The post-acute and senior care marketplace has seen an increase in underperforming assets in recent years. Key factors include rapid growth, development in overly saturated markets, weak sales and marketing infrastructure, labor challenges, and untested and inexperienced management. The unprecedented COVID-19-related realities that the industry is navigating at this time only add to the strain being felt by these troubled senior living communities. These challenges will force operators to move from their normal and customary operating routines into planful and robust turnaround management practices.
A planful and purposeful turnaround strategy starts with recognizing the circumstance and being open and realistic that you are in a turnaround situation. Too often, operators find themselves blurred by hope and optimism and somehow think that the challenged situation will “magically” self-correct. However, as the saying goes, “hope is not a strategy” and no truer words can be spoken when it comes to addressing distressed asset situations. You need to clearly understand the true definition of a turnaround, pay attention to the external and internal factors contributing to the underperformance of the senior living asset, pay attention to the warning signs, and execute on a turnaround plan (i.e., the turnaround matrix).
A turnaround strategy can be defined in three ways:
With that strategy in mind, the next step is to identify the factors that must be addressed as part of the turnaround plan.
HDG has seen numerous external and internal factors leading to underperforming assets.
Some of the key external influences on performance include:
Personnel issues, including management and staffing, lead the list of internal issues related to underperforming assets:
Some of the warning signs that go along with operational decline can be subtle, so it’s critical to maintain a close watch over the metrics:
Based on our experiences, HDG has found the greatest success when following a robust and purposeful senior living turnaround strategy consisting of four critical stages as depicted below.
The primary objectives of the management change stage are to: put the right top management team in place to lead the turnaround; weed out and replace any top managers who might impede the turnaround; and be swift with action. Don’t be long suffering—chose a capable and experienced turnaround professional; then, assess the skills and abilities of your board and make any changes as may be necessary.
The primary objectives of the situation analysis stage are to: determine if the business can actually survive; determine the turnaround strategy and approach that best fits your situation; and develop a concrete action plan with specific goals and objectives. As part of this stage, it is essential that everyone is universally clear and in alignment. Priorities must be set according to short-term issues and problems, intermediate term issues and problems, and the longer-term issues, problems, and desired outcomes.
The primary objectives of this action-oriented stage are to: take whatever actions are necessary to enable the organization to survive; establish positive cash flow and cash flow strategies as quickly as possible; raise and secure sufficient cash to fully support the chosen turnaround strategies; and work diligently to protect and/or develop resources needed for future sustainability, profitability, and growth.
The primary objectives of the business restructuring stage are to: ultimately enhance profitability through more effective, efficient, and sustainable management of future operations; and restructure the business for increased profitability and ongoing return on investment.
From our experience, a true senior living turnaround can take anywhere from 12 to 18 months with incremental successes along the way. Given the intensity of the turnaround, it’s easy to fall back into old, problematic routines as you start to see successes. Don’t repeat history. It’s a new day with renewed focused, prioritization, and accountability.
As you enter the return-to-normal stage, stay focused on these key objectives:
If you’d like more information on HDG’s turnaround capabilities, please contact us at email@example.com or 763.537.5700, and watch our recent webinar in partnership with Senior Housing News, “Managing a Successful Senior Living Turnaround in a COVID-19 Era and Beyond.” We have the ability to assist with interim leadership needs, occupancy development, operational and financial analysis and performance improvement, and overall turnaround planning and execution.
Authored by: Craig Abbott,
Executive Vice President of Growth