How would you characterize DaVita’s strategy?

Read the below article and write a 3-4 page essay in APA format (not including the cover page and reference page) answering the below question. Do not make this a question and answer but an essay paper.

Note that you must conduct research and your paper must have 3 scholarly references. This means that you must locate peer-reviewed articles. Please be sure that you write an essay and do not use a question and answer format.

Questions

How would you characterize DaVita’s strategy?

2. What advice would you give Kent Thiry in terms of leading and managing the integration of the Gambro organization?

3. What would be included in your “first 100 days” action plan?

4. How could you preserve DaVita’s culture in the face of an acquisition that includes Thiry’s former organization, Vivra

Selected Cases LEADING STRATEGIC CHANGE AT DAVITA: THE INTEGRATION OF THE GAMBRO ACQUISITION

In the summer of 2005, Kent Thiry, a 49-year-old Harvard MBA, ex-Bain consultant, and now the CEO of DaVita, thought about how he and his management team should address a set of emerging and important challenges. DaVita (publicly traded on the New York Stock Exchange under the symbol DVA) was a $2.2 billion annual revenue operator of free-standing and in-hospital kidney dialysis centers.

Thiry and his senior team were meeting to discuss the next steps the company should take to continue its organizational development and strategic evolution. They were especially focused on how to manage several looming challenges. DaVita was just in the process of completing a $3.1 billion purchase of Gambro, a large competitor. The acquisition would nearly double its size, from 700 to more than 1,200 dialysis centers and from 13,000 to 25,000 people. As such, it would cement its position as the second largest operator of kidney dialysis centers in the United States.

When Thiry came to lead the company in October 1999, the organization had been beset with financial, operational, regulatory, and morale difficulties. “The company was technically bankrupt,” he said. “It was being investigated by the SEC, sued by shareholders, had turnover at over twice our current levels, was almost out of cash, and, in general, wasn’t the happiest of places.”1 By 2005, the new management team had achieved a complete turnaround. The company’s market capitalization had grown from $200 million to more than $5 billion, the clinical outcomes had become the best in the industry, the company’s organic growth was the highest in the industry, and employee retention had improved dramatically, with a 50% reduction in turnover.

However, this had not been a typical turnaround. Instead, a closer look at DaVita’s culture and leadership showed that the DaVita management team’s focus had been on creating a strong and positive values-based organization where all levels of the organization had an emotional commitment to its success. The foundation was the Mission and Values, first created by 700 of the company’s managers in 2000 and now widely practiced throughout the company. To the management team, the company’s rebirth strategy was based on the belief that they had to create something larger than themselves in order to be successful. Thiry commented:

· At Vivra [another kidney dialysis company where many of DaVita’s senior leaders had worked together], we implemented many people, team, and culture-friendly policies. They were consistent with my basic values, but the extra energy I brought to them was because they were a means to the end of having a successful company. This time it is different. This time the building of a successful company is a means to the end of building a healthy community. Because humans spend more waking hours at work than anywhere else, if you are a leader who purports to care about your team, it makes no sense to create a paradigm which concedes all that time needs to be spent in [a] relatively vanilla values or sterile emotional commitment environment.2

Because of this, Thiry and his team flagged several important challenges they believed needed to be addressed if DaVita was to continue its successful evolution of both operations and culture. The question was, How could they use the culture to achieve even greater operational excellence?

THE GAMBRO INTEGRATION

One immediate task entailed integrating Gambro into the DaVita way of managing and its culture. Gambro was significantly more hierarchical and formal than DaVita, and did not have a strong people-oriented culture. Prior to the merger, DaVita had been disparaged inside Gambro, with Thiry described as “a compliance maverick, reckless, and egotistical.” Ironically, Gambro had itself purchased Vivra in 1997, then a smaller, publicly traded dialysis company led and transformed by Thiry during the 1990s. As the leader of the combined organization, Thiry’s goal was to be respectful of Gambro, its people, and its capabilities, while maintaining DaVita’s unique culture and way of management.

PERSONAL TOUCH IN A GROWING ORGANIZATION

Prior to the Gambro integration, DaVita operated in 37 states. Its growth, size, and diverse locations made it increasingly difficult for Thiry to personally touch the many teammates on a regular basis. This presented a key challenge: How to personally impact teammates as he had during his first five years at the helm? Affectionately called “KT” by many teammates in the company, Thiry was, by everyone’s estimation, extremely charismatic and energetic. More than that, Thiry was the primary architect of and cheerleader for DaVita’s unique culture and values. The company reflected the vision shared by Thiry, Joe Mello, and a few others such as Doug Vlchek. Mello, DaVita’s COO, and Vlchek, DaVita’s chief wisdom officer, had worked with Thiry before and had joined DaVita in 1999 to help drive the organizational change initiative.

