Learning from Past Recessions: Cutting Costs, Reducing Turnover & Increasing Revenue
Stephen Tweed has been in home care for several economic downturns, including the Great Recession and he’s joining us to talk about what he’s learned from past economic downturns and what insight that will give agency owners navigating current challenges.
Well, thanks, Miriam. It’s great to be with you and all the Home Care Pulse fans out there. This is a great opportunity to have a conversation about where we are today and where we can go in the future as a result of all the turmoil that we’re experiencing in home care.
Definitely. Well, we’ve got some heavy hitting topics today, so let’s get right to it. So, like I mentioned, you’ve been in home care for several economic downturns, including the great recession. How have you seen those economic downturns affect the home care industry? And what insight does that give you into how this current economic downturn could and will affect the industry?
Well, that’s a fascinating question because my wife, Elizabeth and I, who are also business partners were talking about that the other day. And we’ve actually been through five major economic downturns in our country, starting in 1981 and then the late eighties and the early nineties and of course nine 11 and then 2008. And so we have seen the ups and downs of the economy in our country, but interestingly enough, we’ve seen that major economic upheaval has not had a significant impact on the home care industry. Certainly it has an impact on individual companies. And what we’ve observed over the years is that the stronger companies with the strong foundation, the strong company culture tend to get through those economic upheavals and come out. The other side very stronger. What we have seen though, is that the buying patterns of seniors and their families, particularly in the private pay sector are influenced by things like the stock market, so that in private pay, we tend to look for clients that have higher net worth.
And what we’ve observed is that high net worth individuals oftentimes think about their buying patterns based on the strength of their stock portfolio. And they get that report every month from their broker or their financial planner. And when the stock market is up, they feel like they have resources and they’re comfortable spending when their portfolio goes down, they are a little bit more cautious about spending dollars, even when they’re not tapping their investment portfolio to write that check, they have enough in their checking account to pay for home care, but the mindset is, well, I’m less wealthy now than I was last month. So I have to wash my, my spending. And so I think that’s one of the things that we’ll watch coming out of the COVID crisis. And of course the stock market was up dramatically the couple of days earlier this week and last week. And so if that’s any indication, I think that we’re going to come out of the COVID crisis with a strong economy and new opportunities for home care companies going forward.
We also have seen in the media a lot of talk of, of home care being a recession proof industry. Can you speak to that phrase? Like you’ve said, you know, most organizations come out stronger, but whereas home care is unique in a way. What are your thoughts on that term “recession proof”?
Well, I think it is relatively speaking because people who need care need care regardless of what the economy is doing around them. And so other parts of the healthcare continuum, hospitals, physicians, home health agencies, nursing homes, all continue to function and do business, even when there’s an economic downturn. Obviously there are some factors that affect certain parts of the healthcare continuum, but for what we’ve seen home care, private pay home care has tended to be relatively recession proof. Other than, as I said when higher net worth consumers look at their stock portfolio, they may be a little more cautious that he may cut back hours per week. But generally you don’t see a lot of people dropping out of home care simply because the economy is is slowing down. So that leads me to believe that we’ll continue to see a strong marketplace for home care going forward.
And as we said earlier, the stronger companies will grow and prosper. I think there may be some smaller companies where owners are just exhausted from all of the turmoil of this last three months. And if their business wasn’t growing and profitable before they may be ready to say, you know what, I want to go do something different with my life. And so one of the questions that we’ve been talking about in our home care CEO mastermind groups is what are the opportunities for growth through acquisition, with larger, stronger companies, acquiring smaller companies and tucking them into their current business in their local marketplace?
Interesting that being said, that kind of puts us right along with this next question. You work with a lot of agencies, particularly those that are larger and most likely more stable because of their size. Can you speak to some of the ways that these successful agencies have adapted in this time versus those that have not?
Yeah. I think the, the larger, stronger, more successful agencies see this current crisis as an interruption in their growth pattern. And most of the companies that we work with are in the top 10% of the industry by revenue. And so these are the larger, faster growing companies and they are looking out further into the future. And as a matter of fact, I did a presentation or actually facilitated a panel discussion last fall at the home care association of America. And it was called lessons from the mega companies. And we had board members of our largest mastermind group. And we talked about six specific lessons that we have learned from being around these people for eight years now. And the first lesson is have a huge vision and these visionary leaders really see the bigger picture. They see themselves running a bigger company, and that leads them to look at what do I need to do to get from where I am now, to what I see this vision being five years from now, 10 years from now, the next lesson is about company culture.
