How Rick Chiricosta led Medical Mutual through changes after a tragedy Featured

8:00pm EDT September 25, 2010

The Christmas party Rick Chiricosta attended on Dec. 3, 2008, was supposed to be merry — a celebration of the holiday season and the company, Medical Mutual of Ohio. But something was awry.

The insurance provider’s CEO, Kent Clapp, had yet to show up and while people tried to have a good time, they couldn’t help but wonder where their esteemed leader was — he wouldn’t miss his own Christmas party.

“We’re like, ‘Wow, this feels weird,’” Chiricosta says. “It was a very weird night.”

By the end of the evening, their worries were replaced by horror as they learned the truth — Clapp had been killed that afternoon when his chartered plane crashed.

Shell-shocked, the entire organization mourned.

“You pull in here, and frankly, I would tell you, first, we had to deal with the shock of that, but not just the shock of we lost a dear friend, but what’s going to happen to this company that we all work at and depend on for our livelihood,” Chiricosta says.

Clapp had turned MMO into a solid business and had left it in great shape financially — $2 billion in revenue — but the suddenness of it all created a period of chaos.

“We went through about a month of, I guess there’s no other way to describe it, weirdness,” Chiricosta says. “We had lost a revered leader. We had a number of senior executives that were trying to figure out, ‘Who should be running the company, what was going to happen to them, what was going to happen to the organization?’”

The board recognized the need for stability and opted to not perform a lengthy, textbook CEO search. Instead, it moved quickly and set up interviews on Jan. 11 and 12 — just five weeks after the accident — and Chiricosta was on the list. While many didn’t know him, he had worked at MMO for 23 years, including starting and leading the life division, so he caught the board’s eye.

“To be perfectly honest, the idea of succeeding Kent never went through my head,” he says.

The board made its decision the day after the interviews: Chiricosta would serve as the new president and CEO, and he accepted the role, not knowing if he was cut out for it. While he was lucky that the company was in good financial shape, there are always challenges — employees uncertain of the new leadership, one of the worst economic downturns in full force and health care reform, in some unknown and changing-daily form, looming on the horizon.

“For me, personally, it was very overwhelming to take that role on,” he says. “I wasn’t sure how I was going to do. You’re confident in your abilities, but it was a pretty daunting task.”

It would have been different if Clapp had known health problems or was planning to retire — the company could have prepared — but Chiricosta knew it would be a challenge to gain trust and make necessary changes to steer the company through the downturn and prepare it for whatever happened with health care reform.

“I wanted to make sure that the company was doing the things it had to do without creating the impression, ‘OK, old leadership is out, new leadership is in, there’s a new sheriff in town, and we’re going to bash people over the head with all this change,’” he says.

He decided to institute change subtly, and three principles guided him in doing that — using data, communicating reasons and standing his ground.

He says, “Let’s try to blend stability so when you’re sitting here two years from now, and you look back, … you think, ‘Wow, when I compare January of 2011 to January of 2009, there are some pretty significant differences, but I didn’t even realize they were going on as the change was occurring.”

Use data

Chiricosta is a numbers man, and that wasn’t about to change just because he had a fancier title.

As an employment-based business, if one of his customers had 100 employees but then laid off 25, MMO just lost 25 percent of its business from that group, and that was increasingly happening. He knew numbers don’t lie.

“We had to be able to adjust our staffing levels, and I didn’t want to do it by whacking 50 people or 75 people,” he says. “To me, you have to start that now — you have to start that right away because we knew the situation where we would be looking at an overstaff situation would come sooner rather than later.”

So one of the first decisions he made was that any vacancy or request for added staff was going to be heavily scrutinized in ways it hadn’t been before. And he started with himself. Since he had been promoted, his previous position was open.

“Here’s where objectivity starts at home,” he says. “I never believed that my job that I had before was supported for the level I was at.

“I would have jumped off the roof if [Kent] asked me to, so now I’m in this job, and the first question people ask me is, ‘Who’s going to replace you?’ and what did I say? ‘No one.’”

Instead, he took the different pieces of his position and returned them to the departments that had handled them before and asked a few key people to take on a little extra work — which most were glad to do since this was the baby of the CEO. One position saved. One strong message sent.

“What did it do?” he says. “… I was able to say, ‘See guys, my first move is I’m not even replacing me.’ That was a very strong message.”

In addition to his position, when a couple of retirements in the senior management came up, he chose not to replace those, as well, ultimately going from 10 executive vice presidents to six.

