In our special episode of the Consolidate That! we are going to discuss with Dr. Bob Lester of WellHaven Pet Health and Dr. Thom Jenkins of PetsApp how an acquisition impacts the classic burnout triggers, why team culture is subject to due diligence, how consolidators can build a system to improve employee experience, and the costs of indifference.
Welcome everybody. Thank you for joining us today at this webinar. The topic that we’ve outlined for this is “Putting people first: how burnout prevention in veterinary organizations translates into profits.” We have exciting guests today: Bob Lester and Thom Jenkins.
Dr. Bob Lester is the Chief Medical Officer at WellHaven Pet Health, a family of companion animal practices that believes in caring for the caregivers so that they can care for others. Bob, why don’t you give us a little bit of your background and introduce yourself?
Great. Thank you, Ivan. Thank you for the opportunity. So my background, I fear is not particularly exciting. Like a lot of colleagues, I wanted to be a veterinarian from an early, early age, read all the James Herriot books. That was my guiding light. And as a result, I had a small town mixed animal practice for a number of years. In fact, it was called “Sweet Home Veterinary Clinic”, and it was a sweet little home on the foothills of the Willamette National Forest. It would likely still be there today, had not a couple of classmates come to me with a crazy idea to start companion animal practices inside a pet store. And at first I pushed back, but eventually believed in the vision and came on board. And that was the turn into Banfield. That was back before there was a Banfield. So I did that for a number of years, left there to go into academia, spent five of the most professionally rewarding years of my life launching the new veterinary school at Lincoln Memorial University – really dramatically different kind of school with a distributed clinical year where the students get thousands of hands-on, many primary care cases in the preclinical year. There’s a real focus on clinical skills as well as professional skills, communication, training, leadership, training, practice management training. It’s a remarkable institution.
I left there about three years ago to help launch WellHaven Pet Health. So, as you mentioned, we’re a relatively new group. We both buy practices as well as build practices. We have a number of De Novos, and three years in, so far so good.
As you indicated in the opening, our job is to take care of the people on our teams. If we take care of them, they’ll take care of pets. And then the profits are a consequence.
Thank you, Bob. Introducing the second guest right from London, UK – my friend, Dr. Thom Jenkins. He’s the Co-Founder and the CEO of PetsApp, a mobile-first veterinary telemedicine platform enabling veterinary clinics to offer text chat and video consultations to pet owners. Thom, thanks for joining us. Can you please share your background and your experience operating clinics in Asia and Europe?
Sure. Hi Ivan. Hi Bob and hi everyone. I’m a vet by training, always wanted it to be a vet. Can’t remember ever wanting to be anything else. I got some commercial exposure in my teens when I swapped my paper out for web development. So it went to that school with this sort of commercial interests, graduated from Cambridge in 2012. So not so long ago. And through a bit of Googling, found a platform of four candidates in Beijing and decided to start my career out there and join them and help grow that business across mainland China into Shanghai,
Guangzhou, Suzhou, Nanjing, Shenzhen into Hong Kong and Singapore. I was Chief Operating Officer of that business. I was out there for about four and a half years, and then came back to the UK where I was Chief Operating Officer of a group of 30 connects called Village Vet, which is now part of the Linnaeus Group, which is part of Mars Pet Care. I founded Pets App two and a half years ago, sat on a couple of different boards, both within veterinary and outside of that so I have pretty broad business interests.
Thanks, Thom. And just a couple of words about me. I’m Ivan Zak, a vet by trade, trained in Ukraine originally then moved to North America and like every doctor who is an immigrant, I started by working in a vet clinic as a janitor, and then followed by doing another vet degree in Canada. Graduated from the Atlantic Veterinary College, worked for about 12 years as an ER vet, and did a lot of relief work. Then built a platform that we coined as a Workflow Optimization System – SmartFlow. We then sold two IDEXX where I took over the Software Division for the whole nine months. And then, after that, I left pursuing my passion in finding ways to optimize workflow for veterinarians. I did a little more research on the topic of burnout and how to preserve the experience of the veterinarian’s going through acquisition during consolidation. So thank you guys for joining me.
The topic of this webinar is very dear and interesting to me. It was a part of my dissertation research about burnout. I wanted to look at the problem from a business aspect, not only a moral responsibility, and to see where burnout has any influence on the business in the veterinary domain.
I’ll open up with the recent report from Brakke Consulting: around 1,000 hospitals were acquired in North America in 2020 – it’s a 50% increase from 2019.
Just to outline the relation to burnout and things that happen with a practice when it’s being consolidated, I’d like to show a slide with the classic triggers of burnout originally outlined in the late 70s or early 80s by Christina Maslach.
These are the six classic triggers. And as we’re thinking about the practices that go through stress while being acquired, some of these triggers could be emphasized more than others. When we were talking about the lack of control – it’s quite typical for the owner to benefit from the acquisition financially, but then they lose control of their practice because of the change of ownership.
Another classic trigger of burnout is conflict of values that can happen when the core values of an organization that is acquiring a practice don’t align with those of the people working in this practice.
Another trigger possible, work overload, is one of the most recognized triggers of burnout. Sometimes people think that that’s the only one, but there are six of them.
Insufficient reward is another one in the workplace. There could be a lack of appreciation, people are taken for granted, or, there were some promises that were given by the previous owner and when the ownership changes, they’re not maintained.
Unfairness is another classic trigger. The insufficient reward is sometimes boosted by additional tasks that the organization can pose on the employees and a breakdown of community which is a lack of feedback loops. The managing organization is at the top, and it’s hard to create that sort of report with the parent organization.
So those are the classic ones. And I wanted to mention a couple of other stats that we know about burnout and the effects on the business. Research from Daniel Kim, an MIT Sloan doctoral candidate, revealed that 33% of employees in the acquired companies leave within the first year.
Another stat that we collected from DVM Insider, they wanted to calculate the financial impact of veterinarians leaving the hospital. So they estimate about $16,000. We had a chat when we were preparing for this and Bob mentioned that it’s probably much higher than that. If you think about the recruiting costs and things like that.
Also, in an AAHA 2016 report, the turnover was reported at 20% or 21% be normal in our domain, where it’s only 11 in other industries.
McKinsey & Company says about 61% of acquisitions in different domains (not only veterinary) did not earn a sufficient return on the company’s investment for the acquisition.
So with all of those facts, I just wanted to open up with probably asking Bob, with your experience in independent and corporate environments, you wrote an article that I really liked, Mercenaries And Missionaries. Can you tell us more about the concept?
