Trust in a turnaround: an organizational rebuild starts by restoring the board's confidence in staff leadership.

AFTER TWO YEARS OF CRIPPLING DEFICITS AND DETRIMENTAL communication gaps between senior management and the board, the state of affairs at the Medical Education Collaborative (MEC), Golden, Colorado, looked gloomy in 2002. That wasn't always so. The association's first chief staff executive had built a sterling reputation for himself and the association and a high comfort level among board, staff, and clients (our word for members) during his 12-year tenure, which ended in 2000. Founded in 1988, the organization, a 501(c)(3) with a $2.2 million operating budget, had experienced significant growth in its core business of developing and certifying medical education programs. When the long-standing CEO retired, the board expected more of the same trustworthy leadership from his hand-chosen successor and new senior management team. But reality didn't match expectations.

For two years, the board made several unsuccessful attempts to facilitate much needed growth and implement positive organizational change. But senior management neglected to share critical financial information, thus masking full effects of a fiscal downturn. As a result, significant monies had to be pulled from the reserve fund to maintain operations in 2000 and 2001. The 2002 budget predicted an operating loss of more than $700,000. Operations suffered. The board experienced turnover. Staff morale dropped precipitously.

The bonds of trust between board and senior staff had been broken, and it was time for a significant decision: Undertake the significant effort to turn the organization around or turn off the lights for good. In March 2002, the MEC board made the tough decision to part company with senior management, stabilize the organization using an interim management team, and re-engineer MEC using a unique approach: The board would focus on the re-establishment of trust between the board and staff as a framework to rebuild the organization. In fact, board members were so gun-shy that they went so far as to assign a board member to the top job of CEO and to hire a chief operating officer with the idea that the two would work together until the board felt that trust had been restored and the COO could take over the helm. Unconventional? Absolutely. Any number of governance experts would beg to differ with this strategy.

Imagine my surprise when I interviewed for the COO position and board members told me that they wanted an association turnaround that would include a change in business strategy, analysis of possible downsizing and regional office consolidation, implementation of a customer service and business development culture, and the addition of a board member as a full-time MEC employee--effectively the CEO.

At the time that I joined MEC, the board and I reached an agreement regarding my eventual transition to the top position. If we worked together to re-establish trust and grow the business, the board member serving as president and CEO would step down after three years at the helm.

But this unusual leadership structure is only part of the story. The processes MEC used to turn the organization around, combined with the lessons learned from our successes and failures along the way, may be helpful to other organizations facing similar challenges.

Laying the foundation

When recalling reasons why MEC's board decided on its particular turnaround strategy, MEC board member Mark Dorsey, CAE, says, "Without trust, all you have are questions." Dorsey, assistant executive director and COO, National Ski Patrol and American Snowsports Education Association, Lakewood, Colorado, explains that the questions multiply into "questions about decisions, recommendations, investments, business plans--you name it. Trust is one of the most significant factors in an association's success."

Fortunately, MEC has only a three-member board, making involvement and decision making easier. Two of those members live near the headquarters office in Golden, Colorado. The third board member lives in California, the location of MEC's regional office at the time. All three members of the board made themselves readily available to provide insight, assistance, and a willingness to combat big problems with bold decisions. I recall one conference call about staffing decisions that started at 9:30 p.m. and ended after the late-night talk shows.

The rebuilding process began with a promise and a wish list. The promise was that the CEO and I would make the board aware and a part of all business-process and staff-change decisions as they developed. The instant any board member felt out of the loop, it was that member's responsibility to identify the issue and propose a solution. The wish list simply was a grouping of business components, programs, and deliverables that all good associations maintain--and that the board and staff of MEC agreed to restore or create. The wish list included simple deliverables such as

* updated job descriptions for all employees;

* monthly financial reports for board review;

* an updated business plan;

* data security and storage plans;

* staff training and motivation programs; and

* a reserve fund investment policy.

