Turnarounds
Aged to perfection
How Thilo Best led Horizon Bay Senior Communities out of trouble and into growth
By Brian Horn
Smart Business Tampa Bay | June 2007
When Thilo Best was recruited to manage a portfolio of properties owned by White Hall Real Estate Funds, he knew he would be
facing a difficult situation.
Operations needed to be improved and the most recent acquisition wasn’t working out as planned.
Best accepted the challenge and formed Horizon Bay Senior
Communities to manage the portfolio, and took the dual roles of
president and CEO.
“My first month on the job was going out to see all the communities, to start assessing the quality of the people and start figuring
out what was the good part of the company, what was the not so
great part of the company and taking actions to fix, what was at
that time, a cash flow drain.”
He spent the next 90 days assessing which properties could be
sold to fix the cash flow problem as well as finding people to
replace the ones that didn’t fit into his plans.
“We were really taking some of the team from that [previous
management] company and going to the market and building
my own team,” he says. “The reality is we really had to build
our own culture.”
Best says you need to build a solid team regardless of what
situation your company is in, but when facing a turnaround,
that task needs to be done promptly, which will most likely
lead to some mistakes. Some people look better on paper than
they really are.
“You put them in a situation where they really have to execute and perform and they just don’t,” says Best. “You won’t
know until you hire them.”
Because the initial team had to be put together quickly, it was
made up of employees who had a few key traits.
“Basically, I was looking for a willingness to listen, a willingness to approach the business a different way and a knowledge
about the industry and business.”
Some vacant positions were filled through recruitment from
other senior living companies. Best says if you are in a turnaround situation, you may have to overpay to get the talent you
need, and you may need outside help to find the right people.
“One thing I did was once we identified core team members,
I brought in somebody to advise us on interviewing,” says Best.
“We laid out the skills we were looking for and they helped us
formulate our questions. The best way we have found to do
interviews is to give them a hypothetical situation and ask
them how they would handle it.”
Once everyone was in place, Best kept them focused on the
short term.
“The early years were very interesting,” he says. “The big
question to me from the team was, in essence, ‘Who are we,
what are we going to do and how are we going to grow? What
is our niche?’ For 12 months I said, ‘We are not going to answer
that question. We are going to focus on profitability and delivering quality care to our residents and that is all we are going
to focus on.
“We’re not going to have a grand mission statement or some
big branding company come in and think about what our strategy is for the next five years. If you are in turnaround mode,
frankly it’s about survival. There may not be a next five years.”
Trim the fat
Some of the communities in Horizon’s portfolio weren’t
delivering results.
Some were not yet at full occupancy, some were poorly
designed and some needed more capital expenditures to fix
them and some couldn’t be fixed at all.
Best looked at which properties were profitable and which
weren’t, and within 18 months of taking over, sold 22 of the
46 properties and reinvested $40 million into others.
After selling the properties, Horizon’s revenues only
declined 10 percent, and by the end of 2006, the company
was managing a total of 48 properties.
“You can tell we definitely sold the right communities,” he
says. “There was a dramatic swing in our earnings in a positive way. When you sell your underperformers it also helps
you on the whole 80/20 rule, where 80 percent of your time
will be spent on 20 percent of your company that’s really
causing the problems. When you sell the 22 properties that
are causing the problems, it frees everyone up to do a better
job on the properties you retain.”
Through the process, Best also realized what type of communities they had the most success at overseeing.
“What we did recognize, as an organization, was what we
were good at managing were large independent living communities that have some level of assisted living,” he says.
“Our core competency was not managing small assisted living communities. We really had a hodgepodge of properties.
If you are managing five different types of hotels versus a
Marriott Courtyard, it’s going to be easier to manage a bunch
of Marriott Courtyards.”
Creating the right culture
Once things stabilized, it allowed Best to start answering
those questions about the company’s direction and culture.
“We had an identity statement,” he says. “We interviewed
people at the communities and at the regions and asked,
‘Who do you want to be and what kind of organization do you
want to work for?’”
Out of that feedback, the core values of respect, teamwork,
responsibility, professionalism and integrity were created.
As part of living those values and reinforcing the culture he
wants the company built on, he relies on the talents of those
around him.
