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How John Short kept a transaction on track by quickly changing plans Featured

8:00pm EDT May 31, 2010

John Short had a big problem with very little time to fix it and a lot riding on his ability to find a solution.

RehabCare Group Inc. had just acquired its second-biggest competitor, Symphony Health Services LLC, in a deal that would nearly double the size of one of its most important divisions.

“We were very automated and we used handheld technology for all of our clinicians,” says Short, president and CEO at RehabCare Group. “They were paper-based, so we could see there was substantial value in moving them from paper to our technology.”

Both companies specialized in post-acute rehabilitation services. The problem for Short was that many employees at the newly acquired Symphony Health were quite fearful of computer technology.

“A substantial number of them felt much more comfortable with paper than they did with PDAs and technology,” Short says.

Others didn’t just feel uncomfortable with computers; they didn’t even know how to turn one on.

“We had about a third of them that had to ask us, ‘Where is the on/off switch?’” Short says.

Clearly, this was not good news. It did not bode well for the plan Short had developed to seamlessly integrate Symphony Health both into his company, which had more than $600 million in revenue at the time, and into the company’s skilled nursing and rehabilitation services division that stood to double in size.

“Any change management plan you come up with will probably not survive the first implementation test,” Short says. “You read about that in change management books and MBA school. But when you’re knee-deep in it and the alligators are coming for you, it’s a whole different deal.”

So what’s a CEO to do? Short says you need to quickly ask yourself two questions: “What are your guts telling you? Do you have the time to find out whether this version of the plan will really work?” Short says. “The biggest challenge you’ve got is recognizing when things aren’t working or aren’t working well enough. It’s letting go of Plan A, B, C, D or E and getting on to Plan F and recognizing there will probably be a Plan G. It’s nerve-wracking.”

It was also essential if Short was to keep this deal from completely falling apart.

Be humble

As bleak as things may have looked to Short, he had at least prepared himself over the years to deal with adversity.

“You should never be comfortable,” Short says. “If you’re comfortable, you’re missing stuff. This is one of those cases where age and experience works for you. Age and experience typically give you scar tissue from really stupid mistakes and that makes you a lot more humble and a lot more sensitive to the fact that you can really screw up. Those screw-ups have real consequences to real people. If that isn’t enough to terrorize you, then you’re in the wrong business.”

Short knew his plan wasn’t going to work and that he would need to come up with a new course of action to integrate Symphony Health into RehabCare. Fortunately, he did have one thing going for him. While there were some novices, not all of the employees at Symphony Health shuddered at the sight of a computer.

“We had roughly a third of these folks that immediately turned on the computer, got out the manual and we hardly had to talk to them,” Short says. “They figured it out, they were moving and they were asking great questions.”

When you’re in a bind, your inclination is to grasp onto anything you can find that will pull you out of trouble. Short knew these knowledgeable computer users could help him begin to get things back on track.

“We thought we were going to be able to train each site as a group,” Short says. “What we ended up doing was getting the people that were computer literate, training them and having them go back and train their colleagues. That worked out a lot better.

“We said, ‘Look, our plan is not going to work this way. What do we have to do to make it accessible and successful for the folks that are going to have to change?’ You express a lot of humility and indicate that, obviously, you don’t have all the answers because you don’t have the answers to this deal. You empower them to take the lead. It’s pretty easy to tell them what the vision is and where you want to end up. The hard part is how to get from Point A to Point B.”

It was pretty easy to pick out the people who knew what they were doing from the ones who did not.

“You just grab them and say, ‘OK, we have an exciting new challenge for you,’” Short says.

Give them an ego boost by showing them that even though you’re buying their company, you really need their help to make it work.

“First explain the rationale of what you’re trying to do and why,” Short says. “That satisfies a segment of the group. At the same time, you have to identify processes and approaches that they do better than you do and implement them on your side so they can start thinking, ‘Wow, these guys really do value us.’ We treated them as equals and showed them that we were not perfect and we did not have world-class processes everywhere. In fact, in several areas, they did stuff better than we did and we started using their folks to train our folks. It became more of a team integration rather than, ‘You guys don’t know anything. We’re going to teach you how to do this.’”

Short ended up accomplishing two things at once. He was expanding the knowledge base of his new employees and simultaneously integrating them into RehabCare’s culture.

So what about the people who really don’t get your way of doing things or don’t want to get it?

“People identify themselves pretty rapidly if you’re looking for it,” Short says. “If they’re giving you the basic, ‘I’m not going to do this,’ the faster you recognize it and segue them out, the better it is for them, for us, and for their colleagues and management.”