Yeah. Happy to, thank you, Ivan. So I wrote a column for Today’s Veterinary Business a couple of months ago, titled Mercenaries and Missionaries. And the thesis is as most of us know consolidation isn’t unique to veterinary medicine. Consolidation takes place throughout the economy in any fragmented, successful industry that will benefit from investment. And as we think about the two different categories as I put them, the mercenaries, they rely on the financial thesis, which is really clear. When you look at our industry, pet numbers are up, pet lifespans are up, pet spending is up, euthanasia’s are down, shelters are emptying. There’s a whole generation of veterinarians that look a lot like me, that are looking for exit and retirement. So from a financial point of view, what a nice profitable, fragmented recession resistant industry, where the investment community can park money with little risks and typically short term.So they’re looking to buy a practice at one X, get a whole group of practices in a relatively short timeframe and sell them for two X. So intellectually and financially it makes great sense. However, it’s a short timeframe. And during that timeframe, that makes little financial sense to reinvest into the practices that are joining their group.
I contrast that with what I termed the Missionaries. Missionaries, on the other hand, typically have veterinary professionals that understand the investment thesis, but they also understand the heart of the profession that it’s a relationship business. It’s about people and the good we do for society and pet parents, and take a longer term view, understanding that we’ve got to reinvest in people. We’ve got to look at the long-term horizon, that it’s not all about the investment thesis. It’s more about purpose. It’s more about passion. And if you focus on those things, then the profits will follow.
Thank you, Bob. And then in your experience, because you’ve been observing the two sides – a consolidator and a non-consolidator, what do you think can happen if we pay not enough attention to the wellbeing of the employees that are going through an acquisition? What impact do you see on the financial side of things?
Yeah, without a doubt there is. If we don’t take care of the people, somebody else will. We’re so fortunate in our industry that the rate limiting step is not a lack of consumers. Pet parents are beating down the doors to come see us. The rate limiting step is attracting, selecting, developing, retaining great veterinary professionals, doctors, veterinary, nurses, and others. So we have to pay attention to them. It’s the heart of our business. And perhaps naively, as I look at consolidation.
Consolidation is pretty predictable. Thom has probably already seen it in the UK. In the US we’ve got 50+ consolidators. 10 years from now, that’ll be five or six. Naively I want to believe that those of us that are Mercenaries, we can prove to the investment community that by focusing on our people first, then the rest will follow – as opposed to the entirely financial thesis, where it’s easy to forget that this is a relationship business, this is a people business. P&L is not a bad word, we need to have that to be sustainable, to reinvest, to take care of our people, but people come first.
Yeah, and I think it goes along with it with an understanding that serving the customer is very important. But if you don’t have people motivated that are serving the customer, then there’s lack of motivation to generate that revenue. And interesting how the age and the character of both customers and the veterinarian’s is changing now where a lot of veterinarians are now represented by millennials. They have a completely different mindset and the way they perceive the world and the way they are known to be narcissistic and with a feeling of entitlement But at the same time, there’s a different management strategy towards those people. They need to be rewarded constantly, and it’s not necessarily a monetary reward, it’s just recognition of goal achievement and basically motivating them in other ways. And as you said, there’s no lack of demand. There’s definitely enough. You know, the humanization of the pets is advancing and people are observing their pets more because of COVID restrictions, they are seeing more symptoms and they’re visiting more veterinarians. So the demand is growing and the supplies are becoming shorter.
Thom, you have experience in Asia and in Europe. We had you as a guest on another podcast [Consolidate That!]. It was fascinating to hear your story, how you just googled where to go in Asia and became a CEO of a consolidation. Can you tell us a little bit more about that, because your role there was really assessing the culture, and the integration pre- and post-acquisition. How much did you see the connection of that to the profits post-acquisition and the recovery of the synergies that were expected from those acquisitions?
Yeah. So I think there’s a common issue with any acquisition is this idea of the “bait and switch”, and that can be a deal team that comes in right, and then there’s an operational team that comes in after the deal has been done and takes over. So people are dealing with different people. And so what we try to do at both companies I’ve been involved in this stuff was have the operational team involved early in terms of a non-financial due diligence process to get a sense of whether there is cultural alignment there. You know, I think it’s a worthwhile thing to do. I would say it’s hard to do. One key ingredient in being able to do it is knowing your own culture. And not everyone does, you know. I think it’s something that’s very hard to do. So starting by interrogating your own culture and doing that sort of non-financial due diligence process on your own business is what’s going to unlock those rewards later because sometimes you’ll find these gaps in what you say and what you do in reality, and confronting those early is the key to success.
That makes complete sense. It’s not only discovering your culture and articulating it. It’s also following what you say. Understanding the culture in the acquired practice.You know, I recently heard an interesting definition of the culture. Previously I thought that it’s, you know, mission, vision and your core values. But also I was just actually doing an M&A course where they said that culture is not only that, it’s also – how do you do stuff here? Like, what is acceptable, what’s not acceptable? It’s not only those core values that are super important because they are briefly articulated. But if you merge, you know, probably a hundred core values across different companies, there’s a lot of things that repeat his words, but in reality, how do you do stuff. What is good? What does good look like for you and for us? So those are all important aspects of the cultural assessment. In your experience, is it more important to do this assessment pre- or post-acquisition? What is the best way to approach this?
Both. Because if you don’t do it pre-, if you don’t at least attempt to do it pre-, then you’re stuck. I would broaden that definition of culture. I’d agree with you, but what it really is – it’s predictive of how people are going to behave when you’re not there. That’s super important. So one way to arrive at your culture is to look at your stakeholders and do a stakeholder mapping exercise, and your stakeholders are the investors, your customers, the pet owners, but also your patients and your team, right? That would be one set of stakeholders. And if I’ve missed one, Bob, you can, you can shout.
Then arrive at your strategy, which will feed into culture. You want to rank that stakeholder prioritization and the easiest thing in the world is to sit here and say: Hey, they’re all important. Yeah, they are all important and strategy is making hard decisions and it’s like, how do you allocate your limited resource? So who’s going to have priority here. Right? And so what you want to do is get a sense of that for yourself. And then pre-acquisition, you can do things to see, right? How does this team order stakeholder prioritization? And if it’s way out. That might be one to say no to. And that’s a really good way to answer this question about “What is our culture”. It’s to invert it and say, “Well, what, isn’t our culture?” Who do I not want to acquire, what does that business look like? And then walk through that.
Identifying that business ahead of acquisition is tough because you’re at an informational disadvantage, right? The vendor, the person that’s selling the business has more information about the business. Then they acquire, but a perfectly reasonable thing that you can do to assess your culture. And this is why you should think deeply internally about this as well, because the things that you are benchmarking culturally, well, you want to approximate those in your pre-acquisition due to non financial due diligence. So if you care about your staff turnover, right, you’re saying it’s roughly 20% in the veterinary field. That means the average member of the team stays for five years. So if team is important to you, high staff turnover is probably a negative signal, probably in most cases. So that’s one thing on your due diligence balance scorecard. They have higher churn than our benchmark than an existing business. Or if you don’t, if you’re just starting out on this acquisition journey, then where we would like to sit where we’d like to peg it in the industry. Those sorts of things are super valuable. Ask them.
