← Leading Organizations That Matter
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- [00:11]
Ray Spadoni
Welcome to Leading Organizations that Matter, a podcast about leadership, organizational culture and how we find meaning and purpose in our work. I'm your host Ray Spadoni and today's topic is that time Bayada became a nonprofit. An Interview with David Baiada welcome to the second season of Leading Organizations that Matter and I'm delighted to be kicking off the new season with an interview with David Baiada, CEO of the multi billion dollar global company Bayada Home Healthcare. Bayada as a company has long been a leader in the post acute healthcare industry founded by Mark Bayada, who fully handed over the reins to his son David some seven years or so ago. At the same time and as the title of this episode indicates, something else big happened, Bayada converted from for profit to non profit status, a move that shook and I would dare say shocked the industry. At Bayada they described this as putting mission over money. Now, because this is a podcast dedicated to the leaders and supporters of mission driven organizations, David seemed like the perfect guest to discuss issues such as non profit versus for profit healthcare. We're going to get into that mission versus money thing. David joined Bayada in 2002 and has held a variety of progressively responsible roles, working from the ground up in that company all the way to CEO, a position he took in 2017. Before joining Bayada, he worked as an Associate at Diamond Management and Technology Partners in Chicago. David earned an MBA in Healthcare Management from the Wharton School at the University of Pennsylvania and a BA in Economics from Cornell University. He serves on a variety of boards including at carebridge Health and Impassion Health, and has received a number of distinctions for his leadership and the effectiveness of his voice and advocacy in the industry.
- [02:21]
David Baiada
Let's get to it. David, thank you for joining me here on the podcast. I appreciate your time very much.
- [02:28]
Great to be here.
- [02:29]
Awesome. I gave listeners a quick overview of your background before hitting record with you, but can you just talk a bit about your company, what it does and its history prior to the big decision you made to become a non profit?
- [02:44]
Sure. Bayada Home Healthcare is a provider of in home healthcare services here in the United states and in six other countries overseas. We were founded in 1975 in Philadelphia by my father Mark Baiada. So coming up on our 50th anniversary in just a few short weeks, January 17th and at our core we are a mission and values centered, entrepreneurial, organic growth company focused on delivering a high quality service and creating opportunities for caregivers and clinicians to access opportunity to provide their life's work and caring for Others great.
- [03:25]
Well in advance. Happy anniversary. 50. That's a big number.
- [03:28]
Big number. Yeah, big number. You know, we've been doing this a long time and obviously lots different now than the very beginning or much larger. The world has evolved, but great to be here 50 years in and look forward to 50 more and beyond.
- [03:41]
Well, that's great. That's great. We're going to talk about what your company did and the big change that it went through. And this has to do with going from a for profit company to a nonprofit, not for profit company. And I know that there are some who hear that and they think, well, it's really just, it's a tax status designation and that things like mission and focus and approach to care delivery and approach to the market can be quite similar between for profits and nonprofits and maybe even completely identical. I mentioned in the intro that Bayada decided to, quote, put mission over money. So can I assume you don't agree with that sentiment?
- [04:30]
I'm not sure I would draw that exact conclusion. I think the, the assertion that we chose mission over money was more connected to our founder and our owners who chose to institutionalize an ownership and governance structure that would help bayada last for 100 years and beyond rather than sell or pursue a liquidity event for personal wealth creation.
- [05:01]
Okay, so was that the driver? And maybe. Let me reframe that. Can you take us through the thought process that led you to that decision?
