Meet Ken Jaeger, founder and CEO of Denver-based MorningStar Senior Living. Ken’s senior living operations career spans more than 25 years, including a role as VP of Sunrise Senior Living from 1998 to 2002. There, he worked on new community launches—experience he later brought to his own startup: MorningStar.
Today the company counts more than 20 communities in seven states, and it’s still growing. Jaeger has also recently gained recognition from Ernst and Young as a recipient of the Entrepreneur Of The Year 2016 award in the Mountain Desert region in the Healthcare and Lifesciences category (he’s up for the national award this month). We sat down with Jaeger to learn about how his company takes cues from Ritz-Carlton, why senior housing is about much more than just sticks and bricks, and why when it comes to starting a new endeavor, you’re best positioned for success if you don’t go it alone.
Tell me about how you got into senior living.
I got into senior living right out of college, it’s all I’ve ever done. Back in the day, you’d open up a newspaper and look for a ‘Help Wanted’ ad. There I was, a graduate from college with a business and healthcare administration degree, and I answered this ad to be a business office manager in a skilled nursing home. I worked through several promotions to executive director, which actually ended up being the best job to prepare me for what I’m doing now. As an ED, when you run your own senior housing company, that without a doubt is the single most important job that we have in our communities. As the executive director, you have heard it a thousand times, the ED can make or break your communities.
Today I know exactly what my 20 EDs are talking about because I walked in their shoes for eight years. That ended up being a tremendous blessing.
What did you learn as an executive director that helped you build the company?
It boils down to leadership. A leader needs to be a team member, and when they see you out there getting your hands dirty, your sleeves are rolled up, you’re caring for the residents, walking alongside the housekeeper, in there helping wash dishes, they see you being a servant-minded leader. From day one when I learned that lesson, I said, “When I build a company, it’s going to be built around leadership,” and that’s exactly what we focus on.
Did you know you wanted to start a company back then?
I wish. I probably realized about year four that some day, I was going to develop a company built around the core values that were important to me, and I started taking notes early on.
What are those core values?
Exactly what our company is built upon: good old-fashioned core values of love, kindness, gentleness, self control, peace, joy. I think that if you instill that in yourself and you walk the talk, then people see that and they follow right along. I’ve found if you can hire team members with those core values, good things are going to happen when it comes to caring for your residents.
I want to talk a little about your path to Sunrise. Tell me about that.
Well, I was running a CCRC during the growth time of Sunrise, and they were coming to the Mountain region and the West Coast, and they happened to come into Denver where they didn’t have any communities. Imagine that—crazy, right? The one I was running was a fairly large community, about 250 units or so, with all of the disciplines, and I happened to give them the tour.
Were they mystery shopping you?
They were mystery shopping me. So evidently I must’ve said something right. When I gave them the tour, a couple of days later they called me and said, “We’re back in town and we were wondering if you wanted to have lunch.” So I said, “Yeah, let’s have lunch, do a little follow up.” I didn’t know what they wanted. I thought they wanted to talk more about the market. They said “Hey, we’re breaking into Colorado, Washington, California, and we’re looking for some good team members. We like the way you presented and gave your tour, would you mind joining us?” Then I met Paul [Klaassen] and a few others of their senior leaders and decided to make the switch into assisted living. When I made that switch, I thought I’d died and gone to heaven.
Why do you say that?
God bless the people that work in the skilled nursing industry because it’s such a tremendous calling, and you really need good people, but it is so heavily regulated that it drives you crazy. When it came to independent living and assisted living, there weren’t at that time as many regulations cramping your style. You were able to focus on resident care, which is what we’re all called to do. I think when that burden is lifted you’re able to do the things you really want to do.
So tell me about your time at Sunrise. Was it an important part of your development?
It really was. That’s where I learned the development aspect of our industry. I was primarily an operator. In my Sunrise years, they were very good at finding the dirt, doing the development phase, then the marketing phase, knowing what metrics to use as you build it, why it will be successful. I learned all of that during my time at Sunrise. Had I not been there, I wouldn’t be able to do what I’m doing today. When I started MorningStar I knew I needed to partner with a good development company in order to get all the t’s crossed and the i’s dotted.