Appraisals are a real key way of communicating culture to the team because it’s telling them what behaviors do we encourage and reward? What behaviors do we discourage and not reward. And so if you ask them, you know, what’s your appraisal process and they shrug their shoulders and they say, “What appraisal process?” Well that communicates something culturally, right? It might just be, it’s never occurred to them. None of these things are like an immediate red flag “just back off”, but they’re all feed into this balanced scorecard. I feel like I can take up the whole hour talking through these things, but you get the idea it’s important to do it pre-acquisition, but then when you have the business, it doesn’t stop there. Now you’ve got to as quickly as possible fill the information gap. That information with disadvantage that you were at before you owned the business, it should stop existing as quickly as possible.
And, you know, in acquisitions in general, it’s largely that you discover the downside, especially early on, the surprises are usually negative. If there’s something really positive, the vendors. Probably been shouting about it beforehand. So you want to confront these negatives really early and that’s hard, especially when you’ve been pushed to justify your investment thesis, your reason for acquisition. You’ve got to just say no. Okay, there’s a new reality, now things state it. And what is the reality on the ground? And it could, you could find that, there’s you, you do the one-to-one with each member of the acquired team and you find that there’s some toxic elements here. Well, confront those as early as possible. You now have a duty of care about this team. So confronting those as early as possible is key.
Fantastic. And we have a comment from Julie, it says “Culture needs to be brave in addressing what they do not want.” So using that comment and what you said, Thom – the more you do upfront, the more important it is for selecting [the practice that would make the best fit for your organization]. I love your concept about the balanced scorecard or on an acquisition scorecard. It would be interesting to maybe expand on that a little later. But again, in that acquisition course that I just took, the professor was talking about how it’s very rare that you find a nice surprise after you buy a house. It’s always something bad. It’s not like, “Oh my God, there’s another room here.” Or, you know, the basement is finished. We didn’t know that. So. There’s always something, something like a leaky roof or something like that.
Bob, with your experience in the short three years, you guys assimilated close to 50 practices, and with what Thom was articulating about this sort of a filter, I would call it a strategic filter. In your experience, do you filter out the practices because it’s so compelling to acquire the practice with it, you know, nice fits of the EBITDA that you were looking for, the revenue that you were looking for, the mix of doctors, the location… Is there a filter that you put on and understand the culture or the degree of burnout that can affect your choice to not buy the practice?
Yeah. And Thom describes it really well. And it is difficult. Pre-integration you can’t know everything no matter how hard you listen and dig. And you have to know your culture and say no. In our experience, probably the biggest predictor of culture is really getting to know the seller, that practice owner and that team has assembled, those clients who know that community. So spending as much time as you can, listening to the seller.
In our case, we talked to the seller a lot about what your dream sheet is, what does success look like for you? Should you join our group practice six months from now a year from now? Do you want to take a month off and bicycle through Europe? Do you want to go from six days a week to four days a week? Do you want a new ultrasound machine? Do you want better benefits for your team? What does that look like? And as you really listen to this seller, you get a good indication of what kind of culture they have and does that align with yours? And you have to be willing to say no, if it doesn’t align further.
This release has surprised me the last three years – as a relatively young, smaller group of practices, there’s a lot of big players out there in the space that are after practice as well, many of which have bigger checkbooks than we do and we often get outbid. It’s not unusual that we will come in 10, 50, a hundred thousand or more or less than the bigger players, but the practice owner still elects to join our practice. That’s a tremendous indication that they believe in us. We believe in them. There’s a real fit there.
And back to the point you made early, Ivan, about the triggers, one being “Promises”. You think about this profession and part of the beauty of it is we’re so small here in the U S. There are more attorneys in the district of Columbia than there are veterinarians in the entire United States. If we go out and break promises – that says a lot of things, most of which aren’t good. But if we were to go out and break promises and not live up to what we say, not be transparent, not listen to sellers, that would bite us. It just gets around. It’s too small a neighborhood we live in. You’ve got to uphold your promises.
I liked this idea of delegating the pre-acquisition due diligence to the vendor. And this is something that I think people often don’t get right. You should be losing deals. If you’re doing that effectively, you should be having deals where the vendor opts to go elsewhere. And that means that you’ve got this self-selection filter, you’ve delegated some of the due-diligence to the vendor and they know that it’s not going to be a fit. You know, when I’m doing interviews at PetsApp, I spent a lot of time trying to persuade people why they wouldn’t want to work here.
And by the end of it, if they still want to work here, I know this is going to be an incredibly successful hire.
Having the confidence, when you really know your culture, when you’re on that acquisition pathway and say: “Here’s why you might not be a good fit for us.” And then walking away from those deals. I think if you can confidently do that, you know, you’re getting that right.
There’s too many consolidators out there where the investors or someone behind the scenes, likely at the board level said, you will buy 50 practices this year, and that becomes their mantra. And they’re going to hit that number. They’re not looking at culture, they’re not looking at fit. They’re not spending time listening. They have a number to hit. And while I get the investment thesis and you can stack the EBITDA and you can make the rationale on a spreadsheet, it’s absolutely the wrong thing to do.
Also, if the investment and the arbitrage is the driver in the organization, if your synergies were based on increasing EBITDA by a certain percent after acquisition, and have a provider leave – the whole provider in the hospital – then your EBITDA tanks with the revenue that that person was bringing in. So ultimately if you’re not presenting it, there’s a direct financial impact on that.
You know one aspect is culture. But then the other one is – are people happy in this practice? There are some practices, some horrendous stories that I heard how people bought the practices, that it was just chaos in there. Are there tools that are available to really assess the sort of happiness in the practice prior to acquisition?
There definitely are. Just to come back on that last point you made, Ivan and Bob. Too often when you see a lack of cultural alignment – what people do is they just discount the price that they offer. And that’s not good enough. You need to say no and walk away because early on in the acquisition pathway, it is largely arbitrage driven. And so the distinct competence is acquisition, right? So if you buy something, no matter how cheap, that requires you to have this operational competence that you don’t yet have to then do a sort of turnaround play. Your investors have pressured you into doing something that’s really, really going to damage the whole investment thesis, because you need to trust that connection is going to be on autopilot to some extent until you’re ready to allow on the operational bandwidth.
But let’s say you have made this mistake or whatever it is, and you want to take a temperature check and all that sort of thing. And you should be doing this regardless. One really useful tool, as a leading indicator of employee churn of staff, is Employee Net Promoter Score. It’s also called internal net promoter score. You might’ve heard of net promoter score as a customer satisfaction metric, it can be used as an employee satisfaction metric. And you’re just asking them “How likely would you be to recommend this clinic as a place of work?” And they score you on a scale of 0 to 10. If they score you a nine or 10, they’re very likely to stay. And if they score you seven or eight – who knows. If they score you a six – they’re likely to leave. And then you take your net promoter score, you calculate it in the same way as you calculate the normal net promoter score, which is your percentage of promoters, the nines and tens, minus the percentage of detractors.