We say company culture eats strategy for business. And so the culture is really the way that we do things around here and it’s influenced by four factors, the leadership style of the CEO, the core values that guide the thoughts and actions of the company, the behavior we expect and the behavior we permit. And I mentioned my wife, Elizabeth, who is an executive coach and works with hospital CEOs and physician leaders in academic medicine, around leadership and teamwork. And she says the behavior we permit, we promote. And so the companies that have a strong culture and a clear vision tend to continue to grow through this. The third lesson is to be a systems thinker and these leaders look at their business and they look at the tasks that are repeated over and over and over again and say, how do we put systems in place and systems involve processes and people to systematize.
And then we look at the fourth lesson, which is the companies that attract the best talent when in the marketplace. So this is a time when stronger companies are looking at the talent that they have currently and looking out there for other talent that may be available to join them. The fifth lesson we learned is about telling your own story. And again, each of the leaders of these larger companies has a personal story about how they got into home care and the ability to tell that story and use that to attract clients and attract caregivers is an important part of this process. And then the six lesson is measure everything. I have a mantra that says what gets measured, managed, what gets rewarded gets repeated. And so our mastermind members are really into tracking metrics and analyzing those metrics and using that to make the strategic decisions. And so, as we look at this time period of coming out of the COVID crisis, I think those companies that have learned those six lessons are going to be stronger and are going to grow. And I think smaller, younger companies can look at those lessons and say, how can I learn from that and apply some of those principles in growing my business?
Yeah, that’s fantastic. Wow. I wish we could dissect each of those points. There’s been a lot said, you know, and, and each of those points is so foundational in this concept of, you know, growth as a business I want to dive into too, though, you mentioned leadership of the CEO being one of those foundational points. What, in your experience consulting and guiding these agency owners, what are some of the action items or the tips that you can give these leaders in how they can better become better leaders of their agency?
Well, that’s a great question. And I think that the lessons in leadership go back to first of all, a leader who, who is a visionary, who has a, a picture of what it is that they’re trying to accomplish and has the ability to communicate that vision to the other members of our team. And whenever I think about vision, I think about Walt Disney, the founder of Disneyland and Disney world, and what was an amazing visionary leader. And I don’t know if you remember this, but Walt Disney built Disneyland in California. It was very successful. And so he came over here to Florida and flew over what is now Orlando and Kissimmee and Lake point of Vista, which was then swamp and looked down and, and, and made a decision and purchased some land and started building the magic kingdom and Epcot center.
And Walt Disney died before the magic kingdom opened on opening day, the group of dignitaries and guests and friends were there for the opening of Disney world. And at the end of the day, they were walking back toward the gate entrance to the park and among the group was Roy Disney Walt’s brother. And one of the guests said to Roy, this is amazing. It’s really a shame that Walt never lived to see it. And Roy, his response was, Oh, he did see it. That’s why it’s here. And so these visionary leaders that have the ability to see the bigger picture of what it is that they’re trying to build and then can craft a culture that is attractive to workers and particularly attractive to top town. And so attracting top talent, and then looking at the systems and putting systems in place. And again, with these larger companies we’ve looked at different systems that are, matter of fact, we have a, a principle that I created about a decade ago called the five phases of flow, and every client flows through those five phases.
So the first phase is attracting clients. The second phase is converting callers to to clients. The third phase is staffing recruiting. The fourth phase is caregiving, and the day to day operations and the fifth phase is collections. And from looking at those fit five phases, we identified 12 specific systems that home care companies need to look at. And so to your question the leaders of these larger, faster growing companies are individuals who see the vision. They come with core values themselves that then translate into the core values of the company, which translates into the company culture. And then they, they build these systems using the top talent that they’re able to attract to put the company together. And then as I said, they measure the results of what they’re doing and use those metrics and their scorecards to make other decisions, to adapt and adjust and, and to grow the business as they go forward. And so there’s a, there’s a lot of opportunity for home care owners and CEOs to develop their own leadership skills, to develop their communication skills to develop their skills, to coach key members of their teams going forward.
Yeah. Fantastic. I love how you piece together the vision and how that directly relates to the values and the values to the culture and the culture to the metrics, you know, the actual, you know, data collected as a result of really the leader’s vision, those values being upheld and, you know, implementing that culture. And so I’d like to kind of wrap up this topic. You, you hit it right there at the end about measuring what would be, you know, maybe two to three of the key metrics that leaders and agency owner executives are, are focused on now at this time, you know, which ones have been most important, but, but in general, for a business owner, what are the two to three that you think are, you know, most foundational?
