The tone of this blog is frequently critical. That’s probably because I believe we all learn much better from negative examples than from positive.
But if you don’t have any positive examples with which to contrast, we can easily forget why negative is negative. So the occasional positive blogpost is especially important. And this one is a real upper.
PSA: Pediatric Services of America
Last week I had the privilege of working with a very fine small company, PSA Healthcare. They deliver home health care for medically fragile people, mostly children. They have about 3,500 private duty nurses, operating from 50 locations in 17 states. What they do can make an enormous difference to families, allowing them to lead normalized lives under difficult conditions.
But having a great mission alone doesn’t make for a fine company. A lot of what makes PSA fine is that they are intentionally and consciously using trust principles to run the business. They are not only making a lot of people very happy and proud, they are doing very well by classic business measures. A fine case of doing well by doing good.
Let’s start with the metrics, go on to the principles, and end up with the real punch lines.
The Numbers. Jim McCurry started as CEO a little over a year ago, when PSA had been declining in revenue, market share, and profitability. Previous management was a classic top-down, measure-by-the-numbers team that had, simply put, failed.
The old style was that each month the bottom-performing offices were required to ‘justify’ themselves on a conference call to the top management. At the annual meeting, office heads were required to double-up on hotel rooms. Orders were given, decisions had to be approved up the line, and the style was management by FIN—fear, intimidation and numbers.
By the end of McCurry’s first year—at the tail end of a recession—revenue steadily increased, reaching a 20% annual rate of growth by year-end, all of it volume-based. The company increased profitability, more than doubled total profits, and turned the market share decline into market share gain. Staff morale is up enormously. Expenses are down.
Bottom line: really solid business results.
The Principles. How did McCurry do it? It was not the classic MBA turnaround medicine of tightening up, taking control, and cutting expenses. Instead, Jim told the staff the following:
“From now on, this company is run for the customer. The office heads work for the customer, and the rest of leadership works for them. Make your own decisions, and we’ll help you make them. Don’t wait for us to tell you what to do, you figure out what to do and do it—we trust you. No more intimidation, no more review boards.
“Our new mission has three parts: Action-oriented, Care-giving, and Trust-based.” (It spells ACT: coincidence? Of course not).
The annual meeting I was privileged to be part of was full of hokey-yet-fun skits, honesty, mutual helping, and positive energy.
The Punch Lines. McCurry is an MBA. A Harvard MBA, actually, from a year after Dubya’s vintage.
The company’s owners are two private equity firms; the head of one of these is dedicated to the business in large part because his mother had been born so prematurely that she likely would have died were it not for the in-home nursing care she received in the first weeks of life.
This is a profitable business, not a charity. It is being run like a real business; like a real business ought to be, I should say, because too many businesses are being run the way PSA used to be run.
It’s refreshing to see an example of the much maligned du jour—MBAs and private equity—using modern, “squishy” leadership and management principles to improve life and the bottom line in parallel.
Collaboration, ethics, trust, openness, honesty, integrity—these are not fuzzy phrases, uttered by bureaucrats, wealthy Hollywood stars, or mega-rich Googlish do-gooders. These are utterly workable principles that deliver the best results around. They give capitalism a good name. Collaborative capitalism, I like to call it.
McCurry and PSA Healthcare deserve their success.
Charlie
I love it! More stories on real success stories- they hit the spot. Keep them coming…
Trip
Charlie,
Thank you so much for the fantastic training. It was the absolute best leadership conference I have ever attended in my career. Thank you for capturing the essence in your blog today. We LOVE the new PSA!
Dawn
This was defintely an interesting example, although I would have liked a few more details about how they carry out their policy. The last company I worked for had a customer based-policy too. They called it the "Customer Covenant". Unfortuantely, having a stated policy didn’t actually change the culture. It didn’t make the software better or the work environment more collaborative, even though those were stated goals. That is why I am more interested in practives than policies. Any cludes as to how they made this work would be appreciated.
Leadership is really so important isn’t it – if Jim managed to increase volume, double profits, and lower expenses (all in one year), it must’ve been very badly run before.
Some specifics would be good. Obviously there’s the top level strategy of being action-oriented, care-giving & trust-based. I’d like to see how this was distilled down into its tactical components and how it affected the employees.
Chris: I called Jim to ask him about your request for more specifics. He graciously agreed to do so.
I’m summarizing a bit, but here’s what he had to say, using the 3-part framework from the book Switch (with which he is clearly enamored):
Direct the Rider – We told the Location Directors that the key economic driver of our business was Weekly Staffed Hours per Location and that our then existing average weekly hours per location were substantially lower than industry benchmarks. Given this diagnosis, we told the Directors that our focus was to profitably grow our average weekly staffed hours per location from X to Y. We also told them that achievement of this objective was a function of 3 (and only 3) things:
1. Recruiting and retaining nurses
2. Winning and keeping cases and
3. Maintaining our position as number one in the industry in terms of clinical excellence.
Motivate the Elephant – We told the Location Directors that we had complete confidence in their ability to move the company toward our objective of Y weekly hours per location and that henceforth the role of corporate management would no longer be to control their actions but would instead be to provide them with coaching, support and tools to help them achieve whatever goals they had set for their own locaton. In short, we said "We Trust You."
We backed this up by eliminating numerous micromanagement directives and restrictions, and instead began to treat the Locations Directors as the key leaders and decision makers of the company. This was done with numerous little things. Some of the things we did in this regard you already mentioned in your blogpost. We gave them their own room at our annual meeting. We implemented a "profit sharing" plan so that they benefited directly from the performance improvements at their locations. We eliminated many restictions on their decision making flexibility, and, very importantly, we eliminated corporate level positions the primary purpose had been to inspect and control the decisions of the Location Directors. We eliminated all corporate reports that focused attention on Locations that had performed poorly, and created new reports that focused attention on Locations that had performed exceptionally well.
Shape the Path – We re-organized our centralized nurse recruiting team to make it into a service organization for the Locations. We completely overhauled our on-line application process for nurses, simplifying it so significantly that our number of applications tripled, making it much easier for our Locations to identify and recruit highly qualified nurses. We dramatically reduced the amount of time Location Directors had been spending spending reporting up the line on how they were spending their time and on getting approvals for even minor decisions.
Thanks Charlie – really appreciate the response – there’s a goldmine of information there in terms of planning an organisational change process – a small dose of metrics and plenty of focused autonomy to create a high trust environment.
Thanks again!
Chris