By identifying and agreeing on the results we wanted, we had a better idea of what to seek from employees. Across a six-week period, we held a series of intense meetings among board and staff. Eight of MEC's 17 employees worked outside of the headquarters office. Dorsey and I traveled to California to personally interview each employee at the satellite office. With a more firm understanding of employees and workflow, MEC's board member and new president, Judy Over, a national education director with 15 years of trade association experience, worked with me to focus on staff education and evaluation. Sticking with our trust theme, honesty was the only policy, because we knew that an informed, productive staff was essential in doing much of the work that we needed done. We held an open discussion to inform staff members about the organization's projected deficit, its goals, and the fact that I, in cooperation with the board, was analyzing and recommending improvements in five areas:

* staff productivity and performance as measured against the wish list, goals, and updated business plan;

* the value of keeping both a headquarters and regional office;

* development of a new corporate culture, stressing open, honest communication, accountability, and accomplishment;

* alignment of the organization's strategic vision with core competencies; and

* the match or mismatch between staffing levels and the organization's mission and market success.

We answered all staff questions to the best of our ability, including, "Are we going to lose our jobs?" Our answer: "We don't know, but we will let you know immediately about any staffing decisions, explain our rationale, and provide a transition package that takes into account your length of service." Of 17 staff members, only one said that she was uncomfortable with our approach; she explained that she didn't like conflict. We don't either, but it's a reality of doing business.

Creating a game plan

To move forward with our defined goals, we started by focusing on the basics: our mission, services, value to clients, and strengths and weaknesses. "Although I had been a board member since MEC's inception, it was time for all of us to start from the beginning," says Over. Throughout the process, a mind-set of a start-up organization that had no sacred cows served us well. When we asked staff, board members, and some clients, "What are the critical services we provide?" we were surprised by some of the answers. In short, we concluded that MEC existed for fewer reasons than we imagined. Some services existed to provide a perceived value established long ago. Our core service, however, was simply to provide cost-effective certification services that reduced industry risk while increasing accuracy, compliance, and quality. Our ability to provide these quickly within a nonbiased framework was critical to our customers, who represent educational organizations and the pharmaceutical industry.

To validate the new core service idea, we conducted additional market analysis and surveys. We hired a research firm to obtain opinions from both current and potential customers about desired services and programs, as well as our fee structure. The research confirmed our focus, and MEC chose to rebrand the organization around the core services.

Our community had come to know MEC as many things to many people; now we needed to be open and honest about what we would strive to be. In addition to an extensive education campaign via telephone, we sent e-mails, postcards, and letters to all people and organizations interacting with MEC. The list included all clients identified in accounts receivable, as well as accounts payable. It only helps a transition when the world hears about it from every rooftop.

Aligning operations with objectives

Behind the scenes, a serious operational situation required significant changes in culture, staff, business process, and even the physical workplace. Unfortunately, the years of prior management and communication problems had created a culture that wouldn't support MEC's new focus. Because culture is an extremely strong force, within the first year, we had to make sweeping changes.

* Implement a new structure and service model. Based on surveys, analysis, and our core competencies, we designed and deployed a new organizational structure around a customer-service and quality-improvement model. Our former structure required most employees to be generalists, covering everything from answering phones to servicing all levels of internal and external clients. The generalist approach was good for covering employee gaps and work overflow, but it was bad for ensuring solid business tracking, customer service, and management reporting. Although our new structure added a layer of management, it allowed for greater specialization and increased performance through separation of duties. The new organizational chart held even greater meaning when combined with a new business plan, revised salary and benefits structure, updated job descriptions, specified performance review process, revised employee manual, and new orientation process.

* Conduct terminations. Most of the 17 staff members weren't ready for the dramatic culture shift we envisioned. Instead of fighting a long, losing battle to change culture, we opted to change staff and positions where appropriate. In 11 months, we eliminated 13 of 17 staff positions. We staged the terminations in three main cycles: 1) immediate elimination based on performance and need for the position, 2) midterm terminations based on business process adjustments, and 3) final terminations related to consolidating our California office positions back into a new Colorado headquarters office. Our staff interviews had identified significant duplication between the positions based in the Colorado headquarters office and those in our California office.

At the outset of this process, we openly communicated the three planned stages with staff and made a commitment to complete the restructuring within a year. Legal counsel was sought prior to the staff eliminations, and we practiced open, honest communication with all affected employees.