TEAMMATE MORALE AND COMPENSATION

Maintaining the culture and sense of community within DaVita was not easy, even before the acquisition of Gambro. Taking care of dialysis patients is a difficult job. One out of every five dialysis patients dies each year, creating not only a difficult work environment but also a lot of emotional strain. With the company’s turnaround receding into the past, numerous employees—or “teammates” as all are called at DaVita—had rising expectations for wages and working conditions. The company’s ability to raise salaries was constrained by the high volume of patients—about 79%3—who were covered by government programs such as Medicare and Medicaid but whose reimbursement rate did not cover the cost of treatment.

Because of financial constraints, dialysis providers could not afford to pay high overtime rates. As a result, many of DaVita’s patient care technicians, who typically earned between $11 and $14 per hour, worked two jobs in order to generate sufficient income. One manifestation of the pay challenge was the barrage of questions that Thiry and Mello would get as they traveled the country conducting “town hall meetings.” Town hall meetings were an opportunity for teammates to ask questions of senior leadership, in person. It was quite common for teammates to ask why their wages were not higher and why productivity expectations were so high and always rising. Moreover, DaVita competed for nurses in labor markets with nursing shortages. Many other organizations had chosen to just throw money at the problem of attracting and keeping nurses, something DaVita could not afford to do.

OPERATIONAL EFFICIENCIES AND PRODUCTIVITY IMPROVEMENT

The fifth challenge was to continue to drive productivity improvement and to think about ways to fundamentally reengineer the business. As Mello noted, the company had made great strides in enhancing labor productivity over the past several years. But there was always the looming threat of reduced reimbursement from the government for dialysis services. This revenue stream represented approximately 60% of total company revenue.4 Mello talked about the challenge of doing things that would materially and fundamentally enhance the company’s cost structure so DaVita could be largely impervious to what might happen in its environment.

As Thiry prepared for the meeting with his executive team, he thought about what the company should do about these challenges and maintaining the culture his senior team had worked so hard to build. He wanted the team to come up with some ideas about how to address the challenges facing the company, and of course, to do so in a way that was consistent with its values and culture.

A BRIEF HISTORY OF DAVITA (1994–1999)

DaVita was the new name given in 2000 to Total Renal Care (TRC), a company originally founded by Victor Chaltiel. Chaltiel had sold a former company for a good profit, with the business model of leveraging cost savings obtained through large-scale purchasing and distribution systems for drugs in the Medicare reimbursement program. Based on his success, he planned to do the same thing in the domain of kidney dialysis centers through roll-ups of smaller chains and individual centers. One of Chaltiel’s strategies was to apply strict business principles and reap their rewards upon entering the traditionally not-for-profit domain of kidney dialysis centers (run by hospitals and physician specialists). He focused on growth through acquisition through the 1990s. The Internet bubble focused many analysts on top-line revenue growth, which provided TRC with a high stock price that allowed it to continue making acquisitions at a fast pace.

Unfortunately, Chaltiel and his team failed to integrate their acquisitions, leading to some operational incoherence in TRC. One example noted by Harlan Cleaver, DaVita’s chief information officer, was that there was no uniformity in a critical patient data form used to record and monitor patient care during dialysis, and little standardization in reporting and work methods across centers. This absence of standardization made routine management activities, such as transferring personnel and patients across centers, much more difficult if not impossible.

Cash flow issues created serious problems. Mello commented that another operational weakness of TRC was insurance reimburse-ment—a critical problem for a company whose revenue was entirely dependent on it. Insurers and the government would frequently question charges and demand additional documentation. They would occasionally unilaterally reduce the reimbursement amount, and delay payment until they received answers to queries and requested documentation. Medical service providers such as DaVita needed to pay close attention to billing and collections to avoid a cash crunch.

Finally, senior executives paid scant attention to the dialysis centers themselves, which were seen more as an avenue of corporate growth where patients and caregivers were economic units in a bigger financial structure. This head-quarter-centric, financially oriented operating culture did not win friends among the health care practitioners who worked hard in the field to deliver quality care.

In 1999, Total Renal Care ran into severe financial difficulties, having just recently merged with another large competitor that had also been built in a rapid fashion. The board of directors turned to Thiry, who was in the process of leaving a private-equity-funded managed care company where he had been for two years post-Vivra in 1997. He was eagerly anticipating time off with his family. When headhunters called to see if he wanted to interview for another CEO position, he always replied, “No.” Thiry was within 90 days of his “retirement” when TRC called:

· I still remember the call. After my assistant told me who was on the phone, I picked it up with the intention of giving the same ‘no’ answer. As I started to listen, all the positive memories of my first time in dialysis, at Vivra, came flooding back. It had been the most powerfully positive time of my professional life. I have no idea what I said in that phone conversation. All I know is I went home that night and asked my wife Denise if it was okay to interview. She was livid. What about my alleged interest in more time with the family? What about the fact that this was a turnaround located in another city [Thiry lived near San Francisco and TRC was headquartered in the Los Angeles area]? The difficulty of the decision felt like a terrible burden at the time. It turned out to be a gift. Never before did I have to think so deeply about why I wanted to do something. After agonizing for a few weeks, we decided I would give it a try. There is a saying I love—we use it at DaVita all the time: ‘Begin with the end in mind.’ I started at DaVita with more of an end in mind than any other beginning in my professional life.

