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Positive Business Outcomes for Healthcare Companies

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Posted by on in Best Practices

It always amazed me, during pre-acquisition due diligence, how prospective buyers accept the most outlandish stories of how the company for sale acquires and retains customers. The buyer may ask to speak with some, and the seller may direct them to certain pre-picked accounts with orchestrated answers, but it seldom goes beyond that. Obviously there is a need to keep the transaction confidential, but more often than not, it also reflects a desire of the buyer to simply buy. Acquirers have their own reasons for purchasing, and their reasons are based more in the short rather than the long term.

Most acquirers factor in a percentage of customer loss in the purchase price. One industry-gobbling conglomerate actually factored in 30 to 40%! They would buy competitor after competitor, integrate the companies with little regard to the customers who would flee as soon as their contracts allowed. Smart ex-owners would reopen, take back the same customers, and in a few years sell out to the conglomerate again. This situation lasted for years until the conglomerate’s Board of Directors finally got wise and replaced the management.

A change in ownership or management opens every customer to poaching by competitors. The cardinal rule for keeping customers is simple: just as those who do not learn the lessons of history are doomed to repeat it, those who do not know why each client is their customer are doomed to lose them! Customers come and stay for many reasons. It may be price, a unique product offered by the company, a way of doing business (such as payment terms) that match the customers’ needs, a personal relationship between key staff or owners of both firms, or simply force of habit. New management comes in and starts consolidating, raising prices, changing products, procedures, and terms of doing business and eliminating relationship holders because they have to meet their own goals. It is necessary because financial expectations were set to justify the cost of the purchase. Simply put - they have to pay for what they bought.  The issue is that all too often the customer loss that accompanies these changes comes as a complete surprise, causing needless accusations, misdirected assignment of blame and job loss, all due to not knowing the customer.

My career has been built revitalizing companies after such changes have caused an exodus of customers, employees or both. Keeping the customer is really not difficult to plan (success or failure lies in the follow through). Every customer must be evaluated and the reason they are a customer determined. Then a plan must be put in place to retain that customer, especially in light of planned changes that may affect their reasons for being your customer. If you plan on increasing prices and 50% of your customers are with you solely based on price, you should consider lowering costs rather than raising prices. If you have a key relationship holder who is proving too costly to retain but 30% of your business is tied directly to that employee, you should find a way to live with him or have a plan in place to transfer that relationship with that customer before you let him go. Relationship managers you can trust must be assigned to every customer and a path developed to take that customer from where they were to where the company needs to go. Levels of risk need to be assigned to each customer and all of this must be constantly re-evaluated. You cannot save every client, but no client loss should ever be a surprise. The loss should have been anticipated, and the management group must know that they exhausted every effort to prevent the loss. It is not complicated, it is necessary, and it must be part of any company’s redevelopment plan.

Of course, there is a great deal more to customer retention than we have outlined above. Other factors include preserving quality, staying abreast of changes in the marketplace, pricing, billing, etc. All are relevant, but arguably, maintaining the customer relationship is as important as any. These are all areas where Veltri Management Solutions is eminently qualified to assist. Please contact us at samveltri@veltrihealthcaresolutions.com or speak to us directly at (908) 327-1999.

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Posted by on in Best Practices

b2ap3_thumbnail_162px-Robert_Edward_Lee.jpgManagers need two skills to be successful. They need to be decisive, and they need to be able to cultivate support for their decisions. The two go hand in hand.

Being a manager means making decisions and standing behind them. Making decisions involves judgment, experience, intuition and sometimes dumb luck. While it is important to make the best determination given the circumstances, it is just as important to simply decide! The average company’s workforce would be surprised how often management just does not take any action, postponing or avoiding the tough choices and hoping the situation just works itself out. Of all the choices to make, deciding to avoid making a decision is the worst!

This does not mean that we are advocating making a decision without having enough information to make the best one. It does mean, however, making the best choice in light of the facts at hand when circumstances dictate that a decision must be made. We are not gods, and history is the best judge of whether a decision is right or wrong. But history is kinder to the wrong decision than it is to the decision that was not made at all. The decision by Robert E. Lee to send Pickett against entrenched forces at Gettysburg (and in effect, lose the Civil War) still places him in a kinder light than Union General George Meade whose indecisiveness about pursing Lee after the battle lengthened the war by 2 years.

The other factor in successful management is the need for support from above as well as below. Without either, you are on an island and your decisions will die at birth. A manager needs to know that s/he is acting in tune with the company’s overall goal and plan; that the manager has the support of those above them; that someone has his or her back. The rare manager who operates at odds with his parent is the manager who has some exceptional value to the organization that overrides other concerns. For example, the manager of an operating unit whose EBITDA dramatically exceeds the company average. Over the long run, however, these “exceptional values” prove to be fleeting and, once gone, the forces that have been kept at bay will descend upon the manager and destroy him.

Likewise, a manager needs the buy in of those s/he manages so that their directives are carried out quickly, with conviction and with true intent. We have all seen staff that delay or ignore directives, not because they are right or wrong, but because the staff has not bought into the reason why the directive must be carried out. A manager cannot take the time to always explain each decision to everyone, but if s/he has done it enough so that the staff trusts the manager’s decisions, they will be follow the manager’s lead. To return to 1863, Pickett’s soldiers knew they were marching towards disaster, but they did it for Lee; they knew him and believed in him and the decisions he had made before.

Management must be decisive, must make choices that move the organization forward and must have the buy in of those involved. Employees are most motivated working for managers they see as a true leader. Make that decision; your company and employees will be the better for it!

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