- [05:09]
Sure, sure. You know, it really all traces back to the early 2000s when we first decided to write down our mission, vision and values in a document called the Bayada Way. We had always been a mission centered organization with a pretty deep rooted, values oriented culture. But as we got larger, we realized that institutions that last a long time with deep rooted values start by writing them down and making the written word a key part of passing those values on from, from one person to the next. So we wrote down the Bayada Way and, and the vision statement was really quite simple but quite profound in, in that it laid out a vision to serve millions of people worldwide, to be a global organization, and to continue to grow and to build and maintain a lasting legacy as the world's most trusted and compassionate team of home health professionals. And when we wrote that, we realized that the word legacy had needed to be, to be really reflected on and, and teased out and, and it introduced for our founder and our CEO at the time, my dad, and for our family, an exploration of what do we want our legacy to be here and, and over the course of, you know, three, four, five, six, seven years. We arrived at some core objectives about what we want our legacy to be. And, and they were really twofold. Number one and most important, we wanted to make the Bayada way come true. Both as a business and as a family. We felt deeply rooted in this responsibility for ensuring that the organization fulfilled its mission and not just in our lifetime, but multi generationally into perpetuity. And so when you think about that, it's like, wow, how do you make a company last a long time? How do you make it last 100 years and continue to grow and be innovative? So we started to explore ownership and governance structures that would maximize the likelihood of long term success and sustainability. And we looked at lots of different options, all of the usual suspects and some that may be less obvious or less familiar to most. But we landed on, on not for profit because if you look around, you know, your local hospital, your fire department, the university you attended, are all institutions of long term value that are organized around a not for profit structure. And, and so that's why we made the decision and you know, we, we converted just about five years ago now.
- [07:46]
Okay, so maybe we could talk a little bit about mechanics for a second. I mean I personally familiar with what happens when a not for profit nonprofit is acquired by a for profit. The various steps you go through with the attorney General in that reg personally am not familiar with what happens when you go in the other direction. So maybe we could just talk a little bit about mechanics, you know, the process, the key steps and then maybe you could comment David, on. You mentioned that this was pretty much legacy driven and you want to be here in 100 years. So that's what you gain. What did you give up? Were there risks? Were there things about it that you had to forego in order to gain the longer term viability, survivability, impact mission.
- [08:37]
Yeah. So let's start with mechanics. You're not the only one that is unfamiliar with how to activate an idea like this. It's pretty uncommon. We found very few people that had any experience and so much of the, the activation strategy we had to design ourselves with a lot of really smart support and advisory services. But it was pretty uncharted waters. We ultimately as a pretty large company, we about 30,000 employees in 25 states and six countries, you know, hundreds and hundreds of license, you know, health care licenses and provider numbers, government funding and regulated leases and contracts. All kinds of very, you know, sort of arc a long tail of things that get in the way of ownership transition had to be Sorted out and we, but ultimately we created a newly formed 501C really a shell not for profit organization called Bayada. And we really overnight donated from a founder, wholly owned, founder owned S Corp. We donated 100% of the shares of Bayada home health care into this newly formed not for profit. So truly a philanthropic gift of one man's life's work and you know, the majority of his net worth for, for the benefit of society. With that, you know what was a, a gift was technically a transaction and therefore all of the regulatory filings, you know, conversions and legal process, it was like really, really complex. It took us probably in total 2 1/2 to 3 years to you know, sort of work through all the detail, but we're done. And you know, it was a success in terms of what we gave up. As you, as you mentioned, you know, I think we, what we gained was a real sense of pride in having put our money where our mouth is. We've always, you know, communicated ourselves and position ourselves in the market as a values oriented, mission driven entrepreneurial company. But you know, I think there were always people that said well yeah, but you're like for profit and you're owned by one guy and like, yeah, yeah, like you seem like good people but you know, you're probably, I'm not sure if I get it. Well now all of a sudden we like, everybody's like wow, you, you really weren't kidding. And, and so that was really rewarding and gratifying I think has played out in the communities where people really have sort of expressed admiration for, for what was a really unique and incredible decision. What we gave up. I think on one, the thing we were most worried about, and I still worry about every day is you know, if I walk onto a, the campus of a top business school to try and attack, attract top talent and I say, you know, hi, I'm, I'm David Baiada and I'm the CEO of this really amazing entrepreneurial growth company. We're not for profit, but we're really entrepreneurial. And they go, yeah, right. And so I think positioning ourselves in the labor market for top talent has taken a lot of extra work and I wouldn't say we gave anything up but it, it is an area of intense focus to ensure that people don't misperceive our performance based results orientation, you know, as, you know, declining over time as a not for profit. And, and so that's something we think about a lot.
