• September 20, 2016

    Meet John Cochrane, President and CEO of Cornerstone Affiliates: the parent company of non-profit senior living companies American Baptist Homes of the West, be.group, Beacon Communities, Inc., and the for-profit firm Seniority, Inc. Cochrane recently took the helm of the organization following a coming together between be.group and ABHOW that created the largest nonprofit senior living provider in California, and placed the company among the largest non-profit senior living  providers in the nation.

    While he became involved in senior living “purely by accident,” Cochrane has held senior living leadership positions for the last 10 years. With be.group, he oversaw the complete renaming and rebranding of the company and today looks forward to leading the newly-formed Cornerstone Affiliates to carry out its mission. We sat down with Cochrane to learn about some of the unique challenges (and solutions) to operating a non-profit senior housing organization, why it had to be exactly the right time to complete the ABHOW-be.group affiliation and where he sees the drivers for industry innovation rising in the years to come.

    First, how did you get into this business from a career in law?

    Purely by accident. I came out of undergraduate with a degree in poli-sci and you know you either have to teach or go to law school. I didn’t want to teach, so I went to law school. I started working with a large firm in Chicago, and I thought I’d be a career lawyer

    I went to Florida on vacation and my in-laws were hosting a dinner at the Boca Club in Boca Raton. My father-in-law said, “There’s a guy here I think you’ll enjoy meeting. He’s a developer and he builds retirement communities. His name’s John Erickson.” It meant nothing to me, I’d never heard of the guy. My father-in-law knew I had a real estate and development practice at my firm and so I thought ‘Well, this will be a potentially good person to meet.’ So I went to dinner, my wife and I were sitting next to John and Nancy Erickson, and we started up a conversation. John talked about his vision of what a retirement community should be.

    As I listened to him, I was really entranced by his vision of what this chapter in life should be and what a community could be in terms of enhancing that quality of life.

    I was so intrigued in fact that I invited myself out to Baltimore to visit John and hopefully get him as a client for my law practice.

    How was the visit? 

    I go out to Baltimore to meet him, I sit down in his office and we chat for about 45 minutes. Very typical of John, he’s going on and on about his vision, and I’m getting really excited because he was and is a strong, forceful advocate for successful aging. At the end of it he says, “Well do you want to take a tour of my community?” I said “No.” He said, “Well, you have to.” And I said “OK, you’re probably right. So we leave his office and walk through Charlestown which was 1,600 apartments, 120 assisted units, and 240 skilled units. Just huge. We wander around and my jaw is just on the floor. I’d never experienced anything like this before.

    A lot of things struck me. One, the size of the place and the activity of the place; I’d never seen anything like it. Two, John knew his residents. He didn’t know them in the way of just giving them an anonymous wave while walking past, he knew them. Finally, John knew his employees in the same way. He didn’t walk past people and do the anonymous wave at them, he actually knew who they were, interacted with them and it was clear in the interaction that he enjoyed them and that they enjoyed him.

    At lunch, John says to me, “You know, I know you want me as a real estate client, but it’s easy for me to find lawyers who can do zoning and land work. The harder part is finding people to carry the mission and vision forward.” At that point I said to him, “John, listen, if you can find a place for me here, I’d love to come work for you.” I flew home to Chicago that night and had to break the news to my wife that I proposed winding up my law practice, selling the home we had just remodeled, taking a 90% pay cut, and moving to Baltimore. Because she is a saint she agreed and six weeks later, I was living with John and Nancy Erickson in their spare bedroom and commuting to work with John while my wife wrapped up our Chicago life.

    I often think to myself: ‘How did I end up here?’ What’s interesting is that it’s been 20-plus years, and I have truly never had a bad day in this field. I’ve had days where things obviously didn’t work out and where things didn’t go exactly as planned, but I’ve never had a day that I didn’t wake up eager, excited and happy to do the work that we do. I can’t think of another profession that gives us that ability to impact lives, do meaningful work and have it be so completely rewarding, from both a team member perspective and a resident perspective.