Well I actually, I’m going to take it a little beyond that Miriam, because I’m one of the biggest fans of Home Care Pulse and the annual benchmarking study. And when Erin and the team created that, what 11, 12 years ago I became a big advocate and a supporter and a partner with home care pulse all over the years to fine tune the questions. And so in my viewing point, the answer to your question is if home care owners want to understand the metrics and the measurements of home care, they need to participate in the home care pulse benchmarking study and using the preparation worksheet, they will be gathering information about their own business that helps them understand their own business better. And then by submitting that data to home care pulse, and then getting a copy of the benchmarking study, they can look at how does my business compare to the industry benchmarks.
And so if we look at the benchmarking study, there are a couple of categories, obviously there’s the financial benchmarks. And I’m a big fan of using those financial benchmarks with my clients and with our mastermind groups. And we actually do our own benchmarking within the mastermind and compare it to the home care pulse benchmarks, and have deep conversations about, let’s say, marketing, how are we spending our marketing dollars? And what results are we getting? And so then you look at the benchmark report and you have a whole section on sales and marketing, and there are data points in there that can help an owner see how they’re doing relative to the industry. And then the benchmarks around recruiting and retention. I think one of the valuable data points that we track is caregiver turnover. And of course we’ve seen turnover go up in almost a hockey stick shaped curve the last 10 years with a big jump up in 2018.
I’m looking forward to seeing the 2019 numbers when the report comes out here momentarily. I think it’s in printing right now. And so the, the, the, the caregiver re retention number is important. And one of the bits of data that I learned from Home Care Pulse is that about 80% of turnover happens in the first 90 days of employment. And so we’ve been doing a lot of work within our mastermind groups to look at 90 day retention, and what are the factors that cause people to stay or to leave within that first 90 days? So we’ve seen some of our members have really significant outcomes as a result of focusing on that and figuring it out for themselves and their employees and their local market.
Appreciate you bringing up the benchmarking study. We have found some very interesting insights this year, and speaking to recruitment and retention and caregiver turnover, I appreciate what you said about the first 90 days. We have identified that first 90 days to be absolutely crucial in, in the caregivers, you know, life cycle and journey with your agency. And, and I know you have put a lot of time and effort and thought into, into the, what we call the caregiver crisis. What can you speak to about turnover right now with this crisis that we’re in as you know, economically, but also this caregiver crisis? What, what ways have you seen agency owners adapt and learn whether it be, you know, in that 90 days, what strategies are they implementing, or what other ways have, have you consulted to agencies about reducing that turnover? What are some action items we could speak to the leaders listening to this today about?
Well, that’s a great question. And as we have studied it, and as we have talked with our members in the various mastermind groups, what I’ve observed is that there are really three key elements to reduce reducing around the first 90 days. The first element, it begins with selection. If you select the right people to begin with, and there’s a good fit between the person and the culture of the company, a good fit between the person and the job, and then a good fit with the job skills, then you increase the probability that they’re going to be successful, and therefore that they’re going to stay. So selection is the key, and we’re actually, as we speak going back, and as I mentioned re redesigning and revamping our caregiver quality assurance program with a new emphasis on selection in some different ways than we’ve done in the past.
The second big element of 90 day retention is making sure that new caregivers are working the hours that they want to work. Because what we’ve observed is a new caregiver is tired. They are assigned to a client or multiple clients. They go out there and they’re working their shifts. And if a client leaves goes in the hospital and is in a nursing home, and that caregiver loses those hours, if they don’t replace those hours fairly quickly within a day or two they began to look around because most caregivers are living pretty much paycheck to paycheck, and they have a certain number of hours. They want to work and it might be 40 and it might be 30 and it might be 20, but whatever the hours they need and want is what keeps them there. And so working with the schedulers in the company to make sure that those new caregivers who lose some hours, get them replaced fairly quickly.
And oftentimes that doesn’t happen because the new caregiver is not yet on the radar screen of the schedulers because they have their favorites. The one they’ve worked with for a long time, the folks that they’re accustomed to calling and this new person may not yet be in their frame of reference. So they don’t get a call two, three, four or five days go by without replacing those hours. And pretty soon that new caregiver says I’m not making enough money to meet my needs, to pay the bills. I gotta go find something else. The third big issue then is comes back to the company culture that we know from our research, that caregivers stay with the company. Number one, because they’re doing meaningful work number two, because they feel valued and appreciated number three because of flexibility. And then number four, because of feeling fairly paid.
