August 9, 2016 by Speakers' Spotlight
How to Handle Stepping Back from the Company You Built
John DeHart’s purpose in life is to create systemic change by building companies and building culture. The co-founder and CEO of Nurse Next Door Home Care, John has helped shape the company into one of Canada’s most successful health care brands, with over 85 locations in North America. Speaking on inspired entrepreneurship, workplace culture, and leadership, John takes the idea of “corporate vision” and turns it on its head, to leave audiences with a fresh perspective, energized, reinvigorated, and inspired to take themselves and their organizations to the next level. In this interview with Canadian Business, John and his co-founders of Nurse Next Door talk about the emotionally and logistically complicated work of handing off their baby:
Letting go may be the toughest challenge for any entrepreneur. Ken Sim and John DeHart did it in the prime of their careers. The founders of Vancouver-based Nurse Next Door, which provides home care to seniors, stepped down as co-CEOs, even as their company was on the cusp of rapid expansion into the United States. They learned to trust new CEO Cathy Thorpe, former director of Canadian operations for the Gap, as she took their franchise network in new and unexpected directions—and learned to keep their opinions to themselves. Sim, DeHart and Thorpe discuss candidly how they navigated the swamp of succession.
Ken Sim: There was never any consideration given to [selling out]. I’m the largest shareholder of the company. I want to be involved until I’m buried or cremated. First, this company has an incredible purpose of making lives better. So for me it’s not about the money; the money is a by-product. We’re taking care of people’s parents in their own homes. We’re letting people age in their own places with dignity. I get really stoked about that. Second, I’m not a flipper. I just think the company’s phenomenal, so why would I ever want to give it up?
John DeHart: My peer group is entrepreneurs. They all have the same issue. Somewhere inside they all want to do it: step back and let someone else run their companies. I’ve been asked so many times how we did it.
Ken Sim: We tried to do the co-CEO thing. The reality was we couldn’t make it work. If people didn’t like my answer, they went to John. If they didn’t like John’s answer, they came to me. John and I have two totally different styles of running the place. We both acknowledged that we were the biggest impediment to the company’s success—more than the competition, more than the economy. We had to make a change so one person was accountable. And so one of us had to step aside.
John DeHart: We knew we would eventually have to go with one CEO. It ended up being me [in 2012], but then that brought a new set of problems. I didn’t want to report to Ken. When we sit down for a board meeting, whose side wins? We both struggled with it. Eventually I realized it would be better if we, as owners, were on the same side of the table.
Ken Sim: I remember talking to Milt Wong [the late Vancouver financier and philanthropist] about five years earlier. He said, “You’re going to struggle emotionally, Ken. You’re going to lose your sense of identity. You don’t get your sense of identity from your title or your paycheque, but from how people interact with you. People are not going to be coming to you to solve problems.” I said, “Thanks, Milt. I’m ready for that one.” When I stepped back from the day-to-day operations, I went through probably six months of depression. Emotionally, it was just a train wreck. It was something I had to work through.
John DeHart: Early on, I thought that when we got to 100 locations, I would hand this off. I’ll want to launch the next brand. By 2013, we were nearing that 100-location threshold. But it becomes an execution piece. Verne Harnish, one of our mentors, said there’s a 50% failure rate for businesses going from the founder to an outside CEO. And I’m saying to myself, I don’t know if I can risk 50%.
Ken Sim: While Johnny did some amazing things, it became clear that we needed a different skill set to take the company to the next level.
Ken Sim: We couldn’t put it out to a massive search and advertise it everywhere, because people might think, Oh my God, what’s happening? instead of seeing that we were thinking strategically, that to reach the goals we want to hit three, five, seven years out, we need a different skill set.
John DeHart: We decided on a process. First, we highlighted what traits and skills the person had to have. For example, the person had to have some experience with family business. Ken and I are kind of like two brothers. We look at things differently and don’t always get along. We needed someone who could deal with that.