    You’ve gone from the Midwest, then to the East Coast and now you’re on the West Coast. How are things different here?

    For lots of reasons, this is my favorite place I’ve ever lived. I love it out here. But from a business perspective, California is so regulated, and so uniquely regulated, that it makes certain challenges for running the business.

    What kinds of challenges are very unique to California?

    One is that the state doesn’t draw a distinction between independent living and assisted living. That makes it uncomfortable for residents, it makes it uncomfortable for family members and it makes it uncomfortable for prospects. We have to do certain things in residential living that you have to do in assisted living, and it’s just burdensome for people in independent living. Second, the state is so employee-friendly that there are a bunch of employment regulatory hurdles that you’re constantly at risk of tripping over, which makes it frustrating because you end up spending more energy trying to manage your way through regulations than actually taking care of building an engaged team and delivering exceptional resident experiences. Having said that, I’ll say that my experience with most of the regulators as individuals has been more positive than in many other states. I think they recognize to some degree that some of the burdens are unduly burdensome. Mostly, they’ve been really good people to deal with.

    be.group Headquarters, Glendale, Calif.

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    Cornerstone Affiliates is a not-for-profit organization. Are there ever days you wish you were working for a for-profit organization?

    There are days…. In terms of public perception, there’s an advantage in the not-for-profit community, although, I think that advantage is narrowing. I think 20 years ago it was a significant barrier between for-profits and not-for-profits, and today you’re seeing much closer alignment in the minds of consumers between the two.

    I think 20 years ago it was a significant barrier between for-profits and not-for-profits, and today you’re seeing much closer alignment in the minds of consumers between the two.

    Consumers are increasingly agnostic about for-profits versus not-for-profits. I think the significant advantage that we have as not-for-profits is not being beholden to quarterly reporting. We’re not public companies and we don’t have to make short term decisions in running our business. We can actually make long term strategic directional changes that I think many for-profits would have trouble with.

    The downside is a lot of not-for-profits don’t manage as efficiently as we otherwise might because we don’t have the discipline of the market being imposed on us. Two, we have a lack of urgency that you don’t see in the for-profit world. As a result, you’ll find a familiar, repeating story of not-for-profits creating businesses—we created independent living, CCRCs, assisted living, skilled nursing, and memory care and then losing market share to the for-profits which now dominate most of those businesses, and dominate in a big way. For some reason, not-for-profits are okay with ceding ground to the for-profits, and I don’t think we should be. So I think we lack urgency and we sometimes lack accountability in growing our missions. I find that deeply frustrating.

    Do you think not-for-profits should be thinking more like for-profits even though they don’t have those pressures?

    I think we can, and I think we should. I think you’ve got to get team members understanding that thinking like a for-profit does not mean shaking every nickel out of those that we serve. What we need to emulate is their sense of urgency, their sense of accountability, and their nimbleness. We need to mimic their creativity, their drive, and their accountability. Because we have different and sometimes narrower paths than the for-profits in areas like access to capital, we have a tendency to give up and not try to compete. We need to not give up so easily.

    What are some of the biggest challenges you face?

    I think those are the biggest challenges. The urgency, access to capital and also access to talent. The for-profits can compete in ways that we cannot for talent. We can’t reward people with stock options because there is no stock. How do we find other ways to adequately reward people for running the business, taking the risks we want them to run and producing the results we want them to produce? If we’re expecting people to work as hard and put their minds and hearts into the work just as much as they would for a for-profit, how do we find a way to adequately reward them for that effort?

    So how do you do that?