“If we go to our staff and say, ‘We want to do more with less,’ isn’t it important to start at the top?” he says. “Suppose I had gone from 10 to 13. We’ve cut 100 people at our troop level, but we’ve fattened our executive level? I don’t think that’d go over well.”

The company is down 40 percent in its senior management, and he says you have to start at the top in those situations.

“It plays very well with the staff when you can say, ‘We did it, too,’” he says. “I’m not cutting your benefits; I’m not cutting you. … And they realize the financial impact of adding an executive or getting rid of an executive is significantly more than the impact of a lower-level position, so it really sends a strong message.”

After having done it himself, then he could challenge everyone else when they had requests.

“You have to be consistent in that respect,” Chiricosta says. “You can’t say that, and then when you have a big decision to make, you can’t have any exceptions.”

Chiricosta has a human resource committee meeting every month where they analyze requests to add new positions or replace vacant ones. In one, someone wanted to replace two people, and he really challenged them.

“I said, ‘I may be wrong. I may not know exactly what goes on in that department, but here’s what I want you to do; I want you to come back to me with the facts that will refute what I’m throwing on the table,’” he says.

On the way out of that meeting, someone commented that he sure knew a lot for someone at his level.

“I said, ‘I don’t know if I do or not, but I know enough to be dangerous,’” he says. “There it is — throw the issue on the table, give them the opportunity to come back and say, ‘You were close, but not exact,’ and I’m OK with that.”

Using data is key to making strong decisions.

“I don’t prefer to do things just because — it’s not playing favorites,” he says. “I try to do everything based on sound data and analysis. What makes sense and why? I may really like you, but if you’ve got an operation that’s got 12 people doing something that ought to have six, I’m going to ask you, ‘Why do you have 12 people when everything I know says there ought to be six people doing that job? What’s up with that?’”

When you do this, it teaches your employees to get data, as well, instead of making rash decisions.

“Sometimes, the people who are putting a recommendation don’t even know themselves,” he says. “Sometimes you’re forcing. And I’ve had people say, ‘I’m glad you made me go back and get the data — I had no idea that we got that many phone calls.’”

And employees appreciate the opportunity to defend their decision instead of simply having a request shot down.

“Your job is to explain it to me, as opposed to, because you’re my friend, you can ask for six extra people because I know it’s just nice for you to have,” he says. “People respond well when they know that objectivity and accountability are parts of the equation.”

Today, MMO is down about 120 employees, and 99 percent of that has been through attrition. At a company town-hall meeting in the fall, when the company was down about 100 people, Chiricosta explained that.

“You share things — ‘Hey, we’re down 100 employees; did you guys know that? We have 100 less employees today than we had, and guess what? With no layoffs,’” he says. “You know what kind of response that got? Every time, huge applause. Our employees appreciated that because they know that was helping their job security.”

Communicate why

Chiricosta doesn’t listen to consultants. If he needs a consultant to tell him how your department should be running, then why does he need you to run it?

But there was one piece of consultant advice he did listen to when he first took over: “He told me, ‘Rick, the most important thing for you is to be as visible as you can, and you can never overcommunicate,’” he says. “I tell you, that was unbelievably good advice.”

Because Chiricosta was virtually unknown to most of the company, he needed to earn trust, so he focused on communicating to employees.

“There was a lot of uncertainty of, ‘Who is this guy?’” he says. “I just felt that the more I could communicate with them about two things — the ‘what’ we were going to be doing and, more importantly, the ‘why’ — those were some of the biggest things that I feel strongly about.”

This was crucial because of the changes Chiricosta was trying to make to better position MMO in the downturn.

“You tell your employees, ‘Here’s what we’re going to do,’” he says. “That’s great, you’ve told them. If you don’t take even more time to tell them why we’re doing it, you’ve made a huge mistake.”

One of the biggest examples of this was his decision to terminate the employee pension plan. Some would gasp or scream or accuse him of being anti-employee, but he had a real reason for doing so.

The pension plan had been frozen back in 2001, so anyone who was hired after Jan. 1, 2002, wasn’t participating in the plan. Anyone, like Chiricosta, who was a participant, hadn’t had anything added to it since that time. Yet, despite that, it was costing MMO money to pay people to handle the benefits it was paying out and to do the required financial reporting for the plan. On top of that, because you’re investing for the long term, the company could be at serious financial risk if the markets tanked.

