Changemakers: Dwayne Clark, Founder and CEO of Aegis Living

Don’t ask Dwayne Clark for his top 10 U.S. senior living operators doing exciting work. No such list exists.

“If you gave me $500 million and said, ‘Dwayne, I need you to go find 10 operators in the United States — build communities and have 10 operators in various geographic locations, operators that you feel really good about,’ I could not find you 10,” says the founder and CEO of Seattle-based Aegis Living. “I’m being totally serious here, I could not find you 10.”

The entrepreneurial visionary believes in senior living leadership that is unconventional, unafraid, open to new ideas and people-centric. From innovative building design to hospitality-fueled hiring to a charitable foundation for staff and their families, Clark describes and defines his views of the industry as it is today, and where he wants to drive it tomorrow.*

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Looking back on all the changes that you’ve driven in your career, are there one or two that you think have made the biggest difference?

I think Aegis has taken a very unconventional path. From the very beginning, we stood apart to be a very different kind of company, starting with the kind of people we hire. I think over 90% of our people come from outside the senior living industry.

The bridge to your customers is your staff, especially your line staff. You’ve got to make those people delighted in their job every day. That is the whole point, and this [distinction] has been incredibly important to us: We’ve repeatedly been voted best company, and we were in Glassdoor’s top 50 companies two years ago. I think culture distinguishes us — I’m just really very proud of ours. No one has really stretched the value curve as we have, where people think, “I am going to pay this much because I believe in a great value.” I think that’s what we’ve done.

You mention the importance for Aegis in hiring a lot of hospitality people. How did you begin that trend?

I’ve been in the industry for 35 years. In my first seven years, I worked for Leisure Care, which I think is an extremely good, service-oriented organization. They hired from various service industries: hotels, restaurants and so on. I grew up in that company learning about service and presentation and Four Seasons-level service.

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Then I went to Sunrise, and what Sunrise did really well was high-level care. But some of their managers didn’t know how to read a profit-loss statement back in the early ’90s. As I was building Aegis, I said, “What would be great is if we combine these two concepts: take people who are highly service-oriented, and give them Four Seasons marching orders in terms of presentation and customer service.”

Then we thought, if we could build a building that was exquisite and then combine these three things, that would be quite a company.

That’s what happened, and we ended up paying people a lot more money, even giving people equity. We are making 50% to 100% more than average on each community.

I just think the quality of talent we have, and it’s not to sound like an egotist here, I think it’s extremely high.

How have you been able to attract that talent? What investments have you made to hire those people?

I think it starts with the way we think. When we first started this, we definitely had great ambitions and dreams about what we were going to do and who we were going to hire. It was hard, until we started seeing some victories. And that starts with how you treat people.

I think this COVID crisis is very relevant to how we treat people, because one of the first things we did was to say, “Okay, we have to take care of our staff … They’re having troubles. We need to consider how people can get childcare, get their kids home from school. We need to look at providing free food, for not only employees but their families, so they can take food home for their families. We need to open up telemedicine to all staff (we use a company that we’re affiliated with, 98point6) and make sure that people have access to doctors from their home.”

It was hard, until we started seeing some victories. And that starts with how you treat people.

Once you start doing that, it’s like any company with a high service reputation — like Ritz-Carlton or Four Seasons. The word becomes true that this is how you react and then it becomes part of your DNA.

You mentioned some of the changes that you’ve made in response to COVID-19. I know we are in the early stages, but do you foresee changes coming to the industry that will last after this acute crisis ends?

Well, keep in mind, Seattle was the Wuhan of the United States. The Kirkland Life Care nursing home is eight minutes from our corporate office. So, we were impacted early on in mid-February. We had our first staff member get it on February 28th. Seattle had the first case in the United States, had the first death in the United States.

We want to be a leader in how we can not only discover how the disease transmits but how we can look at vaccines and other things.

I think COVID-19 is going to affect everything. Where do I start? The price of lumber in the last 90 days has fallen 45%. Anybody who is building will see a dramatic change. The price of oil is down 70%. Anybody that is building anything, from the price of their screws to the linoleum they have that has oil-based products in it, those prices are going to drop dramatically.

This changes the banking industry. Spreads are changing. Interest rates are dropping. I think there will be a consolidation of the industry. I think when people are in isolation and you lock buildings down for two months, a lot of companies can’t afford that. We can.

We’re smart, we have a sufficient balance sheet. We’ve got great capital behind us. But not a lot of people can say, “Hey, I went two months and then it took me four months more to get back to average. I exhausted my reserves.” I think there’s going to be consolidation. We were very fortunate in that when the COVID outbreak first came, the corporate occupancy was over 93%. We’ve been in this now I think about five weeks and we’re still 91.5% occupied.

The industry average is 87.8%. I don’t think most people that are 87%, if they fall 10% in occupancy, are going to do very well. That’s the challenge. I could speak for two hours about how it’s going to impact us. I think people are going to have a much more vibrant PPE supply. I think they’re going to be less dependent on hospital systems. I think they’re going to be much more sensitive to early detection and isolation.

