President and CEO
ZT Wealth/Altus Healthcare Management Services
The genesis of Taseer Badar’s healthcare venture — Altus Healthcare Management Services/ZT Wealth — was the observation that despite a large rise in spending, physicians suffer from a steady decline in professional fees.
This is due to declines in health care benefits from insurance companies and government sources in a climate of increased patient load and increasing liability insurance.
Badar’s goal was to ensure the benefit of the health care dollar to health care professionals who are prime movers of such spending. Badar, Altus’s president and CEO, wanted to invest in physicians’ success and bring cutting-edge technology to the health care arena.
Despite early skepticism from both health care executives and medical practitioners,
Altus HMS/ZT Wealth has grown in both experience and assets.
With only seven years in the industry, Altus HMS has grown to include three surgical centers, six outpatient hospice companies, durable medical equipment, practice management, infusion, a physician-grade vitamin line and a wellness practice.
The company is continuing its growth strategy in 2013 with the addition of three stand-alone, fully functional emergency room locations along with the planned purchase of three additional hospices.
Badar has infused Altus with his entrepreneurial spirit by investing in the business and encouraging his executive staff to do so as well. Personal investments in the company have afforded Badar and his executive team heightened accountability for their business decisions and pronounced dedication to the success of the venture — a management strategy that is reaping impressive rewards.
Badar works hard to “see the invisible” and understand where his company needs to go before the rest of the market does. He firmly believes that the best place for personal investment is in his own firm.
“I don’t like gambling in the market,” Badar says. “I want to invest in what I know, and I know my firm.”
How to reach: Altus Healthcare Management Services, www.altushms.com
Niloufar Molavi is now facing a challenge that she hadn’t seen in her years with PricewaterhouseCoopers LLP — acquiring and retaining talent for the accounting firm in the light of fierce competition. The complicating factor is that thanks to a heavy presence of energy companies, young talent in the Houston area is in high demand and supplies are low.
Molavi, Houston market managing partner for PwC, is realizing that you have to pull out all the stops to have an edge over the competition.
It’s no secret that PricewaterhouseCoopers over the years has developed comprehensive internship and management development programs that attract desirable young talent. Molavi is betting on those programs to make a difference.
“The average age of our workforce is 27 — so that will give you a sense of how much we rely on and focus on young talent such as college interns,” Molavi says.
“The students like to have an experience while they are in college, and they really don’t know what to expect ultimately when they come out of school, so we just give them that glimpse,” she says.
But more importantly, the interns will get to know PwC, which hopefully will lead to their choice of PwC for employment.
“It has been a great tool for us to not only recruit but they will see what it is like before they have to make a decision that will have an impact on their long-term careers,” Molavi says.
Here is how Molavi uses internship and management programs at the Houston location of PricewaterhouseCoopers to help fill the 1,069 seats at the table and keep those seats occupied.
Look and listen
The practice of finding and hiring qualified job candidates has grown more sophisticated for most companies in recent years. Such was the case of PwC some years ago when it started its internship program, now a well-entrenched fixture.
With the competition to secure talented individuals, it is essential to look for the skills that clients are demanding.
“It’s important to sit back and make sure that you have identified not only the technical skills in people you hire but, more importantly, the soft skills or the intangible skills that you are looking for in people,” Molavi says. “Identify what those are, and recognize over time those change — just because we know today what we are looking for may change over time. We live in an ever-changing environment, and you need to revisit that as often as you can to ensure that those intangibles haven’t changed.”
Once you sound out your clients, you’ll have a better opportunity to know what will best match their needs.
“The most important thing is listening,” Molavi says. “Spend a lot of time with your clients to make sure that you are listening to their issues, issues that are important to them, issues that they are dealing with, challenges and opportunities that are at the forefront of their minds.”
There are several key qualities that should be “must haves” on the intangible resume of an internship seeker.
“Adaptability — someone who’s willing to come in and adapt to new opportunities and a new environment,” Molavi says. “It’s someone who comes with flexibility of different ways of doing things.”
Equally as important is the attitude that learning is a dynamic procedure that lasts an entire career.
“Another important element is the ability and the desire to continue to relearn; when you are in an environment that’s changing all the time, you need to be comfortable that you are always learning, and it doesn’t really matter what level in the organization you’re at,” Molavi says.
If the desire to learn is kept burning, it can help establish a long-term interest in a particular field. The possibilities of advancement are many.
“Even as a leader, you can continue to have opportunities to learn new things every day,” she says. “For me, that’s exciting. That’s really what’s kept me in the industry and at PwC.”
Find the right fit
It’s been said that in the military as well as other sectors, the age group of 18 to the mid-20s make the best soldiers or workers if properly trained. And those who are even more well-trained do even better.
While the business world can’t really compare its stresses to those of the military, the advantages of young recruits are unmistakable — and similar in both fields.
