Culture Drives Scale – Lessons Learned from Health Catalyst and Evolent Health

So I ask you to picture yourself in the main room of an old lodge—a Boy Scout camp on an island on a lake in central Connecticut.  There is a big fire burning in the hearth, rag-tag furniture, throw blankets, bottles of water, cups of coffee and 25 people sitting around working out of three ring binders outlining our company’s vision and goals, a new system of KPIs and, I’ll admit, a few truly heinous slides contributed by yours truly (this really came to light when I asked my team to “take a look at the flesh colored circles” during one exercise). Powerpoint art is most certainly not my specialty! Welcome to the Oxeon Annual Offsite, a three-day event held in late September that brings focus to our mission, our culture and on insuring the continuity of what enables us to love going to work everyday.

Like corporate off-sites all over, we do team building exercises like building towers with dry spaghetti and a marshmallow, we learn about each other’s Myers Briggs type, we study income statements, and rollout new company initiatives. We conduct training and learning sessions, allowing ourselves to focus on the things we don’t have time to focus on while doing our daily work but that are crucial to our success as a company and enriching the young people who work here. For three days, our first core value of intellectual curiosity is on full display, as people are totally engaged with learning and contributing at each step along the way.

Our offsite is largely designed, planned, organized and executed by young professionals under the age of 30. Our culture is designed to enable them, has confidence in them taking risks and doing things they’d never do otherwise, and anticipates the failure that may naturally result at times.  A big part of that culture is due to our second core value of grit.  We value resilience, creativity in the face of adversity and an ability to pick oneself up after getting knocked down. For what it is worth, that core value of grit came in handy at this last offsite, as the Boy Scout camp is off the grid with no running plumbing.

Our third value of collaboration was tangible not only during the offsite process but each and every day at the Oxeon office. From designing the agenda, to planning the logistics, to delivering many of the sessions, multiple people on our team came together to do something they had never done before.  I’m not sure that many 26 year olds have executed a 3-day offsite for a healthcare technology and service executive search and investment company; to be successful, they worked together. Collectively, they achieved a greater result than imaginable individually, as with so many other things they have done to drive Oxeon forward.

To balance out some pretty serious sessions on income statements, our portfolio, and strategic plans for the end of year, our off-site also involves 80’s dance parties, silent karaoke, temporary Oxeon tattoos, and too much wine. A fourth core value—high emotional quotient—is well represented here, as every team member shifted seamlessly between substantive contribution and teaching to brushing up on Madonna’s dance moves.

As mentioned previously, both Oxeon and Cien Ventures, our sister company, share a common goal in striving to positively impact 100,000,000 lives through the companies we recruit for, we invest in, and start de novo. Not surprisingly, my personal favorite session was one that focused on our fifth core value: a Spirit of Generosity. It also underscored the essence of our organizational mission to Make People Healthier.   Nadia Danford, a 2012 college graduate, a Senior Associate and the 6th employee at Oxeon, led this session. She enlisted no fewer than six of her colleagues, representing a wide range of Associates and Senior Associates and led us in a discussion, taking an off-the-beaten-path approach to evaluating the success of our clients and investment portfolio.  Nadia and crew ignored the traditional measures of success—“how much capital has X company raised this year?” “How many new clients did Company Y add to their pipeline?”  Instead of focusing on sales, number of employees, venture-backing, BD partnerships completed, IPO timeline or new product releases, this session focused exclusively on the societal impact of what our clients do on a daily basis, down to the individual patient level.

We discussed the impact of a world class COO or CFO executing an innovative Direct Primary Care model at Iora or Qliance, the societal impact of Omada preventing Type 2 Diabetes, and the impact to the parents of a very sick child who gets a world class second opinion through Grand Rounds. There was a great discussion around what it means to have invested in Landmark Health, then recruited their entire leadership team, including their Chief Medical Officer Mike Le, who has designed an incredibly innovative clinical model to deliver home-based care to poly-chronic populations.

So, in an hour session, I watched great people, who happen to be young and the engine that drives Oxeon - talk with great acumen and pride about why what we do really matters.   I go to sleep that night- albeit with too much wine and 80’s music in my system- knowing that great people and great culture are intact.

But the challenge for Oxeon, and for many of our clients, goes beyond establishing this foundation. We must figure out how to maintain and grow culture and values in lockstep with the growth of the company.  Whether it is two to 25 people or 10 to 600 people, organizations have to not only maintain the values that enabled their original growth and success, but nurture and evolve them as the respective organization grows. The impact this has on the organization, the CEO, the leadership team and every last person hired presents a complex and interesting set of challenges for a growth-stage company.

A Powerful Realization

What I’ve come to realize, at the ripe old age of 45 and after a career of leading frankly ho-hum entrepreneurial endeavors, is that if you get people, culture and values right, you can get a lot else wrong and still get the whole thing right.  Honestly, I’m a bit bummed that it took me 45 years and 6 companies to figure this out but at the same time, I’m happy it finally got through my thick skull with a bit of time to spare.