- [12:32]
That's interesting. I mean I, I mean it's Quite commendable. It's very impressive and really inspiring. I think the, the, the founding of most impactful non profits. There's a story and there are individuals who put their life's work into it, but certainly your family, your father did so at a scale of magnitude that is, I don't know, has there been anything like this that you know, of, of this magnitude to, to have a conversion like this where, where someone really did take the long view and was focused on the mission.
- [13:16]
We really struggled to find examples that had, you know, material, materially similar characteristics. Since we made the conversion, there have been a couple of well publicized examples. Notably, Patagonia made a similar transition, although with some differences. The general intent had a lot of similarities and some of the mechanics were quite similar too, although many of them, the other examples are not in industries where they qualify as, as charitable, like healthcare. And so many of them use trusts and other type of structures to accomplish similar objectives. But you know, I think your question's important. You know, we really felt like we were, you know, blazing a new trail here and I Hope, you know, 50 years from now on our 100th anniversary, we can look back and say that we inspired others to do something similar for the benefit of the community and for the benefit of the people we serve.
- [14:23]
I was just going to ask about that, David. You know, when you were searching for precedent and for examples, you had a hard time finding them, but now everyone's going to search and find you. You. And so, you know, was developing a blueprint and you know, forging ahead in what is an unusual, certainly when you did it path. Was leadership also part of your, your equation?
- [14:50]
It was definitely on our mind. I don't think we've yet allocated much attention to it. And, and I, in, in a significant way, I see an opportunity for me personally for we as a family now that kind of the dust is settled from our transition five years later to kind of pick our heads up and say, yes, we are continuing to build a great company that continues to have deep roots in the community and provide great service, but how can we, you know, tell our story more effectively to inspire others to, to think in similarly long term, you know, meaningful ways?
- [15:33]
Great. I know you're taking the long view and you know, at 50, you're looking ahead to being 100. So five years in is probably too soon to ask this question, but how's it going so far? Do you feel as though you've been able to accomplish some of your objectives and have there been any big surprises along the way.
- [15:55]
Yeah, well, like you said, I think it is a little too early to claim victory. Ultimately most organizations that fail over take generations to fail. You know, ownership transition, whether it's family ownership or, or otherwise often takes quite a long time to, to instigate, you know, failure and demise. So I think it'll still be quite a long time before we see whether this structure achieves, achieved its objective of maximizing long term sustainability. But there's some good signals so far. I feel really hopeful and optimistic. I mean as I mentioned before, the market has responded very positively. They say, wow, like that's a really cool thing. People admire and respect and, and express inspiration by what we did. They, we, we are quite differentiated now. Well, as before, there are a lot of for profit health care organizations of, of size or scale. We are now the largest not for profit, you know, health care services organization, home healthcare services organization in the country by a lot. And so we're sort of in, have a bit of a differentiated market position which I think is actually really one way to measure success. Differentiation is a good thing if you want to succeed over time. And I think that the employee population, the people that raise their hand and say I want to be a part of that and I believe in it, has been such like a really wonderful response. And, and so that's another indicator that I think we're on the right track.
- [17:44]
That's great. You know, you mentioned going to top business schools and recruiting leadership and executive talent. Perhaps this is wishful thinking on my part, a little bit Pollyanna, but is there an appeal for some to join an organization that is innovating, that has been focused on performance and metrics and organic growth, but also who went through something like this, put its money where its mouth is, as you mentioned, as individuals are also seeking meaning and purpose and impact in their lives. So again, maybe it's Pollyanna ish of me to think this way, but are there competitive advantages in terms of attracting talent?
- [18:35]
I really believe so. I, I don't have evidence yet to support it. But you know, the reality is there we do have a tailwind which is that, you know, we live in an era where purpose is cool and, and that's evolving in a meaningful way, you know, in parallel to the decision that we made in the way we're positioning ourselves in the market. And you know, one tiny indicator that certainly is not, you know, isn't the whole story, but I lecture every year at one of the top business schools in the country and to a healthcare class that, you know, I've been doing for 15 years and, and I tell this story and you know, there are people that like, really are like, wow, that's great, cool. You know, not for me. And there are other people that are like, wow, that's really meaningful and different and I feel like I really want to learn more and I really, you know, feel inspired and connected to what you're trying to do. And so I, I think, I don't think it's Pollyanna at all. I think once we figure out how to do a better job of telling our story because we admittedly just kind of been doing our thing, I, I, I sense that there's an opportunity for us to, to use it as competitive advantage as you described.