Cathy Thorpe: I actually started using Nurse Next Door about six years ago. My parents are in Edmonton, and my mom was going through a very serious operation. I was literally sitting in the hospital waiting room with my dad, thinking, What am I going to do, because I live in Vancouver and my dad can’t handle this on his own. Then I saw the pink brochure beside me. So I was a client. I had an amazing experience.
John DeHart: Ken and I had to each come to the table with three names. The people on the list all had jobs already, so the board contacted each of them to gauge their interest level. I didn’t know if Cathy was available. She wasn’t living in Canada at the time. But I knew her, which in my mind reduced the risk. Our kids went to school together.
Cathy Thorpe: We were living in Germany, and John called me, saying, “We’re looking to bring in a president, and would you be interested in that role?” I jumped at the opportunity because I had gone through that experience [of being a client].
John DeHart: We conducted the full interview process with two people, one from Ken’s list and one from mine. Due process was important. We wanted to see someone who had worked at a company where the brand execution was stronger at 200 locations than it was at 100. Cathy’s experience at The Gap—that was a brand that executed flawlessly. She built the team and knew how they did it.
Ken Sim: We went through some hard-core interviews, a process known as topgrading. We went back to high school, college; we looked at her grades, every single job she’s had. We hired an outside consultant from Chicago to facilitate that process. I had a lot of confidence in it. The results were all telling us that we had an amazing person here.
John DeHart: We were very diligent on the reference calls. We talked to seven or eight people who had worked for Cathy or whom she had worked for. Each interview was an hour long. The people who’d worked for her all said, “I would run through walls for her. I’d follow her anywhere.” And that’s not because she was nice to work for. They said she was a hard taskmaster. One told us, “She’d make me cry once a year.”
Cathy Thorpe: They wanted to bring someone in who had done it before. They’ve built what they’ve got, but they didn’t know what that next level could look like. They looked at my 15 years with the Gap, running the Canadian business for a number of years and the German organization for three years. They were looking at my results on leadership development: How have I driven results in my career, how have I done that through people and how have I created those teams that can really excel?
John DeHart: It was a scary hire. It didn’t come easily. It wasn’t a choice between Cathy or the other candidate, it was us—are we ready? If it wasn’t for the board’s role in this process, it would have been a lot more difficult.
Cathy Thorpe: I have a family business certification from Sauder [School of Business at the University of B.C.]. I became intrigued with family business after working at the Gap and then consulting with private companies. How can you bring the governance you have in corporations into private companies? Another word for it is “rules”—rules for how people are going to interact and work together. Family businesses are amazing and messy. They’re highly emotional. So if you don’t bring in rules, the lines can get blurred.
Ken Sim: It’s true Cathy’s here only as long as we want her to be here. On the flip side, Cathy’s only here as long as she wants to be here. We wanted to make sure John and I did not get involved in how she achieves her goals. When she came on board, we said we’re going to focus on the What and you focus on the How. We’re going to give you a structure, and these are the non-negotiables: Our core values are the non-negotiable laws of our organization. Everything has to be done with our core values front and centre. But besides that, go nuts.
Cathy Thorpe: I said for the first six months, I need a board meeting every month. They were looking at having them quarterly, but I said, “I need to get to know you guys.” They are very different. John is the brand, the sales person. Ken is the process person. They each go to those places when they’re talking through things, and I didn’t want to be the person in the middle making the decision. If there was something they didn’t agree on quickly, I’d put it on the board agenda. I would sometimes have to say, “Thanks for that idea. It’s a How.” We really had to be specific about it. We’ve got it on paper. We wrote down how many times we’re going to meet with one another. How many times do we meet for coffee? How many times do we meet for lunch? What does Ken need to feel like he can trust me in this relationship? What does John need?