    We do it in a number of ways. We’ve changed our compensation philosophy to a pay-for-performance and at-risk compensation structure that is much more aligned with what you would see at a for-profit than you would typically see at a not-for-profit. Our at-risk portion of compensation is significantly more than you would find at typical not-for-profits. But it’s tied into financial and mission performance. If we achieve high performance hurdles as a company and the company is rewarded, then team members have a chance to be rewarded in a really meaningful way. That structure has been very successful in helping to focus and drive performance. I think we can also compete with quality of life. The quality of life that we offer is in many ways significantly better than the for-profits. We’re not corporately driven, so it’s not a mindset of just meeting your numbers every quarter, it’s really a mindset of changing people’s lives and helping to change and drive this field and industry.

    Do you think the innovation in the industry will come from the not-for-profit side?

    It always has. If you look back 20 years at where industry innovation came from, it came from the not-for-profits. We’re successful at innovating. What we’re not successful in doing is scaling that innovation and bringing it to the marketplace. That’s where the for-profits have expertise. I don’t want to say they’ve co-opted our innovation, but I think we’ve allowed them to run away with that innovation. When you look at innovation going forward, the interesting question for for-profits and not-for-profits alike is who’s willing to understand what innovation truly is, who’s willing to commit the resources to it and understand where the industry is going and commit long term resources to innovation.

    Not-for-profits have an advantage here because we can afford to take a longer term view and have a longer term payoff to innovation. What is going to be interesting to see is whether we will see innovation coming from non-traditional providers, from people who aren’t in the field today. I expect what we’re going to see is that the disruption coming into our field is not going to come from within, it’s going to come from without.

    Tell me about the recent be.group-ABHOW affiliation and how the company will be branded going forward.

    Our expectation going into the conversation has been that we would not use a legacy brand for the new company, that we would have something new that would signal to the market that we’re a new company. Having said that, we need to be married to success more than we’re married to anything else. We’re married to our mission, to mission fulfillment, and if the best vehicle for that is an existing brand, whatever that would be in our family of brands, we need to look hard at that and make sure that we don’t throw out the baby with the bathwater. If we have something that is already the right vehicle for where we want to go, we need that message internally and externally, and we need to use that existing vehicle.

    The re-brand from Southern California Presbyterian Homes to be.group was a successful one. People see be.group, and the cool thing about it is you don’t know if it’s a for-profit or a not-for-profit.

    That was part of the intention behind it. be.group was a successful brand launch and it’s done everything we wanted it to do. We were looking to be inclusive and timeless and flexible and something of an empty vessel in which people could pour their own meaning. You realize, as you get into a brand study, just how challenging that is. First of all, every word out there is owned by somebody already. Second, as you look for the baby boomers, they’re going to change any label you put on them, even if they like it, just because they can and it’s what they do. ‘Retirement’ today is a bad word. ‘Homes’ is a bad word… is ‘community’ a bad word? I don’t know. Maybe it’s an OK word today, but in three years it might not be. So how do you put a name out there that gives you the ability to message, gives you flexibility, gives you inclusiveness and gives you the ability to move with the market as the market evolves? That will be our challenge in finding a brand identity for our combined company.

    As the leader of this now-larger overall organization, what’s your top priority moving forward?

    Top priority is establishment of our corporate culture. Our affiliation is an opportunity to create a new company and new culture. This is a chance to revisit everything for us and create the culture that we want and need to have, to do the things that we all want to do as a company. As we talk with team members across the company, it’s fascinating to me how energetic and eager people are to have an impact on how people age. How excited people are about where this field is going, how fast it’s changing, our ability to play in a new space that’s being reconfigured even as we live it.

    The second thing we need is a strategic plan that is clear and focused. We can perhaps do anything, but we can’t do everything. If there’s something I would say not-for-profits are guilty of in a way that for-profits aren’t, it’s lack of focus. We see a need and we fill it. So we’re constantly grabbing at opportunities, and it all comes from a good place. The problem with that is, you end up being good at a lot of things and great at none of them. What we’re looking to do is say, “You know what, there are endless opportunities out there to help people age well. While they are all exciting, the question is how do we narrow our choices to say ‘We’re going to do this, and we’re going to do it really, really well?’”

