By Jack Cumming
Some years ago, I bought Brookdale stock at $37, and it’s been all downhill from there. We’ve seen turnaround suggestions come and go. Now we’re entering a new era with new leadership, but it’s unlikely that Brookdale will do anything other than drift.
No Spark
Absent from Brookdale is the spark of entrepreneurial genius and clear thinking. Just scanning the board reveals how vapid the future is likely to be. It’s easy to fall into a comfortable rhythm of a recurring routine, with reports of mediocre occupancy results. One month shows recovery and a bright future, while the next month comes laden with excuses. Brookdale’s occupancy has long lagged industry standards.
There’s frequent talk of shareholder value, which mirrors the 1970 self-serving mantra of Milton Friedman that the sole social purpose of corporate America is to increase profits. Hollywood gave voice to that sentiment with the memorable line, “greed, for lack of a better word, is good.” But, as Dr. Phil might say if he were Brookdale’s therapist, “How’s that working for you?” Land and Buildings had a propco/opco idea. “How’s that working for you?” Then there are all those baby boomers who will need healthcare. “How’s that working for you?” It’s time for new thinking, but that does not seem likely.
Conventional Board
Check out the Brookdale Board. It’s filled with conventional board types, many with plausible healthcare experience and others with a smattering of real estate “expertise.” What’s missing? Answer: The entrepreneurial spark is missing. Brookdale needs someone of clear vision to redefine its purpose and to turn it around from being a conventional healthcare or real estate investment play into something extraordinary that improves the lives of ordinary Americans. It needs to offer something that people want, not something that they’re stuck with.
Some directors have hospital experience. That makes a shareholder, which I am, reflect that hospitals aren’t doing very well in the United States, and many are struggling. Is that what Brookdale needs? Then, we can consider that Brookdale is headquartered in Brentwood, TN. Brentwood is a Nashville suburb, and Nashville is the center for country music. Taylor Swift has built an extraordinary personal brand from a Nashville base.
Unlikely Location
Still, Brookdale is not in the country music business. Its brand is weak. Just talking among my contemporaries, some of whom might become Brookdale customers (I’m 88), reveals that they mostly associate Brookdale with poor food. That’s not good. Brookdale is a national business located not in a national business center but in a country music city.
The last time Brookdale had a notable national advertising campaign, it was about how caring Brookdale employees are for the cute, failing old people in residence. That’s hardly an appealing concept for prospective customers. It seemed more intended to tell Brookdale employees how to humor aging residents. Since then, Brookdale has become known for pushing higher rents as a boost for shareholder value, and it hasn’t worked. Shareholders have languished.
Missing Entrepreneurship
Every successful entrepreneur I’ve studied, say, from Steve Jobs to Jeff Bezos, has recognized that customers come first. Before Milton Friedman unleashed a license for greed, most people thought that corporate entities were privileged by the state with limited liability because they increased customer value and did so on a financially sound basis. That earlier American ideal is easily forgotten by many of today’s corporate leaders and the denizens of their boardrooms. Brookdale does not appear to this outsider to be any different.
Now there is a need for new vision. Is that likely? The past track record from Andrew Smith through Cindy Baier, with key departures like Will Clark and Chris Bird, does not bode well. I suppose that if there were focused leadership recruitment, it might be possible to find a seasoned marketer with astute financial discipline. That bird, though, has likely already flown the coop of a constraining cage. The future will take imagination, combined with sound business judgment. It won’t be today’s housing, and it won’t be today’s healthcare.
Reinventing the Business
Does the age restriction serve the business well, or would a better-living-for-all concept with a focus on aging work better? Does wholesale real estate management as a capital market process work well, or would a more retail concept work better? Does the emphasis on healthcare work well, or do American healthcare’s dysfunctional finances suggest that some other expertise might work better?
Once more, as was the case in late 2017 and early 2018, Brookdale’s Board has opted for change. Will the Board deliver intelligently on that realization that change is needed? Could the Board attract a Carl Icahn, V.K. Krishnamurthy, or the like to lead the Board and to find a capable CEO to take Brookdale from a drifting enterprise into something progressive? The answer might be a merger with an enterprise that has done a better job than Brookdale of grooming talent.
Transformation might require moving to a money center city in search of talent. It would definitely require redefining the business purpose and the value proposition. If Brookdale can outgrow its lethargy, it has the potential to become a great American company.
This is 100% spot on. I could name a number of people who could transform Brookdale in a very short period of time.
I could do it.
The problem is that hiring managers, even for CEO positions mostly want to hire people that are just like them. But here is the problem… most star CEO’s in the public arena are in great demand. It seems unlikely that anyone who is already a public rock star would want to take on this challenge.
As I have written about it, and suggested I want the job. Many of my friends in the industry have sent me emails telling me I would regret it. That it is an unfixable problem.
It is fixable and it starts with painting a brand new picture of what could be… How Brookdale could change the world of aging services, how Brookdale will redefine what it means to grow older.
It of course has to be more than just words. The words have to translate into actions, and those actions need to be meaningful and visible.
Don’t count on it getting better. My bet is they will pick someone with lots of experience in the corporate world who had had modest success or at least has not made a huge mess of things.
They will be someone without senior living experience or if they have experience it wont’ be someone who has changed the face of senior living.
But my bet is someone mediocre from inside Brookdale or outside the industry.