- [19:52]
Well, it's great. I mean, I imagine, you know, certainly in the hiring process for all employees, but really for those who are going to lead your organization and be in impactful positions, you want there to be good compatibility in terms of a person's values and the culture of the organization. And you mentioned what you've done is a differentiator in the market and it's, I would imagine, a differentiator in hiring. Folks who are thinking of joining your company are probably pretty clear where you stand.
- [20:23]
Yeah, no question. And, and, and to be fair, we spent a lot of time being clear about who we are and what we stand for long before the ownership and governance transition. Right. The, the expression of the Bayada way and the way in which the words in the document permeate our day to day work through ritual, tradition, recognition, decision making. We, we are very intentional about how our value system shows up in the way we interact with each other, in the way the business works. And, and I think from the day it was written, we worked very hard, not always successfully, but very hard to ensure that we had a stake in the ground that like, you know, fork in the road. Number one, if you want to be a part of this organization is that this has to resonate with you, this has to inspire you. You have to connect with the words in this document and if you don't, it doesn't make you a bad person. It just means you're not going to really enjoy it here. You won't find fulfillment and joy in the work here because it's a big part of who we are. And then, you know, I think so that's always been part of how our sort of management philosophy and now this ownership and governance transition really only just continue to build on that, on that foundation.
- [21:46]
Great. Let's talk a little bit about the broader healthcare system. On the podcast, in a few of the interviews that I've done so far, either very directly because it was explicitly part of the conversation, or oftentimes indirectly, this notion of the for profitization of healthcare has come up. There are many parts of healthcare, home care and hospice certainly that have, especially hospice, have gone over very much so to the for profit side. And there are a lot of nonprofits and you know, industry pundits and experts and so forth who are describing this as a threat and something that's regrettable to just be very blunt about it. And they talk about the fact that some of these organizations aren't doing what Bayada has done by taking the long view, they might be taking the short view and maybe even the very short view, especially when you have, you know, investment dollars and venture capital involved and so forth, they might be just looking to, you know, recover an investment and make a profit and move on to other things. And that may not be a good model for healthcare. You are a for profit company and now you're a nonprofit company. Any perspective on the bigger picture issue of healthcare?
- [23:03]
Yeah, I mean, I generally have a pretty hopeful and optimistic outlook on healthcare services really being built on a foundation of people who have self selected in a profession to help others. And so if you, if you work, you know, up from what happens in the home or in the healthcare institution bedside, every one of those people chose this profession because they want to do good. And the way in which companies are run to support their desire to do good, you know, maybe there's correlation be in between the way, you know, incentives work for profit, not for profit, the way governance works. I just, I'm not so sure that there's enough evidence to really be conclusive in all that. I think there are plenty of not for profit companies that are very profit centric in their decision making. And there are plenty of not for. And there are plenty of for profit companies that are very mission centric in their decision making. And, and I'm not sure I have enough evidence to understand the patterns. I believe that like if you. There are very few people that I've encountered, even if they make short term decisions for the right or wrong reasons that aren't running healthcare companies that are running healthcare companies for any other reason than at least in some way they want to do something meaningful. And I really believe that, I really believe that, you know, healthcare services, it's really hard. It's really hard. And everybody's got their own view and sort of approach and business model. Our Business model really works sort of up from the foundation of our vision. We think we have a responsibility to the community, if we're doing a good job, to do more of it. And so if we believe we are doing meaningful work and providing a great service, then we want to grow. And in order to grow in a service business, you have to have profit to reinvest in innovation and new people and new locations to deliver more service. So our mission is to generate adequate surplus to reinvest in our mission. It's, it's a virtuous cycle. And so I actually don't really distinguish back to your original assertion around tax status. You know, surplus is important to our not for profit mission. And, and because if we don't have adequate surplus, we can't reinvest in taking care of more people and doing a better job over time. And I think we do see plenty of organizations on both sides of the ledger, for profit and not for profit, that don't adequately reinvest. And therefore their innovation and their adaptation to market conditions slows over time and they don't last 100 years or more. And that's exactly the fate that we are trying to overcome.