Before accepting the job offer, Thiry reached out to a set of people who had been with him in his previous dialysis venture, people whom he trusted, liked, and respected. He recruited Harlan Cleaver, who was now living in Denver, to be the chief technology officer and David Barry to be COO. He reached out to Doug Vlchek, whom he had hired into Vivra, to lead the organizational change and culture-building efforts. Thiry recalled, in reference to the musketeer imagery he loves, asking them something like, “Will you ride again?” They all accepted. When Barry left in the first year for personal reasons, Thiry brought in Joe Mello, who had also been with him at Vivra.

When Thiry arrived at TRC in October 1999, the company was a mess. It could barely make payroll, was in default on its loan covenants, and was paying penalties to the banks. Highly leveraged from its many acquisitions, it was essentially on the verge of bankruptcy. The stock had fallen from nearly $50 to $2 a share. Systems were nonexistent or in chaos, and the organization’s employees were dispirited and unhappy. It was not at all clear that financial survival was possible.

KEY SUCCESS FACTORS FOR A DIALYSIS COMPANY LIKE DAVITA

There were four critical factors for organizational success along both financial and clinical outcome dimensions.

Attention to Detail

The first factor was painstaking attention to operational details and compliance with government regulations. For instance, a company that charged the government, through the Medicare program, for services that were not actually delivered and/or were not documented could face accusations of fraud and suffer financial penalties as well as delays in payment. Legal problems could also arise from actually delivering care or medicines that patients did not need, as well as for improper relationships with drug companies or physicians that might entail kickbacks for patient referrals or purchases of pharmaceutical supplies. Proper record keeping and ethical behavior were vital to the ongoing success of dialysis companies.

Managing Financial Outcomes

The opportunity to make a financial difference in operational results rested largely on small but important behaviors and decisions. One such activity was carefully using supplies to avoid waste and maintaining appropriate stock levels so that inventory costs were not unnecessarily high, yet avoiding emergency ordering. Another activity was the reuse of dialysis filters and maintenance of the dialysis machines to ensure both long life of the equipment and lower cost per treatment.

Possibly even more important was the activity of efficient labor-hour management, given that the proportion of labor costs in the total cost structure equaled one-third to one-half of the treatment cost. As Mello pointed out, in 2005 DaVita would do about 7,000,000 dialysis treatments. Each 0.01 savings in labor hours per treatment achieved across the company was worth about $1.8 million; this savings went directly to the bottom line.

Achieving Good Clinical Outcomes

Attention to detail during the dialysis visit and strong personal relationships among the DaVita staff and patients drove the achievement of good clinical outcomes. First, attention to detail also mattered a lot for obtaining good clinical outcomes. For example, it was important to take care while putting the patient on the machine, monitoring the treatment as it was occurring, and taking the patient off the machine at the end of the session. It was also critical to monitor the patient’s health status generally so that treatment issues could be foreseen and addressed. Good clinical outcomes also enabled DaVita teammates to take pride in working in a company that provided the best care in the industry, an advantage in recruiting and retention.

Second, achieving good clinical outcomes depended not only on the patient’s commitment to treatment but on the emotional tone and bond between the center’s teammates and the patients. Patients sometimes missed their dialysis appointments because they found the treatment unpleasant, the logistics of setting up appointments too difficult, or they became depressed by the likelihood of success. However, according to various DaVita clinic teammates, one important factor affecting patient compliance was the extent to which patients trusted and felt comfortable with the dialysis center and its staff. Emotions are contagious, and to the extent that DaVita could create positive, genuine emotions on the part of its workforce, those positive emotions might influence the attitude of patients. This could thereby improve the patients’ survival, not only through their positive mental attitudes but also by affecting their compliance with the difficult regimen of living with late-stage kidney disease. As one administrator said, “It’s important that the teammates like their jobs and smile and relate in a compassionate way to patients, because that makes the patients feel better about being here.”

Employee Attraction and Retention

The final critical success factor was the attraction and retention of teammates. DaVita competed for nurses with hospitals, doctors’ offices, other health care providers, and, of course, with other dialysis companies, and the chronic nursing shortage in the United States meant there were always unfilled positions. Hospitals typically paid more per hour than DaVita or its competitors.

Patient care technicians (PCTs), the largest category of employees, typically earned less than $15 an hour. Many worked two jobs, with their second job often being for another provider of dialysis services. PCTs were often tempted to leave for better-paying opportunities, either with other health care providers or to find different occupations.

Retention of teammates was important because turnover was costly, entailing finding and training replacement people, and possibly paying overtime labor rates if a center was temporarily short-staffed. High turnover could also impair clinical outcomes, because a nurse’s or PCT’s experience in doing dialysis and working in a team enhanced patient care outcomes. Being an employer of choice was not just part of DaVita’s mission, but was also important for business success and better patient care.