“Our clients are always interested in our talent because we bring in the young; we help develop them,” Molavi says. “Our talent gets to see a lot of different opportunities and things and they learn pretty quickly on the job because of the exposure they get to our clients. So they are in high demand in the market. And we know that; that has been something we’ve been dealing with for years.”
With a focus on young talent, new entry-level candidates coming right off the college campus, it’s critical to look at their abilities and what they’ve learned on campus and their technical skills.
“First of all, try to find the right fit for the organization,” Molavi says. “At that entry level, spend quite a bit of time not only in the interview process on campus but spend time with those individuals over a two- or three-week period to get to know them and build that relationship — and then offer the best ones an internship.”
A typical internship lasts 10 to 12 weeks. It’s an opportunity to get to know the interns and see how they can work in the environment — and is a great opportunity for them as well to see what opportunities they may have.
“Look at a lot of those intangible qualities in individuals,” Molavi says. “Teamwork is huge for us. We work in teams. We do not do anything alone. So watching the interns work in teams and how they perform is important. Relationships are very important, both within our organization as well as with our clients, and watching how they develop those relationships and their abilities to learn in that area is essential.”
An internship is also a type of probationary period. It’s time to spot any red flags.
“I have had at least one person who interned with us, and at the end of the internship, she and I sat down together — she realized that accounting wasn’t for her and had never really been her passion,” Molavi says. “She had made certain decisions to go into the accounting field, and although she did a great job, she decided that her passion was somewhere else.”
Remember that interns are still students. Most will still have another year of college to finish.
“Internships happen generally right after their junior year for most individuals, so we don’t expect them to come in and know everything,” Molavi says. “We are not testing them on the technical knowledge that they are bringing to the table on day one, but you want to really look for those qualities for a good fit. Then put them on jobs that you would as brand-new associates so they get to experience what it’s like when they join as a full-time hire.”
One of the more important steps any organization needs to consider when you bring in interns is if you will have the opportunities for them to learn and develop in that short period of time.
“If they come in and they are not getting those opportunities, then it is going to be difficult,” Molavi says. “I think any business needs to look at how it is structured and what opportunities it can offer to an intern.
“I know that many of my clients even use internships to give students a sneak peek of an industry by bringing them in over a summer period and rotating them through various parts of their organization.”
Focus on the basics
It’s a serious undertaking for an organization to operate an effective internship program. But it doesn’t have to be expensive. PricewaterhouseCoopers’ program, while a significant commitment for the company, looks at it more as on-the-job training.
“On-the-job learning and development is really important,” Molavi says. “We do that quite a bit, and it’s easy too. I mean it doesn’t cost you a lot of money; you’ve just got to make sure that you are paying attention to it.
“You take the opportunity as you would a project — you stop and make sure that your team understands what you’re doing, why you are doing it, why it is important to your client, what they are going to learn from it so that it doesn’t just become a task; rather, it becomes a learning opportunity.”
As you develop your training programs over the months and years, design as much on-the-job training into it as possible, and it will help pay dividends.
“When we look at our training programs, about 70 percent of it is actually on-the-job training — every day on projects, at clients, real-time feedback and learning,” Molavi says.
PwC’s program has evolved over time to its current configuration: Each intern is mentored by three colleagues.
“One, they will have a buddy,” Molavi says. “They will have an associate who is closer to age and in experience to them, someone they can go to from day one with any questions they may have. They could be administrative, technical or industry questions. The buddy is someone with whom they can engage on a day-to-day basis.”
In addition to a buddy, each intern has a mentor who is a manager/coach.
“The manager ensures that they are getting the experiences, the exposure, the developmental opportunities,” she says. “The managers are responsible for their assignments during that period and help the interns through that.”
The last is a mentor who will nurture what are often called soft skills.
“The interns also get a relationship partner so they will actually have a mentor who will be engaging with them and spending the time to talk about opportunities in the profession, and more importantly for our interns, the opportunities at PwC that they will have in the long term,” Molavi says.
“The program involves quite a bit of investment but again it has become a very important source for our full-time hiring, and we believe the investment ultimately pays off both for us and the recruits.”
Another aspect of an internship program is shadowing. Interns are given the opportunity to shadow a partner for one day to get a glimpse into a day of a partner’s life.
“Because they see us in bits and pieces, the interns probably don’t really realize everything in which a partner may be involved,” she says.
“One of my interns a couple of years ago had the opportunity to shadow me,” Molavi says. “She had a fantastic experience. It just happened to be one of those days where I was doing a lot of different things. We started off the day when I was actually in a coaching session with one of my ‘coachees,’ and moved on to an interview that I was doing that day with a publication. She got to sit in on that.
“We went to lunch with a client. We had a client meeting that she attended with me. Then we came back and dealt with some of my internal roles.
“She was just amazed at what I touch in one day and saw things that she would be very interested in down the road. So hopefully those kinds of looks give the interns a little bit more in terms of what a day could be as they go through a shadowing process.”