Do you think senior living is changing fast enough?

For who? For me?

For the good of the industry.

I just got to tell you -— and again, I’m going to sound real negative here — I don’t think there’s a lot of innovative leaders in our industry.

I think people are okay with yesterday’s vanilla model of how they operate. The thing that I discovered early in my career is, I’m a guy with pretty average intelligence. If I want to be super successful, I’m going to have to hire people a lot smarter than me, who have a lot of different experiences than mine. As silly as that sounds, as fundamental as that sounds, that’s been the overarching success of why Aegis has come out as a really successful company.

All you have to do is go down the list of our senior executives. Our president, Kris Engskov, was the president of Starbucks, North America, that oversaw 30,000 employees and $20 billion in revenue. That’s not a normal senior living president. Our chief people officer, Sandra, was the head of Amazon Marketplace that oversaw 24,000 employees and gave the most critical human resource people development decisions to 24,000 people. That’s not your normal senior housing HR person.

I don’t think there’s a lot of innovative leaders in our industry.

These are not people you typically find in senior housing, and it’s why I often use the phrase, “The making of the quilt.” The making of the quilt has to do with what each of these people bring — not only their resume but their company’s experience and knowledge and intelligence to our company.

When I hire Sandra, who was the chief people officer at Amazon, I’m hiring Amazon. When I hire Kris from Starbucks, I’m hiring Starbucks. Each of these people bring a piece to the quilt.

I challenge my fellow senior living operators: When they make their quilt, how many patches are going to be from world-class companies, or are the patches all from other senior housing companies? Are the patches all from their own company? I think it sounds silly in a way, but that’s a huge point of distinction.

I read that in the early days of the company you were in a position where your son wanted to go to a certain college and you said, “We’re going to send you somewhere else because of where our finances are right now.” Is that right?

Yes. My son wanted to go to UCLA. We did the tour, he applied, we went through all that. He was set to go to UCLA and (the company) didn’t have enough money to pay payroll. My partner called me at the time. The only money we had was my son’s college fund. We had to use that to make payroll and we couldn’t recoup it fast enough for him to go to school four, five months later.

We said, “That in-state tuition at University of Washington looks really good.” That’s what happened, and he’s never looked back. He loves being a Husky.

Those are the kind of sacrifices that you make as a company, especially a family-owned company, that probably no one will ever know about. You do it and you suck it up and you just move on.

When you start the first life cycle of a company, you’re making all kinds of sacrifices. I remember I didn’t go on vacation for three and a half years. In fact, my cousin who’s a dentist called me a couple of weeks ago and she said, “Remember year three of the company, I had to pay for you to sleep on the floor of my Mexico condo? You couldn’t afford a plane ticket,” and I’m like, “Yes. Why do you have to remind me of that?”

You just do what you have to do. I wouldn’t trade any of it for anything.

I guess I brought that up in the context of risk, because I wonder, do you have to have a certain pain threshold if you’re going to be an entrepreneur? Do you think that’s fair to say?

Yes, it’s pain tolerance, and it’s endurance. I think that’s really what it’s about.

I think a lot of entrepreneurs fall out because they think this is some kind of 100-yard dash, and it’s really not. I would say you better be prepared. You don’t want to go 10 years and not make a profit, but you better be prepared to go five to seven years and not really see any lucrative salary.

Keep in mind, I went from being executive vice president of Sunrise, which was a publicly-traded company, and getting bonuses and stock options and great salary increases to my compensation in total probably dropping by 60%, 70% for the first three or four years. You just had to make it work. I was young enough that I could do that. I was in my late 30s and thought, “Hey, we’ll just do what we have to do … to make this happen.”

I think endurance is a big thing and then you hopefully set some goals and you meet them and you start to get some windfalls and it starts to work out.

Are you surprised that there wasn’t a greater rush of new operators in the last few years, given the demographic trends and capital available?

I’m going to answer that in two ways. First of all, if you gave me $500 million and said, “Dwayne, I need you to go find 10 operators in the United States — build communities and have 10 operators in various geographic locations, operators that you feel really good about,” I could not find you 10. I’m being totally serious here, I could not find you 10.

I will tell you, in talking to the major equity sources in the country, everyone has validated when I make that statement and says, “You’re absolutely right.” I probably could find you five I feel good about, but there’s not 10. Am I surprised that there’s not more? I’m not surprised because it takes a lot of work to be a quality operator.

The issue is very simplistic. Good operators make a ton of money. When I got in the game about 35 years ago, the big deal in the late ’80s and even into the ’90s was management contracts. Management contracts we’d look at, they’d say, I’ll pay you a 5% or 6% management fee … Maybe if you do a phenomenal job, they throw a $5,000 bonus to your company or whatever. People were lined up outside the door to get those contracts. It was so competitive.

I will tell you today, I would go broke if I had 3%, 6% management contracts. The cost of talent is so much that if we manage at a little over 6%, you can’t make any money. The people that do take management contracts with 5% or 6% are giving you inferior management because they’re paying people less. That’s the conundrum.