When did you know it was the right time to go out on your own?
I think you reach a point in your life where you’ve learned everything you need to learn in a particular industry. You learn the basics, you learn what’s important, then if you’re going to put your own personal touch on it, there’s only one way to do that, and that is to go out on your own. There are some people who are just born with an entrepreneurial flair or spirit to them.
I think you reach a point in your life where you’ve learned everything you need to learn in a particular industry. You learn the basics, you learn what’s important, then if you’re going to put your own personal touch on it, there’s only one way to do that, and that is to go out on your own.
Are you one of those people?
I’m one of those people, and I thought, ‘Well, if I’m going to create my own brand, I need to set out and do that.’ I’ve loved all of the companies I’ve worked for. In my tenure since I graduated from college, I’ve worked for some pretty phenomenal companies. I’ve learned something new with every single one of them. I have no regrets. It was just time to branch out and put my own spin to it.
I read in an interview where you said: “I figured the first thing I designed wasn’t sticks and bricks, but the core values that we’d apply.” Tell me about that.
When I left Sunrise, I took three months off to do nothing but write my mission statement, vision statement and core values. You can hire the best architects in the world, the best contractors, the best interior designers, and at the end of the day you have a beautiful building. I knew how to do that, and I knew how to assemble a team. But what you can’t just go out and find is somebody who has your core values. You have to write those out yourself and believe. Then once you have it down in writing—in your mind and in your heart—you have to execute it. I went out and started talking to people who were like-minded and who wanted to circle up around this vision and start painting it on a canvas. That was really important to me, that I got that part of it done first. That’s what I spent several months executing.
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Who did you talk to when you were developing this? Were you building your team or just looking for advice on what your core values should be at that point?
I did focus groups and focus studies and I would meet with other CEOs of senior living companies, other vice presidents and people who work in the industry, finding out what was important to them, what makes them successful. I did a lot of research on my own.
Did you learn anything specific from them? Anything that sticks out?
I think what most people would tell you is sometimes they start too fast. They want too much, too soon, and if you’re not cautious, if you don’t stick to your core values, it can get away from you. My motto was to grow slowly with quality communities versus quantity. That’s been our motto from day one and here we are, 14 years later, and we’re still cautious.
When you started the company, did you have visions for how big you wanted to make it?
I did at first. People asked how many communities and I said, “Well, if I can do one or two, maybe up to four communities, I’ll be happy. I could wrap my arms around that and it’s all good.” So then I got to three or four communities and a fifth one came, a sixth one came and people asked me the question again. “Well, I think eight communities would be a good spot.” Got to eight, then 9, 10, 11, 12 come, and [then my answer turned into,] “Maybe 15 to 16.”
What made you want to keep going bigger?
It was the opportunities that came our way. They were quality opportunities. They came in smaller segments. One or two deals at a time. When you’re in development mode, unless you do an acquisition of 10 to 12 communities, you’re going to grow slow. If you’re going to grow wise, you should grow slow, and that’s what we did. Now when I get asked that question—we’re at 25 communities right now—I say we’ll probably double, settle in around 50, and let the next generation take over from there.
What’s been the toughest aspect of starting MorningStar?
Growing the infrastructure and keeping it ahead of development. You always have to anticipate when you have communities coming online—do we have the bench strength? You can’t just hire anybody in our industry. You have to look for people with servant hearts, and look for people who are called into this relatively new industry. It’s not like the hospitality industry where they’ve been around for decades. Our industry is still fairly new when you really think about it. If you’re going to hire right, you’ve got to be very proactive and do your research. I learn a lot from companies like Ritz Carlton, Chick-fil-A, Hobby Lobby, that are quality-run companies. I’ve met with many of their senior executives and CEOs.
You did the Ritz Carlton training, right?