And so there’s no doubt they’re doing meaningful work. That’s been given in industry, but that’s not wanting to feeling valued and appreciated. They want to feel valued first of all, by their clients and family second by their immediate supervisor and then third by the company. And so what are the things that we do to engage that new caregiver in the first 90 days to help them feel like they’re connected to the company that they’re valued and appreciated. And that’s where many of the companies in our mastermind groups have specific individuals whose whose assignment or part of their assignment is to connect with those brand new caregivers to help them feel connected, to help them feel valued, to recognize when they’ve lost some hours and they need to get more hours and nurture them through that, that process. So the 90 day retention program is a consciously created program in many companies. And it may very well be Miriam that part of that dip. And I’m delighted to hear that the turnover has gone down this year. A part of that may be that more and more companies were paying attention to turnover and retention and home care policies had some great articles and web casts and other resource information available that I think companies have put to use and have worked at reducing their turnover.
Fantastic information. As you probably know, we released an impact survey, a COVID-19 impact survey over the last couple of months, we released one, you know, back in March and then another one just a couple of weeks ago in May. And there’s been a lot of talk and buzz about remote work and, you know, remote hiring and remote interviews and even telehealth, you know, integrating into home care. And as we all know, and you, you hit on it that this is a very personalized and human to human industry. Where, where do you see that we can strike that balance of integrating technology and implementing, these new processes that involve technology. But how do we, like you said, how do we keep that, that personalized connection with our caregivers and even with our clients where, you know, how do you think we, as an industry can strike that balance and become most efficient using both, but keep that human element front and center?
Well, that’s a great question. And you mentioned earlier in our conversation about the concept of a new normal, and my observation is I don’t know that there will be a new normal for some significant period of time, because we’re all going to be figuring out how we go forward, serving our clients, serving our caregivers, given the change that we’ve experienced in the last 90 days. And so your question about technology is a great one. And what I see happening is that more and more home care companies will be comfortable having their team members work from home. And, and even to the point where some will have smaller office space and they will rotate people coming into a physical office around rotating, working from home. And so I think that will become part of standard operating procedures for many companies is that part of the staff is in the office.
Part of the staff is working from home staggered hours so that we can cover 24. We’ve seen a lot of impact on virtual hiring and virtual onboarding of caregivers. And a lot of companies are saying, gee geography was always a problem for me, cause it was hard to get applicants to come to my office. Now I realize I don’t have to do that certainly in the recruiting phase and perhaps not even in the selection and on early part of the onboarding phase, I think companies will bring caregivers in for skills testing, perhaps for drug screens and background checks, those kinds of things, but the need for caregivers to come to an office for eight hours of on onboarding training may not be as necessary as we thought it was before. And so I think a lot of those things that we did in person before are going to be done virtually of course, the advent of, of online video platforms like zoom is having a big impact on that.
And then the other thing that will happen is, is a whole new look at digital marketing of how we use the internet to reach out to referral sources. And what does that look like? And I think your question is really poignant there, as we know that that a lot of sales and marketing activity in home care is related to personal relationships. Again, you go back and look at the data and the benchmarking study, and it points out that the best way to grow a home care company is make personal calls on high potential referral sources. And so now we haven’t been able to do that for 90 days. And I know our members are really having in depth conversations about how they do sales and how they do marketing if you can’t get face to face with referral sources. And so I think there will be some new insights come out of that new ways of building personal relationships.
And I think there’ll be a learning curve about how we apply technology in a way that meets people’s need for interaction and relationship building. I don’t know exactly what that will look like yet. So we’re having lots of conversations and lots of discussion around what the leading companies are doing to shift and use technology. The other thing that’s coming out of this whole thing is that with the need, for companies to care for clients that are COVID positive, we’re seeing a whole new development of companies that are looking at providing more complex care to clients that have more complex medical conditions. And so I think going forward, we’re going to see more specialty programs around specific diseases. And that means companies will have caregivers who are higher, trained, have more skills. And the technology will come into play there in terms of online training. And I know you all at Home Care Pulse, have just partnered with In the Know to provide that online training for caregivers. So I think that would be very interesting to see what happens going forward as more and more companies use the online training capabilities to develop the skills and the knowledge of their caregivers in the field and their team members in the office.
