employees make an amazing difference since profitability is the aggregate of all employee activities over an extended period of time.

In sum, a great deal of a company's value rests with its employees, a fact that more and more investors are beginning to recognize. When the good employee leaves a company, she takes value with her. Consequently, if a company is bleeding people, it is bleeding value, even if management fails to recognize it or doesn't know how to deal with it. Just the direct cost of turnover, according to a report funded by the Robert Wood Johnson Foundation issued this past October, is at least $2,500 per frontline worker. And that doesn't even touch the potentially more substantial indirect costs such as lost productivity and decreased customer satisfaction.

So how do we keep them on the farm? Well, it's not just dollars. In fact, we know that once basic financial needs are met, the talented employee is usually more interested in empowerment than pay and benefits. Consequently, the environment within which (and the pace by which) empowerment takes place is likely to be more critical (at least over the long haul) in retaining employees than simply increasing compensation.

While a company can (and should) establish culture (which, in turn, establishes the nature of the working environment), it is the manager who reflects and operationalizes that culture. A company must be careful, therefore, to extend the reach of its culture throughout the organization, or there can and will be as many cultures as there are managers. Assuming consistency in culture, it is the manager who is responsible for assuring its application to employee responsibilities. He does this through the four critical functions of selecting, directing, motivating, and developing staff.

To repeat, however, the manager must fulfill those responsibilities within the established corporate culture or the results can be disastrous. Fulfilling those functions within divergent cultures produces discordant results, even in otherwise similar communities. Studies have shown that operations possessing the same physical environment and with access to exactly the same resources can demonstrate appreciably different outcomes.

The role of manager in corporate America undergoes constant scrutiny and reinvention-sometimes to the point of elimination. For a time, the focus of management gurus was on replacing the manager with the team. Those who tried it soon regretted it. Teamwork is essential to the successful company. I've emphasized the importance of teamwork in most of what I write, especially on the topic of effective quality management. But teamwork requires only that employees function as teams, not as management. But absent management, the team is a corpus without a head-and if it is not given leadership, it will create its own. The issue has not been to eliminate the role of manager. It is to define it.