Start at the bottom

As he was putting out one fire, Short still faced the challenge of trying to integrate as many as 3,700 employees from Symphony Health into his organization.

“The first thing you do going in is forgive yourself for making the mistakes you’re going to make because you’re going to make mistakes,” Short says. “Just get over it. We sent letters and had personal phone calls with every one of the 3,700 employees within the first three days we did the deal, telling them either there was absolutely no change contemplated with their job or, on the other side, there was a change and here’s what it looked like.”

He began this seemingly overwhelming task by putting together a communication plan.

“We’re in a pyramid,” Short says. “I have to sit down with 10 folks. Those 10 people have to make their 10 calls and the layer below them makes their 10 calls and it’s not nearly as onerous as you might think. You only have four or five layers there and you cover everybody.”

Short brought even more order to the process by having people make calls to their counterparts at Symphony Health.

“Have the HR guys talk about the HR issues,” Short says. “You have the CFOs talk about finance issues. A healthy fraction of the discussion is, ‘Do you want to stay? Who that reports to you should we keep? And why should we keep them?’ Then you go through an initial set of interviews and it doesn’t take long to decide actually.”

When you begin the process of sitting down conducting interviews with people about their future, you should start at the bottom of the organization and work your way up.

“Those are the most important people,” Short says. “Those folks pay my check, so I have to keep them happy.”

You also shouldn’t be the one doing the interviewing of people at these lower levels.

“It doesn’t do any good for me to do that,” Short says. “People will tell me what they think I want to hear. So you really have to get their supervisor, who typically has not only an employer-employee relationship but also a friend-colleague relationship to have that discussion. Do it in a way that is as nonthreatening as possible, including making it clear that there is no problem if they’re not comfortable. If they want to leave, do everything you can to assist their leaving.”

Remove the uncertainty

There is an obvious question, of course, if you’re starting at the bottom in evaluating employees to remain in your organization: What happens if the supervisor conducting interviews with his or her direct reports doesn’t have a place in your future?

“I would love to tell you this is a perfect process,” Short says. “We tend to do it simultaneously because speed is of the essence. Are we going to make mistakes? Sure. Are people going to mislead us? Sure. But if you get people comfortable that you’re not going to fire them tomorrow, they’ll be pretty up front about, ‘I can do this, I can’t do this, I don’t know if I can do this.’”

It’s uncertainty that you’re trying to remove from the equation. The quicker you can do that, the better off you’ll be.

“A third of the time, they’ll come up to you and say, ‘I don’t feel comfortable working with another company. I want to leave,’” Short says. “Another third of the time, they’ll say, ‘I really want to stay. Is there a role for me?’ Then you get the people in the middle that are trying to think about it. The big thing is, as long as you can give folks at any level a soft landing so their decision is not distorted by, ‘My God, I’m going to be on the unemployment line tomorrow at 8 o’clock,’ you typically can get pretty rapidly what their desire is.

“Successful integration is speed, speed, speed. People want to know, ‘What is my future?’ The faster you can answer that question for every individual in the other company, the better off you’re going to be and the better off they are going to be.”

When it comes time for you to meet with your counterpart, the CEO at the other organization, you can never go wrong by following the Golden Rule.

“Treat him or her exactly the way you would want to be treated if the roles were reversed,” Short says. “Make sure you show a lot of respect for what he’s done. Make sure he has a soft landing if he hasn’t already gotten one built into his agreement with the prior owner. Engage him intellectually in the challenge. At that time, we’re all type-A personalities. So it’s really not hard to engage him unless you piss him off.”

If you find other people on your counterpart’s leadership team who seem reluctant to stick with you, let them move on.

“If they are avoiding your eyes and won’t make eye contact, if they fidget or are nervous, if they’re very evasive when you ask them direct questions, they’re probably not going to survive my management style anyway,” Short says.

The honest, upfront approach helped Short keep the acquisition on track and move past the initial problems that threatened to derail the whole thing.

“It had a great ending, but we sure look at acquisitions very differently than we did back then,” Short says. “Because every acquisition is going to require a culture change. The thing that we learned was the plan we had put together was based on our 10-year experience with technology. We assumed everybody knew as much as we did. What we quickly learned was we shouldn’t do the plan. We should take the people we’re trying to change and train and have them develop the plan. They are the ones that are going to be affected by it.”

The 18,200-employee company recorded $869.4 million in operating revenue for 2009 and Short says humility will be a key to being able to take that figure even higher.

“I know I’m going to mess some stuff up,” Short says. “I’m mature enough to say, ‘I’m sorry,’ and get to work on fixing things that I messed up in the first place.”

How to reach: RehabCare Group Inc., (800) 677-1238 or www.rehabcare.com