Mission, Vision and Strategy in the context of a changing regulatory environment

If you’re involved in aged care, then the last 18 months have been full of uncertainty - as we waited for the Taskforce recommendations and the government response to the recommendations, and now we wait for the new Aged Care Act and the new “Rules”. 

With all this uncertainty, it’s easy to say “We cannot update our strategic plan until the future is clearer”.

At Pride Aged Living, we do not buy into this argument. We support the notion that a strategic plan is developed to increase the probability that you will get to where your mission and vision are leading your organisation. We accept that the regulatory environment, including uncertainty, has a very significant impact on your strategy, however, we see this as secondary because the regulatory environment will primarily impact your mission, vision and business plan.

Strategic plans amidst uncertainty

The future is always uncertain, and rarely does it meet our expectations. This is why good strategic plans should be regularly reviewed.

A 2012 Bain & Company study of over 2,000 companies found that over a 10-year period, about one in 10 achieved their strategic financial goals.

Rather than impact on your strategic plans, the anticipated change in the regulatory framework for aged care highlights, and the recent history of unsustainable financial performance of the sector reinforces the need to review your organisation’s mission, vision and business plan. 

The changing regulatory and competitive landscape may actually cause you to totally change the direction in which you are heading.

We undertook a strategic planning review with a client who was asking themselves:

• Do we diversify into independent/supported living?
• Do we expand into home care?
• Do we reduce our position in residential care?

While for some organisations, these will be strategic questions. For many, they go to a more core issue of what your organisation is - mission!

We’ve talked to many residential providers who have looked over the fence at home care, particularly when times are tough in residential care and thought:

We’d say there are two compelling reasons why you should be cautious about adjusting your mission/vision or strategy to expand your number of services in the current environment:

1. Adding complexity does not help solve the existing problem

If you are struggling with sustainability in residential care, then diverting your attention to a new area where you are likely to have little experience and will most certainly incur losses in the first few years will do nothing to address the challenges in your existing operations.

2. Specialisation versus diversification

In research undertaken a decade ago during my time at RSM, my team at the time investigated the drivers of differing financial performance in residential aged care. While the specific numbers may differ today, the study’s core finding remains relevant. 

We found that 88% of residential aged care providers that achieved the highest financial outcome on average offered 1.2 services, which was the least number of services (including home care and retirement living) offered by all providers. This suggests that increased focus/specialisation when the environment (regulatory and financial) is the most challenging is a more effective strategy/business model.

Source: RSM Bird Cameron – Factors Influencing the Financial Performance of Residential Aged Care Providers - 2014

Act now to revise your business plan

In our experience, rather than getting involved in strategic paralysis, providers should be using the period from now until the new Act and Rules come into force to revise their business plans. 

The same research from my time at RSM shows that 64% of the best-performing providers, from a financial sustainability perspective, deal with the change in the operating environment by adjusting their business plans and focusing on their pricing strategy.

Source: RSM Bird Cameron – Factors Influencing the Financial Performance of Residential Aged Care Providers - 2014

Many providers are reassessing their mission, vision and strategy in light of the challenges and changes facing the sector. The reality is that much of this is based on the outcomes or uncertainty of future outcomes.

This morning, I was listening to the radio and discussion on the Sydney Marathon being awarded as the seventh World Marathon Major. One caller opined that while running a marathon is challenging, success is all about the training input. 

As believers in the relationship between supply and demand, we think the same is true of aged care - a winning strategy is all about the training methods (business models) operated by the high performers. While there is much analysis of the outcome of the sector, there is less evidence of the characteristics of high-performing providers. 

Join our upcoming webinar

If you are looking for a business model in home care or residential care that will give you a sustainable future, then invest one hour in attending our upcoming 'New Strategy Under the Aged Care Act' webinar with Inside Ageing. 

Jason and I will share what we've learned over more than 25 years of operating or advising operators on what works.

To learn more about the webinar and register, click here.