THE TURNAROUND (1999–2005)

With an acute awareness of these critical success factors, Thiry and his colleagues set about the task of turning the organization around. The first order of business was the business itself. Over the next four years, the organization worked to fix billing and cash flow problems, restructure outstanding debt, bring the information systems up to speed, hire people who could “get stuff done” (“GSD” remained a popular acronym in the company, and being “good at GSD” was a high compliment), and invest in continuous improvement projects and training.

It was a difficult time for the company. For a time, the government stopped paying DaVita for laboratory tests because of issues in record maintenance and documentation. The company had to decide what to do with the patients whose lab tests were not being reimbursed. The team decided to continue performing tests that it felt were essential in delivery of care and to appeal the decision to an administrative law judge to attempt to obtain the denied funds. Four years later, after winning six successive judgments, the government paid DaVita over $90 million. Harlan Cleaver, the chief information officer, described the process of bringing order to the system and establishing common practices, measures, and information systems across the centers. His first step was to standardize the paper-based system used to keep track of patient care in the various centers. As he pointed out, it made sense to start with that patient record system because the issues were of standardization, common practices, and alignment, without the added complication of computers on top of everything else.

The second order of business was getting the philosophy right. Thiry and his colleagues recognized that what they said and did in those first months would set the tone for the ensuing years at the company, so close attention to building the kind of culture and organization they wanted proceeded in parallel with the business turnaround efforts. Thiry described early meetings of the executive team in which they would spend time discussing basic issues, such as whether they could make payroll and their ongoing negotiations with the banks, and then they would turn to talk about the core values, culture, and operating philosophy they wanted to instill. When Thiry and Vlchek would start talking about Mission and Values, many of the executives were very skeptical about the value and intent of this activity when the company was in such dire straits. Thiry believed that without a clear statement of Mission and Values, the operational turnaround could not be sustained.

A big part of the new philosophy was to recognize that the centers, where patient care was delivered and where most DaVita teammates worked, were key to the company’s success. To emphasize the importance of the centers, Thiry had all senior managers, himself included, “adopt” a center and drop by occasionally. Thiry’s center was in Hayward, California, and long after his last visit, people in the center were still commenting on his attention to them.

The company later replaced the adopt-a-center program with the practice of having everyone hired in or promoted to the vice president level or above go through “Reality 101,” which entailed spending a week in a center helping to do the day-to-day work. Executives participated in activities such as machine set-up prior to dialysis, machine teardown and disinfection post treatment, helping with blood pressure monitoring, or whatever tasks they felt comfortable in actually performing. As Thiry explained, it was important not to push people to do things they felt uncomfortable or unskilled at doing, but it was also important for people to experience what it was like to get up at 4 A.M. to get to a center at 5 A.M. SO it could be open for the first patients at 6 A.M., and to see what life in a center was about.

Thiry and the senior management group understood they needed the involvement, cooperation, energy, and ideas of the clinic managers, the frontline supervisors who make the centers work. In May of 2000, more than 400 clinic managers, plus people from corporate headquarters assembled in Phoenix, Arizona, for the first of what has now become annual corporate-wide meetings. The choice of location, Phoenix, was intentional, as the phoenix is a bird that rose from the ashes, just as the company was seeking to rise from its precarious condition. At this first meeting, suggestions for a new name for the company were presented. It was the company’s teammates, not the board or just the senior management, collectively assembled at this off-site, who voted on and thereby chose the new name, DaVita, which is an approximate translation of the Italian phrases “to give life” or “he/she gives life.”5 Also at that meeting, groups discussed, debated, and voted on proposals for the core values. Figure 1 shows the mission statement that Thiry presented at the meeting and the core values decided upon by the Phoenix delegation. Over the years, the seventh value, “fun,” was added by another election.

For much of the first 18 months, Thiry and Mello would hold frequent conference calls with the top 800 or so people in the company to update them on progress. As part of each call, Thiry would say, “What is the incremental evidence that we are serious about our Mission and Values?” And then he would provide an answer to that question.
Thiry commented, “There were many periods where, absent the pressure of knowing I had to ask and answer that simple question out loud in front of 800 people, in many instances I would not have launched another program, or policy, or communication. They would have been squeezed out by the harsh realities of normal business—like they normally are.”

With increased focus and attention to operational details, the commitment of the company’s teammates, and the bank negotiations behind it, DaVita embarked on a remarkable transformation in its performance, achieving not only great financial results, as shown in Figure 2, but also consistent, year-over-year improvements in clinical outcomes and reductions in turnover.

THE DAVITA WAY: VALUES AND ORGANIZATIONAL CULTURE

DaVita did not develop its culture by accident. The culture was a result of what Thiry calls “purposeful actions” that “articulated and demonstrated” what a company could be. First, Thiry created a clear, concise, easy-to-remember mission that was quickly turned into a song still sung today. Then, he asked 700 colleagues to come to a consensus on the core values. They also used the following question as a benchmark for their own development: What did other great companies do to cultivate cultures— companies like Southwest and Disney?

