Hiring Top Guns
In a rapidly expanding market, one way to grow and diversify your firm is to recruit top executives who can do it for you. The experience of All Metro Health Care suggests it can be done without compromising values that your family cherishes.
All Metro Health Care in Lynbrook, New York, was a small fish in a rapidly expanding pond. The home health care market was exploding, creating great demand for nurses, aides, house cleaners, and nannies to help the sick and elderly. But local agencies that provided such people were either going out of business due to cuts in Medicaid and Medicare reimbursements, or being acquired by huge health care corporations. Managed care outfits were also passing them by for firms that could provide a wider range of services. The Edwards family, owners of All Metro, knew the firm would have to grow and diversify quickly, or die. And they knew that leading-edge knowledge was even more important than capital in growing the family business.
For 40 years, founders Irving and Norma Edwards had promoted from within. In 1989 their youngest son, Glenn, had taken over daily operations (his two brothers had become physicians). Together, the trio made the brave decision to go outside the family for top executives who could turn their modest agency into a strong contender. “Going outside” meant they would have to share sensitive information, control, and perhaps even ownership. That was okay. The real worry was that bringing in a team of top executives who could perform the functions the family was not capable of would erode the core values that had contributed to All Metro’s success—quality care for every customer and personal attention to the needs of every employee.
In short order, the Edwardses brought in three top guns with expertise in finance and mergers, high-tech home care, and sales and insurance case-management. In only two years, since 1995, the executive team has acquired 10 companies, penetrated the new high-tech home health care market, and broadened All Metro’s services through four small sister companies (Plaza Domestic Agency, Plaza Nurses Agency, Care Givers on Call, and All Metro Emergency Response Agency). The new team has boosted All Metro’s annual sales growth from an average of 5 percent in the late 1980s and early 1990s to nearly 20 percent, quickly making the company a $40 million fish that’s big enough to confidently swim the turbulent waters of the health care industry.
Unlike many family business owners, the Edwardses realized they had to go beyond the family’s pool of expertise to manage growing numbers of employees, clients, and resources, and to achieve the growth needed to thrive in an increasingly complex business with stiffer competition. They did so without giving away a single share of stock. They credit their success to three factors: Careful selection of “known quantities”—people they had worked with through consulting relationships or joint ventures and who share the family’s priorities; generous pay and lots of autonomy in place of shares of the company’s private stock; and a conscious effort to maintain the family culture as they professionalized the organization.
Never stand still
The Edwards family’s willingness to try new ventures stems from Irv’s restless business nature. “In 42 years, we haven’t had a single down year, even during recessions,” the founder boasts. He attributes that record to “never standing still. I’m always looking for new ideas. I’m never content.”
Giving up authority was another matter, however. All Metro’s employees sit at desks in open view across a wide floor that was once the first-floor lobby of a bank. Irv’s desk is in the back, with a perfect view of the entire setup. Although Glenn keeps a small office in what used to be the bank’s vault, he spends most of his time at his desk “on the floor” near the hub of the five businesses headquartered there. Each business is run from a cluster of desks abutting each other. Salespeople as well as “back office” employees who take care of personnel and recordkeeping have staked out other little islands of adjacent desks across the open-floor warren.
The second floor, called the “beehive,” is cluttered with computer equipment and desks for finance, accounting, and MIS functions. The one private oasis in the building is Irv’s pine-green carpeted, elegantly decorated, air-conditioned office that comfortably sports a 10-person boardroom table. Glenn is quick to point out that his dad’s office, which is kept locked, is used mostly for staff meetings and to interview potential employees.
The open office on the first floor gives Irv direct oversight of every employee, but it has also created a casual, collegial atmosphere in which employees helped one another and freely schmooz. Although Irv is clearly watching over the roost, his presence is not intrusive, employees say. The Edwardses have tried to take an interest in each person’s welfare, creating a great place to work, though perhaps not the greatest profits.
Irv and Norma had launched the initial company, Plaza Domestic Agency, in 1955, when they noticed a tremendous demand for domestic help among young couples who were moving out of New York City to the nearby Long Island suburbs. Because public transportation was not yet widely available, the homeowners had to pay the helpers’ round-trip taxi fare to get them to and from their homes, as well as the cleaning fee. The Edwardses offered to find workers and shuttle them back and forth, at no extra cost. The business took hold, but by 1980 sales were still less than $500,000 a year.
Sales began to take off the next year, after Glenn had joined the company. While attending college he had worked at developing a different market for the agency. “The day I turned 17 and got my driver’s license, my father put me in a car, bought me a suit, directed me to hospitals, and told me to make them aware that we provided a new service: placing nurses’ aides,” Glenn recalls. “The first day I went out there people started ordering services.” Glenn kept selling all through college, where he earned his bachelor’s degree in sociology with a minor in child care. After he graduated, he immediately began working full time for a newly created company, originally called All Metro Aides (since changed to All Metro Health Care to deflect any association with the AIDS disease). The first year of operation, All Metro pulled in $100,000. In year two, sales spurted to $1 million.