Get ready for that net promoter score to be significantly worse than your customer promoted score, you know, sort of benchmark a net promoter score is hard to talk about, because it depends on customer collection methodology, but customer net promoter score is normally in the range of 60%. Even in the veterinary sector it’s not unusual to find employee net promoter scores, internal net promoter scores, being negative. Unfortunately. We’ve got a lot of work to do on this stuff.
Another thing, if you’re not prepared to do something like that, it doesn’t take much. So if you’re not prepared to do it, why not? Some people find that too impersonal, which I think I can relate to, but you’d be just the number of people, whether it’s corporate practice or independent practice, that walk into work one day and are faced by resignations that are a surprise to them. Well, maybe it wouldn’t be such a surprise if you just took this temperature check every now and then. As personally, as our relationships with our team members can be, it’s hard to know where the problems are, the things that are brewing and you want this leading indicator. You don’t want to leave it until it’s too late. But if you don’t want to do that, or in addition, in your post-acquisition one-to-one with each team member whoever’s leading the integration. A really good question to ask it’s super trite, super cliched, but it’s useful – if you were the boss for the day, what would you do? You know, if you were running this practice for a day, what would you change? What would you keep the same? What do you love? What do you hate? That sort of question? Just tease out the little niggles, that really can tell you what’s going on.
That’s great. And I think, you know, I like the angle of these two, because one is more, I would call it operational, where you get to the detail, what will you change? But the other one is more scalable, which you can deploy across the larger organization. They can do it repeatedly because a lot of the times we were talking about the change or the lack of change during acquisition, that’s been a big bargain in the last sort of five, 10 years. One of the things that veterinarians like, especially those that want to stay in practice for five or 10 years after the acquisition, is that nothing will change. And when you do make a change, it’s important to know if people are capable of going through the change. It is less likely for people to change while they’re unhappy. They’re not motivated to work there, to begin with – why would they change from their common workflows? So I think that’s a good temperature check in general, between the sort of changes that you applied post post-acquisition to expand the margin, to actually check if your team is capable of changing. Maybe they were happy, but then once you implemented a new financial system, new PiMS or something else – then everybody’s pissed off.
It’s really good to do it immediately on day zero and as close to day zero, as you can bear and then do it. If you’ve got this hundred day integration plan, which I think is pretty common with your 30 day checkpoints along the way and your 10 days “lessons learned” exercise at the end. Running another internal net promoter score, Employee Net Promoter Score. It makes a lot of sense. That’s too frequently to do it on an ongoing basis, but those two sort of sense checks do make sense. It’s important to add those, another question, which is “What is the main reason for your score?” and giving people that opportunity to give you feedback.
Excellent, but back on the topic of change. A lot of BD [business development representatives] come into these hospitals and say “We’re not going to change anything. We don’t want to impose a uniform, you know, nothing, you just guys do whatever you do.” And then is it really possible? And how much transparency do you need to bring with that message? Because, I mean, if you’re coming in and saying that we’re going to do everything that you hate to do – like accounting – and you just practice medicine. So how possible is it to go with this thesis? We’re not going to change anything and actually stay with that.
Well, I can start and then Thom can fill in the blanks. I make the analogy rightly or wrongly to marriage. In marriage, when you get married, you’re still you, but things change. And change is always a struggle. Nobody, very few people embrace change, but when you come on to integrate a practice, if you’ve done your due diligence around culture, often they’re looking for change. There’s things that they recognize that they could be better at. They’re looking for your expertise for your consultation. And every single one is a little bit unique. Well, there may be a timeline too, to bring the changes that you want to bring along. You need to take the time again, to listen to that team, to learn from them, to find out that “Hey, in our practice, we aspire to get everyone AAHA accredited.” They may not be ready this month. They may not be ready next month. They know it’s out there on the horizon, but I have to be sensitive enough to know what’s going on within their practice to recognize when that’s achievable and when that’s not. So being able to treat each one as a unique integration is really important.
Yeah, I would agree with all of that. And it depends on your strategy, right? I think it’s important not to create a false dichotomy of “everything changes and or nothing changes.” Everyone sits somewhere on the spectrum. For a lot of acquirers, especially in the early days of consolidation in a market, the idea is to leave alone as much as possible. And that’s why the cultural alignment piece is important because if that’s going to be a successful model, you want to be able to know what kind of behaviors are going to be happening when you don’t yet have the bandwidth to be checking whether they are aligned with your strategy and with your mission. But that can only last so long.
The idea that you just acquire businesses and by spreading the risk across accumulation of smaller businesses, that’s the part of this EBITDA, arbitrage thesis. But that pays out. And then the next fund comes in, the next investor comes in and they need to have an investment thesis and there needs to be some uplift for them. Well, EBITDA, arbitrage has paid out or, you know, that whatever’s left is not going to be enough to justify the investment. So then they need to achieve some synergies. And those synergies are going to be a cost reducing or revenue enhancing or some combination of the two. Right. And that requires change. So sooner or later things will change. But I think it’s disingenuous to say to the team that, you know, nothing has changed. Because one thing that has definitely changed a hundred percent is the incentives. The incentives of the team have changed. They were working for an owner that they either loved or hated. And you know, maybe there was this opportunity to be buying the partnership at some point that might not be possible. In some cases it might be possible. But the incentives have changed. And incentives also inform culture, because incentives drive behaviors. It’s super complicated. The long and short of it is, yes, you can change more or you can change this, but at some point that the investment rationale will turn to strategic initiatives that need to be imprinted.
One last thing I will say is it’s a real shame to miss out on that change opportunity. Point of acquisition is an opportunity for change because in your hundred day post-merger integration process, whatever way you look at it, there’s this period of ambiguity. And there will be some tolerance for the ambiguity. And if you say to people, look, we’re going to close the window on this ambiguity after a hundred days. But in this hundred days, I need you to bear with me as we go through this process. There’s an opportunity to change there, and to say, we’re not going to take that opportunity because our investment thesis is eager to arbitrage, but someone like me, who’s just passionate about running back the clinics as well as they can be run. It’s a missed opportunity. It just feels a bit boring to be honest.
That’s fantastic. And we have a question from Melissa: “How early in the deal should you tell your employees that you’re selling the clinic?” I would split it a little. Basically the entire team is told on the day when the papers are signed, there’s no communication anymore. It’s like, “Hello everybody. I just sold you all.” You know, maybe there’s a better form of that.
There are two tiers to that. One – when there’s still the negotiation, that should be the first tier of communication, maybe to your closer team, to your associates. When the seller decides they’re selling the practice, do they need to consult with their associate and management team or practice manager? Such as “this is who we’re selecting”, “this is what we’re looking for”. So that’s one tier and then expanding to another circle, the entire team, when is one of the recommended times. So any of you guys, if you want to jump in, to answer that.