    There is a much larger organization now than there was even a month ago. What made it the right time when the affiliation finally did come to fruition? Did you ever doubt that it was going to get done?

    [Former ABHOW CEO] David Ferguson and I were at a Chief Executives of Multi-site Organizations [conference], and had our first conversations about affiliation nearly six years ago. We undertook some pretty serious talks looking at putting out organizations together, and out of those talks what we came to the conclusion is that it was the right idea, the right two companies, and the right plan, but the wrong time for both of us. ABHOW was in the middle of investing hundreds of millions of dollars in their communities and taking on an enormous amount of risk, and was worried about taking their eye off the ball. We at be.group were at the very beginning of a turnaround and recognized that we needed to be stronger to be an attractive affiliation partner and we couldn’t afford to take our eye off the ball, either.

    So fast forward to now probably a year and a half ago, Dave Ferguson came back to me and said, “Listen, it’s been five years since we’ve talked, I’m now approaching retirement, and I’m having a conversation with my board about planning my transition. It’s a natural time to pass the baton, why don’t we restart our conversation?” We did, we got our boards involved, and very quickly we realized that when we put our missions together, we were mission-compatible. Then we put our strategic plans together to see if we were strategically aligned, and we looked at where we wanted to go forward, and we compared our financial strength and operating structures, and what we realized this time, very quickly, was: Right organizations, right fit on every level and absolutely the right time.

    In terms of growth strategy, will there be more affiliation on the radar?

    Yes, I think there are more affiliations to come, and consolidation is almost desperately needed on the not-for-profit side in this business. We need the scale, the resources, the depth of talent, we need to attract capital, we need a sense of urgency, we need simplicity. Everything that consolidation can bring, I think we need.

    … Yes, I think there are more affiliations to come, and consolidation is almost desperately needed on the not-for-profit side in this business. We need the scale, the resources, the depth of talent, we need to attract capital, we need a sense of urgency, we need simplicity. Everything that consolidation can bring, I think we need.

    Having said that, what you’ve typically seen in the not-for-profit world for affiliation is a strong organization and a weak organization coming together. One of the reasons that our affiliation has gotten so much attention is, we were two strong, stable, successful organizations. We didn’t need to come together. People looked and said “Wow, look at that. They’re just doing it because it’s good for their mission.” That was a real revelation for folks. It turned on a lightbulb for healthy organizations. If they see something in consolidating, they better be looking at that. Will we continue to grow by affiliation? A cautious ‘yes.’ We will not do rescues; they take twice the time, they’re five times the risk and a tenth of the return when they get done. I just don’t see any reason to do that.

    We’ve recently seen the Brookdale merger on the for-profit side. I’m curious about your thoughts on that and how that transition has gone. Is there a sweet spot for growth in this industry?

    I’m a fan of what Andy [Smith] is doing at Brookdale; I think he’s got the right plan and he’s working hard to get the right team in place and to execute on what has clearly been a bigger merger to integrate than they anticipated. I’m not sure of all the reasons that hasn’t yet gotten traction as a merger. It’s been financially not what they’d hoped for yet. It’s also early, so that could turn around relatively quickly.

    Ultimately, I think the scale, resources and clarity they will have in terms of market perception will be very positive for Brookdale. So I think long term that’s a merger that will be positive for Brookdale, for their shareholders and stakeholders, and be positive for the marketplace. I think that merger highlights some of the challenges we’re up against as not-for-profits. We think that an affiliation of ABHOW and be.group is a big deal, producing a $400 million company. It’s a big deal to us, I’m not sure if it’s a big deal in the marketplace. Frankly, we’re still a rounding error for some of these big competitors.