Develop new leaders
If your organization has made it a practice to have an internship program, it needs an employee advancement plan to get the most advantage of the intern program.
Tapping outside talent for management posts is not an easy process today, and it is beneficial to promote from within, not only to recognize that individual but to prepare in case a manager should leave. Talent that started as interns is an excellent source for management positions because of the familiarity with the company and work records that show advancement through the ranks.
For example, PwC uses a global leadership development program called Genesis Park for employees who are approaching some nine years of experience — a senior manager or director. This is a 10-week residential program for about 50 people, three times a year, which moves around the globe.
“You bring in individuals from around the world so every one of these 10-week residential programs is very global and very diverse,” Molavi says. “You are bringing people together who have never worked with each other — to work with each other.
“It takes individuals through what I call real-life experiences. This is not a situation where they’re going to role-play. It gives them the opportunities to work on real projects for either a particular territory, PwC territory or a global issue that our global leadership is dealing with.
“They’ll have the opportunity to work on that project and come back with solutions and thoughts. So they are really learning and having that experience of working with individuals they didn’t know before, bringing different talents together, putting their minds together and driving innovation to come up with solutions.”
Programs such as Genesis Park allow employees to not only continue to develop professionally but personally, as well, with leadership skills.
“My coachee who went through came back out in some ways a different person,” Molavi says. “The most important change that I noticed was the self-confidence that she gained from being part of that team and part of that opportunity, and knowing that, she exhibited an attitude, ‘Wow, I did this, and I was able to have a very different experience, and it felt good, and I learned a lot.’”
How to reach: PricewaterhouseCoopers, www.pwc.com or (713) 356-4000
The Molavi File
Houston market managing partner
Born: Tehran, Iran
Education: University of Texas at Austin, with both my bachelor’s in business administration and master’s in accounting
What was your first job?
My very first job that I got paid for was working during summer school at Houston Memorial High School, and I helped the staff in the office, running a lot of different errands.
What has been the best business advice you ever received?
To be willing to take risks. In terms of my career development, this has been the best advice that anyone could give me — the fact that someone took the time to sit me down and talk about the fact that unless you take risks, you’re not going to learn, you’re not going to develop, you’re not going to see new opportunities. You need to step out of your comfort zone and do it often.
When you become complacent and you’re getting comfortable with something, it’s time to do something different. So that is something that has certainly stuck with me. My sponsors early on pushed me and gave me those opportunities, opened those doors for me to step out of my comfort zone and do different things. It certainly has been very important to me, and I have seen it help me in my career and in the advice that I give others.
Who do you admire in the business world?
There are a lot of individuals who have accomplished great things, so maybe the way I would put it is not so much the individuals but those people who going back to what I was taught who had been authentic. They are not trying to be someone who they’re not. They are authentic leaders. They have at times put their necks out there and done something different that was not conventional, taking the risk, and then been successful at it.
Those are the people that I look to, those individuals who aren’t always going to be sitting at the top of organizations. They’re not necessarily going to be the CEOs but individuals who have had significant impact on success with an organization, for-profit or nonprofit as well.
What is your definition of business success?
For me, I think it is really simple: if you think about the success and the legacy that is behind, to be able to have clients who would say, ‘Well, she was our business partner and she was able to help us achieve our business goals.’ Being a tax practitioner, it is important to make sure that we are helping our clients achieve their goals. I think that would be to me a great legacy to leave behind if I could look back at the number of partners I have personally made so that they could be successful.
Mark Carr was operating Christian Brothers Automotive in Houston when a Chevy Suburban driven by a woman from Michigan gasped its way in to the repair shop. It was giving off the telltale knock, knock, knock that even novice mechanics know means the engine is dying.
But what infuriated Carr was not the sad shape of the rusted-out vehicle but the fact that the woman had just paid $750 for repairs at another shop, and the engine was still clunking. He smelled a fresh rip-off for the unlucky victim.
“Her husband was disabled, and she was on disability,” Carr says. “She was trying to take care of her husband and was crying. She said, ‘I just paid $750 to get my transmission fixed and the car’s making the same noise that it did before.’ So I patted her on the hand and said, ‘Come on; let me take a look at it.’”
His diagnosis was on target. She needed a new engine.
“But this guy took $750 that this poor woman didn't have to fix a transmission instead,” Carr says. “I got in the car and I drove down to the guy and I said, ‘You know what? The guy who sticks a gun in your ribs in an alley is more honest than you are because at least you know he is stealing from you. I don’t know how you get up in the morning and look yourself in the eye in the mirror. You disgust me. I am going to tell everyone that I know not to come here. I don’t know what you are going to do for this woman because I can’t control that, but you should refund her money.’”
The man just stood there, not knowing what to do with Carr.