In my experience, it really rests with the seller. Recognize that the practice owner/seller generally only sells one practice in their life. It’s not like they’re experienced at this. And their worry of course is what if I tell the team and then the deal falls apart, or what if I tell the team and from the acquirer’s point of view, they tell the team and the team all leaves. So I think again, you have to spend time listening and talking with the seller. The leadership of the team is informed and they’re along for the ride and, and perhaps even helping make the decision when it it’s time to tell the team, if the seller takes the approach that calls a team meeting and tells everybody, “Hey, I just sold you to corporate and I’m leaving in six months.” Well, that’s going to be a really difficult integration. If the seller sits the team down and says, “I thought really long and hard about this. I love you guys here, my work family. I’ve looked at all the different alternatives, but the time has come for me to make some changes. And I found this great new opportunity with better benefits and career development and your jobs are all safe.” And how they tee it up, how, and when they present it to the team is really critical. But again, you need to be open to listen to the seller and coach them along in this case. Thom you’ve done more of these than I what’s been your experience.
Yeah, in my experience, this is exactly right. Typically the vendor will tell the team when the deal is done. I believe in candor and transparency, but in terms of telling people the specifics, specifics of what deal has been done, usually when it’s been signed is the only time you really can know for sure that it’s been done. Right. There’s all kinds of things that can happen along the way. The real test for me is, is it a surprise to the team or not? The best teams are prepared for it and expect it and can completely understand it, like “Oh yeah, I know that there’ve been health issues in their family and they want to spend more time with their family. And I’m so glad that they’re going to be able to realize that through this.” That could be one story or, you know, “Obviously he or she was on path to retirement and this makes sense to me and I was prepared for it.”
The negative stuff happens when it’s a complete shock. And often that shock is combined with a sudden upset in expectations. So, “Oh, I thought I was going to have a chance to buy into the practice.” You’ve got to remember the incentives in veterinary medicine and how these incentives change with consolidation. Typically a veterinary professional, that early compensation in their career, historically has been below what they would typically expect for an equally qualified person in another sector. Right. But the benefits have been sort of back loaded instead of front-loaded where at some point I’m going to be able to become a partner in this practice if I want to. And that will provide me with a nice sort of income and a retirement opportunity, et cetera, for a lot of associates coming through now. Suddenly that, that story, that narrative has been upset through acquisition. And it could be that the vendor was telling the associates that, yeah, you’re working your way to partner. And suddenly this narrative has changed. And that’s, again, to me, is a poor cultural indication. And so trying to tease out what are the expectations in the team and, and trying to honor those expectations. Any deal that is done is part of the art of acquisition. And again, it depends how much flexibility there is in the investment model of the acquiring entity.
Having that flexibility, you can get some really good deals done in a way that keeps the team on board. Vendor retention, as well as team retention, post-deal is a massive indicator of a deal success. I know in the early days of NVA, there were numbers floating around, but they were just doing a great deal, there was great vendor retention. You know, this was some time ago, I don’t know where that stands today, but they’ve been acquiring a lot of practices very quickly. And how did they do that? Well, retaining the leader within the business, to me sounds like a good idea. If you are not going to replace that with your own operational bandwidth.
Absolutely. And you know, Bob, you mentioned something that alarmed me. You know, when people say, “I don’t want to tell my team because as soon as I tell them, they all will leave.” So we shouldn’t buy that practice because you will tell the team and they will leave. So I wouldn’t really want to buy that type of practice?
That’s where the advice: if the acquirer is giving the vendor advice, someone to tell the team. Again, that’s slightly disingenuous because the incentives are misaligned, you know, it would be in the acquirer’s interest to find that out earlier, whereas the vendor – not really. I think take any advice with a pinch of salt. Again, you’ve got to know where the incentives are aligned and where they’re not aligned. And typically when I was doing acquisitions, you just got to be candid about that. For example, “I’m not the best person to advise you on that because frankly, our incentives depart at that process. So take your own advice and follow your own opinion.” And that’s why I agree with Bob that needs to be led by the vendor on that.
Thom, you just mentioned something important, about understanding the buyer and one of the questions that I had to both of you is: when the seller is deciding to sell, what are those attributes that they should be looking for in the buyer? We have 47, I think, consolidators right now in North America – different multiples, different incentives, different formulas. What is the proper way of assessing the buyer? Like what is that path to understanding that.
As I talk with sellers, there’s typically three big things that they’re looking at. If I chunk it down into a small list, and they come in different orders – that tells you a lot about the culture of the practice as well.
One is often legacy. I spent 20 years building a main street hospital. Are you going to take care of the main street hospital? Are you going to scrape my name off the door? What is this going to look like?
Two is my work family. I love these people. I’m with them more than I am with my, my biological family. Do you want them, are you going to keep them, are you going to treat them right? What will life look like for them post-acquisition?
The third (and sometimes it’s the first) – it’s financial. For many folks, this is their retirement. What’s the deal look like? And some sellers are willing to look the other way on legacy or team. If they get the biggest multiple, others will sacrifice the multiple because they know their team will get treated best. So it’s all part of that cultural due diligence to really dig in and find out what is the dream sheet of the seller? What do they really want? Does that line up with the buyer?
Yeah, I agree with all of that, Bob, you’ve done a really good job finding the spokes on that triad. What I would say is, again, this is said with as little cynicism as possible, I think for a lot of deals, it does come down to who’s offering me the most. And I think that’s because that’s the one thing I can trust. You know, if you tell me you’re going to treat the team, well, I no longer own the business. Can I hold you to that? If you tell me you’re going to protect my legacy, what does that mean? Does that mean you’re just going to maintain the brand? Is my legacy just a logo? I’m emotionally invested in this business and I don’t want you to rip the heart out of this business after you acquire it.
Those kinds of things are hard to define. Once I don’t own equity in the business, it’s hard to hold you accountable to that. The one thing I can be sure of is that you transfer that amount of money into my account. And so this is another incentive that acquirers have to be very confident in their culture. Because the culture is predicting how someone behaves when others aren’t looking. That’s a reciprocal thing. That’s a reciprocal expectation. So it’s not just how other people in the veterinary clinic teams are behaving when no one’s looking, it’s how people who lead these consolidators are behaving. What are the standards there? And so one thing I would really, really encourage vendors to do is take references. If your employees matter to you, if your legacy matters to you – take references. What’s beautiful about veterinary professions is that people are willing to take coffee with almost anyone. That if you ring someone up and you see that they’re sold to this consolidator who’s layering on the charm to you right now – ask them, how did that go? You know, ask a few of them. It’s all public, you know, when these deals have happened, just ask them.
Bob was right earlier, he said in your pre-acquisition due diligence, spending a lot of time with the vendors is super beneficial and finding out how the vendor thinks about the exit and the motivations for exit and how they order those things. That tells you a heck of a lot as well. But I think vendors, in the context of early consolidation, can be forgiven for prioritizing financial because there’s not a lot of other information to go on.