Employees became teammates, and, if they “crossed the bridge” of believing the company could be special, they became “citizens” of the “village” (not a company), with Thiry as “mayor.” Hugs were common, as were high-fives and laughter, even among the intense ex-consultants and MBAs who populated the business offices. Through what are called “traditions and symbols,” DaVita executives brought organizational change concepts to life and made them real.

Cathy Gelb, who ran the DaVita Academies as part of DaVita University and who had been with the company since 2001, commented that one of the things that distinguished DaVita from the Fortune 1000 companies where she had worked as a freelance training consultant was the tremendous amount of strategic thought and intentionality that went into every single action and decision. She noted that, for instance, all meetings were carefully planned, even to thinking about the particular music that would be used, the sequencing of materials, seating arrangements (for instance, at Academies, should guests be put in the back?), and the specific words and terms that would be employed during presentations. All of this planning was an effort to create the right message and feelings and provide an optimal experience for those in attendance.

Evaluation data were collected about everything, including every meeting and class, and used to make educational activities and meetings more effective over time. Gelb also commented that Thiry did not like the word “culture” because of its association with the word “cult,” and there was already some joking about “drinking the Kool Aid” because of DaVita’s very strong, carefully managed, and inclusive set of management practices.

The DaVita Way of Managing was captured in a set of phrases—short and easily remembered—that encapsulated many of the values and operating principles of the company. These values, and the associated behaviors, were also incorporated into interview schedules used to select new teammates, into all performance appraisals, and into the company employee attitude and satisfaction surveys.

New, Ours, Special

At DaVita meetings, executives always asked the assembled people to respond to three questions: “What is this company? Whose company is it? What could it be?” The answers, literally shouted back, were “New,” “Ours,” and “Special.” The idea of “new” was not just that DaVita was a different organization after the 2000 turnaround, but with its ongoing acquisitions and new business ventures it was always a new place reinventing itself. “Ours” means that the company is the responsibility and under the control of the teammates who work for it, who have the opportunity to make the company what they would like it to be. This leads to the last question. Note that the executives do not ask what “is” the company, but rather, “What could it be?” The answer, “special,” captures in a word the aspirations for building an organization that is truly unique in its culture and its results for its patients, while “could” reflects the fact that the development of the organization is a journey, and although it has achieved great things, its aspirations are for more, and that being special is something yet to be fully achieved.

We Said, We Did

Accountability is an important value at DaVita. So is measurement—the company measured not just clinical outcomes, costs, and labor utilization, but almost everything that was related to dimensions of performance. In addition, there is an emphasis on systematic, planned thinking and actions. All of this came together in the idea of follow-up, something that began at the very top of the organization. As Richard Fontaine, one of the directors on the company’s board, explained, at virtually every board meeting Thiry would present a list of issues and questions from the preceding meeting, and then go through them one at a time and explain what the company and he had done about each. This included, for instance, progress on building a succession planning process and preparing back-up people ready for senior-level positions. Similarly, at DaVita Academies, if the company had made assurances or pro mises to the workforce—to get an answer to some question, to address some concern or problem—Thiry would explain what had been done and end with, “We said, we did.”

The implication was that the company and each person in it was accountable for meeting its commitments—for addressing issues and explaining how another important value, continuous improvement, was occurring. As several people noted, if someone was in a position of often having to say, “We said, but we didn’t do,” that person would probably not last long at an organization that stressed accountability and getting stuff done.

One for All, All for One

This idea, from the Three Musketeers books and movies, was a prominent theme in the company. Thiry’s office at corporate headquarters in El Segundo, California, near the Los Angeles airport, had a movie poster from The Man with the Iron Mask, and has hanging in it the sword that Thiry brandishes—in full Musketeer uniform—at DaVita Academies and other meetings. The phrase represents one way of understanding the idea of community and shared obligations and responsibility. “One for all” means that it is the obligation of every DaVita teammate to contribute what they can to the whole, to expend their best efforts on behalf of the collective, and to take responsibility for the company and each of its members. “All for one” means that just as the individual should devote himself or herself to the group, the group has a responsibility to help that individual develop and succeed and surmount difficult setbacks and transitions.

An example of this care and community was a fund called the DaVita Village Network, to which DaVita teammates contributed to help others out with, for example, unexpected medical expenses or other financial needs. Teammate contributions to the DaVita Village Network were matched by contributions made by the company out of its profits.