“And I left,” he says. “But that is how I stuck up for her. That’s not the only time that I have done that for my customers.”
Did she get her money back?
“I don’t know if he gave it to her or not,” he says. “But I hope he did; I hope I shamed him enough to give the money back. How would you like somebody doing that to your mother, and there was nobody to stand up for her?”
The incident is a reflection of the simple but powerful mission Carr has for his company — love your neighbor as yourself. With Christian Brothers Automotive, Carr’s goal is to distinguish his company in a field in which a number of lesser shops have often taken their lumps for poor customer service.
“A lot of times, you get a customer who walks in the door, and he thinks that you are a crook,” he says. “He may even say it before you even touch his car. It was a challenge for me to change that person’s mind, to show that that wasn't true.”
In 1997, the company began selling franchises that promoted family values. Today, there are 750 employees and 109 franchises in 14 states, and 25 more are in the planning stages.
“I did start out with a partner, and I bought him out about two years into it, so that is where the ‘Christian Brothers’ came in, using my Bible study,” he says about one of the most frequently asked questions.
Here’s how Carr, president and CEO, set Christian Brothers apart from other companies in a field that is often viewed suspiciously and how he generated $160 million in revenue in 2012.
Walk in another’s shoes
Not every company is founded upon what you might call a divine “nudge,” and other types of inspiration have led entrepreneurs to found enterprises. But no matter where the inspiration comes from, if that nudge becomes the heart of your company — and if you believe the company will only continue through a strong connection to that inspiration, superior customer service and a spirit dedicated to strengthening the community — you will be successful, Carr says.
He founded Christian Brothers Automotive in 1982 with the help of fellow church members, after he spent months praying about how he should change his life. One of the first steps he took to stand out above the rest was to take inventory of market perceptions of the industry.
“I sat down and I made a list of 20 reasons why people hate to get their car repaired,” he says. “I went through every one, checked off all 20 on that list and said I can solve every one of those.
His first goal was to be a light in the community. To do that, establish your operation as fair and reliable, he says. When you make honesty and integrity the foundation of your business, word gets around. Word-of-mouth is everything, and it spreads rapidly, be it positive or negative.
“People are talking about us, which makes me proud in a good way,” Carr says. “It’s all about, ‘Love your neighbor as yourself.’ That is our motto. Whatever race, color, creed, country — no matter where you’re from, everybody wants that.”
Another “image lifter” was a new design scheme. Carr created a positive culture shock when he installed an upscale home-charm décor that includes hardwood floors, leather couches, artwork and decorative lighting in the waiting rooms. The scheme was a hit among women, who had a negative perception of dingy auto shops and the possibility of questionable practices.
Don’t skimp on training
Training is a large part of jobs today, and few organizations can afford to skimp on educating their carefully selected employees. In service-related businesses such as car repair, a business often comes out ahead if it starts with a manager or executive who doesn’t have skills in the service field but instead is strong in business operations, Carr says.
“We do not want any of our franchisees knowing anything about cars,” he says. “If they know about cars, they can be in the running, but 90 percent of the time, we turn them down. We turn down by probably a 2-to-1 ratio.”
Instead, for his company’s franchises, Carr looks for businesspeople who know how to manage people and manage money. To get around their lack of knowledge of the industry, Christian Brothers hires all the employees for the new franchisee because that person doesn’t know what to look for. Then, after about a year, that person will have a better understanding of what to look for, says Carr.
Because no amount of training can address every possible task or situation for a new manager or executive, the education process has to be as thorough as possible.
“We go through extensive training with these people,” Carr says. “I actually have an exact replica of what my store looks like inside my office. It’s got the lobby and all the point-of-sale software so they are in the environment that they’re going to walk into. It is exactly the same — the waiting room, the counters, the whole thing.”
Carr has employees play the roles of customers during training sessions, both good customers as well as mean ones.
“We banter with the trainees to see how they are going to handle that particular situation,” he says. “We are in a lousy business. People are already walking in thinking we are crooks if they are a first-time customer. You just try to deal with it the best you can. If we screw up the car, you say that you were wrong, you take it back in, you fix it.”
Build an image of a cheerful giver
Companies that have become a better corporate citizen in the community are not likely to abandon those efforts, as the good will they achieve can’t be bought at any price. That good will can be especially beneficial in an industry segment that has taken its licks over the years.
And while Carr says a company can offer any number of promotions, those that have staying power in a consumer’s mind are optimal.
“I have a tremendous heart for single moms,” he says. “We hold a nationwide day for free oil changes for single moms. We served over 1,000 people last year. We hope to make it double what it was last year.”
Such events build the image and the brand of your company, but it can’t just be the event. Your core values of honesty and integrity have to be woven into the event or it may come across the wrong way and damage your image more than it will help it.
“It is not to get business,” Carr says. “It’s just to show who we are as a company and who I am as the leader of this company.”