Yeah. Wow. It’s an interesting time and there’s a lot to digest here. I want to backtrack just slightly. We talked about andyou mentioned these relationships with referral partners. What have you seen as far as those relationships goes over the last few months? Has there been strain there, or have you seen those relationships hinder? Or has there been improvement and will there be improvement moving past this from, from those relationships between home care and the hospital system and assisted living facilities, nursing homes. Have you seen those relationships grow at this time and what are they going to look like moving forward for agency owners?
Yeah, well, it’s interesting. It’s almost a, a bi-modal curve if you will. That is for many agencies, their relationships with referral sources have dwindled because they haven’t been able to get face to face individual case managers and discharge planners are working from their own homes. So they’re not as accessible. They’re not taking phone calls, maybe they reply to an email. And so it’s been very difficult for many agencies to connect at all with the people that were their referral sources, particularly if they, if, if it was more of a transactional relationship than it was a personal relationship where they really felt connected. The other side of the curve though, are those companies that have seen an uptick in the relationships with their referral sources because they had, they had established person relationships before it was more than just transactional. And then secondly, they reached out to their key referral sources and basically said, we’re checking on you, how are you doing, what are the issues you’re facing?
How can we help you? We’re here to support you. And we saw a really interesting dynamic for those agencies that had made this strategic decision, that they were going to gear up and prepare for providing care for COVID clients. And when they went back to their referral sources and said, we’re willing and able to care for clients who were coded positive. The reaction to that from their referral sources was very positive. And I think some of these referral sources are seeing home care companies in a whole new light as doing more than just whatever there just is. I think a lot of referral sources, particularly in, in acute care you know, in hospitals and physicians, offices in rehab units and nursing homes saw nonmedical home care as less important than skilled home healthcare. But now they’re seeing more of an opportunity for home care companies to care for these clients in the home. And I think as an industry, we have gained a whole new respect and a whole new awareness. We’re now seen as a stronger part of the whole healthcare continuum. And so for those companies that have had established relationships with referral sources and went out to them, not from the standpoint of who do you have for me today, but
What’s happening in your life personally, how are you doing what’s happening in your organization? What can we do to support you? Here’s the capabilities that we have, how can we help you? And that has been received very positively. And I think a number of companies have seen their their brand promise be increased as a result of, of that kind of a conversation. But all the companies we’re working with are asking, asking the same question you’ve asked is how do we do this going forward? How do we take our company to the marketplace? Is it digital? Is it face to face? Is it some other format?
Yeah. Great response. We’ve, we’ve hit on a lot of big topics today, but I’m glad we could get that bit in about referral sources because it’s a huge component as we fit into the healthcare continuum. And it’s been interesting to see those relationships grow and change over the last few months. But I think looking ahead, you’ve hit on some really great points as to how agency owners can adapt and prioritize those relationships. Looking ahead, as we close out the conversation, I just want to hear, what your hope is for the industry moving forward. You know, we’ve talked about what’s happened and what’s happening, but what would you like to see as we close out the conversation moving forward? You know, what’s your aspiration for the industry?
Well, my hope and wish is what I really see happening. And that is that home care is developing a new awareness and a new respect among other parts of the healthcare continuum. And we’re being seen as a key part of that continuum. And that’s been an open up opportunities for home care companies to, to interact with and, and support their referral partners. And the more that companies have the capacity to do that well, both in terms of the communication and the rapport that’s developed, but also in terms of providing the care, showing measurable outcomes giving feedback to referral sources. And so what I see coming out of this is companies that, that have a clear vision for the future that are growing a strong culture and are able to attract the talent that they need to put in place systems and procedures and, and hire the right caregivers are really going to grow and prosper and do well. And matter of fact, I was going through some of my material in preparation for this. And I wrote down an equation that says vision plus culture, plus talent equals excellence in home care. And I see many excellent home care companies coming out of this crisis, growing learning. And I’m very optimistic that a lot of positive things are gonna happen for these individual companies and for our industry as a whole,
Who better to say it, then you, in all honesty. As you talk about, you know, these agency owners needing to have that vision and have that passion for their agency, I think who better to say those words than you, you represent the industry so well as you are a visionary, but you also have the perspective and the grounding that you need to, make decisions and, and lead out in the ways that you do. It’s been a pleasure to hear from you today. Stephen, I know that there has been a lot of topics that we’ve hit on today and it’ll take some to digest, but we are so grateful for your support and your relationship with not only Home Care Pulse, but the industry as a whole. We, thank you for everything that you’re doing. We hope to continue to hear from you and see you and be here to support you and to support the industry.