I received quite a bit of correspondence after my recent piece regarding the CareSync shutdown. I had some pushback about my comments about the risk of working for a startup, where I said, “For people higher in the company who fully understood what it means to be part of a startup, they are likely prepared for such a scenario. For lower-wage workers on the front lines, especially for those living paycheck to paycheck in a relatively tough economy, it’s devastating.”
One correspondent essentially blamed the employees, stating they should have known that working for a startup is risky. I would argue that there were probably a fair number of people who worked there who either didn’t understand that they were working for a startup or didn’t fully understand what kind of risks are inherent in that situation. If you’re a nurse or care coordinator who isn’t as familiar with the healthcare IT space, it might look pretty good. Especially when a company leases a shiny office building and hires a couple hundred workers, people might not register that it’s a startup.
Even in established companies, there can be startup-type projects that put workers in as much jeopardy as they might be with a startup, but it’s not obvious. I watched some of my dearest friends get downsized when their company blew through scores of millions on a project, only to shut it down while the rest of the company went forward in a profitable state.
Another reader commented on the issue of survivor’s guilt:
I read your blog about CareSync today and found myself nodding my head in agreement at most of your points. I’ve been working for a startup company the past couple of years. Prior to that, I held a variety of roles in a different industry, where survivor’s guilt was a daily thing. I can’t tell you how many hundreds of jobs I saw disappear, often for selfish reasons such as protecting the C-suite’s annual bonus. At some point, I had enough and retired and that’s how I ended up in healthcare IT.
There is a huge difference between that industry and healthcare IT. The major players all have negative sales growth, and any growth you see on their quarterly statements comes from expensive acquisitions instead of organic growth. Healthcare IT is experiencing a nice growth curve still since most practices are underserved in my segment. I talk to many different practices weekly and each of them appreciates the help we give them.
The CareSync debacle just highlights the fact that there are people running businesses that they shouldn’t be. Given the amount of funding CareSync received, it is clear to me that they did not have a sustainable business model. The C-suite should have either pivoted or reorganized to a sustainable model. After what happened at Theranos, if I were a CareSync investor, I would be looking into whether or not a crime was committed.
I’m not the legal eagle in the family so I can’t comment about the criminal piece, but these types of examples should give investors pause and encourage them to ask more questions about the businesses they are supporting. I’ve been asked several times to support ventures in a much smaller capacity, from money to labor, mostly because of the personalities involved and their track record for success. Even though I’m a small investor, you have to do due diligence. Just because someone made money in the past in one industry or another doesn’t mean they understand healthcare IT.
I did a deep dive into a company that was courting one of my relatives as an investor, and not only was there really not a market for their product, but how they were approaching it was flawed. It was a bolt-on user interface designed to “improve the EHR experience,” but they were going after it by trying to court major EHR vendors. I gave them a bit of free advice — it’s probably not the best idea to go to a vendor and call their baby ugly. Maybe they’d have a better shot at going after either a regional or specialty-specific user base and getting some grassroots traction then moving up from there and trying to be acquired by a vendor. They ended up cold-calling a bunch of vendors and have gotten exactly nowhere in the last three years.
I also heard from one of my favorite healthcare startup CEOs, whose response made me respect him even more than I already did:
Today’s post is near and dear to me, as it is something I battle every day as an employer in this space, especially in a startup-like environment. I take very seriously the lives I am in control of. I worry greatly about what could happen if bad things happen and I need to make significant cuts. I would have to be a sociopath to not lie awake with that concern as it relates to each client / prospect / lead we are trying to get business and revenue from. If we lose all of our clients, what will I tell the people who rely on our bi-monthly paychecks to feed their families and cover their expenses?
First, I make clear to the entire organization, from board to rank-and-file folks, that everything is subject to change. Even though runway is a great indicator of longevity for overall company success, growth, and existence, that doesn’t mean that there are no risks whatsoever. If projects / prospects don’t come through, certain folks will inevitably face a departure. Fundraising concerns are also a part of it, and with each pitch, it is my job to make sure the health of the company (and therefore the team itself) is well taken care of. Even with revenue, capital, a great plan, and strong leadership, no company is truly protected and no employee is truly safe. It is my job to provide opportunity for folks, protect that opportunity as a condition of their employment, but also be smart and savvy about investment and spend every day. If you come into a company and start counting share price on equity and think it is all rosy, you’ll probably be the first to be shocked if and when things don’t go as planned.
Second, I suggest to employees that not get too whimsical in their spending. I toe a delicate balance, but try to instill in every employee, from executive to intern, the realities that could present themselves and what it would mean to be 180 days without income. This has happened to me earlier in my career, so I can speak from experience — if you aren’t prepared, you will struggle. Saving, being cautious with spending, and being aware of the frailties of life are messages I try to impart during regular check-in with all employees. They don’t teach people these skills. Many assume that the career ladder is a short hike up stairs. Few are aware of what may lie ahead, and it should scare everyone.
Third, I have a separate near-term savings that is a rainy-day fund. Not for purchases, travel, college savings, or retirement, but an account that I fund every month that could carry the family through any immediate challenges that could be faced. Whether it comes with having elderly parents who have poorly prepared for retirement, small children who are likely to need care that may not be covered, or pets that will do absolutely idiotic and expensive damage to themselves and the world around them, I think I have enough liquid capital to get through a rough patch, which took over a decade to stash away. It pains me to think of the things I missed out when I was younger by putting so much money aside, but it makes more and more sense each passing day when I hear stories of friends, neighbors, and colleagues going through career issues that are really scary.
Whether you run a health tech startup, work for one, or are working for a huge health system in any capacity (I have been all three), I think it is important to reflect on your immediate needs in a responsible way. Nothing is guaranteed in life, nothing lasts forever, and getting a heads-up doesn’t normally happen.
I’ve worked with several CEOs who spend money like water and it’s not always clear whether it’s personal money or the company’s money. Knowing my own temperament, I would prefer working for someone who is willing to talk to employees about the possibility of a downturn and his own rainy-day planning rather than talk about his new boat or her condo in Aspen. You may be buying the finest liquor and the best cigars, but how are you doing running the company?
I once worked with a hospital CIO who kept the security camera footage of his house in the Florida Keys running continuously in a window on his desktop, mostly to show off his dock and his boat. The only thing I could think of was how much time he was wasting every day.
My CEO friend went on to hypothesize that perhaps his conservative attitude towards finances comes from being “in healthcare” since we see people who have life-changing medical issues or end up changing their own career plans to care for others. I agree, but also think some of it is also generational, since many people in my age bracket are working under the assumption that Social Security will be a historical footnote by the time we are of retirement age. He went on to close with this:
One last thought on this topic. I don’t think it is specific to healthcare or startups. I just had a friend that works in insurance / re-insurance for the past 25 years get RIF’ed on a random Friday. The entire team of a Fortune 250 company was cut as the company migrates to blockchain. I can laugh about the blockchain part, but the reality is that here is a mid-50s executive who was part of a mass cut of staff unexpectedly. Three kids, mortgage, college for at least one child. How prepared are even the most well-heeled Americans from the unlikely (though statistically incredibly likely) scenario where job goes away and the next one doesn’t seem like it will come too easily?
The blockchain reference definitely made me chuckle, but it’s a serious topic. If you’ve been “released to the workforce,” what advice do you have to give that you wish you knew before the layoff? Leave a comment or email me.
Email Dr. Jayne.