Lumevity: Behind the Scenes with Larry Kleinman

• By:  Don Bertschman
• Posted:  July 27, 2021
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“If we understand the strategy, if we understand what you need to do to compete and win in the marketplace, then we can look at the metaphorical four walls of your company and figure out what has to change,” says Larry Kleinman, Highmark Health’s chief human resources officer.

He’s been doing just that at Highmark Health since 2015, guiding and implementing changes to support a successful five-year transformation strategy, and position the organization to take on its ambitious Living Health strategy through 2025. Along the way, his thinkUP initiative has completed well over 400 change projects, delivered at least $245 million in net directly measurable profit and loss impact over a three-year period, plus $230 million in other economic benefits, freed up more than 8 million employee work hours, and earned two Gallup Culture Transformation Awards.

With the proven expertise, approach, and tools that drove that success as a model, Kleinman and co-founders Marcus Johnson, Kelli Amerine and Rob Spence have now launched Lumevity, a wholly-owned subsidiary of Highmark Health. Read on to hear Kleinman’s insights on the challenges of change, how Highmark Health got it right, and why Lumevity is a different kind of consultancy for companies seeking help with organizational effectiveness, digital transformation and change management.

Understanding and implementing strategy

Don Bertschman: How has the rest of your career shaped what you’ve done with Highmark Health’s thinkUP initiative and now Lumevity?

Larry Kleinman: I’ve done a lot of this work for a long time. I started in sales, had my own company and sold it, and then went into consulting. Most of the consulting was about driving strategy implementation, which is all change. This is back when firms such as Bain and McKinsey would leave big binders on a CEO's desk and say, here's how you win in the marketplace, good luck. Our firm would be brought in to dissect that and work with the company’s leaders to make the change happen. For eight years, I did that with companies like GE, Unilever and Ford, and I learned, project by project, how to drive successful change in different cultures.

But consulting meant constant travel. At some point, my wife said, “it's time for us to be normal.” Soon after that, the president of Becton Dickinson, a large medical device manufacturer I was consulting with, asked if I'd be willing to work for them. I took the job.

On my first day, the president told me I’d actually be working with both him and the head of HR. I said, woah, woah, I don't have anything to do with HR, I don’t know the first thing about it. And he said, a lot of what you know how to do in terms of understanding and implementing strategy, our HR function aspires to do.

It was bizarre — half my time I’m doing benefits enrollment and recruiting, and the other half I’m working with division presidents on redesigning the global supply chain and manufacturing footprint, and the sales and marketing function. So I learned HR backwards — most people in HR start in comp, then they do recruiting, then benefits, and then leadership. I didn’t know HR, but I knew how to craft a company strategy, how to dissect it and work with leadership to bring it to life. What I learned at Becton Dickinson is that being in the HR chair can put many of the levers to drive change at your disposal.

Don Bertschman: You take that top “HR chair” at Highmark Health in January 2015. What are the challenges or opportunities that lead to the thinkUP approach?

Larry Kleinman: About six months in, I talked with our CEO, David Holmberg, and we pulled the plug on a previous project with a third-party firm — because everybody was unhappy with it. I saw two things. First, the organization was like a detached garage: stuff had piled up over many years. Second, we spent tens of millions on consultants, and yet little changed. Everyone did the customer nod, yeah, great ideas, and then when the consulting project was done, it was back to business as usual.

It was clear to me that we needed an internal consulting group that had to live their own recommendations. It took one conversation — Karen Hanlon was CFO at the time, David, and Deb Rice-Johnson, everyone agreed to start an internal consulting group and begin working out a common methodology to drive change.

It took a few months to find the right person to run the group, which ended up being Marcus Johnson. I told the recruiter, first, I need an accountant — somebody who thinks in business terms and puts everything into dollars. Second, I need an artist — somebody who is able to reimagine things, who can envision a blank canvas and create what hasn’t been painted before. Third, I need somebody who can lead. That’s a rare combination — Marcus has it, and he’s done a phenomenal job.

The first year, we did about 15 projects. We measured three things — the most important was five-year net present value for every project, along with flow-through to the bottom line. We also measured types of projects. Early on in particular, we didn’t want cost reduction projects to be more than 40% of our portfolio, because then employees start thinking this will be about cutting jobs.