The Village—Not Just a Company, But a Community

Related to the idea of “one for all, all for one” was the idea of DaVita as a community—represented in the word “village.” Corporate headquarters in El Segundo was referred to as “Casa DaVita” (the house of DaVita), and village language and imagery were used in many ways. Joe Mello would tell a story from one of his favorite books about a man living on a hillside who sees other members of his village below in danger from an onrushing flood, and sets his own house on fire, so that when the people rush up the hill to put out the fire, they are saved from the flood. The word “worker” was never used and seldom was the word “employee”—instead, people were referred to as “teammates” or “citizens” and, consistent with the village imagery, language that evoked the idea of “citizenship” and the mutual obligations of citizens and their community was emphasized. In the words of Gina Randolph, a group vice president, “We think of ourselves as a village where each facility is a neighborhood.” When pressed on how important these distinctions were, she responded, “From the viewpoint of a career that spans several decades, this is the first time I have had the privilege of working for a company whose Mission and Values are so completely alive and not hanging on the wall.”6

No Brag, Just Facts

DaVita was committed to a fact-based approach to management and decision making, to talking to people about the facts, and to using facts and evidence as much as possible for every decision and statement. So, when Thiry stood up at a DaVita Academy meeting and stated that DaVita provides the best care for dialysis patients in the industry—a statement that, on its surface, was not unlike the typical corporate claim about its quality, service, or leading edge technology—he then provided quantitative data showing how DaVita was doing on specific clinical outcome measures, ending with the phrase, “No brag, just facts.” It was a way of cementing the idea that people at the company should attempt to anchor their judgments, their statements, and their claims in quantitative data, not in hyperbole or wishes.

Fact-based decision making was reinforced in the company’s measurement system. Clinic managers received monthly, multipage reports showing how their performance compared to goals or budgets, to their own prior results, and to other facilities in their region, in their division, and in DaVita as a whole. Annual surveys of employees provided information on satisfaction and engagement, as well as perceptions about the extent to which people felt the company was living up to its Mission and Values.

But what was most interesting, and what really reinforced the commitment to a fact-based, measurement-rich culture, was what happened when the company was unable to measure something of importance. Patients who did not show up for dialysis because they were in the hospital or on
vacation made scheduling labor more difficult and affected labor productivity. But this indicator could not be captured systematically given current management information systems. Therefore, the measure was included in the monthly reports as a blank graph with the notation, “Not Available.” As Joe Mello explained, if there were some important critical data that could not yet be assessed, the company included them anyway on the reports, showing they were not available. This presentation of a missing measure, month after month, encouraged people to figure out ways to measure what might have first been viewed and dismissed as “unmeasurable,” and therefore the availability of data useful for making decisions kept improving.

We Are Here

DaVita wanted to encourage its teammates to be fully involved and present in the company, not just physically but also emotionally. There were “We Are Here Awards,” which were $1,000 in vacation expenses given to randomly selected nonexempt (hourly paid) teammates who had perfect attendance (no unplanned absences) during a 90-day period. At DaVita meetings, teams would be asked if they were here, and would respond with a cheer, or chant, or yell, or some combination that indicated not only physical presence but also involvement and commitment. In Thiry’s office, painted on the wall was the saying, “This is not a dress rehearsal, this is my Life.” There was an emphasis on having people fully engaged in their work and with the company, so they could find meaning and fulfillment in their jobs and in their associations with teammates.

The Shining Star

The “i” in DaVita was dotted as a star, referred to as a “shining star.” Thiry would say that the star lived in a lush green valley and only came out to sit on top of the “i” when a DaVita teammate did something special for a patient or a fellow teammate. Because at any given moment there was always someone doing something special in the company, the star was always “out.” At the national awards ceremony, the highest awards were called “Shining Star Awards,” for people who not only performed their jobs with exceptional proficiency, but who also exemplified the DaVita values and who contributed to the well-being of the team.

DAVITA MANAGEMENT PRACTICES

Values and beliefs, ways of being, and the organizational culture had to be produced and reproduced every day to be real and meaningful. DaVita did a number of things to ensure that its Mission and Values would infuse the day-to-day behavior of its teammates and to help ensure that it operated in ways consistent with its aspirations. Many of its management practices seemed (and were) like common sense. All were products of extensive discussion by people inside the company, and all were talked about regularly, practiced, and were embedded in everything the company did.

The DaVita Way and the DaVita Way of Managing

DaVita thought that it was beliefs that drove behaviors that, in turn, produced performance. As Thiry explained it, the “DaVita Way” was “what (who) we are: our Beliefs (which have been introduced and articulated over the past few years), as well as the consistently practiced Behaviors (which are derived from those beliefs).” The company articulated and lived its beliefs through talking about its history, its symbols and traditions, the idea of the village, communication, talking about the future, and caring and sharing for members of the community. The DaVita Way of Managing defined a set of behaviors and competencies that the company sought to promote and produce, and which formed the basis of all of its selection and performance management practices, and were reinforced in its educational activities. There were four behaviors critical to the DaVita Way of Managing: It (1) gets the right stuff done, (2) fosters team, (3) stewards resources, and (4) builds relationships.

