The New CEO as a Change Agent – Paradigm

Posted on August 10, 2008

When the CEO is the new hire in an existing company, he or she needs to be the architect of a well-thought out plan to produce the best possible results. Here’s how Bob Fahlman, CEO of Paradigm, did just that.

More and more I hear discussion about on-boarding – the art and science of bringing talent on board and helping them acclimatize to the company – so they fit in and get oriented and productive quickly. But what if they’re supposed to be a change agent? If the newcomer is supposed to take the company to the next level from incremental success to transformation success?

That was precisely the case when Alliance member Bob Fahlman was brought in to run Paradigm, a $170 million in revenue healthcare firm headquartered in Concord, California. They specialize in getting the best medical results for people with complex medical needs. These are individuals with catastrophic injuries such as spinal cord injuries, traumatic brain injuries, multiple amputations and severe burns, as well as complex conditions such as chronic pain. They have transformed the way results are achieved by introducing data and technology innovations that change the way things are done, and provide results that are five times the industry average.

This was not a turnaround at all – the firm had been growing steadily each year, and had been serving its owner and customers well for 15 years. But in 2006 the original investors sold the company to Sterling Partners, a private equity firm, with the understanding that the objective would be significantly accelerated growth. They tapped Bob, who has grown four firms significantly, leading two of them through very successful IPOs.

Listen and Learn

Bob didn’t meddle for the first 30 days. He soaked it all in, getting to know people, the culture, the clients and the processes. This is the classic on-boarding approach, but the usual goal is to fit in and become productive as soon as possible. In contrast, Bob’s goal was to create his own 100-day and 180-day written plan of how to position himself and the team to quickly shift the company’s growth into high gear.

Building Trust with Executives

After the first 30 days Bob saw that his executive team had real value, and if at all possible, should be retained. The staff was also performing well and would be hard to replace. They were just accustomed to incremental, conservative growth and a cost control approach to the bottom line, rather than a growth approach to increasing revenue. Bob began to spend a lot of time with his top team, creating stronger and stronger relationships with each, while planting small seeds about growing the business. By the end of 90 days, he felt they were ready to stare at his vision of the future of the company.

The Shock of the New Vision

You just can’t ask an executive team whose norm is incremental, conservative growth to come up with a totally new and aggressive approach to the business. So Bob drafted a business plan that showed almost doubling the size of the business in three years. It was based on real information he had gleaned in the first 90 days, and it had enough specifics to show how it could be done. And on day 100, he presented it to his team. They were shocked. By the end of the meeting, about 40% thought Bob was crazy and could destroy the company; 40% were excited about being a part of a revitalized, aggressive company; and 20% were on the bubble. There was work to be done.

Gaining Momentum toward the New Vision

Bob challenged the team to do their homework and create their own growth plan. They attacked Bob’s “crazy” plan from the bottom up, adding up sales from new customers and segments, etc. The result of the bottom-up approach was just about what Bob had proposed. But the process of them getting into the details, given a glimpse of Bob’s vision, kicked open the doors to a future that started to seem possible. The executive opinion poll shifted by day 120 to about 70% excited, 20% cautiously optimistic, and 10% unconvinced.

Internal Road Show

It was around day 120 that Bob’s key task shifted to adjusting the mindset of the entire team. He dismissed only one person – a remote sales executive that had a history of non-performance. He and his top team began to present the plan to all departments and all employees, making sure that they saw the personal benefit. One critical group, for example, was the clinical group that works closely with each case. They were already overworked and were hard to hire. He made sure they understood that new streamlined systems would be put in place to ease their workload, and that additional staff would be hired and trained before the aggressive sales campaign was begun. It was about six months after Bob joined the firm that they were ready to start making the big changes.

The Quantitative Results

In the spirit of the Alliance, I’ll give you the answers to the questions that any Alliance group would ask Bob at this point to get a measure of how effective Bob’s mutual on-boarding approach was. It has now been one year since Bob joined Paradigm. The founder is still working there and is happy and productively focused in his area of passion and expertise. Sales are up 19% year over year through 2008. Profits are 166% of the YTD Goal. Personnel turnover continues to be at its historical low. The same top team is still in place (the President did retire), with the addition of over 50 new members. These are some impressive results.

Most CEOs never hesitate to act, and jump in with both feet. But when the CEO is the new hire in an existing company, he or she needs to be the architect of a well-thought out plan to produce the best possible results. Bob Fahlman did just that.

Takeaways:

1. Unless it’s a turnaround situation, make no immediate moves. Take 30 to 60 days to learn.
2. Develop a written plan for the first 100 and 180 days detailing key objectives to be attained within that time frame.
3. Assess key executives in the first 90 days and get them to share and support the new vision for the company, then involve the whole company in the change process.
4. Execute, execute, execute.