From the start, we were very conscious and intentional about which projects we did and didn’t do. We said no projects where there isn’t a fully vetted business case, no projects that will take years, run over budget, and are late. We thought of it like a SEAL team — we don’t start anything without a clear plan to get in, get business value, and get out. And we balanced the project portfolio to implement changes in multiple areas, so not just cost reduction, but other value drivers like cost avoidance, revenue, productivity, asset utilization, employee engagement, and turnover reduction.

Scaling up success

Don Bertschman: Did that first year sort of prove the concept, and then you start building it out and applying it more broadly?

Larry Kleinman: The first-year projects delivered $57 million in five-year net present value, and about 40% to 42% of that falls to the bottom line. Karen, our CFO then, basically said, hey, great first year, what are you signing up for over the next three years? We started with about $300 million in five-year NPV. Then I started thinking we could do more — perhaps a billion dollars of NPV. I began calling people — alright, let’s re-engineer the question. The question now is how do we get to a billion dollars of five-year NPV? How long would it take, how many projects, which types of projects? From there we developed a strategic plan — nobody asked us to do this, nobody even knew we were doing it — that committed us to $434 million on the bottom line. We got the green light from David and Karen — and then we had to figure out the implementation plan.

That’s when we started to think about ways to redeploy people, that was a whole new capability, and we partnered with marketing to develop thinkUP branding and naming conventions and communications to help bring the workforce along with us. We had started working with robotics, machine learning, artificial intelligence, so we could figure out what processes were inefficient and automate solutions with whatever tools worked best, but the secret sauce was the community concept. We implemented things like Idea Lab, and events like Quarterly Connections, that brought people on the journey with us. We did change with them, not to them. For the first couple years, a council for each business unit chose the priorities, not us. The way I describe it is they had their hands on the steering wheel and trusted us to be the engine, to come in and do the work.

That’s a “pull” approach to change, as opposed to a top-down “push” approach. We intentionally used the pull approach until we had enough momentum, enough credibility, to start combining push and pull with enterprise projects. We went back to the executive leadership team and said, these projects bring much more complexity, so they have to be pushed, top down, but they also have more economic benefit. The call center project was a classic. We thought we had seven or eight call centers across the enterprise, and it turned out we had 23 — approximately a $200 million spend. Knowing we were going to encounter an unprecedented amount of change, this is also when we asked for VP dashboards to drive greater accountability. If you’re a VP or above, you control the resources of the company, so your everyday job is to figure out how we get better. Combining the community activation devices with top-down enterprise projects and dashboards, the push with the pull, that’s how what we’re doing became ubiquitous across all parts of our enterprise.

Another piece of this was inventing a partner ecosystem. We brought a lot of “frenemies” into the same room — consultants, tech firms, all these different partners — and we said, we’re changing how we work. We want you to be part of our journey, each of you has great capabilities we want to tap into, but we’re going to do it within our methodology, our branding, and at enterprise scale. We created three tiers, and said, you can play with us at any level, but you can’t go around us and have one engagement with this team, another with that team, in this fragmented way anymore. A few months later I was talking with the CEO of Catalant. Part of their model involves a machine learning algorithm that works like Match.com for consultants. Long story short, we bought that machine learning algorithm to sit atop our partner ecosystem and suggest the right consultant for a project, agnostic of firm.

Put it all together and we have almost endless capacity — it’s allowed us to scale change everywhere.

The birth of Lumevity

Don Bertschman: The Highmark Health story could be a book on its own — but at what point did you start thinking, hey, we can launch this as a new business?

Larry Kleinman: We thought about it at the outset — but more as a big dream. A turning point came in 2019 when Catalant’s CEO asked me to speak at an event where they had about 100 CEOs, COOs, chief strategy people and key leaders. By then, I’m telling our story pretty much just like I told you, and I could not get out of the room after my talk. Leaders from major corporations were peppering me with questions, inviting me to come talk to their CEO or boards. About 70% of companies that try to do large-scale change fail — and here I am saying we’re succeeding, we have the numbers, here’s what we’re doing differently.

That response led to some conversations about starting a business, but our decision was, until we’re confident that we’re on track to deliver that $434 million at Highmark Health, let’s not dilute our focus. After another year, despite the pandemic and getting almost no work done for two months, we were overdelivering our numbers and I said, alright, there’s no stopping this, the flywheel is going. That’s when I reached out to Deb Rice-Johnson to pitch this as part of her scaleUP growth initiative.

Don Bertschman: Who do you see Lumevity working best with — are there certain qualities or challenges, is it a specific sector?