We went through the Ritz Carlton training, and just a couple weeks ago went to Oklahoma City for one-on-one time with David Green, the CEO of Hobby Lobby. David told me he’s got something like 750 stores now, it’s a multi-billion dollar company that he started in 1975 with $600 in his pocket. He said that what he does is, he has to hire right, train right, develop, and then most importantly, motivate people. That’s what we look for. People who are passionate about our industry, who have servant hearts, who are servant leaders in themselves, and can energize and motivate people with core values. That’s tough. You have to stay on top of it.
I’m curious about the Ritz Carlton training. Tell me about that experience.
What you find about Ritz Carlton is their consistent delivery of quality service. They are the best. When you walk into a Ritz Carlton, whether it’s in Maui, San Francisco or Miami, their service is at the highest level every time, bar none. It’s at the highest level from all walks of life in their hotels, whether you’re a dishwasher, housekeeper, maintenance guy, concierge or general manager; they are all talking the same language. Everything they do is about the customer. When you get that drilled into you, it becomes you. What we discovered when we went through that training is, you not only have to have great customer service policy and procedures, but you have to train on it and hire right on it by day one, and you have to be able to sustain it. A high number of companies who go through that Ritz Carlton training fail by year three. The reason is, they don’t have the right people in place to sustain it. It took us six months to put our program together. We got 12 executive directors and home office employees, designed the program and took a year to train on it so every team member in our company, all 1,500 team members, were trained on it. Then we went out and we hired a vice president of culture whose sole job is to continue to train on our customer service program that we designed, emulating Ritz Carlton.
Do you think it applies well to senior living, what they’re doing at the Ritz?
There is somewhat of a dilemma in our industry: We push for hospitality, but yet in senior housing, residents are coming to us frail, and there is a clinical component. But what we’ve discovered is that just because you’re frail or in a wheelchair or a walker doesn’t mean you don’t want high-level customer service. So we deliver that hospitality to not only the independent living resident, but also to the assisted living, memory care, resident in hospice—they deserve just as much love and attention as the next person.
You won the EY Entrepreneur of the Year® 2016 Award in the Healthcare and Life Sciences category in the Mountain Desert Region, from Ernst & Young. Congratulations. Was that a big moment for you?
It was a lot of work. I was surprised at how difficult it was to make it to the semifinals and then the finals, and the interview process and all of the meetings you go through. It was a lot of fun. Ernst & Young has been around for years, and if they do something, they do it right. When I won the regional award, I thought, ‘Well, this is pretty cool.’ The national one is in Palm Springs in November.
So you’re up for the national one too?
All the regional winners go to the national contest. If nothing else, I’ll get a good round of golf in there in November.
Good luck! We’ve started to see a lot of people who used to work for Brookdale or other big companies start to break off and start their own companies. Do you have any advice for people who are starting to do that?
I would probably tell them the same thing Paul Klaassen told me when I met with him and told him I was going to be leaving to start my own company. He said, “Ken, the best I can tell you is start small. Do one community and do it well. When you are satisfied with that one, if you’re called to do a second one, do a second one, but do it as well as you did the first one—if not better.” I think too many people get in too big of a hurry. If your main motivator is quantity, to make a lot of money, I think you’re in the wrong business. There’s nothing wrong with making a profit, we do very, very well. But our profits are a result of customer service, and delivering very high-end quality care to our seniors. The bottom line to wanting to get into senior living has to be focused on the resident, focused on team members, sacrificing yourself for them, and the fruits will come.
You went from skilled nursing to high-end private pay. Do you have any interest to go back to skilled nursing at all?
Probably not. There’s a huge need for that industry, but I would be more interested in partnering with them like I do now, versus doing it myself. That’s not our calling, but there are some tremendous companies out there that do it really well. I’ll venture with them, put it that way.
What’s your definition of leadership?
Servanthood. My own personal philosophy is rooted in Judeo-Christian values, and I don’t think there’s a better leader in the world than Christ himself. He came to serve. I follow that motto and I think that a true leader is about serving others.
What’s the biggest challenge MorningStar has faced and how did you overcome it?