* Hire new staff and open a new office. The realignment included adding eight new positions--in accreditation and client service, sales, and marketing--that matched our needs and goals. While many associations hire for skills, they almost always fire for personality. Because we couldn't afford additional turnover, we weighted personality matches with the organization slightly higher than the skills match. We sought motivated candidates who combined an association background with a startup mentality. We selected candidates who embraced the building blocks of trust: loyalty, commitment, and communication. Across time, we learned that this strategy had both positive and negative results (see sidebar). To centralize and improve operations and service, we closed the California office at the end of the first year. At the same time, we relocated our existing Colorado office to a new, expanded space in Golden that allowed room for future growth.

* Support change. To show solidarity during this tough transitional process, senior management and the board discussed, debated, and agreed on each major step and expected milestone in the process. We edited our mission, vision, and purpose to reflect the evolution of the business. The three-member board was a big help in this area, providing quick decision making and no political agendas. Staff was often involved, and these decisions and changes were methodically and regularly discussed to ensure continued building of trust and commitment. In addition, personal visits from the board to individual staff members helped solidify the open-door trust and teamwork approach. While somewhat unconventional, this technique worked well in facilitating our turnaround.

Training and supporting the new team

As we implemented changes and rebuilt and trained the staff team, continued internal and external communication was critical. We educated customers about staff changes and kept an open-door policy with customers regarding the improvements that MEC was making on their behalf. Weekly staff meetings required two hours or more to provide general employee training, answer questions, and leave some time for a brief team-building exercise. One of the best exercises we undertook involved asking employees to find a song that best described them. All the songs were burned on a CD and copied for staff. We held a contest to see who could match the songs to the right employees. It provided humor and much needed bonding.

The board was kept in the loop through weekly discussions and phone calls, senior management presentations, and a monthly board report that came from Judy Over, the board member on staff. It would have been easy for staff to hate the idea of a board member watching over their shoulders. But for those of us who had ever wished that board members "could actually see how hard we work," this was a dream come true. The factual information regarding staff efforts and successes was not clouded by any intermediary, but rather came directly from a peer. Communication increased between staff and the board. Credibility, trust, and staff successes kept growing.

Implementing improved processes

All of the changes took place with one eye on the future and another on the bottom line. By conducting a line-item analysis of each cost center, staff identified expenses that could be reduced or delayed and service contracts and agreements that could be renegotiated. The ultimate goal was to shrink the deficit by increasing service and revenues while cutting costs.

Our focus remained on improved customer service, but constant tweaks in our procedures were necessary. This just-in-time management created the need for extensive meetings, since employees' job descriptions needed to change along with the rapid process improvements.

Part of setting forth the best operating procedures and workflow came from identifying bottlenecks in productivity. We needed to drive through a few potholes to know where to pave the road. "We had aggressive goals that required significant streamlining of our processes and procedures," says MEC Vice President Kelly C. Enders. "Fortunately, the level of trust and involvement of our board allowed us to focus on the things we needed to do to be successful."

Trust allowed staff to make necessary adjustments to firmly establish a customer-service culture and performance model during the two-year turnaround cycle. Once staff knew that they could expect each other's full support, as well as the support of the board, the results started flowing. The board's confidence also grew, restoring the sense of trust throughout the organization.

Measuring outcomes

Trust breeds success. After two years of re-engineering, MEC's external and internal customer-service levels increased along with the organization's financial results. We scored measurable success in several key areas.

* Service. Despite a reduction in staff from 17 to 12 employees, MEC certified 35 percent more education programs in 2002 than in 2001. The upward trend continued in 2003 and 2004, with 32 percent growth in the number of organizational clients. Client retention remained steady at 87 percent throughout the organizational changes. In addition, the organization implemented a testimonial program due to substantial, unsolicited positive customer feedback.

* Committee growth. Based on organizational growth and industry interest, MEC's education review committee expanded its size and scope, and a new education development advisory committee built volunteer and organizational contacts and an industry-trend information database.