Irv worried about growing too fast. “There was a quality labor issue,” Glenn explains. “You can only recruit so many good people. My father used to control the growth by taking me off the road.” But soon Irv came to trust his son’s judgment, and All Metro’s ability to manage expansion.
Surviving industry turmoil
With insurance companies requiring patients to leave hospitals “quicker and sicker,” as Glenn describes it, the demand for home medical services continued to expand. The company’s sales reached $16 million by 1990. But a number of factors were conspiring to put an enormous squeeze on smaller players. The U.S. Department of Labor began to require licensing of home health care agencies in each state where they operated; each state is governed by a different agency, requiring its own reams of paperwork to comply with regulations. Furthermore, competing agencies were sprouting at a fast rate. And insurance companies began relying more on managed care, buying pooled services from big national home health care companies such as the $2 billion Olsten Kimberly Quality Care. Another obstacle: Medicare was becoming more reluctant to foot the growing bill for home care.
Instead of tightening the reins and becoming more autocratic, CEO Irv Edwards began handing more responsibility to his son, who became president in 1989. “I was doing most of the work myself,” Irv says, “but I realized I was someday going to retire.” Irv, now 69, is beginning to do just that. Irv and Norma, who still works as needed in customer service, compliance, and training, plan to move to Florida in October, where they expect to work part time for All Metro’s three offices there.
Glenn, now 38, also learned to delegate. When the six-foot-four, baby-faced son first became president, he says, “I was purchasing, paying, ordering, selling—plus working on the front line with field workers and patients. I was bringing in a great deal of the revenue. Today I bring in less than 5 percent. The plain truth is that when you grow beyond your limitations—your own skill set—you start prioritizing. I had to decide: ‘Do I want to be involved in sales? In operations? Where am I going to be most effective?’ ”
The major obstacle to spreading authority, Glenn adds, is giving up the checkbook. “When you’re running a private business you have to watch the pennies. Who’s going to control disbursements, approve payments to vendors? I’ve relinquished that to senior level managers in MIS, sales, and marketing, who are all working off their own budgets.” However, he admits his father still reviews just about every disbursement after it’s been ordered. “I’m going to miss that when he retires,” Glenn says.
Fishing for talent
Ironically, after years of hands-on management by the family, when it became necessary to hire nonfamily executives and delegate authority in strategic areas such as finance and marketing, the Edwardses seemed to be ready for it. That’s probably because they didn’t have to go too far outside to find outsiders. They snatched two of their nonfamily executives from inside the industry—people they had done business with for years. They didn’t offer stock in the family business, but instead provided high salaries and assurances of authority and autonomy.
Since 1995, All Metro has hired three key nonfamily executives: Jim Watson, vice president of development for Suffolk County; Scott Redding Mixer, chief financial officer; and Elaine Winkler, director of sales. Each brought to the company major areas of expertise that All Metro needed to grow.
Jim Watson was the Edwardses’ first catch, in January 1995. Watson had known Glenn for 10 years while working as vice president of sales, finance, and management at another family owned health care business that had engaged in several joint ventures with All Metro. “I had gotten to know the family and understand how they worked,” Watson says. “I got to see them in action and learned they were ethical, fair people.” His hiring, he says, was a sign that the Edwardses realized they had to go outside for key people to take advantage of the industry’s tremendous growth potential. “It was a big step bringing me in,” Watson adds.
The family didn’t lure Watson by offering him the sky. “They offered me an opportunity,” Watson explains. “That’s what I was looking for—the opportunity to grow a business using my own ideas, in conjunction with the philosophies of the company.” So far, that opportunity has enabled Watson to expand All Metro’s existing services to the eastern part of Long Island, which now rakes in about $7.2 million a year, roughly 22 percent of All Metro’s sales. Watson has developed new high-tech home care services for the aging, including respiratory care, infusion therapy, dialysis, and wound treatment—services that only 5 percent of home care companies currently offer. All Metro has also rolled out many of these services, plus other high-tech home care for high-risk pediatric and HIV patients, at many of its 17 locations in New York, New Jersey, Maryland, Florida, and Missouri.
Scott Redding Mixer, the next recruit, was more of an outsider. Mixer, now 42, had limited experience in the health care industry. He had graduated summa cum laude and phi beta kappa in history and economics at the University of Pennsylvania and did graduate work at Oxford University. While living in Europe, he had been an adviser to several European governments, then moved back to the United States to work on Wall Street, negotiating mergers, acquisitions, and corporate restructuring. Later, while working as an independent consultant, he was introduced to the Edwardses by an accounting firm.