“If we have a lot of talented people in a room, let’s get
around a table and identify the challenges we have and identify which best practices come up from the group,” he says.
Best describes his leadership style as participatory on
some things and having full delegation on others, which
helps create a culture of open communication.
He says much of his participation focuses around asking
questions, especially ones the person coming to him might
not be able to answer.
For example, he asked some numbers-related questions to
someone who had come to him with a question of his own.
This forced him to go back and find the answers, creating an
“ah-ha” moment for the employee.
“But the idea was not to take an approach of, ‘I’m smarter
than you and you need to be as smart as me,’ but more to
highlight the skill set they need to run a particular business
unit,” he says. “Any performance-oriented person is going to
be more embarrassed than anything when they don’t have
the answer and take it as a challenge.
“You have to be open and honest and create an environment where people will be comfortable challenging you on
certain things in business. I am not high-handed, even though
the decisions ultimately do rest with me, at the end of the
day, to attract performers. And we very much have a performance-oriented culture, you have to have accountability
and hold people to certain standards and success measurements you have at the company. You have to listen to them
and create an environment where they are comfortable if
they disagree with you.”
While it is important to learn from mistakes, Best says part
of creating a positive environment is not dwelling on them or
spending time blaming other people.
“As a group, we take ownership of mistakes and get that
out of the way and focus on improvement,” he says. “That
was important to create a culture. You have to take risks in
business.”
Communicate change
As the company grew from $125 million in portfolio revenue in 2004 to $192 million in 2005, the biggest challenge
was changing the company’s orientation from a turnaround
company to a growth-oriented one.
“In a turnaround company, you tend to watch every penny,”
he says. “On the expense side, you probably spend a dollar
only when forced to. Where if you are a growth-oriented
company, you have to get out ahead of the growth and hire
people sometime before the growth is in place.
“That is a real mind-set change. But if you explain it to people that this is what we are going through and the why, it definitely helps the buy in. Any major change isn’t going to be
easy.”
Best says he needed to have open and honest dialogue with
his senior management team and explain why the change
was made.
“I have found and learned over the years that it is definitely worth taking the time to explain the ‘why,’” he says. “Even
though, from an expediency, urgency and execution standpoint, it might not seem like it makes sense to be overly communicative about why. To get the buy-in, as you manage
through change, it is imperative to answer that question.”
He says if you are implementing changes, the main people
you want to make sure understand the “why” are the leaders
and performers of the company.
“Then they can go explain the why to their respective
teams,” he says. “I’m a firm believer that you can’t overcommunicate. Oftentimes, if the change is dramatic within the
organization, the first people to push back are your high-performance people.”
Today, Horizon Bay continues to be in growth mode,
announcing deals in April that will take total portfolio revenue to around $485 million.
Let go
As the company started to focus on growth, Best, who now
serves as chairman and CEO, saw it was time to step back
and let his managers take the reins. That was easier said than
done.
“As you get to a certain size, it’s imperative,” he says.
“Delegation is not something I think, for a good manager,
comes easy. A performance-oriented person, the way I think,
tends to mean they personally are pretty good at execution,
not at philosophies and policies, but at execution. So, you set
objectives and that person can go execute.
“To me, delegation doesn’t come easy. But, when you do it
and do it at the right time, it’s also very rewarding.”
As far as knowing the right time to delegate, Best says it
comes from experience.
“One of two things will happen,” he says. “Either you’ll delegate too early, in which case that will show up in results or
in the individual you delegated to feeling overwhelmed. Or if
you delegate too late, if it’s a performance-oriented person,
they are probably going to come to you and start saying to
you, ‘When are you going to give me the reins?’
“But again, you have to create that culture where they are
comfortable having that dialogue that says, ‘I’d like it if you
gave me more rein,’ or however they phrase it. You have to
create that culture where they can come to you and honestly tell you they’d like more rope.”
If you’ve never created that culture, Best says that can
cause truly solid performers to start looking for other opportunities if he or she feels unable to grow in the company.
“One way or another, if you’ve gone past the delegation
phase, it will probably begin to manifest itself,” he says.
“There is probably not an optimal time. You just have to use
your best judgment and delegate and see what happens.”
HOW TO REACH: Horizon Bay Senior Communities, (813) 287-3900 or www.horizonbay.com