* Finances. Despite facing six-figure losses in the first year, board and staff righted the organization and achieved a positive net income of $570,000 in fiscal year 2003. Revenues increased by 31 percent, while expenses decreased by 18 percent.

* Morale. Amid all the staff changes, morale continues to remain high. Employees regularly pitch in on programs well outside their job descriptions, and none of the new hires left to seek positions outside of MEC. In addition, the trust that stemmed from planning, fairness, and honesty resulted in no bad blood or legal problems with departing employees. Several remain in contact with MEC and have asked for letters of recommendation for other positions.

Drawing conclusions and carrying on

Unconventional as it was, on-staff board oversight achieved improved communication between senior staff and the board, higher trust for executive decision making, and swift decision-making ability. As a result, the board member serving as president has expedited--from three years to two years--the transition period to step down as president. As this article heads into production, Over, MEC's president, elected to step down from her position. The board then eliminated the COO role and elevated me to the position of president and CEO.

"After two years of hard work and significant [organizational] growth, the board was ready and willing to complete the transition," says Over. "We have a management and staff team that we support and trust 100 percent."

The turnaround included its share of stress for board, staff, and clients. And clearly the quality-improvement process is never-ending. New service and regulatory requirements will always spring up. But when you witness the extent to which trust creates a positive domino effect on an organization's success, most challenges are really opportunities in disguise.

Want more information on this topic? Check out the "Outtakes and Exclusives" and "Link to Learn" areas at www.amonline.org.

RELATED ARTICLE: 10 RULES FOR TRUST BUILDING

During a two-year organizational turnaround at the Medical Education Collaborative, Golden, Colorado, we learned some valuable lessons about creating an environment of trust between board and staff that leads to a vibrant, effective organization.

1. Establish ground rules for board-executive staff interaction and decision making. Determine appropriate authority, responsibility, decision-making, and reporting requirements.

2. Stay creative amid changes. We earned significant loyalty, for example, from an employee whose position was being eliminated. In our discussion about her position, she explained that she understood the rationale for change but wanted to be considered for a quality-improvement position that she proposed; we agreed that her idea was sound. The new position increased organizational success, while convincing her and other employees that the organization was trustworthy and not simply out to eliminate people and positions.

3. Balance nonprofit educational mission and profitable market-based approaches. Some associations focus heavily on their missions to the exclusion of their markets. For-profit organizations can do just the opposite. By maintaining a healthy balance between an association's mission and markets, employees and board members maintain respect for sound business principles.

4. Over-communicate the goals of building trust and honesty. This is easier said than done, but we are convinced that employees stayed on the team because they knew that management was an honest partner.

5. Establish a common goal--and enemy. We focused on a goal of customer service and being an enemy of failure. Build trust by holding people accountable for reaching common goals and for living by Thomas Jefferson's motto: "I'm a great believer in luck, and I find the harder I work, the more I have of it."

6. Consult legal counsel early and often during staff changes. Implementing difficult staffing changes clearly has legal implications. By honoring the law and treating employees with respect, you can often avoid nasty and expensive repercussions. While we terminated 13 staff, all of them said that they were treated with respect and dignity; several have remained in contact and have asked for letters of recommendation for other pursuits.

7. Put decisions in writing. You can always change course, but you need to agree on what you have decided for the meantime. Trust grows when you communicate consistently.

8. Don't change faster than your internal or external customers can handle. People need a little time to understand, discuss, and accept change. Even though our staff changes ultimately improved service, we severed interpersonal bonds between staff and organizational clients more quickly than some were ready to accept. As a result, we needed to rebuild trust across time to undo or reverse the damage.

9. Hold team-building activities for staff and board together. Whether you are staff-driven or member-driven, human nature shows that increased connections generally increase trust and teamwork. Team exercises that don't focus specifically on the work at hand help establish mutual respect and support.

10. Have fun and reward hard work. Work hard and smart and laugh at the inevitable mistakes. When you've reached a goal, take time to celebrate--and rest for just a minute before you undertake the next big challenge.

Stephen M. Lewis is president and CEO of the Medical Education Collaborative, Golden, Colorado. E-mail: [e-mail].

PHOTOGRAPH BY TODD POWELL