One more thing occurs to me. At least here in the US, as multiples have continued to go up and up, we’re seeing more and more joint ventures that there is some retained equity that the seller or vendor chooses to stay and leave some skin in the game that I think is a really strong model. Three years ago I saw most of the sellers just wanted to cash out. Now more and more we’re seeing people want to retain a part of the practice, which is a win-win then they’re still there. They’re guarding their team, their legacy. They’ve still got skin in the game.They’re going to benefit from upside downstream. It’s a real win. And I really liked that.
Absolutely, and that leads us to one question that we have: “You have mentioned the Balanced Score Cards system, is its implementation “the silver bullet” for the talents burnout prevention?” One of the things that you just mentioned, the incentivization. So going back to those six triggers of burnout, number one is the lack of control. Well, when you leave the part of equity behind and it’s 30-40% in that joint venture – that’s the way for the owner to maintain that feeling of being controlled, especially if it’s the case of not retiring but just wanting to cash out and still continue working for five, ten years. That model completely makes sense.
And just to follow on the burnout prevention, the reason why I brought them as an example, because those are the classic six burnout triggers. That’s been out there for 30 years. Look at your environment and ask, do people have autonomy? Do we provide them autonomy in their decision making and how they do medicine, or do we tell them what medications to use without explanation that this is just what we’re, you know, what we’re getting from vendor management, but then explain, give them autonomy to choose. The conflict of values, that’s another one. So work against this trigger, align and determine the culture, the values early, and then see if they align. And if some people are not aligned, maybe they’re better off in another setting. The work overload – manage that properly. If you’re giving new tasks to people, don’t add that on top of the lack of capacity.
Big one. Ivan. The workload is a big one because this is where an accidental bait and switch happens. The acquirers that don’t plan to create any change, is that pitch of “you get back to doing what you love, being a vet or looking after the patients and we’ll take care of the admin, the accounting, all that sort of thing.” Well, actually the information expectations of all of the acquirers with the investors that they have to report to are much, much higher than your average independent practice owner. An independent practice owner might just check the bank balance once a month and see, you know, am I cash positive? Okay, that’s fine. Whereas the acquirer suddenly they might have this massive central accounting team. But they’re very hungry for information. And so suddenly the practice is like, let’s see your twice daily cashing up procedure, financial reconciliation. I want to see your purchase orders and your invoices and the teams just like “We never had to do any of this before and you said you were going to take care of all of it!” And I think that it’s not on purpose, but it can be this accidental, miss setting of expectations. And do I think maybe it’s one for the consolidators just to, to think about it. I think, does that, does that ring a bell? Because again, your reputation catches up with you very quickly and that will damage your investment thesis. If these teams are being burned out by you mismanaging that expectations and increasing workload, when you said you would reduce it.
Yeah. The other trigger you mentioned that resonates with me is control. And at least here in the US, I think the early consolidators largely came from the manufacturing world and in manufacturing, it’s very hierarchical. It’s very top down. It’s all about my managers and it’s building followers at the local units, not leaders. I believe as highly trained as healthcare professionals are, veterinarians and veterinary teams are brilliant people. They know what to do with just some consulting. They don’t need that directive approach. They need a consultative approach. It needs to be very bottom up.
It can’t be the cookie cutter top down, like the Corporate said “You’re going to do this and that this quarter.” That may not make any sense at all to that individual hospital. So there has to be autonomy. There has to also be accountability at that local hospital. So really driving doctor and veterinary professional leadership at each unit and making it bottom up in more of a servant style than a directive style – I think it’s enormous. It’s much harder to do. It’s a whole lot easier to go hire a bunch of middle managers and hand them clipboards and checklists and send them out to tell your hospitals what to do. I believe that’s the wrong way to go. Many in our industry unfortunately follow this direction.
Yeah. I think you’re right, there’s this upside to consolidation that often gets ignored or unexplored. I don’t much care what your ownership structure is as a veterinary practice. But if you do have this professionalization of practice management, that’s one of the purported outsides of consolidation. Well, then you should be able to provide opportunities for career progression that team members never before thought possible. And if you’re not doing that – well, what’s the point. It just feels like a bad trade-off. I could be wrong on this and I don’t want to disparage anyone or say anything out of whack with reality, but I think the AVMA not so long ago had to change their charter to say that a non vet could be, could lead the organization could be CEO. And the reason that they gave was a lack of depth of veterinary talent to manage an organization of that scale. I can completely sympathize and relate to that, but that’s sad. Maybe we can fix that if we do recognize the breadth of talent across the veterinary professions and reward that and provide a diverse career opportunities and then we’ll retain more people, more talent within the profession. So there is this upside that doesn’t get talked about a lot.
That’s a really good point, Thom. And with the consolidator community, shame on them if they’re not looking for veterinary professionals to step up in a decision-maker role. Because they’re
out there. But also shame on veterinarians that aren’t raising their hand and saying “Balance sheets and P&Ls is just arithmetic. I get that and I can bring you the heart of the profession and a real understanding of how to be more successful.”
Excellent. There’s a curve ball here that I wanted to ask you guys. How do you deal with a doctor who joined a practice to not be in a corporate practice and then it’s sold? I don’t know if any of you want to pick that bit.
Happy to speak to that. Not a whole lot you can do about that other than try and unpick why they care so deeply about the ownership structure and are there biases there that need addressing? Can you address their concerns? But if you are a consolidator, if you are a large veterinary group or a corporate or whatever word you want to use for it, that’s what you are. And if someone doesn’t want [to work there] – well, fine, as long as independent practices exist, that’s where they can work. There’s all kinds of reasons why people aren’t going to want to work for you. And that’s part of this. And we actually have an article on our blog on PetsApp blog called “Why wouldn’t you want to work here?” And if you can’t answer the question of who wouldn’t want to work here, then again, you don’t know your culture and it might just be that this person doesn’t want to work there. So let them work where they do want to work. I have a lot of compassion for them and try to interrogate the reasoning and make sure they are making the right decision. But if ultimately they’re confident that you cannot provide what they want, let them go and do their best work somewhere else.
Yeah, and to add to that, it comes down again to listening and that one-on-one conversation. Hopefully they’ll give you the opportunity to sit down and talk with them. What is it they really want? There may be an opportunity for them to have equity within a bigger corporation. There may be an opportunity to put them in a leadership role to really hone their skills so that when they are ready to go buy a practice, they can do it on their own. Maybe you’ll even help back them. Maybe they’ll go build their own practice. And as the consolidator buys it back in 5 or 10 years, when they’re ready to exit. There’s so many opportunities there that the two passions could align. If they’ll give you the opportunity to sit down and talk with them, and if it doesn’t fit, it doesn’t fit. It’s a small profession. Let’s shake hands. Let’s keep up. Let’s see how we can help one another.
