Culture Shift Fixes Failing Finances at Redstone Highlands

Written by Kris B. Mamula, Pittsburgh Business Times, August 17-23, 2007

In 2002, Redstone Highlands was busy building two retirement facilities in Westmoreland County worth $47 million at the same time the nonprofit continuing care retirement organization was awash in red ink.

The $5 million loss resulted from basing the expansion on overly optimistic revenue data, said President and CEO John Dickson, who came to Greensburg-based Redstone Highlands in 2001 to replace a CEO who had been terminated.

"Some projections really didn't equal the reality of expanding that fast," Dickson said.

But the problems went deeper. Health care costs rose 45 percent that year; temporary agency costs to cover staff call-offs had reached $400,000; turnover peaked at 50 percent. A troubled work culture was hurting Redstone Highlands, Dickson said. Redstone's future would continue to be uncertain unless employees' view of their jobs and workplace changed.

Dickson began with an institution-wide survey, which revealed serious employee-managerial grievances. The result was a "very eye-opening experience," Dickson said. "We really had to change the way people were treated."

Redstone began by establishing core values of the institution and a list of things that would no longer be tolerated: favoritism, gossip and disrespectful language were among them, a list that was developed by employees. Three years ago, Redstone also began inviting managers to annual strategy retreats. After the first retreat, three managers were let go because it was clear they wouldn't fit in the reorganized agency, according to Randy Thornton, vice president of finance and CFO.

Other employees, such as Resident Services Director Candy Kubinec, readily embraced the new vision. "I'd never seen a strategic plan for the company," said Kubinec, a Redstone Highlands employee for nearly seven years. "I was wondering why I was there, but as the day went on, I realized they really wanted input."

Getting employees to embrace an institution's vision begins with the CEO, according to Robert Alfred, CEO of Attitudes Inc., an Oakland-based management consultant. Upper management's commitment to changing workplace culture will determine how well the rank and file accept the change.

"Whoever heads the business has to drive the process," Alfred said. "If he or she is lukewarm, that's about what you get when you're done."

"Eventually, you have to have everybody buy into it," he said. "We have to share values, but we first have to communicate values: What do you we want to be when we grow up?"

On the financial side, Redstone Highlands began an employee wellness program in cooperation with Highmark Inc. The result: Redstone Highlands' insurance premiums dropped 7 percent on a total expenditure of $900,000 for fiscal 2007. Redstone Highlands' wellness program ranks in the top 5 percent in effectiveness among some 450 similar programs statewide, according to Meghan McDanel, worksite consultant.

Managers received bonuses to curb use of temporary staffing, reducing the agency budget to $50,000 in fiscal 2007 from $400,000 in 2002, Thornton said. Reducing employee turnover to 20 percent last year saved the institution $166,000 compared to 2002. Most important, Redstone Highlands went from a net operating loss of $5 million in 2002 to a net operating gain of $800,000 in fiscal 2007.

"If you truly treat people correctly, it pays back enormously," Dickson said. "It's true engagement and ownership.

"That has paid off in great dividends."

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