Hosting philanthropic events making contributions and donations to the community result in positive feelings about the company not just from the community but from the employees, as well. Carr says Christian Brothers give away 10 percent of what it grosses across the entire company, donating to charities and other organizations.
“On the 30th of the month, when I call the controller and ask how much money do we have in the account to give, that’s the day I am the happiest,” Carr says. “I love it. I just love it.
“If you give from your heart, He blesses you 100-fold, and that’s what He has done with me.”
How to reach: Christian Brothers Automotive Corp., (281) 870-8900 or www.cbac.com
The Carr File
President and CEO
Christian Brothers Automotive Corp.
Born: Syracuse, N.Y.
Education: I barely made it out of high school. There were 32 kids in my class and I graduated in the top 30. I skinned out, although I did get accepted at three of the top art schools in the Northeast.
What was your first job?
I had a paper route when I was about 10. I used to clean toilets in a bar before I went to school in the morning, and I was a garbage collector on the back of a truck because I refused to collect unemployment. I also delivered fuel oil in upstate New York in 20 degrees below zero weather.
Whom do you admire in business?
Herb Kelleher of Southwest Airlines is one of the smartest businesspeople that I read about. The guy is so smart. All his planes are the same. The maintenance is low. He treats people well. It’s not flying first class, but they treat you well. The customer service, everybody’s got a smile. Nobody likes to fly anyway, but I just think that his whole philosophy, his whole concept of business and his making it so practical in the industry – he’s the only one out there that’s profitable. I also admire Lee Iacocca. He took something that was a mess and turned it into something that was good. I think that is why I like what I do. I’m trying to take something that is really crummy and make it into something decent. And it works so far.
What is the best business advice you have ever received?
My dad said to me, ‘Mark, credit is everything. Pay your bills, pay your employees and pay yourself last.’ I think that’s been really good advice. The credit has gotten us where we are – never defaulting on any loans. He was right. I have paid myself last, and not very much. There wasn't much left. But it took care of the employees.
What is your definition of business success?
It’s not size. It’s getting to a point where you don’t have to worry about paying your bills, you don’t have to look over your shoulder to worry that something is going to come up that you did dishonestly. You really enjoy getting up in the morning and going to the office. And if it is one employee or 1,000, it doesn’t really matter. Just because you are bigger doesn't mean you are more profitable – if you make $1 million a year and your expenses are $999,999, you didn't make any money.
Controversy sparks conversation, and the recent Penn State scandal is no exception. After details unfolded of the abuses committed by former assistant football coach Jerry Sandusky and the school’s complicity in covering it up, professionals have been talking about the steps taken and not taken by university officials to properly manage the crisis.
If there can be a silver lining, it is that business owners are examining — many for the first time — how they would handle a similar crisis. Organizational crises can explode in an instant. These incidents briefly capture headlines, but the physical, physiological and financial repercussions can have a lifelong impact on people and threaten an organization’s profitability, productivity and brand image indefinitely. Companies must act quickly to contain the damage and minimize the impact.
Prepare a management plan
A crisis management plan helps a company coordinate its response and prioritize its concerns, whether that involves protecting people, the environment, assets or the company’s reputation. A crisis plan also outlines all aspects of communication flow and who has what responsibilities.
Those identified to serve on a crisis response team should be familiar with the plan. Some companies conduct practice drills to rehearse procedures and identify weak spots.
In the heat of a crisis, a multitude of operational units and functional areas assemble to tackle immediate and tactical matters. But when an employee’s actions, intentional or unintentional, cause or contribute to a crisis, HR often plays a more significant role, advising management on how to deal with employees involved, as well as those impacted.
Immediate suspension of employees may be appropriate to allow time to investigate details or accusations. Consider, too, whether authorities should be contacted. If a law has been broken, the company has an obligation to notify law enforcement officials. Management may be reluctant to move too hastily, but inaction or a delayed response can be perceived as ambivalence and further damage the company’s reputation.
Companies should have a policy that dictates the precise steps to be taken when there is suspected or alleged misconduct so management can ensure it is following company policy as its continues to examine the matter.
Above all, communicate
Communicating internally and externally becomes paramount in a crisis. Prompt and proactive communication provides companies the opportunity to tell their side of the story. Ignoring or burying bad facts won’t change them nor can any amount of spin, but open and honest communication can shape how the company is perceived during and after the crisis.
After the initial impact, consider the steps necessary for the company to fully stabilize and ultimately recover. There could be ongoing investigations, questions of liability, or required actions involving workers’ compensation claims or potential lawsuits. Also consider what additional employee assistance may be needed.
As with many things in business, the best defense to a crisis is often a good offense. Businesses can prevent many mishaps and certain misconduct by ensuring that employees are familiar with company policies and thoroughly trained on safety protocols. And if something still goes wrong, having provided the proper instruction may mitigate some company liability. Also, as with the Penn State scandal, ongoing abuse could be stopped and damage minimized if wrongdoing, once discovered, is immediately reported to appropriate authorities inside and outside the organization.