Lately, my focus has been around scaling our business and taking it to the next level.  This is purposeful as we spent our first two years focusing on getting our model right, building a foundation of great culture and great people.  We feel good about those investments and earlier this year, at a leadership offsite, we had the opportunity to crystalize our vision for the company. We ultimately decided on a pretty lofty goal: to positively impact one hundred million lives. We’re already on the right course by working with incredible companies making tangible impacts on hundreds of thousands, maybe low millions, of lives. However, I know that to reach our goal, it means we must take this model we’ve worked out over the last few years and swing for the fences. To achieve the impact we are working towards, we have to scale beyond the 25 people at Oxeon Partners and Cien Ventures today, along with our operations and our products and services.

I have to admit that I am lucky as I study an issue like scale. Because of what we do at Oxeon, I am in the fortunate position of working with great leaders as clients, interviewing great executives all day long, and collaborating with amazing co-workers. So if I don’t take pages from all of their playbooks as we tackle this next phase for Oxeon and Cien, shame on me!

So, as I try to lead us through challenges resulting from our own scale, I have looked across all of these amazing organizations and leaders I admire and am struck by one common theme: an incredibly deep and strong commitment to culture, values and people. This is a common mantra at the earliest stages of a company and a consistent focus with the founding teams we work with. Moreover, what I’ve been fascinated by lately are the conversations I’ve had with leaders at companies like Evolent Health and Health Catalyst and their ability to maintain and even grow their foundation of exceptional culture and values during massive organizational scale - something that Oxeon aspires to accomplish as well.

Setting the Foundation

Dave Thornton, who is the Chief People Officer at Evolent Health, recently ranked the 4th most promising company in America by Forbes Magazine, was one of the first 20 people hired at the company. Can you think of any other venture-backed company that hired a Chief People Officer that early in their growth?  Dave believes it was a conscious decision by Frank Williams, Evolent’s CEO (recently ranked #1 in a Glass Door study of the most beloved Healthcare CEOs), who knew that if you invest early in the right culture and people, this foundation reinforces itself and becomes self-perpetuating during growth periods, ultimately reducing the long-term cost and impact of coming to this conclusion too late.  Less than three years later, as the company approaches 700 team members, the quality and potency of Evolent’s culture and people is palpable, engrained and self-perpetuating; the investment is clearly delivering an ROI.

I also recently interviewed Dan Burton, who is the CEO of Health Catalyst. Health Catalyst is the leading provider of enterprise data warehouse and performance solutions for large hospitals systems.  Like Evolent, he leads an organization totally committed to people, culture and values and it shows.  In 2013, with 80 employees, Health Catalyst was ranked #20 in the Modern Healthcare Top 100 Places to Work.  Amazing, in 2014 and having grown to 180 employees, they ranked 17th!  But in asking him to talk about the early days at Health Catalyst, he takes me to the days leading up to the first round of funding from Sequoia Capital when the company authored and collectively agreed upon a document they called The Things That Can’t Change.  Taking money from one of the most successful and well-regarded venture capital firms in the industry meant that certain things were absolutely going to change. But the organization committed that certain aspects of Health Catalyst were untouchable.   This has become the Health Catalyst Way and includes defining Core Cultural Attributes like being smart, hard working and humble.  No matter what lay in front of them in teaming with Sequoia, this wasn’t going to change.  Dan agrees with Frank and Dave at Evolent that these commitments at the earliest days of a company are foundational and pay huge dividends when the company scales.

The CEO’s Role

As Oxeon has gotten bigger, I have not shifted enough of my role as CEO to being more of a full-time proponent of great culture and developer of great people.

This hurt us.

But because we have always been focused on great culture and great people, the team felt like they could tell me this—and it is not easy to tell your CEO that he is inaccessible and acting like an a-hole. More importantly, they gave me an opportunity to react and respond, versus telling me all of this during their exit interviews. So I listened, took it to heart, hired an executive coach, and have been working on the things that the great culture and the great people said they needed.  I’ve learned that culture may be foundational at the start of any company—how could it not be? You are three people! But it is very easy—and I know from experience—for the leaders of an organization to get too busy “building the business” and forget to “build the organization.” Time and time again, this will chip away at and ultimately erode the entire foundation.

Dan believes that people and culture are the single most important responsibility he has as CEO.  It isn’t the setting and determining of the cultural values but it is demonstrating them and leading an organization that acknowledges and rewards them. He talks of the day when the company has 1000 employees and is helping 1000 hospitals on a global basis. If the values and people are what make Health Catalyst successful and great, he needs that to translate to the 1000th employee or that type of scale will not succeed.

