Daily Editors' Notes

Many LTC operators avoiding path to greatness?

Share this article:
John O'Connor
John O'Connor

Billionaire Warren Buffet famously once said he had two rules for investing. The first was to make money. The second was to remember the first.

Long-term care operators looking to build great companies have access to similarly pithy advice, courtesy of Michael E. Raynor and Mumtaz Ahmed. In the April issue of Harvard Business Review, they offer three simple rules for creating a great company:

·      Rule 1. Better before cheaper — Put another way: Compete on differentiators rather than price.

·      Rule 2. Revenue before cost — That is, prioritize increasing revenue over reducing costs.

·      Rule 3. There are no other rules — So change anything you must to follow Rules 1 and 2.

What's a bit disconcerting about this advice is that it runs counter to what's actually taking place in many nursing homes and other senior living communities today.

Let's face it: Many operators have been competing on price for years, if not decades, and continue to do so. And we have certainly seen plenty of examples of cost-cutting as a way to remain competitive lately.

So are these guys blowing smoke? Apparently not. Whether you agree or disagree with their conclusion, you must admit that they did their homework.

They started with a simple goal: to determine the core elements successful companies share. That begat an analysis of thousands of firms. From this, they narrowed the list to a few hundred firms that had performed well over time. In every instance, those three rules (really, two rules) had been followed.

Does this mean things like operational excellence, talent development, leadership style, corporate culture and reward systems don't matter? Not necessarily. But it is worth noting that they could not find consistent patterns of how they did.

Who would have thought that running a great company could be this easy? Or this hard?

Share this article:

Next Article in Daily Editors' Notes

Daily Editors' Notes

McKnight's Daily Editor's Notes features commentary on the latest in long-term care news. Entries are written by Editorial Director John O'Connor on Monday and Friday; Staff Writer Tim Mullaney on Tuesday, Editor James M. Berklan on Wednesday and Senior Editor Elizabeth Newman on Thursday.


    More in Daily Editors' Notes

    Could you make money if Mom's nursing home does a good job?

    Could you make money if Mom's nursing home ...

    A man recently raised more than $51,000 ... to make potato salad. And in a similar type of online campaign, senior living investment company Mainstreet raised more than $1.6 million ...

    Finally, a Medicaid funding plan that actually makes sense

    Finally, a Medicaid funding plan that actually makes ...

    When politicians talk about Medicaid funding and nursing homes these days, an unsettling theme often emerges: the need to spend less of the former on the latter.

    What are the scouts saying about your long-term care organization?

    What are the scouts saying about your long-term ...

    There is no draft in senior living, nor really a need for one. But what if its three most dominant players were to be sized up? How might the scouts ...