Companies should have procedures in place that allow employees to anonymously report incidents without fear of retribution. Familiarize employees with those procedures, as well as the possible disciplinary or legal ramifications of not reporting illegal activities.
Promote an open culture that encourages forthright communication and forbids collusion and cover-ups. The most visionary business managers cannot predict the timing or nature of their next company crisis, but they do acknowledge that a crisis will eventually occur.
Preparedness, precautions and practice can help companies respond promptly to crises and minimize the damage they can cause.
John Allen is president and COO of G&A Partners, a Texas-based HR and administrative services company that manages human resources, benefits, payroll, accounting and risk management for growing businesses. For more information about the company, visit www.gnapartners.com
When Dr. Paul Klotman took over in 2010 as president and CEO of Baylor College of Medicine, the school had been losing up to $70 million a year — for the previous five to six years. The financial books were not a pretty sight.
A previous conflict had developed between Baylor and one of its hospital affiliates and a different pathway was chosen for the two. Unfortunately, it cost Baylor about $40 million a year.
“It was not huge in size as part of a $1.5 billion revenue stream, but it was a fair amount,” Klotman says. “We had a new financial challenge that presented itself, and because we were in the process of building some facilities right before the housing market burst, we had a significant problem with debt service and negative cash flows.”
But Klotman was ready to jump into the challenge for which he had been hired. He was no stranger to turnarounds. He had been involved in a major financial about-face at the Mount Sinai School of Medicine in New York as the chair of the Samuel Bronfman Department of Medicine. He moved the department to a top-tier academic program by expanding the faculty practice, increasing basic and clinical research revenue and focusing on the educational mission.
“I felt very comfortable in what had to be done,” Klotman says. “Taking the job was actually easy, because Baylor is such a fabulous organization and all the fundamentals were extremely solid. It was just an issue of dealing with the budgetary deficit and turning around the institution’s financial operational deficit.
“I had been at a Veterans Administration hospital, I was a federal employee at the National Institutes of Health for years as a scientist, I was at Duke University in the private sector, and I was at Mount Sinai in a very competitive clinical world, so it helped to have those experiences. I have to say as difficult as the situation was, there was very little that surprised me.”
Klotman set out on a path to initiate new processes to let the faculty do its own thing by following some traditional business principles — such as managing its budgets.
“It’s not rocket science, but it is surprising that it is not that common in academic organizations to worry about your margin, your expenses and making sure you’re maximizing your revenue,” he says.
“When I first came in, we focused on doing just that. We created zero-based budgeting that was all mission-based. In a very short time, within two years, we went from a $70 million deficit on an annual basis to where we are basically cash positive.”
It wasn’t just a matter of spreadsheets and figures. A change in culture from varying processes to one with solid business principles is an unsettling process, and is indeed sometimes not undertaken because it is so disquieting.
“I think one of the hardest parts is gaining leadership’s support of converting to the business sentiments,” Klotman says. “All of the leaders were supportive. All of them were willing to give it a shot. We would never have turned it around as quickly as we had if it weren’t for the leadership of the chairs, the senate directors and the faculty.”
Here are Klotman’s keys to stem the bleeding at Baylor and engage the leadership in new types of financial management.
Face the situation
One of the things that a crisis does is that it gets every employee’s attention. Once the stark news is delivered, the workforce should be able to know and understand the financial realities.
“The crisis allowed us to change the budget process at a time when it otherwise might not have been very accepted,” Klotman says.
Unfortunately, keeping the status quo is not an option. There is going to be change.
“When the boat has to go in one direction you’ve got to have everyone rowing in the same direction,” he says.
Some organizations may call in a consulting firm to dissect the financial and management processes and it can be beneficial. In other cases, the analysis by an outside group is just that – an outsider’s look at internal problems.
“Before I arrived, a consulting firm had been there, and I would say the faculty and leadership were probably not as responsive to the consultancy, because the consultants didn’t have any of the same experiences,” Klotman says. “You could see the cultural rift. When I first arrived and saw the interaction with the consulting group, which actually did a fine job in getting us in the right direction, you could see the disconnect between faculty and leadership and the consulting group, because they did not speak the same language.”
The most important action to take as the first step in the cultural makeover is to be transparent in all the processes.
“Show the data,” Klotman says. “If you show them the information, there are not a lot of arguments that you can have about your situation. If you’re not transparent about it, it’s very easy to blame everybody else. But if you just are transparent with the data, it’s simple to establish accountability.”
But transparency is something that is very hard to get if your data is disorganized. If it lacks uniformity and completeness, it is crucial to get the data in order.
“Getting transparency may be complicated, because there may be a lot of dollar movement from one bucket to another bucket,” he says. “Part of it is where you assign expenses to the right unit — making sure that you are allocating expenses correctly, and that you are attributing revenues to the right sources. Otherwise you can’t make good decisions.
