Being unsatisfied can sound negative, but Discovery Senior Living CEO Richard Hutchinson doesn’t see it that way. Being unsatisfied with the status quo drives him to be a changemaker.
His changemaking track record is impressive. From building a pay-for-performance sales culture to launching a business intelligence division, he’s moved Discovery and the senior living industry forward throughout his 25-year career.
Hutchinson’s leadership skills were honed through military service, including in the Gulf War. He cut his teeth in the real estate world, including working for a Florida builder focused on master-plan communities, single-family homes and highrises, before entering the senior housing sector.
Today, Bonita Springs, Florida-based Discovery Senior Living is involved in developing, building and managing communities, with a portfolio of 55 properties and more in development — including projects to bring a data-driven “experiential living” model to life.
Senior Housing News: As you look back on your career, what are a few changes that you created, either within the company or the industry, that make you especially proud?
Richard Hutchinson: I would guess that the industry has changed a fair amount since I started 25 years ago. Right from the outset, we adopted a pay for performance sales and marketing program, which was really different in the industry, and has paid benefits from day one. The genesis of that is the master plan community development background that we had when we entered the industry, and that I continued.
I was unfamiliar with the sales process in the ’90s where you just pay a big base pay, you go out, get some referrals and you move people in. We were pretty innovative back then. We were a 100% commission only on sales, we used a sales system from day one which included some of those basic metrics on sales, and then we had a sales process, which we taught. That was very different in the ’90s.
I think probably a few years ago, a big inflection point for us and what I think is probably the same for the industry, was we created a business intelligence group and collected all of our data. We’ve been data junkies for a long time prior to that, but having all that data is akin to being able to see, and all of a sudden we were able to see a lot of things.
The ability to make change means that you need to understand what you have. Almost four years ago now, when we started our business intelligence group, was a sea change for us. We’re able to focus on truth versus that anecdotal fiction gut feel business process that a lot of folks go through. It allowed us that granularity in our service profitability, and that actually ended up being a cornerstone to Discovery’s experiential living operating model.
I think going forward, the consumer is going to demand customization and optionality, and I wouldn’t want to be the person who is just starting out, starting to capture data and understand those service components, and being able to roll that up because I think folks like that are probably a bit behind at this point.
What was entailed in terms of technology or people to launch the business intelligence unit?
With the technology piece, one of the biggest issues we’ve had in this industry in general — and Discovery’s no exception — was the separation of data through systems. For a very long time, what we had tried to do is find that magical system that could go ahead and contain everything for everybody that we wanted, so that we’d have the single input data source and then have the ability to manipulate the data and bring it back into a usable format for any situation.
We then had a realization that that wasn’t going to happen. There was no singular answer across all of our business lines and service components where we could have a system. The genesis of it was, hey, why don’t we get somebody who can really get good at data mining in all these systems and then just roll up some basic reports. I’d like to say that it was one of those days where we had an epiphany and said, we’re going to start a business intelligence group and it’s going to do all these wonderful things, but it was actually incremental.
We started out with just trying to solve a problem. Then what we had found was when we did get the data and we found that the data was maybe not perfectly scrubbed, we needed someone to go in and scrub data and make sure that what was in one system was consistent with another. Now we’re receiving reports without having to go into multiple systems because our BI group simply had report formats for us that we wanted. We requested things and it was almost immediate that they could pull the data.
The data was now consistent and we realized, wait, this is really, really cool stuff, and it grew until every business line we have, and every leader in pretty much every department, started seeing the need for that data. We could then use that data and make quicker decisions.
The profile of the person that we’re looking for isn’t really necessarily coming from the industry. It’s somebody who can take data, obviously, smart folks who can learn what the data means, and then provide it in a useful format. From a technology standpoint, certainly use [corporate performance management platform] BI360 and some other software systems as we grew up, some proprietary stuff we developed with our own internal folks, but that department now consists of about five people, and they’re busy every day, supporting every line of business we have. I’m a data junkie, so I am constantly asking them for information and scenarios.
Did you end up going to pay-for-performance not just for sales but other operational roles?
Not really. We have what I think is a diluted pay-for-performance system. I think admitting your mistakes, admitting when something isn’t going well, is interesting because one of the most important things for leaders when you’re making changes is having the courage of your conviction and seeing things through. It’s not always a straight line. It really is a bunch of course corrections along the way.
In this one, I had to swallow my ego and pride and say, okay, we didn’t roll it out well, we didn’t communicate well. It is clearly causing a lot of anxiety through the organization. I think we can make this a win by diluting it down, but letting people understand that we don’t just push forward no matter what, there are times in which there’s a natural pause and you should reflect and decide whether or not you want to continue to push forward.
Now, having said that in our operational leadership, even on-site, we certainly have a performance orientation like most people do, but we’ve gone one step further than a lot. We have a long term incentive plan that executive directors have. I think that’s one of the reasons why in a pretty crazy employment environment over the last four or five years, we’ve maintained a lot of our executive directors.
You’ve mentioned that the industry is set in its ways, and also that the consumer is changing rapidly. Do you think the industry is changing fast enough?
No, I don’t think so. I don’t know that many industries are changing fast enough, and it’s the pace and the tempo of consumer behavior and the way the consumers not only want to purchase things incrementally, but generational changes and technology changes, that make it difficult to keep pace.
The fundamentals of our industry have been great, so [we have] the good-bad equation. The good news when you have such a great supply-demand equation is that you’ll end up with people who can replicate other people’s product and services and do quite well, and good for them. The bad thing is, it does stifle innovation, because you’re successful, even though you’re really not innovating.