    When you look at Brookdale, they talked about creating the first national brand provider, and the importance they believed about having a strong national provider identity. I agree with that, I think that’s a compelling rationale. No not-for-profit comes close to that kind of market presence. That’s both a challenge and an opportunity to those of us on the not-for-profit side.

    You have a lot of different types of communities, from very low-income to high-end CCRCs. How will the industry fill the void between that gap?

    Well that really is the big opportunity. I have a lot of thoughts, but I don’t yet have any solutions. Our field as a whole does an good job meeting the needs of the top 20% of the demographic, the people who can afford a market rate CCRC product or entry fee/monthly fee CCRC product. We do a superb job when it comes to meeting the housing needs of the very-low-income senior.

    The real challenge and the real opportunity we have today—and when you layer on the coming demographics, it’s almost mind numbing—is the middle 60%. What do you do for these folks? They say they don’t want to live in a community, so we have a lot that say they don’t want a typical community today. How do we help people age well in this vast middle market? I think that’s where you’re going to find the disruption and the innovation coming. That’s where the market is really going to change.

    What I think you’ll see when innovation comes to the middle market is a spillover effect that impacts both higher-end CCRCs and the subsidized market. You’ll start to see the introduction of technologies and services that enable people to thrive and remain at their highest functionality without living in a traditional community. A key to developing truly innovative capabilities is to understand the consumer in a much deeper, much more genuine way.

    What I think you’ll see when innovation comes to the middle market is a spillover effect that impacts both higher-end CCRCs and the subsidized market. You’ll start to see the introduction of technologies and services the enable people to thrive and remain at their highest functionality without living in a traditional community.

    That’s something we haven’t been very good at. We were good at it 40 years ago, and I think the success of our field reflects that. We saw a need 40 years ago; it was a genuine need, and we stepped in with products that met that need CCRCs, low-income housing, products related to assisted living, etc. A lot of what we’re doing today is providing that same product to a very different customer. I don’t think we have an adequate understanding of who they are.

    It’s a needs-driven thing that we make you fit into our box today. We’re providing something that has not changed materially in 25-30 years. It’s a long time. Who’s driving around in a 1975 Buick today, except for the rare collector? And yet we’re still building retirement communities that look like they fell out of a magazine article from 1975. The consumers are already telling us that they’re rejecting that. I guess that can scare people or excite them. For us, it excites us because we see almost limitless potential. When you look at the coming demographic changes, the opportunity we have is staggering.

    You mentioned some of the disruption will probably come from people outside of the industry, and there’s a lot of focus right now on future leaders. First, what’s your definition of leadership?

    Leadership encompasses a whole lot of traits. When you look at what makes a successful leader, you’ve got to look for someone who has a deep sense of curiosity. Someone who’s always questioning, probing, asking why, asking what if. That’s a favorite question of mine. What if? What are the possibilities here? You’re looking for people who are decisive, who know how to get started. People who have an informed point of view. I’m looking for people who come in and have an opinion on something, an opinion rooted in some kind of research and understanding. You’re looking for people who can get it done, take risks, live with failure and persevere. Do we understand the difference between an acceptable risk and acceptable failure? Clarity is important. Do you have somebody who can look at a bunch of seemingly disparate data and synthesize it and communicate it and make it actionable? I think that’s what leaders do. They give clarity to certain circumstances that at the surface don’t appear to have a lot of clarity.

    You mention risk. What’s the biggest risk you’ve taken in your career?

    The biggest risk was jumping out of a stable law practice and leaving a life that was predictable, stable, successful. I mean, I’ve probably worked in this field for almost 20 years before I was making the same money I was making when I left the practice of law. The biggest risk I’ve ever taken is seeing a door open and not fully knowing what was behind there, and jumping in.