The family had used Mixer as an independent consultant for about a year before hiring him as chief financial officer in May 1995. As a consultant, Mixer helped the company reorganize and automate systems such as payroll, billing, medical records, and personnel. During that time, he pared general and administrative expenses to free up money for investing in acquisitions.
“Scott was earning a high fee,” Irv notes. “We realized that by offering him a full-time job we’d save money and have him here all the time.” The family also wanted to tap Mixer’s Wall Street expertise in mergers and acquisitions. Glenn had spent five years unsuccessfully romancing several smaller competitors. “I had one form of expertise— knowing the marketplace exceptionally well,” he explains. “I knew the target companies that were good prospects. But when it came to closing the deal, to building a plan that satisfied both seller and buyer, Scott gave us the expertise that we hadn’t gotten in the past from me” or other in-house sources.
Right before joining All Metro’s staff, Mixer closed his first deal—with Alert Medical, a Long Island-based competitor with revenues of about $1 million. In the two years since, Mixer has led All Metro’s acquisition of another nine companies, with sales ranging from less than $1 million to $3 million.
Autonomy, not ownership
“It’s unparalleled how much authority they’ve given me,” says Mixer, who has 14 departments reporting to him, including accounting, corporate finance, payroll, billing, collections, MIS. Mixer has changed many longstanding relationships with professional organizations, switching bankers, lawyers, accountants, and insurers to much larger and more prominent organizations, which was an important factor in helping All Metro transact acquisitions. Mixer and Glenn both admit that if and when the market is right for All Metro to pursue an initial public offering of stock, the new professional relationships will make it possible.
Going public would make it easier for the company to provide shares to key managers. In between wheeling-and-dealing and restructuring the company, Mixer has been working on a stock-sharing plan for company employees, including field workers, but he isn’t holding his breath. “The owners have not agreed to it yet, but we have discussed it,” he says. Glenn says he is not averse, in principle, to diluting family ownership, but claims, “It’s more a matter of how many things we can get to.” Instead, he becomes animated when describing plans to increase the share of performance-based salaries from the current 25 percent of managerial compensation to as much as 75 percent. “I don’t know of any independent competitors who give stock to key employees. The lure in our business is long-term employment and being able to work on your own terms.”
High pay, stability, and room to create helped All Metro attract a third top outsider, Elaine Winkler. Glenn knew her from the industry before he hired her as director of sales in September 1996. All Metro didn’t even have an opening at the time, but Glenn snared her as soon as he heard that she had been “downsized” from her previous job as head of insurance case management and sales. Glenn had seen Winkler in action for several years because her previous company often subcontracted work out to All Metro. Her new job includes training All Metro’s administrators and marketing and sales people to better serve existing clients and generate new business in the commercial health insurers and workman’s compensation markets. Her biggest contribution so far has been a tracking system to organize sales. It enables management to quantify where it’s getting business, where it’s not, which employees have called on different hospitals and insurance companies, and who has contacts at those places and has followed up.
While bringing in the three executives was a huge step, the road for outsiders was actually paved by another nonfamily executive, Mark Goodman. Originally a social worker, Goodman had worked his way up from coordinator of staff and outside sales in 1981 to vice president of marketing, where he was charged with developing higher-margin nursing markets. “It takes one skilled nursing case to generate the same revenue as four paraprofessional cases,” says Goodman, who identified niches for skilled nursing services such as pediatrics, ventilator-dependent patients, and dialysis.
Since Goodman was promoted in 1989 to executive vice president of operations, he has watched the company more than quadruple the number of employees in-house from 35 to 160, and the number of field personnel—the actual caregivers—from 1,000 to 5,000. In 1989 the company moved to another location in Lynbrook, across from the Long Island Railroad station. At first, the new headquarters occupied just a third of the two-story former bank building. Now it takes up (and is rapidly outgrowing) the entire 11,000 square feet. Glenn is looking for a new location that will double All Metro’s space.
Building on culture and values
All Metro’s hired guns are rapidly expanding and transforming the company. While some of the changes—such as the loss of control over disbursements—make the Edwardses squirm, they remain certain of the direction in which the executives are taking them because they’ve made sure the outsiders are always operating within the family business’s culture and values. The key to maintaining this alignment, Glenn says, is communication. “It’s our highest priority. My father still writes our company newsletter and repeats the stories about the way he did business at the beginning, about the importance in our kind of personal business of treating everyone like a customer: co-workers, referral sources, patients, and actual customers.”