John DeHart: After we made the announcement, I had one-on-ones with each member of my leadership team, starting with the longest-serving member. There were a lot of tears. I told them it was time to elevate our leadership, and I wanted the employees to be hungry to learn. A week later, they had a new boss. I wasn’t sure whether this would trigger an exodus. After all, we hadn’t included the employees in this process and didn’t consider internal candidates. No one left that first week, so that was good. We got on a video conference call to introduce her to the franchise system the next week. Then Cathy and I got on a plane to visit every region. We got to most of our franchise partners in person. But there was skepticism. I got calls and emails from people who said, “What the hell?” I’m sure they all started to question why they wanted to be a franchisee. I was lucky in that I knew Cathy and I could vouch for her.
Cathy Thorpe: Our first board meeting was about the rules of engagement. We were as specific as saying, “OK, how much money can Cathy spend without getting approval? How often can John and Ken come into the office?”
John DeHart: On day one of her employment, we were on the couch in our old head office, where you could see the kitchen, and in the midst of our conversation, she said, “What’s going on with the kitchen? It’s a mess.” Obviously it was driving her nuts. The next day, we were flying to Toronto, talking for three hours on strategy and then she said, “What’s the system behind the kitchen?” I said it’s just organic; people clean up when they can. She said we needed rules. That’s when I realized this was the person for us. We needed somebody who worries about the details.
Ken Sim: For me it wasn’t much of a learning process. I screwed up a couple of times when I got involved with the How. We were able to clear that up pretty quickly. John probably got a little more into the How than I did. I was already gone for two years. John hadn’t experienced that.
John DeHart: Before Cathy started, I was on the phone with her from Germany for an hour every week. She wanted to know about the leadership team. Ken and I assumed we’d put together the best possible team. But she put it to us, “Have you really?” Then after she started, we had a six-month transition period, where I was still coming into the office. Right away I saw a difference in her leadership style from mine. Her expectations were higher. In the first six months, one person on the leadership team didn’t make it. This was a longtime employee, and I didn’t like it. I had to bite my tongue.
Cathy Thorpe: This is their family they’ve worked with for many years. They are very proud of the people who have helped move this business to where it is. But you do have to bring in new people. So how am I going to get them to buy into that and feel great about that? When I brought in my first hire, I got her in front of them enough times that they believed in her; they trusted her.
John DeHart: After the onboarding process, I went on vacation for a month. I was ready to let go. When I came back, I could see it was a more high-performance culture. It was tough for me to watch. There are times when I want to do something. I have 100 ideas a day about Nurse Next Door. After the six-month mark, I tried coming in with an idea. But she deflected that, and I realized she has a focused plan. I haven’t stopped having ideas, but I’ve become mindful of what to bring up.
Cathy Thorpe: As John and Ken have said for a long time, the company is not for sale. At the same time, if a strategic partner was to come along and they could see the value of working together, they would entertain it. [When St. Joseph Health made an offer], I would say John and Ken weren’t ready for that conversation. But we already had the Vancouver franchise, which is a very successful corporately run structure. Why can’t we leverage that knowledge and build it out? So when the St. Joseph conversation came along, we were open to [selling a master franchise]. We see this as a strategy that can help us expand in the U.S.
Ken Sim: Cathy and her team originated the whole thing. It has nothing to do with John or me. The opportunity presented itself—and opportunities always present themselves—but Cathy and her team not only seized it but also brought it across the line.
Cathy Thorpe: They teach me things all the time. I came from that corporate background where you try new things but within a box. There’s very much a culture here of non-judgment, and I attribute that to John and Ken.
Ken Sim: I have a company now called Rosemary Rocksalt. It’s a Montreal-style bagel shop. [My business partner who started it] didn’t know how to scale. I think it could be a 500-location, billion-dollar company within 20 years.
John DeHart: Nine months after formally stepping back from Nurse Next Door, I got involved with a new business, Live Well Exercise Clinic. It’s a medical fitness business for people with chronic diseases. My wife and I bought a stake in the company. I think it could be as large as Nurse Next Door. This time it won’t take 15 years.