    The biggest business risk I’ve taken may be the rebranding of this organization. I came in and I needed to execute a turnaround. We were in distress coming out of the 2008 debacle and, frankly, coming out of a lot of poor decisions that were legacy decisions made here. The decision to spend the money on rebranding this organization was a significant risk. I undertook that risk because I thought people needed to see internal and external evidence of change. There’s nothing that’s much more evident of change than going from SCPH to be.group. It was a signal that we were in different times, with different leadership and a different company. We did not have extra dollars or time or attention to throw away. We couldn’t afford to have that go wrong for us. But in retrospect, it was the right thing to do.

    How about the best piece of advice you’ve received in your career? And who are your mentors?

    John Erickson was certainly a mentor, and I think that his advice was pretty much always: follow your instincts. That sounds easy, but it’s really not very easy to do, because very often those instincts run counter to what the external world is telling you to do.

    What would you say are your strengths as a leader?

    Passion and vision are strengths of mine. Communication is a strength of mine. I love talking about this business, and sharing my thoughts with residents, with team members, with outsiders. I do a lot of public speaking and I do that because I love telling the story of what we’re doing, of what we’re trying to do and understanding what the opportunities are. I think I can be reasonably inspiring as a leader.

    How about weaknesses?

    I think the flip side of that is the challenge that once you’ve inspired people and gotten them to follow you, do you actually have some place to take them? Do you have the operational focus and right team in place to execute on something? What you don’t want to do is create a picture of opportunity and promise, and years later you’re still talking about opportunity and promise but haven’t delivered anything. You’ve got to marry that with the ability to focus and execute. For those of us who are the dreamers in the field, narrowing ourselves to people who can help execute is a challenge.

    What is your pitch to me as a recent college graduate, in theory, as to why I should look to senior living as a career?

    My pitch is, if all you want to do is to make a pile of money, this isn’t going to be the place to satisfy that. Having said that, you can make a terrific living doing what we do. You should be satisfied with your living, provide for your family, be very comfortable and really happy. If you want to change lives, make a difference and have an impact, in a really meaningful and measurable and immediate way, there is no better field on earth than to be doing what we’re doing. If you give this field everything you have, you’ll be rewarded beyond anything you could possibly imagine when it comes to impacting people’s lives.

    Do you think the industry does a good job of relaying that message?

    No, we’re terrible. We’re just awful. We present ourselves like nursing home providers. Do we wonder why nobody wants to come work for us? It sounds so dismal. We make it dismal and it shouldn’t be. Everyone from housekeepers can impact people’s lives. If you’re going to be a housekeeper, you can be a housekeeper at a hotel, you can be a housekeeper with us, you can be a housekeeper at a fast food restaurant. Where are you going to have the greater ability to get to know people, and to impact and influence their lives? Of course it’s with us but we do a terrible job of communicating how every position in our company contributes to changing lives.

    And we do a terrible job of marketing. This has been my complaint with our national and state associations. We’re fine at doing advocacy work with respect to payers and reimbursements and government support, but where are we telling the story to the marketplace? To the consumers? Who we are and what we do, the impact we’ve had and the work we have yet to do. We’re terrible at that!

    What is be.group or ABHOW doing to change that?

    We are completely rethinking how we message, how we target customers, where we go for talent, and how we onboard that talent. Too often, we get people hired, we put them on the floor, and we don’t give them any sense of the special nature of what they do. Think about the difference with a company like the Walt Disney Company. You go to work for the Walt Disney Company, and I don’t care if you’re walking in as the Chief Operating Officer or if you’re walking in as a clerk; you put on a costume, you go to Disney University, you understand something about the company and how it’s transformed entertainment and what their whole philosophy is. You get the firsthand experience of what it means to bring happiness to people. Why don’t we do something similar?

    We genuinely impact people’s lives every single day. We’ve got real stories, but we do a terrible job telling them. We need to change our storytelling.

    It aligns perfectly with some of the qualities about people coming into the workforce now. Millennials are mission-driven.

    People want to live, to pay their rent, they want to have upward potential and be able to start families. That’s all fine, but they also want to make a difference, they want something that’s meaningful. We have that in spades.