The silver tsunami is actually an apt way to describe it because it is a tidal wave, it will wash over everybody and destroy a lot of things in our industry if we don’t prepare.
COVID-19 is one of the factors, but I think just the changes now have in the consumer behavior, the generation, all those things I talked about, has now grown so much, that seniors housing has no choice but to change, or else you get left behind.
I think that’s a natural maturation of the industry, but it has led us to a little bit of stagnation because of just those great fundamentals that we had on supply and demand, obviously demographically, the silver tsunami as they always say.
That’s still coming, and I have to tell you, one of my biggest fears is that people keep quoting “the silver tsunami” like it’s a panacea and they just have to keep building the supply and doing the things I’ve been doing and, it’ll be great for everybody. That’s definitely not going to be the case in my opinion. I think the silver tsunami is actually an apt way to describe it because it is a tidal wave, it will wash over everybody and destroy a lot of things in our industry if we don’t prepare.
How has the company fared in general during Covid-19, and is there anything you’re doing you think others aren’t, any lessons learned that you would flag?
We’re actually doing really well, and I give my wife a little bit of credit for this because back in January, she was ringing the alarm bell and pushing me mentally on whether or not to take this seriously. We were able to line up some supplies for PPE well in advance. Early on, we didn’t gain enough supplies, but we were able to quickly make that up because we started early. Right now we’re doing really well with PPE, and I know that’s a tough thing for the industry, but we count masks in the hundreds of thousands and gloves in the millions, so we’re in good shape there. I’m happy that we were able to start early.
As far as the virus itself and its impact on our population, our residents and team members, so far I literally had just a few team members and a small minor fraction of our overall resident population, thankfully, but that’s because we also adopted early on really stringent protocol. It might be the military person in me, but it’s hard to do it state by state, local department by local department. Early on, we decided we were going to take the most strict standard that was coming out and then uniformly put it across our portfolio regardless of independent or assisted living, because we didn’t really see the difference in this regard.
We have a program where, especially in Florida, we are able to go in and do precautionary testing, and it includes 100% of certain groups and a representative sample of other groups. Whether that’s team members, shift workers, caregivers, resident populations by floor, by wing, by social grouping, we’ve come up with a sample testing program to make sure that if we do contract the virus in our community, we can contain it. We call it our early identification and early containment strategy and it’s worked very well and we’ve actually had a community come full cycle where they had an outbreak.
We went in, tested a bunch of people early on, found a bunch of asymptomatic folks. We were able to isolate and quarantine those folks early on and thankfully, contain the virus and then actually bring that community back to full status where people who had the virus were able to recover. We’re pretty proud of that. I think the next increment for us is, once we understand with testing who has it, who doesn’t, we can go ahead and be a little more thoughtful, rather than just turning everything off. No activities, no communal dining, none of that stuff. We can actually be a little more targeted and make the experience a little better for the folks living on-site. It is tough to live in an apartment for 14 days or 30 days or however long our governors want us to live in there, especially for that group.
To be a changemaker, you have to be a risk-taker. Do you agree? How would you describe your own risk tolerance?
I agree with that statement. I don’t know if it’s as much an analysis of risk like saying, “I’m willing to be a gambler,” because that has negative connotations in it. One of my favorite authors is Herman Melville. One of the quotes that he has in his book, Moby Dick, is, “I am tormented with an everlasting itch for things remote.”
In that context, it’s about his wanderlust. I think about change, and I think about the risk associated with change in that regard with a mental wanderlust. You have to be a little unsatisfied. That also has a negative connotation, but I think that’s really what it is.
I think individuals, leaders who are just never quite satisfied, they always have that wanderlust, mentally, on what things could be. That’s really the key. Sure, I have a little more risk tolerance than most, is my guess. My background suggests that, but I think it’s more that I don’t know what it is. Just something in the DNA of certain people that says I don’t want it the way it is, I want it the way it could be. That’s something that we embrace. Getting that culturally embedded into your organization is not a simple task, but once you do that, then a lot of that innovation when partnered with the data, and the BI, all of a sudden you feel like you’re taking less risk.
Then just making sure that you’re communicating with partners, capital partners, and ensuring they understand that 10% of everything we’re doing every day is just talking about change or what we’re doing next, that’s important. I think they feel better knowing that we’re not just copying, not just following — that we are going to push the envelope and make sure we continue to stay edgy. And then pretty soon, if you walk on the edge, you’re pretty comfortable there. Our organization is just very comfortable being a bit edgy..
It seems like it’s been a very intense, rapid period of change for Discovery recently. True? Do you feel increased pressure with so many different dynamics at play right now, so you have to move quickly to keep up?
Yes. It’s a combination. I think the tempo of change requires us to continue a fairly robust pace inside of Discovery. I also think it’s a product of success. One of the things that I was very cautious about was scaling our company. There are plenty of examples in this industry of companies that have scaled and failed, as we call it internally.
I think our ability to get our arms around what it means to scale and how to do that effectively with the business intelligence group coming on board, allowed us to increase our tempo of scale. I think when you’re looking at these sophisticated companies, whether that’s the Welltowers or Healthpeaks, or whomever, Kayne Anderson, I think when they get into a boardroom with us and we start digging into the analytics and data, and we’re really talking their language, they can understand and see that we have a handle on the ability to scale and how we do it.
We’re going to continue to take advantage of our opportunities. They may be a little different than what I thought they were going to be six months ago, but they will be present. We will evaluate them and continue to grow.