“I’m sitting there going, ‘You know what? We’re spending all this money on this, the company is at big financial risk, it’s of no value to our employees, and it’s a big distraction because finance people, human resource people, me and a lot of others take a lot of time throughout the year making sure that plan is OK,’” Chiricosta says.

So he decided to terminate the plan and pay employees what they had in it.

“When you explain it to people that way, it has a totally different context, so I stood up in front of the employees and explained to them, ‘Yes, we’re terminating the plan, but (there are) two things you need to know,’” he says.

He went on to explain the administrative toll it was taking on the company and the financial risk it put MMO at. But then he also went on to explain to them why they couldn’t go out and buy a boat with the money they were getting — that they needed to roll it over into another retirement plan because this was their retirement savings and he’d hate for them to not be taken care of when that time came.

“You walk through it, and I think one of the keys, in terms of selling the idea, is there’s nothing like the truth,” he says. … “You tell them the truth. You don’t dance around it, and I think people respond well. They don’t always like it — we have lots of meetings where people walk out and they say, ‘I don’t know if I like what I heard, but I understand it.’”

Stand your ground

Chiricosta had no idea how MMO had gotten away with it.

He would never tolerate his cable company not being open to help him at 7 p.m. on a weeknight or on a Saturday, so how had his company gotten away with it for so long? He knew he needed to make another change.

“I’m thinking about families where there’s only one parent, or there’s two, but they both work,” he says. “Wouldn’t it be great if we were more accessible with other hours? The immediate response was, ‘Oh, no! It’s never been an issue. Nobody has ever demanded it. Nice try, Rick, but that’s silly.’”

Even with data and communicating why he thought it would be great, he was alone. Instead of letting it drop though, he decided to stand his ground, which is something you often have to do.

“I said, ‘Humor me; let’s just look into it,’” he says.

They came back with a million reasons why it wouldn’t work — you don’t understand, there are safety issues with people working late, what about people with kids, what are we going to do on Saturdays, and the list went on.

“Sometimes you have to have a thick skin, or you just got to be — I don’t know what the right word is — maybe it’s diligent or maybe it’s gutsy, to stand back and say, ‘OK,’” he says. “Because it can be daunting when you’re getting the, ‘No, no, no,’ and, ‘You don’t understand,’ and ‘Yeah, it sort of makes sense, but you don’t get it.’ It takes fortitude, frankly, to sit down and say, ‘I know, I might just be being an idiot, but humor me.’”

The initial thought was that employees would be up in arms and revolt, but in reality, quite the opposite occurred. So many employees wanted the new hours that he had a waiting list for people wanting to sign up for a variety of reasons, ranging from decreased child care costs to more time to not having to use their lunch breaks to take care of errands. And now customers had more accessibility.

“Sometimes you ask four times, and you ask one more time, and ultimately, you always do have the opportunity to say, ‘Look, I really need this to be done,’” he says. … “It’s hardest in the early going, but once ... you get a win or two, a couple times when people thought you were so far off the deep end, and once the facts came out, it turned out you weren’t, now the tables are turned and it’s harder for them to think you’re so crazy.”

Chiricosta says that it didn’t come natural for him to stand his ground and disagree with people, and if you’re the same way, he offers a piece of advice.

“Ultimately, you realize there are people whose jobs and livelihood depend on the success of this organization — that’s where you get the strength to say, ‘I’m going to do this because I have an obligation to those people and to our members and to our board to do the things that I think are right,’” he says. “Somehow, it gets you the ability to do it — even when it’s not something that comes really natural, which it doesn’t. Who wants to come into work and have a disagreement with someone? Who wants to do that?”

That was difficult, and in early 2009, he had a lot of days when he went home feeling overwhelmed instead of fulfilled, but as he got more wins, that started to change.

“As the year went on, that shifted, and there were a lot more days that I felt I was getting my legs under me than the opposite,” he says.

… “Every day I feel more at home in it and enjoying it more. Now there’s only a few days a month when I go home thinking, ‘Why am I here?’ There are still a few because it can be daunting, but the tide’s really turned, and it feels really good.”

In addition to feeling more confident in his own abilities, Chiricosta is now confident that MMO is better poised to handle health care reform and that he achieved his initial goal.

“It never really seemed like that big of a change as we converted to it, but now we’re sitting here two years later, and it is,” he says. “That was my objective and goal because coming in and beating people over the head, whether that was me or any other leader, it would have been difficult to be successful that way.”

How to reach: Medical Mutual of Ohio, (216) 687-7000 or www.medmutual.com