There was one other aspect to the DaVita management approach—an emphasis on execution. When the leadership, including Mello, Vlchek, and Thiry, had been together at Vivra, they had noticed that even though they had an extremely talented executive team of about nine people who were all working hard, things were not happening. They went to an off-site meeting and concluded that there were four elements critical for effective execution: (1) absolute clarity of purpose, (2) absolute accountability, (3) relentless follow-up, and (4) celebrating successes. These principles and practices helped build operational excellence and an ability to get things done at DaVita, where they were very much a part of the fabric of the management approach.

DaVita University

DaVita had many employees in a large number of centers, and although turnover had been reduced, it was still high enough that—coupled with corporate growth—a large number of new people were entering the company each year. The Gambro acquisition would bring 12,000 new people into the organization. To achieve a higher level of uniformity in understanding, communication, and management practice, a lot of the DaVita way of managing was transmitted through DaVita University. This activity was started within a year of Thiry’s arrival in the company, even as the financial recovery was proceeding, and the programming has expanded significantly over time.

DaVita University was run out of the Wisdom Department, and the head of the department, who had been Doug Vlchek until mid-2005, was called the chief wisdom officer. Vlchek’s nickname was “Yoda,” after the Star Wars character, an appellation he had been given by Thiry shortly after they first met almost 12 years previously. The name for the department came from Joe Mello. At Vivra, they had a chief knowledge officer, but that was too conventional a name for the department and its head at DaVita. Wisdom seemed to be what the company was trying to impart to its teammates and to continually develop.

DaVita University offered programs in continuous quality improvement (a two-day program required for newly hired facility administrators, managers, and vice presidents who had not taken the class previously), presentation skills, leadership development, team skills, and programs for vice presidents. There were also numerous courses on clinical subjects. But two of the most important programs that reached the most people either directly or indirectly were the DaVita Academy (and more recently, a program called Academy II) and a program called FAST, which stood for Facility Administrator Survival Training.

FAST. FAST was a five-day program taken by all new clinic managers. The program consisted of training in managerial skills such as time management, communication, providing coaching and feedback to team members, and interviewing, as well as material on the DaVita culture (the DaVita Way and One for All). On Thursday afternoons there was a town-hall meeting with Thiry or Mello so that participants could express their opinions, ask questions, and interact in an informal way with senior executives. The course also consisted of specific technical knowledge and skills necessary for administrators of dialysis centers. Evenings were, with one exception, devoted to organized social interaction, including group dinners and bowling, to help build friendships and a feeling of team spirit among the 25 to 30 people who typically took this class together.

DaVita Academy. DaVita Academy was a two-day program for all front-line teammates (for instance, patient care technicians, nurses, social workers, and the people who serviced the dialysis machines). Originally offered on a voluntary basis to people who were interested in attending, the Academy was evolving to become an activity that facility administrators were encouraged to send new teammates to, preferably within the first 90 days of joining DaVita. Data showed that people who attended an Academy had a turnover rate of about 12% compared to 28% for those who had not, so attending an Academy was critical for both retention and also for engaging people fully in the DaVita spirit and way of relating to each other.

A typical Academy session consisted of a combination of lecture and experiential sessions on subjects such as communications, team dynamics, and conflict resolution. The evening activity between the first and second day was always the DaVita Olympics, where teams competed with each other in various indoor light physical activities and performed skits with songs and music that they developed. This informal social interaction, singing together, acting silly together, and working together to compete against other teams, helped break down barriers and build energy and spirit.

Academy II

Academy II was a newer program attended by all teammates from a specific region, designed to “take facility performance to the next level by fostering mutual accountability amongst the team.”7 Because the program involved all teammates from a region, centers were completely closed on that day, requiring that dialysis treatments be rescheduled. By emphasizing how to hold difficult and honest conversations among the teammates to resolve interpersonal issues, the course fostered better and more productive interactions. The course also contained numerous activities designed to impart skills for team building and joint planning for operational improvement at the facilities.

There was every indication that the commitment to training and development at DaVita was increasing in scope and reach. Evaluation of all DaVita University activities was taken very seriously and the programs and materials were constantly being tweaked to make them better. In June 2005, Training (now Training & Coaching Today) awarded DaVita the “ Training Top 100 Award,” which recognized the company’s commitment to learning and performance improvement.

Recognition and Communications

Another way in which people learned about the DaVita way, felt attached to the company, and learned what was going on was through communications and recognition. There were bimonthly conference calls with all of the facility administrators; more than ten different newsletters including DaVita News and Views, the overall company publication; an intranet and email system, and voice mails and emails to celebrate special events and company milestones. Thiry personally answered every email he received from anyone in the company, and he received a number of them, particularly following his appearance at an Academy or training program or a visit to a facility. Facility administrators were encouraged to hold informal meetings with their teams on a regular basis to check in with each other, engage in joint problem solving, and to share information about the facility and the company. It was a company-wide policy that a “town-hall meeting” had to be held whenever an executive at the level of vice president or director or higher visited with a group of teammates at a facility or business office. These meetings gave teammates the opportunity to interact informally with the executive and to ask questions about whatever was on their mind about the company.

