BE DECISIVE (Searchfunder Interview)

SEARCHFUNDER INTERVIEW OF MOISES EILEMBERG - PART II 

We spoke with Moises Eilemberg, former CEO of Avadyne Health and Managing Partner of Rush Mount Ventures. In this three-part series, he describes his lessons learned as he transitioned to being an operator, his follow-on acquisitions, and exit. 

It's been a while since we first spoke. First, I'd like to check in with you on whether you have any additional thoughts from our last conversation?  

Our conversation pretty much captured my thoughts. At the end, we talked a little about how in a small company with not a ton of resources, we may have - when I say "we," I mean people who come from business school backgrounds or from working at large organizations that are run more professionally -- We probably have a tendency to identify a lot of things that could probably be improved. My point was to be careful about how many things you change in a small organization in a short period of time. People by nature, especially those who have been doing the same things the same way for 35 years - which was my situation can only take so much change in a given period of time. My learning and my recommendation would be to try to identify the 3 things that are really going to move the needle if you do change them and focus on those first. Worry about the small stuff over time -- as the organization gets accustomed to the concept of changing things, as time goes on. 

Were you finding that energy was so dispersed that folks could not get the priorities accomplished? Or, were they confused and resistant to change? 

Not so much that. From the individuals' perspective, there is a significant amount of anxiety and fear of the unknown when you have a new owner and new CEO. People have that anxiety in general. Then, certain company cultures are afraid of or reluctant to change. Somebody coming in from a large organization might see that that the health benefit plan really needs to be different. The way payroll is done needs to be different. The way we do the holiday party needs to be different. And, the sales compensation plan needs to be different. We need to be doing accounting a different way. And, we need to hire a new VP of Finance. The expense reports are all screwed up and should be done differently. So, there's a list of probably 500 things that you can come up with that you want to change. If you focus on everything at the same time in the first 6 months, people are going to throw their hands up in the air and say, "Everything is changing."

My recommendation is that, of those things that I mentioned, the ones that are really going to make a long-term impact and that you want to get right -- and get right quickly - is the sales compensation plan, the sales organization and, possibly the hiring of a controller so that you are confident in your books and your accounting. Then, the next year, when the health benefits renewal comes into play, then you can worry about how you are tweaking the benefits. When the holiday party comes around, you'll figure out how to communicate that "We're doing this differently this year and going forward." You don't necessarily need to revise the employee manual this month. Making sure that you don't throw too much change at people at the same time and just do the things that are really going to have long-term impact first.  

How long did it take you to feel like you had the hang of the business?

I would say somewhere between 6 and 12 months. Probably around the time when it started looking like that first year after we acquired the business was going to be better than the prior year (which was the diligence year). It gave me confidence that things weren't going to fall off a cliff (chuckle) under new ownership. That happened towards the end of the first full year.

From that point forward, did you feel as if you were the same as any other CEO or was there a distinction from having come through the search world?

I still recognized that I was still fairly new to the industry and had tons to learn. So, I was still pretty cautious at that time. 

When did you start to think about growth? 

After the first 12 months, I started thinking about additional acquisitions. By that time, I was comfortable with the metrics. I thought I knew the right questions to ask and the right metrics to look at in diligence - which ones were much more important than others. Around that time, I started putting out feelers for additional acquisitions.

Did you do a follow-on acquisition? 

We closed the original acquisition in January of###-###-#### We started negotiations and discussions with our second acquisition around February/March of###-###-#### We closed in June/July of 2007.   

I suppose you took the lesson learned in the first acquisition to make the second go more smoothly? 

Yes, it definitely went a lot smoother. But, there was also different challenges. The owner of the second company I acquired was almost the polar opposite of the first acquisition's owner in that he and I clicked very nicely. We had similar values and philosophies. He was very straightforward, honest and transparent. He was genuinely interested in his employees and their success. So, with respect to my relationship with him, it was much, much better and much smoother. He also immediately deferred everything to me. He was there for support and for anything I wanted him for or needed his advice on. I was actually pretty proactive in seeking it because we had a good relationship and I trusted that he had a good agenda.  

That's a great relationship.  

Actually, about 3 to 6 months after the close, I invited him onto the board of the company. He also kept an equity interest in the business. It was a much tighter, much better relationship.

The challenges then came in the integration and melding of the cultures. That's where a lot of the challenges surfaced.  

How did you handle that? 

It was a very crash course in the issues surrounding putting 2 organizations together. Both organizations had been around a long time. One was a collections business where collectors get paid on commission. They are kind of like traders, where they have their own P&L, if you will, and responsibility for production. The other business was primarily a customer service function. It was a collaborative, service to the patient type of culture. It was two very different cultures. The sales cultures were very different. It was a challenge.

I'm not sure it's as much of a lesson learned. Now that I've been through it one time, I know what to do differently the second time. The first time around, I didn't have the confidence that I would have now. So, I definitely took much longer than I should have in setting up the new organizational structure and who reported to whom. I recommend making the hard decision as opposed to taking the approach of: I'm not really sure of who will report to whom, So, let's play it out and see how people get along and then I'll decide. That was probably not the best approach. 

Was it because you wanted to get the decision right? 

I wanted to get the decision right. I was basically trying to let things play out and gather more information as opposed to being decisive and moving forward with making a decision and drawing clear lines right away. 

My guess is that based on your experience over the last 10 years you've become more decisive?

Yes.

More reliant on trusting your gut? 

Yeah. I guess another learning is that in some situations it's better to make a decision and make it clear to everybody what the decision is at the risk of not being 100% confident of that decision, knowing that you have a 20 or 25% chance of later having to reverse it. In many instances, particularly in dealing with reporting relationships and things like that, it's many times better to make a decision that you are 80 or 85% sure of than leaving uncertainty for 3 months in order to maybe make a decision that you'll be 90% sure of. 

Is that because of the uncertainty reduces the productivity of the team and because of the stress on team? 

Yes. All of the above. When people don't know where they stand and they don't have a clear understanding of what the organization looks like, who reports to whom and who is making the decision (Am I supposed to be making the decision? Or should I be asking someone else?) that creates a tremendous amount of paralysis, inefficiency and wasted time.

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