- [26:09]
That's a very balanced view, David, and hopeful. So, yeah, I appreciate it. It's good to have some hopeful content.
- [26:20]
Do my best.
- [26:21]
You know, home healthcare, you know, began a long time ago, century plus ago. Places like Boston and Philadelphia. Boston I'm pretty familiar with, and you know, with VNA of Boston where I worked, and then the VNA of Philadelphia, which sadly closed its doors not too long ago. You know, it began much like the hospital industry began as infirmaries in a very sort of fractured way, very small geographies and so forth. Always founded by community oriented, mission oriented, you know, groups and people and so forth. But, you know, things have changed. The world is more complicated now. The system is more complicated now. As you think about the bigger picture of the healthcare system, is scale a vital component now for anyone who's going to be, be doing this and you know, are we in a place where bigger is for the most part better?
- [27:21]
Yeah, I think it depends on which subsector of healthcare you're talking about. Clearly there are areas of the healthcare system where economies of scale truly exist. You know, institutions with heavy fixed costs that, you know, you can grow into or grow out of through economies as you pursue scale, no question, and I'm not a hospital guy, but I can kind of connect with the reality that scale matters. If you're running, you know, health systems and Hospitals with huge fixed costs. You know, in our case, 95 plus percentage of our costs are variable. And it's all people. And, and I think economies of scale don't really exist in service businesses. It's certainly not to the extent they do in institutional businesses. And so I think scale can help because it can give you resources and it can give you, you know, more places to try new stuff and more perspective on how the market's evolving and more, more capacity to, to, to absorb the natural ups and downs of service businesses and weather storms. No question. But I actually think in some ways, in our case, we spend a lot of time thinking about the diseconomies of scale and service businesses. You know, we, we're not as nimble, we can't respond as quickly to the changing needs of the consumer or the, the employee in a local community. And so we're actually pretty careful about trying to find the intersection of, of, you know, local and scale, where we bring resources and innovation, but we really decentralize and empower the local team to act like a small business, to act like owners, because that mindset is really what leads to great service and what leads to making the phone ring more often and helping us grow and take care of more people. Not we don't win because we're big. And I, I, so I think it's not as simple as like scale matters.
- [29:49]
You know, I mean, there's a, there are dimensions to this where you want to be big enough to be able to weather the storms that come and reimbursement cuts and regulatory challenges and so forth. But as you said, you want to be able to make decisions quickly, you want to be able to be nimble. And it's interesting. So like many, I would argue, Ray.
- [30:13]
That that scale in, in services, businesses and healthcare services included, you know, diversification and scale tend to be come hand in hand. Right. If you're a single location provider of healthcare services, it's hard to have a diverse mix of things that you do so that you can weather the ups and downs of one thing or another. And so we think a lot about diversification as a as which is maybe just a cousin to scale in our business. So geographic diversification, the types of services we provide, the types of, of payers that reimburse for our services so that if there's ups and downs, we're not exposed. Just like, you know, the way you might manage a personal investment portfolio, we're not exposed to, to single ups and downs. We can weather the storms because they're Inevitable.
- [31:08]
So there's, there's probably another balancing act you have to go through which is to, to integrate perhaps across the spectrum and to, and to, to broaden yourself, but not to broaden yourself so much that you water down your core competency. Is that, is that a fair way to think about part of what you're describing?
- [31:32]
Yeah, yeah. And we, we've, we've got a lot of experience over time of trying to find that right balance. Today, you know, we, we've been very deliberate about diversification of our service mix. So for large providers of home based healthcare, most are focused on one or two types of service. Right. Whether it's privately paid personal care and support services for seniors, or Medicaid funded long term services and supports, or you know, federally funded post acute home health or end of life care. So we're in seven different specialties, but we run them like business units. We like the diversification. They're all gigantic needs, gigantic markets under themselves. And so, and they all have their own ups and downs from year to year, period to period. And so diversification matters. However, it's complicated.