I tried to do too much by myself, and I should have hired my executive team sooner than I did. I probably would’ve avoided a lot of mistakes. When you hire a controller or CFO or COO, they’re specialized. When you’re a CEO, you really have to learn how to back away and allow those individuals who have those tremendous skillsets do what they do well. I tried to fulfill all of those roles for too long. Some more advice for people starting up: Get the right team members in place as soon as you can. You’ve got to spend money to make money. That’s what I would do over again if I could.
You mentioned a couple of mistakes. What were some of the mistakes you made initially?
[They were] along the lines of having my pro forma fine-tuned, having the budget to fit a particular community; I probably spent more money than I needed to to get a deal. I didn’t have the right people in place.
What would you say is the biggest risk you’ve taken in your career?
When you first start out as an entrepreneur, you put everything you have on the line. I mortgaged my house, my car, my dog, my cat… you eat a lot of macaroni and cheese in the early days. That’s probably the healthiest thing you can do, to have all the skin in the game, so to speak. Everything I had in savings was up, and you lose some sleep. But when you have everything you own in your company, you’re sold out. There’s no turning around. I risked it all, and just through the grace of God things came back tenfold.
When you first start out as an entrepreneur, you put everything you have on the line. I mortgaged my house, my car, my dog, my cat… you eat a lot of macaroni and cheese in the early days. That’s probably the healthiest thing you can do, to have all the skin in the game, so to speak.
Was there ever a time that you thought it might not work?
Yeah. About two weeks before I ran out of money.
Tell me about that.
I had put up all of my savings and investments into starting the company. I started the company in August 13 years ago. In September, I went to the NIC conference, loaded with all of my information. I talked to a couple hundred people and couldn’t get anybody to believe in me. Everybody said, “You have a great pedigree, but show me a deal you’ve done on your own.” I didn’t have one. It was hard to start out, to get people to trust me, to believe in me. You have to keep at it. You have to have tremendous perseverance. If you have a fear of failure, you’re not going to make it.
Who was the first person you were able to convince?
It was a developer in the Denver area that had a relationship with a high net worth individual, and the three of us went to lunch and I laid out my program for the hundredth-and-first time. I showed them the property I had in the contract in the Denver area and promised I would put everything I had into this community, financially. Once he saw that commitment and saw the numbers, he said he’d do the deal with me. I made him very happy with his returns on that first community, and once that one was going, we were off to the second one and we didn’t look back.
What was it like to get that first commitment?
I think for the first time in two years I slept well that night.
Did you get a phone call or was it at lunch?
It was a phone call. Then it was a handshake over lunch, then we went to the attorneys to drop a contract and it was all done from there. We rejoiced, then we went to work. Not that many people have $30 million in their back pocket.
Do you think it’s easier today to start your own senior living operating company, than when you got in?
On the one hand, it’s easier today because you have a lot of people to follow; our industry is getting a lot more well known, and there are more blueprints out there. On the other hand, it’s more difficult because there are a lot more operators in the space [to compete with].
What’s the best piece of advice you’ve gotten in your career?
Stay true to your core values. Never forget why you founded your company and your original mission. If you stay true to those values, you will not drift off course.
Who taught you that?
I actually learned that from a good friend of mine, Bill McCartney, who was the head football coach at the University of Colorado. He said, “Know what your values are, ensure that they’re in line to always benefit and help other people. Stick to those values.” He’s a great leader and motivational speaker.
One of the most important things I’ve learned in life is to give to others. We seek out individuals across the world, from Africa to Mexico to Nicaragua, to see who’s less fortunate than us and how can we help. Today, our company runs an orphanage in Nicaragua for 150 kids. This October, the majority of our corporate office, team members and executives, are going there to build a vocational center for them. We believe that if we’re able to give to those who are less fortunate, the fruits come back twelvefold, and we’re able to give again and again and again.
That really defines who MorningStar is. It’s about servanthood, it’s about giving to those less fortunate and serving our seniors.
Who would you consider to be your mentor, and how have they helped your career?
I have had three or four mentors over time. One I obviously never met, he passed long ago, was the author and professor C.S. Lewis. I love his writings and the way he thinks. He taught me to always think through your decisions to ensure that they’ll be in line with who you are. Bill McCartney, the football coach at CU, years ago [was another mentor]. He took a team from ashes to glory just by instilling teamwork. I learned teamwork from Bill McCartney.