The Impact of Making it Foundational and Organizational

Because we started with and have always been focused on great people, culture and values, when we made a conscious decision to scale and diversify, we had the ability to attract leaders like Matt Dumas and Hugh Ma to our team. Our foundation of great people and the eagerness from our young team to learn from great executives has enabled Matt and Hugh to step in and have an impact with very little friction.  The ability to seamlessly add leaders and drive scale reinforces why these early commitments are essential, and ultimately serves to further perpetuate those values across a company as it grows.

At Evolent, Dave said the “second generation” of leaders were “incredibly intentional” in driving values, culture and people. This comes as no surprise as we have had a front-row seat for their recruiting process. Week after week on our search calls, Tom Peterson, Seth Blackley (COO and President at Evolent, respectively) and Dave remained laser-focused on finding exceptional cultural and people fits over specific functional skill sets. By doing so, they ultimately were able to find executives who possessed both exemplary functional skills and interpersonal values.  As they brought in the next wave of people to Evolent, these new leaders consistently upheld the core values of Evolent to as high a bar as the three founders. This commitment has built the foundation for seven generations of hires. It should come as no surprise that they also see themselves as cultural keepers and hold themselves equally accountable in upholding the company’s culture.

This is not easy to maintain as you grow. At Evolent, this entire process is extremely deliberate and measured closely and quantitatively.  Using surveys, engrained processes around capturing feedback and formal review cycles, they are constantly assessing cultural fit, employee satisfaction and how the organization represents itself, both internally and externally.

At Oxeon, with each person we hired, whether the hire was a success or not, we have tried to continually evolve how we thought about people we bring into the organization. We have deployed numerous iterations to our interview process with different exercises, tests, screens and steps.  Our review process has continually evolved to better acknowledge or identify the cultural behaviors to reinforce or change. I guess that may seem obvious - we are a firm solely focused on human capital. But during times of substantial growth, it can be a real challenge, demanding constant review of the process with each hiring effort or review cycle. Ultimately I think it has paid off—we have gotten better at assessing great people who represent and reinforce our cultural values.

Great culture and values are not the exclusive responsibility of the Founders or the CEO. As we’ve grown, we’ve needed every person in the firm to take more accountability and responsibility for our people and culture. Every single person must represent our culture and values in everything they do and must expect themselves and the people around them to be great.  This is now explicitly emphasized in our performance reviews and we ask people to fight for it daily.

One consistent theme is that while organizations fight daily to defend their values, it is important to formalize the process of refreshing the company’s commitments.  Evolent has all employee meetings on a quarterly basis. With as many employees geographically distributed across the country, this is an expensive proposition- especially in the time allocated. But Dave believes that formally refreshing culture and values delivers a huge return on investment and this philosophy is not taken lightly. Per Dave, at the last all-company meeting, more than 50% of the entire gathering was spent on refreshing commitments to values and culture.  We are similar at Oxeon in that we have multiple days each year devoted exclusively to focus on non-search related growth, development, culture, values and mission.

Health Catalyst might even take it further. Dan commits to know every single employee by name and background and to have lunch with every single employee at least once a year. This was easy to do with 20 employees, right? But with 300, even knowing everyone’s name and greeting them in the elevator with “Hi Karen” is hard.  So what did they do? They hired two software developers to build an iPhone app that has different games and quizzes around identifying, knowing names and biographical information on all Health Catalyst employees. People score points and they have leaderboards and people use the app to test themselves, track those they get right and wrong and “train” themselves on the people they don’t know.  At the lunch sessions, Dan and another member of his executive leadership team ask for two things they love about working at Health Catalyst and one thing they’d change.  The proposed changes are brought, weekly, to the Leadership Team meeting and heard, prioritized and addressed. Their unlimited vacation policy - yup #17 on Modern Healthcare’s list - originated as an employee suggestion at lunch.

It is easy to say the company is too busy to do these types of things, but I am convinced that great organizations see it totally differently.

Why Invest in People and Culture

If you were to rank the healthcare technology and service companies most likely to have enormous societal impact, Health Catalyst and Evolent may not trade off the #1 and #2 spots, but if they don’t, they are not far off.  Is it a coincidence that they were both huge culture and value proponents at the earliest stages of the company? I think not.  I also don’t believe it is coincidental that they have invested so much in scaling culture and values while their business operations scale.

Here at Oxeon, in a totally different stratosphere from Health Catalyst and Evolent, the same lessons apply.  I am quite sure that if we had not focused on giving great people the opportunity to “get out over their skis” and had not transitioned people who didn’t live up to our cultural values, we would never be in a position to impact 100,000,000 lives.  I also know that when we do achieve that goal, it will be solely due to our people and our cultural values—and I understand that today’s people and cultural values won’t necessarily be the same as those in place when we impact the 100,000,000th person.  My biggest hope is that they won’t be too different, and that everything we do today will be a part of everything we do then. As I think about what it will mean to achieve our stated goal, I know no investment is too large to make sure that happens!