Recruitment and Career Development

Although there were obviously a number of people who had been with the company prior to late 1999, at least some of those who had joined since its “rebirth” in Phoenix had been attracted by its reputation and unique style. For example, Cathy Gelb recalled,

· In 2001, my husband was doing consulting with DaVita and he would come home and just rave about this company and they were so unique and the different things they were doing. I said, “Well find out if they need any trainers.” Lo and behold, they were running this two-day program called The Academy that they had just started in 2001 and they were looking for someone to run it for them. So, in November of 2001 I joined DaVita to be associate dean of the Academy.

Many, although not all, of the regional directors and the vice presidents (the people the regional directors reported to) had been nurses and then nurse administrators—they had worked their way up in administration. Of course, people in finance and some of the other staff functions had MBAs and other backgrounds. Recently, DaVita had expanded its recruiting efforts at business schools, including Harvard and Stanford. The intention was to hire people with MBAs who would go fairly quickly into general manager roles such as regional directors, overseeing a number of facilities. Thiry noted that it was important to get general management talent into the company from numerous sources.

Benefits and Pay

DaVita offered a comprehensive benefits and pay package that was somewhat unusual for a company that had a reasonably large number of relatively low-paid, hourly employees. Pay was pegged against competitive benchmarks. At each Academy, Thiry would say, “With respect to wages and healthcare benefits, we intend to be fair and competitive. We must be consistent with the market. With respect to everything else, we want to be superior.” There was a broad-based profit-sharing program that covered virtually all team members, based on the idea of sharing the village’s good times and success with all of its citizens. These cash bonuses meant a lot to those receiving them. One email to Thiry is reflective of the sentiments expressed:

· Good Morning and Happy Holidays! I would like to say THANK YOU for the check I received this morning in homeroom. This was an unexpected gift from the Village. This will help with Christmas for my family. We have many to help and feed that day. I am almost in tears right now writing this to you thinking of the extra things that I will be able to get for my daughter and NEXT STEPS husband and the extended family that is living with me. This thank you comes from the heart and [I] wanted to express my gratitude for it.

There were also benefits that provided people an opportunity to invest in professional and personal growth. The brochure listing the benefits for teammates was called “Because We Care: Davita Teammate Benefits.” Inside it said, “The strength of our team is the foundation of our company.… In our quest to be the Employer of Choice in the healthcare industry, we have developed a comprehensive program of benefits that are focused on your health and welfare, investing in your future and special programs that are unique to the DaVita Village.” In describing this investment, Thiry noted that “it is not only in education for their jobs, but also in helping everyone advance their leadership skills and their own sense of self.”8

Health and welfare benefits included a comprehensive package of medical, dental, and vision benefits, extended illness leave, both short-term and long-term disability insurance, life insurance, and a flexible spending account to set aside pretax dollars for health or child-care expenses, and an employee assistance program. Investing in the teammates’ future included a 401 (k) retirement program, a teammate stock purchase program, profit sharing, the internal training the company provided, and various forms of educational assistance, including tuition reimbursement up to $3,000 per year, and an RN scholarship program that permitted people to work for DaVita while attending nursing school, with all tuition and fees paid up to a maximum of $5,000 per year.

Unique to the village were also two programs that provided tuition assistance for the children and grandchildren of teammates. The DaVita Children’s Foundation provided some college scholarships for children and grandchildren of teammates, selected on a competitive basis. And the KT Family Foundation, funded by Thiry and others, provided money to be used for educational expenses for the children and grandchildren of DaVita teammates attending grades 6 to 11, again selected on a competitive basis.

NEXT STEPS

Thiry was a person incapable of being complacent. If you talked to him about what DaVita was doing right, he seemed almost disengaged.

It was only when you brought out problems that he seemed really interested in the conversation. Although DaVita had enjoyed a remarkable transformation and success along multiple dimensions since he and his colleagues had arrived in late 1999, he wondered what else he and the company could be doing to make it even more successful and special. For instance, the team’s goal had been to make DaVita “The Greatest Dialysis Company the World Has Ever Seen,” an objective that it mentioned on its Website and repeated in virtually every gathering of DaVita people, whether executives or front-line caregivers.

It was clear that DaVita had gone a long way toward that goal in six years and was a unique organization with a distinct style and approach. DaVita had been largely successful in a quest to, at least for a time, eliminate the apparent conflicts between the interests of shareholders, teammates, and patients. The company had created a management system in which the interests of each were coincident. Led by Thiry, Mello, Vlceck, and others, the company’s deliberate culture-building efforts had paid dividends in terms of reduced turnover and improved performance.

However, challenges remained, including integrating Gambro teammates, continuing to improve operating performance, ensuring continuity and growth into the future, managing governmental relations, and maintaining the commitment and passion of teammates doing difficult work in a very competitive labor market. At the top of Thiry’s “to do” list was the integration of Gambro’s 500 centers and 12,000 people.

 

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