Say I’m about to graduate college. What would be your pitch to me on why I should come work in senior living?
If a new college graduate wants to get into senior living—and by the way we hire a lot of interns—I tell young college graduates all the time that if you’re looking for an industry that has a business aspect to it, and a service aspect to it, there probably isn’t a better industry out there than senior housing. You’re able to utilize your business skills, your marketing skills, your sales skills, your accounting skills, whatever that particular field is, and then you’re able to wrap your arms around that human touch element of our industry to give the service component away. We all have it inside of us, that goodness, kindness, love, joy and gentleness that we talk about. Why not make someone’s life a little bit better with the particular skill set that you have?
Do you think the industry does a good job of taking those people on the front lines and giving them a path to success?
We have a unique industry where you can come in as a care manager [and grow from there]. You can become a department head, or if you come in as a department head you can move into an executive director role, VP role, development roles… It’s possible, it can happen, and we want [that path] to be available to you if that’s a desire that you have.
With that said, it’s important that there are people in our society who want to be a lifelong care manager. We have to embrace them, encourage them, support them and congratulate them for their successes on a daily basis. It’s a tough job to serve seniors at the care manager level.
How important do you think technology is today for senior living providers?
I think it’s really important. I think technology is something that you have to stay on top of, or you’ll get left behind. Not only at your corporate office, but in the home for the resident and for the team members. Everybody remembers when the internet first came, and the first cell phones, and how cool that all was. Now you’ve got a 90-year-old resident walking around with an iPad. You have to stay ahead of technology or you’re going to be left behind.
We have a third party IT firm that is in our home office at least once a week talking to us about trends, the latest technology, and you have to be prepared every year to re-evaluate your IT because that world is moving at lightning speed.
What kind of technology investments do you think people should be making today?
Communication technology with your financial infrastructure. How systems communicate with each other, whether it’s care plans talking to financial plans, billing, accounts payable, HR, sales; our industry has evolved, and IT has evolved to the point where everything is under one platform now. It used to be where you had four to five different platforms and you didn’t talk to each other. Now there are great systems out there that have everything under one roof, and that’s what we’re moving to, just one platform.
What types of data points do you think people should be tracking?
With data it depends on what your business strategy is. If it’s development, you have to pay attention to market trends, utilize firms like NIC—they’ve got it fine-tuned now. The data is proven [as to] where you should and should not go, so why not take advantage of their platform. If you’re in operations, make sure you’re in touch with the latest companies out there that are constantly redefining and designing software to ensure your business systems are up to speed. Companies like YARDI, for example, they’re exceptional at the billing process, sales process, care manager process. We let them do what they do well, and we’ll use their systems. I think you want to ensure that at the end of the day, your IT platform and the software you’re using comes to the bottom line. Therefore, you have more revenues and income at your disposal to enhance your customer service to your resident, and value your team members at a higher level through their salaries, and everybody wins at the end of the day.
What do you think is driving operators to embrace technology today? Is it the business side or the residents?
I think society as a whole is driving it because you’re a consumer and the customer is coming to you more educated on technology. Operational efficiencies are driving [technology implementation]; your investors are demanding more metrics, they’re asking more questions on operating margins, and all the technology helps you narrow it down, so to speak, so they can give you any data you want at the touch of a button. Everything is measured with technology now. Communications is driving it. You’ve got anywhere from a 2-year-old to a 92-year-old using iPads and all of the social media outlets that are out there; you just go down the list.
It used to be where you would tell somebody you wanted to drop them an email and they would say, “What?” You tell a teenager that now, and they say, “What, why would you want to email me? Put it on Facebook or Twitter.” You have to be up to speed on all of that. We have a full-time person who does nothing but handle our social media. You have to stay ahead of it or your competitors are going to; seniors demand it, team members demand it, your surrounding community demands it to be able to communicate with people. They aren’t just asking for your email address or web address anymore. Technology is all about communication and trends and being involved and being educated.