I think that that’s one of the benefits of consolidation. A lot of people think that it’s bad. It’s not bad. It’s professionalizing the industry even more, it’s creating opportunities. And, you know, I have a lot of my classmates reach out and say, “How did you stop practicing?” I think it was a coincidence that I created SmartFlow, but in the consolidation, there’s so many paths that you can take in management and apply your knowledge of the operations of the veterinary practice and then become an operator of a consolidation. So there’s tons of positive opportunities.
There’s an interesting question here about burnout. How should you approach the deal post acquisition? If the vendor is burned out and doesn’t have insight into this. And is already causing harm in the practice.
As an acquirer, you have a duty of care for the vendor. I strongly believe in that. It’s not me being soft and mushy. That’s me being pragmatic about how small this sector is and how important reputation is in the sector, as well as it being the right thing to do. And if you do see someone and they are facing burnout, one thing we know is that burnout can harm decision-making and someone’s capabilities to make decisions and how they make those decisions. Iit could be a really vulnerable time for them, making a decision that is going to be one of the most important decisions in their career. So I would say, approach with caution and care and sensitivity and be respectful of your duty of care to them. But ultimately this decision could be the right thing for them.
But then you’ve got key person risks to factor in again, pragmatically. So do see how that plays through. You’ve got to protect your own interests and the interests of your existing teams and the team that you’re going to assume a duty of care for. So do think that do sort of play it out and think it through, but I think you do have a duty of care to that person when they’re making that decision. They’re facing such a big decision it’s that it is like someone buying a house for the first time. And I know how vulnerable I felt going through that process. It’s like, I know that when I buy this, something’s gonna go wrong. It’s the same as the person selling the house. Right. It’s the same for the, for the, for the vendor. And it is that their legacy and it’s, it’s a big deal and you get to be part of this massive decision that they’re making. And so look off them, look off to each other.
Yeah, not a whole lot to add. I really like Thom’s approach. What’s the right thing for the seller? We have bought practices. We’ve seen lots of people in those situations, so give them good advice again. It’s likely the only time in their life they’ll do it and it may well be the best thing for them to do is to sell.
However, putting my WellHaven hat on, that’s not a practice I want to buy. If they’re burned out, they’re leaving, their teammates will be damaged. And I’m happy to share that with you. You’ve got a saleable asset here. You’ve got a great practice. You’ve got decades on this corner. There are groups out there that this would be a fine fit for. I don’t think it would be a fit for us.
A real powerful thing to do is to say to a vendor: “You know, I think you’ve got a year of really good growth ahead of you. And if you came back to me in a year, you’d be a lot better off.” And guess what? They’ll come back to you in a year and take that offer from you. Whereas like in all likelihood they might’ve sold to someone else. Just give people pragmatic reasons to behave well. It does pay off.
Makes sense. The other question we touched a little bit on the integration process that happens right after acquisition. I just learned in M&A class and that’s one of the most important moments because this is when the new team is going to be first time exposed to the organization they’re joining. And do you guys know any successful implementation of external teams for change management post-acquisition? Or, you know, there’s also CEO’s that talk directly to all the teams, and there is an integration team that comes in being very pragmatic and mechanical – just plugging in the systems, ripping out the PIMS and, you know, inserting new labs… So who should be leading the integration? Is it a good place for an external change management expert?
I can just share our experience at WellHaven. We’re relatively small. So our model is: we’ve got half a dozen really strong, team members out there across hospitals that are typically practice managers. They’re running very successful hospitals. They get our culture, they get day-to-day workflows, they get our systems, they understand us, they live our culture. So we just parked them inside. We introduced them to the team, to the seller. Often beforehand, we talk about their role. Their role is listening more than telling they want to learn from the practice that’s being integrated. There may there’s often great things we can share with our whole group, part of our philosophy or our communities.
So we have about a dozen hospitals in Denver and Minneapolis and Seattle and Portland, where we’ve got groups of hospitals that all lean on one another and share resources. So we’ll put someone in there that actually lives in that hospital and helps them. And is there 24/7 to answer questions as well as introduce them to the people behind the scenes, the support people. Our support team again is relatively small, there’s only about 20 of us. We’re housed at least pre-COVID right above one of our hospitals. And one of the things we require of all of them, you may be a payload payroll clerk or a CFO, but once a month you put on scrubs and you work in a hospital. So you understand what they need, what their day-to-day is, how important what they do is that you may not touch a pet every day, but you better be helping someone that touches the pet every day. Our challenge, of course, as we grow, can we continue to scale that? I think we can. Thom, you may have other observations.
I think the approach sounds great. Who is good at change management? It’s hard, right? It’s one of the hardest things and there’s going to be aspects that you’re just not good at yet. So reaching for external help could be the right thing to do. You know, if you’ve got known gaps, if you’ve done your 10 days lesson learned exercise at the end of your last post-merger integration and you identify things that then go well – look around you for expertise, that’s going to help you with that.
The idea that you can outsource the integration that you’re getting your hands dirty work with the integration that you can say “Hey, newly acquired team. This is your advisory company that you’re going to report to for a hundred days. And we’ll come in later. Once it’s all calmed down a bit.” I think that sounds like a very bad idea.
Best practice in these scenarios is to launch an integration management office with an open door policy. And like Bob said, be very, very high touch with the sort of scale of businesses that are involved in these kinds of acquisitions. Things that I see work well is placing a vet tech in the new team that knows what the new policies are, new approaches are. Or maybe it’s an area manager that was once a vet tech. Get your operations team involved in the process as early as possible. This is also a really good way for those consolidators that going through the EBITDA arbitrage investment thesis with the M&A statistic competence for them to slowly layer up operational bandwidth and this is a good place to start where you have an operations team coming in for the time to day period, and then gradually easing off. Well, eventually when you do need to extract your post-merger synergies you can leave some of the operations team in, and then today you’re running that new practice. Because that switch in distinct competence from M&A to clinical operational excellence is challenging. It’s super difficult. It’s really difficult. And so if you can get ahead on that, if you can get any kind of headstart on that, you’re onto a good thing.
That’s where the breakdown happens, when the upstream is not connected with the downstream. If you’re buying every practice that has a pulse and then you’re just passing it on without understanding what impact it has on the downstream, on the integration team and then post change management business as usual, if you will, on the operations, that’s where the problems will happen.
I love what you said about visiting the clinics. I’ve researched lean in human health care for the last year and a half. And lean has this distinct thing that they have to do. It’s one of the practices they do, what’s called gemba. So the management team goes once a week, it’s in their schedule, the CEO of the San Francisco general hospital goes downstairs and presents during the morning rounds with the entire team. They see what is happening, where the work is happening. So that’s excellent. I love that. And then the other thing, Thom, you mentioned about, you know, who is good at change management. I think that nobody is, especially external people. They come in, they know the theory. But what I keep talking about and hopefully it will start happening in the near future is really promoting the culture of continuous change. And the, um, what I mean by that is change management.