- [32:24]
Ray Spadoni
Right?
- [32:24]
David Baiada
They're all different. It's like running seven different companies. And, and so how we find the intersection of the benefits of diversification and the scale that comes with it with the offset of the complexity of being in many different businesses at the same time has been a learning experience for sure.
- [32:42]
Well, you know, everyone knows that health care is extremely expensive and there's been, you know, it comes in waves, but there's a lot of focus now on, on cost of care, access to care and so forth. And home based care has long been viewed as part of the solution. Systems now are investing in hospital at home and other sorts of things. There's been this sense that, well, the more we can do in the home, the better. From a cost perspective and probably from a patient satisfaction perspective. What do you see up ahead in this regard? And then how do you prepare Bayada to be relevant? You know, not only because it has survived for another 50 years, but because it has, it's, it has thrived and led for another 50 years.
- [33:33]
Yeah, well, I think there's some clear and obvious market forces, macro level market forces at play. Whether it's, you know, the aging population or, you know, ballooning healthcare expenditures. These are things that point to the need, the increased need for healthcare in general and the increased pressure on providing it in lower cost settings. And so if you put those things together, it's hard not to subscribe to the fact that the need for care in the home is going to grow. The rate limiting factor today, and I think for the rest of our lifetime is going to be access to adequate capacity to provide those services and, and, and to organizations that have that capacity that do it really well and consistently. You know, and so most of what we think about is, is workforce and today we turn around on average across all of our different services. One out of every two people that call us in need for home based care, we turn away because we don't have adequate capacity workforce to provide the service. And, and so the reality is like, it's really hard. Like delivering a consistent in home service is really hard in any sector. Home cleaning, exterminators, plumbers, it's really hard to do it really well consistently every time. And when you're providing that in home service in a period of crisis and emotional stress in the lives of our clients and their families, it's even harder. And so building a movement of people that want to do this work and want to do it at the highest level consistently every time is for us are far and away our top priority and our primary focus.
- [35:34]
Great. Well, you're, you've been doing it for a long time and you have, you know, gone through this major conversion five years ago with an eye towards the future. So it's going to be interesting to watch how this evolves forward in the context of an industry that's also going to be changing and probably continuing to consolidate and, and shift and, and so forth. So very, very interesting. David, thank you for your time. This has been very helpful. If people want to learn a little bit more about you, about what you do about Bayada, what's the best way to direct them?
- [36:10]
Yeah, I always point people to two resources, the obvious being bayada.com b a y a d a dot com. The other is our YouTube channel that, you know, I think provides a really cool window into our culture and kind of our organizational philosophy in the Bayada way itself. And that's a great resource as well.
- [36:33]
Great, thank you. I have to ask because when I post this episode, people are going to think that I misspelled either the name of your company or you because they're not spelled exactly the same. So can you just run us through the difference and why you guys spelled it one way versus your own name?
- [36:56]
Yeah, sure. Well, we, we changed. The original name of the company was something much more generic. We, we changed it to Bayada in the early 80s and decided to use a Y instead of an I. Our, our family names spelled with an I. We decided to use the Y to make it incrementally more phonetic and easier to pronounce and spell, which I think has been pretty effective. It's it still gets wide interpretation, but we were inspired by other companies that many people don't realize have done similar things like HR Block and Bic Pens and a few others where the family names were modified for for phonetics.
- [37:35]
Fantastic. I think that was also a good choice. And listeners out there. I did not make any spelling mistakes in the posting of this episode. It's they are spelled a little bit differently but pronounced exactly the same, which is probably the most important for an audio podcast. So again, David, thank you so much for your time. Appreciate it. Very interesting and in particular your sort of note of optimism is one that I appreciate as we think about how this is moving forward as an industry.
- [38:03]
Great to be with you. Thanks.
- [38:06]
Ray Spadoni
Thanks for listening. I hope you'll consider leaving a five star review on Apple Podcasts or your platform of choice that will help others find us here. My mission is to help empower organizations that matter by supporting those who lead them. Feel free to learn more about me and my work@redsailadvisors.com.
- [38:40]
David Baiada
SA.