Glenn adds: “When there are only three or four employees, you know everyone’s birthday and anniversary. With 160 employees, we still pay attention to that. When employees log onto their computers in the morning, it will flash whoever’s birthday or anniversary it is that day. There seems to be a birthday cake here every day.” Such treatment leads to low turnover on the staff, Glenn says, which itself “helps us instill our philosophy and culture.”
A second important factor in sustaining values is the ever face-to-face presence of a family member. Computers and long-time employees can’t substitute for Irv or Glenn’s appearance at a meeting or in a discussion. Glenn explains, “At a sales or marketing meeting, Elaine Winkler can relay sales tactics and tracking methods of how to get clients and quantify what’s being done. But when it comes down to it, we want it done the Edwards way. At this morning’s sales meeting I came in half-way through to preach family values.”
Glenn still fires up his car and hits the road, visiting each of All Metro’s offices frequently. “There’s no substitute for that,” he says.
Values are also transmitted in financial talks with senior employees. Before Mixer arrived, the company didn’t share profit and loss information with its managers. Today all 17 office managers are included in profit discussions. “Glenn and Irv are gradually buying into this,” Mixer notes. “In order to run the company well, we have to deliver financial information in a timely way and share it with managers in relevant areas. We are now focusing on the bottom line rather than the top line. I come from a more corporate setting, and in trying to create a corporate structure in this business, many practices have to go by the wayside, especially concerning issues of disclosure and the company’s team of advisers.” Mixer adds that this kind of atmosphere is mandatory if All Metro has any intention of readying the company for an IPO.
However, Mixer asserts that despite all the changes, many of the new programs All Metro is rolling out are “natural outgrowths of the culture and ethos of the Edwardses. They are caring, supportive, and patient. We have sought to emulate what a large company would do, but without disrupting the family culture here, because the family culture is positive.”
One thing Mixer doesn’t plan to change is All Metro’s “customer” service department, which is devoted to the company’s thousands of field workers who serve clients. Three employees in Lynbrook are dedicated to helping field workers arrange for child care, English classes, immigration matters, and reference letters. The staff will also replace lost paychecks, or even give pay advances—anything that helps them get the job done. The attention keeps annual turnover below 30 percent, compared with the industry average of more than 100 percent.
Mixer agrees with Irv and Glenn that a family member’s presence is the strongest factor in promoting the company’s culture. “We make sure family members are active all over the company because they portray a positive role. We also make sure that the benefits we offer employees are progressive and reflect our commitment to family-work issues.” For instance, All Metro’s 5,000 field workers, who are hourly workers on payroll and get benefits, are eligible to use free nannies from one of the Edwardses’ newer businesses, Care Givers on Call, which provides temporary home care when regular care givers, for children or elderly or sick relatives, fall through.
Like many family business owners, the Edwardses realize that the toughest part of hiring and integrating outside executives is not the prospect of giving away stock, but giving up the familyness of the company. By hiring the right nonfamily executives, who share their commitment to the family’s culture and values, All Metro has a great shot at continuing to enhance not just sales, but also its culture of quality service.
“Although it was difficult for the family to relinquish some of our responsibilities and take the advice of outside experts on how to invest our resources,” Glenn says, “we decided it was the only way to grow the agency in a new age of managed care, reduced fees, and increased competition.” Now that All Metro has made the transition, Glenn hopes to soon have 25 offices in eight states, and to grow a vital company that will eventually provide an enticing employment opportunity for his three children, the oldest of whom is only 12. Continuing to hire outside talent, he says, is one of the key strategies for achieving those goals.
Jayne Pearl is a freelance business writer in Amherst, MA, and a former senior editor of Family Business. Her last article for the magazine was “Sizing up the CEO Support Groups” (Autumn, 1996).
All Metro Health Care
Business: Recruits, hires, trains, and places visiting home health care providers: personal care aides; RNs and LPNs; physical, occupational, speech, and respiratory therapists; pediatric nurses; nannies and house cleaners. Also installs home medical emergency response systems.
Location: Lynbrook, NY.
Employees: 160 in-house staff; 5,000 field workers.
Founded: 1955 as a domestic house cleaning agency by Irving and Norma Edwards.
Ownership: Irving and Norma Edwards 50 percent; son Glenn 50 percent.
Family employees: Irving Edwards, CEO, who will retire in October; wife, Norma, who works in customer service, compliance, and training; son, Glenn, president.
Claim to fame: Hired several nonfamily top executives who have professionalized and expanded the company while maintaining the family culture and values.
Home health care, the fastest growing segment of the health care industry, consists of 18,500 providers nationwide who employ more than 600,000 people (as of 1995), according to the federal Health Care Financing Association. The HCFA projects that home health care expenditures, which reached $36 billion in 1996, will grow an average of 13 percent a year through 2005.