“Part of our first year was cleaning up that kind of data — and we still have issues with it today.”
The better and more accurate the data is, the better you will be able to manage your financial situation. It may take a year to get the data to the point so that you can provide accurate information about your mission – so accurate utilization of data is needed about billing and collections, efficiency processes, revenue, expenses, space density, etc.
“There are hundreds of metrics that you can do,” Klotman says. “Once we collated all the data, we were able to create a report that all the leaders get. Have your financial people help them interpret that, then get together quarterly and review it together. It’s something we call Numbers Day.”
Holding a Numbers Day is an effective way to review your mission-based budget. Any department or division of a business should earn its operational budget based on its performance the year before.
“Everybody gets to see all the data, including where everyone sits financially so it’s completely transparent,” Klotman says. “If there are disagreements about the data, discuss it. It’s an iterative process so they can ask questions about it; you can make sure that it’s accurate.
“But the main thing is that it provides the leaders with management tools so they can then break it down by department or mission base, look at their own business unit and see how they can improve it.”
This is an obvious key factor in driving improvements. If you measure processes and performances and show your managers, they will have the tool to improve matters.
“If you do it in a way that everyone sees the data, then it is hard to really argue with,” Klotman says. “That’s why it’s an iterative process. You need to have that public forum where people can discuss it.
“It also helps to unify everyone with the understanding, ‘Well, these are the things that are important to executive leadership because they are measuring them.’”
Most of the leaders should be happy to have the data. Initially there may be some arguing about its validity. Ultimately, it provides them with management tools — and it also helps C-level executives understand who can manage, because some of them use the data very well and improve their operations and others just won’t get it.
“You can see that in the long run you may have a certain number of leaders that probably have to be replaced,” Klotman says. “The point is that you are giving them tools to use. There should be no one who really objects to the data.”
Communicate and get feedback
You’ve heard it over and over. Communication is critical for success in any organization and even more so in large ones. The most effective approach lies in the old adages that one size does not fit all and the more, the better.
“You will need to focus on your internal communications to reach more people,” Klotman said. “We had certain levels of publications before, but we created a whole new set of ways to communicate internally from hard copy to Web-based publications.”
He also used town hall meetings where he regularly met with groups and held small staff meetings.
Despite all those things, you still may have issues with communication because each form of communication only hits a certain population.
“We will have a town hall meeting where we are thrilled because 200 people show up,” he says. “Well, we have 7,500 employees. So we have to find multiple ways to constantly say the same thing and get the message out. Of all the things that you will face, I think communication remains one of the biggest challenges.”
In addition to finding other communication routes, you can create feedback committees to represent departments or specialties.
“You can do this through input committees; we have those that represent clinicians, researchers and even students,” Klotman says. “We combine in a council so we can get feedback from the various constituencies and that helps inform us of the kinds of communications that we have to give back to them.
“One of the great things that our director of communications has been able to get members to do is to come with both positive and negative statements about the institution so it never turns into just a complaining session.”
This is extremely helpful in figuring out the things your organization does well in addition to the things you do poorly.
“You’ll get both the benefit of knowing you should continue to do certain things because they are working, and you’ll learn what things aren’t working well so you can begin to focus on them,” Klotman says.
“But you can’t fix things unless you get feedback about the problems, and if you look at the most highly functioning organizations, they almost always have a very robust feedback system where line employees, people on the ground and the rest, can send feedback to you about problems.
“We’ve received individual complaints from staff across our organization where I would say that 95 percent of the time we immediately fixed the problem,” he says. “We’ve had things like the glare in a window where all we had to do was install a shade.
“These are the things that if you create a culture where people feel that they can give you feedback, then you can actually improve things much more dramatically than if everyone was waiting around for a CEO to fix a broken lock.
“You want people to actually give you legitimate feedback about things that are broken and the processes that don’t work, as long as they understand there are some things that you can fix and some things you really can’t.”
Your employees should understand there is no risk in reporting a problem, that there’s no punishment for saying something is broken.
“My favorite example is the aircraft carriers of the world that function with 19-year-olds in the most dangerous, high-risk places where they have almost no accidents,” Klotman says. “We are in health care and education, and every day, we screw up about 100 things, so we ought to be able to do something better. Part of the difference is the culture in the aircraft carrier: everybody reports a problem.”
Give merit rewards
While a new management system and better ways to communicate will go far in helping an organization begin to turn around, a rewards system will help it even further. With the new data available, metrics can be established to ensure that goals are being met.
“You take your leaders and based on their ability to manage their margin and the mission values that you have, allow them to pick a few metrics that they think are important in their own particular area so they can earn bonuses based on that,” Klotman says.
You can implement this as far down the labor ladder as you want, the lower, the better.