Larry Kleinman: The original concept was to start with other Blues and providers. But we have use cases that nobody else has, we have testimonials and videos from the Quarterly Connections, we have something different than other consultants, and all of that will be attractive in multiple sectors. With a few exceptions, like the largest banks, a Microsoft or Amazon, certain high-tech companies, we can pretty much play anywhere.

We have a few different profiles we can position ourselves to fit: companies that are significantly underperforming, companies that failed in a prior transformation, companies who want to automate and digitalize but don’t have the expertise, companies where a new CEO is looking to accelerate change and position the company to scale, or where a new CFO is looking for a boost in their bottom line.

Don Bertschman: When you step outside payers and providers, does it become harder to make the case that successes in Highmark Health’s environment will translate to other industries?

Larry Kleinman: We get that question from prospects — you did this for an insurance company and hospital system, but how is that relevant to us?

Put simply, do you have accounts payable? Accounts receivable? Procurement? HR? All decent-sized companies have these back office operations. We've done a ton of work in the health plan’s operational areas and automating manual transaction processing. Many companies still have antiquated systems and haven't invested in digitalizing those operations. So, many of our use cases are highly applicable for most sectors and companies.

We’ve also proven that our approach works across different cultures. In early 2016, the executive team was discussing where we needed to change our culture to be consistent and conducive to achieving David’s first five-year strategy. We determined that we don't have one culture, we have hundreds. Some say you have as many cultures as you have supervisors — about 3,000 here — but just keeping it at a business unit level, the cultural dynamics in our technology company are very different from our stop-loss company, or dental solutions, or health insurance, or a hospital system where each hospital also has its own culture.

We decided not to wage a war of unification we were bound to lose. Instead, we created what we call the Core Behaviors to overlay on each of our cultures. Then we went to each business unit and said, you know what's good or bad in your culture, and what you want to change is up to you. But you have to figure out how to make these core behaviors part of your DNA, and we're going to measure them.

So, we’ve done projects across different business units and cultures. We get 18% increased employee engagement, based on pre- and post-project surveys we’ve done. Again, that’s attractive to any business, any sector.

A different kind of consultant

Don Bertschman: How will an engagement with Lumevity be different from working with other consultants in this space?

Larry Kleinman: To start — most consulting firms don’t do wall-to-wall implementation, they sell project by project. That's how they're organized. Change management is one practice, digital work is another, operating models are another, and nothing comes together naturally or easily. Our approach is more holistic — it’s about effective change at scale, ubiquitous across your company.

Another way we're different is that we are you — we are practitioners, we did this in our company, we know the organizational realities, we figured out firsthand how to make this work in different situations and cultures.

Companies that hire a consultancy to come in and help with culture usually fail, and there's no economic benefit. Companies that hire a consultancy to drive cost efficiencies often see benefits for a short period, but then the costs creep back in. Very few consultancies can do both and make it sustainable. That's what we have crafted, that’s what we can help a company do.

Don Bertschman: We can link to the website for details, but is there anything you want to highlight about Lumevity’s engagement models or tools?

Larry Kleinman: We envision two types of engagement. In one, we come in and do the work with you — always with, not to. The company dedicates people to the project, we work side by side, and it’s probably a two- to three-year engagement. The other model is that we teach your people how to do the work, and they take it from there.

There will be flexibility, but the first thing we need to do with any prospect is understand their value drivers. If it's primarily a cost play, maybe a new CEO or CFO fixing a company’s bottom line, we’re going to have a different approach than if it’s about transforming through digital tools and automation and positioning a company for growth. We also have to assess what's going to work and not work from a cultural perspective. These diagnostic things are something we will assess very early, so we are able to tailor a solution that meets each company’s needs.

The tools, techniques, those are pretty hardwired. What's not hardwired is the artistry. You're really an architect — trying to look at the grand scheme and architect how to build something different and better.

Don Bertschman: There’s a dynamic quality to thinkUP that also seems part of Lumevity’s value proposition. You're not just architecting here and now, you’re putting things in place that will create value and sustain change — it’s architecting how the building will evolve after it’s built.

Larry Kleinman: Yes, but no one should hire us to craft their strategy — they should hire us to help implement their strategy. If we understand how they're going to compete and win, we can help figure out how to get there. That’s where we’re architecting what that future company looks like, its DNA, its culture, its operations — and oh, by the way, we can put a ton of money on the bottom line while we’re doing it.