If you infuse the culture in the entire organization where the people that do the work have the voice, there’s feedback loops and they can provide information, their opinion on how to run operations of the practice – then that’s a continuous learning and continuous improvement culture. When you throw a change into that culture and ask them, how would you solve this problem instead of coming in and saying, “this is what you do next, because we told you so.” Then the change management is happening because people want to do the change because they came up with this idea. I’m pretty sure that without that consolidators can’t really push, just arbitrage and let’s just push all of these changes very soon.
I think the idea of continuous improvement has a very receptive audience. And this comes back to the idea of the value of that new leadership: we’re encouraged to develop professionally on an ongoing basis; we’re encouraged to take a diagnostic approach to creative problem solving; being solutions oriented. I love this idea of embracing continuous change instead of it just being like, all right, we’re changing now.
I think too often people are looking for that light bulb innovation. When in fact it’s incremental, it’s little changes. And with that comes failure. Not so much an integration, but just as a practice, we try to always be listening. What are the pain points? How can we help? As a result, as we built our de novos, we built an alpha hospital. What if we’re hearing a pain point and there’s someone out there that can solve it, let’s try it in our alpha hospitals. See if it works there, then we have two other de novo betas. Let’s go try it there as well. If it works great, let’s roll this solution out everywhere, but let’s take learnings from the whole practice and share them as we can prove them out. Because with that incremental change are going to come some stumbles – that’s okay. Learn from it and move on.
I love the idea about when I was talking to John, he was talking about sort of the innovation hub practices, I think for a rapidly growing group. Next idea, bring in this new idea of continuous change, laying that on top of sort of post merger integration and the risks. There might be a bit much, I mean, if you can pull that off – fantastic. But for the clinics that have been around a bit longer – I think what the larger organizations don’t do enough of is this benchmarking behaviors to increase the success that they have with the businesses that they’re acquiring. And I think having a sort of innovation hub, having a clinic where you do innovate and you do try stuff, that’s like benchmarking, taking it to the 11th degree. And I think that’s fanatic, super exciting.
And that goes back to, you know, what is the silver bullet for burnout prevention? Community breakdown is the sixth trigger for burnout, when you don’t have feedback loops. And if in the organization you can advise something, it’s taken seriously at the top management level and say, why don’t we put this experiment and then put it across because none of the consolidators, most of consolidators don’t come in with a toolbox of available improvements on their inventory management or marketing. They come in with those thesis to private equity, but that stuff stays on the investment deck. And then when they start consolidation, they’re really fixing a flying plane, developing these processes. So why not take it into a safe environment, develop the process, develop the rollout, develop the training for everybody, and then put it at scale, instead of trying it halfway in most of these hospitals.
We’re running up on time, and I have a final question on the topic of our webinar: how to convert burnout prevention into profits. So do you guys really think that investing into burnout prevention is worthwhile? Do you think culture assessment is an investment or is it an unnecessary process?
I keep coming back to culture. We need to invest in burnout to enhance profits. We need to go back to our purpose and our passion. We’re here to, to help support veterinary practices, help more pets, help our people. As a result of that, you know, you’re hearing from your teams that while our business is booming, people are sometimes breaking. How can we help them? And it’s not one or two things. It’s the lens through which you look at things. It’s how you do things. It’s your employee assistance. It’s your Cubex, it’s AAHA, it’s local leadership, it’s benefits, it’s four day work weeks, it’s flexible schedules. It’s a hundred things, but it comes with how you look at it. If you wake up one day and say, Oh my gosh, my P&L has been impacted because of burnout. It’s way too late. It’s way too late.
The CFO says: “What if we invest in our people and they leave?”, to which the CEO retorts:
“What if we don’t invest in them and they stay?”
That’s the problem you’re up against. And you got to think what your strategy is. Your strategy is not something that you wrote down on a piece of paper and gave yourself a pat on the back about. It’s the decisions that you make and it is your stakeholder prioritization. Usually, veterinary clinics are saying: “We put the pet owner first” or “We put the patient first”, right? Well, guess what, if you want anyone to genuinely put anyone else first, you need to invest in meeting their needs because unless their needs are satisfied, how are they going to prioritize anyone other than themselves?
It is an ongoing investment and it is something that you just need to live all the time. And you need to just build in these ways to sense, check, hold yourself accountable. That’s something really valuable. If you can, if you can build a culture of reciprocal accountability, you know, this is what I expect of you, and therefore this is what you can expect of me. And you build in checkpoints to see if you’re meeting those expectations and you allow people to hold you accountable. That’s the investment you need to make to be good at this stuff.
I love the point Thom makes on prioritization. In my mind, the priority starts with people. It’s taking care of the people in our practice, our doctors, our nurses, our teams, then they’ll take care of pets. If the pets and the pet parents are taken care of, then our practice is going to do fine. Then I can reinvest in the community and nonprofits and shelters and all those things that move my heart, which goes right back to people. But it starts with the people and that gets the flywheel going.
Yeah, I love that. And you know, especially for organization, we’ll start implementing that as a strategic filter for initiative that they’re taking. It’s one thing to talk “Yes, people first, then the customers, then the pets and everybody else”, but then they say, okay, what do we do to push that margin again? And you know, 55 initiatives on their quarterly planning have zero those that take care of people. Then again, you’re not walking the walk and you’re just talking about these things.
When consolidators say that “We’re all about people, we’re supporting veterinarians.” How do you measure that? Show me on your weekly scorecard that you’re looking at with your executive team. Where’s that number? What is it? And that’s really a good question to ask yourself when you’re an executive team. If you’re saying that, how do you measure success in supporting your people? I think that’s very important.
Part of the answer to that. I’ve been a veterinarian trying to prove to the investment community that putting people first is the right way to go. I should be able to point at the P&L and show my growth. My margins, those things are superior because I invested in the people. It’s not always a straight line, but I ultimately, I have to.
Yeah. And that’s the wonderful thing about this sector is you can do well by doing good.
When you say you put the people first, which people? You know, there is a subset of people that you’re putting first, then you want to select for that subset of people whose needs your organization can meet because it’s a different people. It’s not, you know, vets and vet nurses and customer service representatives are not a homogenous mass of people with the same motivations and same needs they’re distinct. Right? And so you’re only ever gonna be able to create this positive environment for a subset of the population.
Excellent. Well, I would like to summarize guys, I recorded a couple of things if anybody is reviewing this. So we talked about:
– The importance of cultural assessment pre- and post-acquisition;
– Employee NPS score, Thom mentioned that it’s important to measure immediately after acquisition and then after the assimilation in 100 days;
– A good question to ask employees: what would you change if you were a boss?
– Communication is the key – communication with the team and making sure that you’re communicating acquisition early enough, explain all the benefits of the transition instead of just dropping a bomb;
– Preserving the legacy, the team and making sure that the financial incentives are there when you’re picking the consolidator to sell your business to;
– Taking references from other clinics that already sold to a particular consolidator, a good strategy suggested by Bob;
– Change management versus continuous improvement culture.
So guys, it was very insightful. Thank you for joining me!