“Once again, this is to get them in line with upper management,” he says. “That way it’s a self-correcting ship. Middle management is really important in great companies, and you need middle management to be active managers to make sure they are going in the direction that you want.”
Give your employees 10 things that you want to have happen, and say, “You pick your four, and we will measure you on those.”
“There is one collective goal: The organization as a whole has to be on a positive margin for you to bonus the leaders,” Klotman says. “People earn their budgets and they earn their salaries. If you’re on margin, and if the departments are on margin, then there will be bonuses available based on producing results that are a combination of ones the CEO picked and ones they have picked.
“As I mentioned before, one of the keys is having things that you can measure. Make sure that you create metrics that can show whether you are getting better or you aren’t.”
How to reach: Baylor College of Medicine, (713) 798-4951 or www.bcm.edu
Paul Klotman, M.D.
President and CEO
Baylor College of Medicine
The Klotman file
Born: I was born and raised in Cleveland, Ohio. My father’s from Cleveland. My mother was born and raised in Galveston, Texas. I went to Western Reserve Academy in Hudson, Ohio.
Education: University of Michigan. I studied zoology and entomology. I went to medical school at Indiana University. You may wonder, I followed my parents — and got in-state tuition wherever I went. I also trained at Duke University Medical Center.
What was your first job?
I was folding pants as a 16-year-old in downtown Detroit. It was a very popular African-American suit store. I also was a day camp counselor there during the 1960s’ race riots. I was right there, and it was actually a wonderful experience. They never touched my car — I was providing a service to the community.
Who do you admire most in the business world?
There are a couple of people that I think are really interesting. One is Tom Kaplan, who I met in New York and who founded Panthera Corp. He’s probably the biggest leader in the gold movement. I’ve gotten to know him personally, and he is just a really remarkable person. The other person that I admire greatly is Norbert Bischofberger, who is the number two person at Gilead Sciences Inc. Of all the people I’ve met, he’s one of the few people who just cares about understanding everything he can to make a difference to help people.
What was the best business advice you’ve ever received?
I know it seems silly but the importance of cash. The CFO at my old organization was really, really talented, and had a huge role in turning around the old hospital focusing on the details of your cash position.
What is your definition of business success?
I view my role in every place I’ve been as a steward of the program, and I think your success is if you leave the place better than when you came. That’s not a measure of personal success; it’s not a measure for a for-profit company but for a not-for-profit organization. I think there is a level of stewardship that is greater than in other areas, and I think that your responsibility is to improve the institution.
Every industry constantly searches for the next thing to alter and improve how business is done. For Houston and the energy industry, that thing is clean technology. Lisa Epifani, an expert in the energy field, explains how it is bringing change to the energy capital.
Leading the energy industry
Houston will be a great leader in the clean tech world. Texas is super lucky to have great resources for wind and solar energy, and Texas has been harnessing those newer and renewable resources.
Clean tech versus oil and gas
It’s obvious that oil and gas are going to be a major part of the portfolio for a long time. We have to acknowledge that and be realistic about the tradeoffs as we transition to cleaner and cleaner fuels. Houston is positioned well, given its knowledge of the energy industry and its geographical location. Texas is a very attractive location for a number of headquarters. Houston is an attractive place for companies to come with its lower taxes and larger labor base.
Regulation in the pipeline
EPA regulations are coming down the track requiring cleaner energy. Companies are going to have to find ways to meet their production demands using cleaner technologies.
Oil and gas companies accept the reality that our economy is turning toward more carbon constraint. The traditional oil and gas companies are going to start making investments in clean energy, particularly as we see tax incentives, different policies, or perhaps something like a national clean energy standard calling for a greater use of those. These companies have money to invest in the energy industry and are going to position themselves to play across the full spectrum of resources.
Oil and gas are still boss
There is going to be a continuing demand [for oil and gas] for a number of years. I don’t see [clean technologies] as competing, I see them as offering a layer to the cake in the foundation of our oil and gas tradition and now we are going to improve on that with these cleaner, newer technologies.
It’s not a matter of one part knocking out the other but blending in a way that makes sense from an economic point of view, security point of view and from an environment point of view. It’s an exciting time in the energy industry and things are improving and it’s a matter of phasing in newer technologies in a smart fashion.
HOW TO REACH: Van Ness Feldman, (202) 298-1800 or www.vnf.com
Van Ness Feldman
About: Lisa Epifani is a partner at Van Ness Feldman and advises a range of clients on energy and environmental matters, with a special focus on climate change strategy, oil and natural gas issues, nuclear policy, and financial regulations. Her clients include industry coalitions, financial institutions, oil and gas pipelines and think tanks. Before joining the firm in April 2009, Lisa spent 10 years serving in key governmental and business community roles, developing energy policy and strategy. She was appointed assistant secretary at the department of energy for congressional and intergovernmental affairs by then-President George W. Bush.