It’s a typical scenario for a startup. A brilliant entrepreneur launches a company based on a promising product or service, grows that company to a certain point and then, within the first three or four years, is replaced or leaves the company by choice. It happened to Martin Eberhard at Tesla, Andrew Mason at Groupon and Jack Dorsey at Twitter.
Christopher Parks avoided the scenario at Change Healthcare. But he might not have if he hadn’t decided to seriously reconsider his role as the company’s chief executive officer.
In early 2011, Parks stepped down from the CEO desk to make way for Howard McLure, a former CVS Caremark executive who came out of retirement to take the job. Two months later, the company hired another CVS Caremark executive, Doug Ghertner, as president. Ghertner transitioned to CEO in mid-2012 and McLure is now executive chairman of the board.
“I spent the first three years figuring out many of the basics, building a 20- to 25- person team and we’d gotten A Round and B Round funding,” says Parks, who now serves as Change Healthcare chief development officer. “But other things were coming into play. We needed to start thinking beyond next year.”
Parks saw the writing on the wall. He knew the company was going to soon require a new level of professional management if it were going to continue to grow. In addition, he was pretty sure he didn’t want to leave a company he lived and breathed for. But could he avoid the fate of so many serial entrepreneur-founders who exit their companies only to move on to the next start-up, and to the next one after that?
“I began to truly understand that an organization is not the founder,” Parks says. “I think it’s normal and organic for that to happen. At the same time, I felt an enormous amount of accountability to our investors. I didn’t want to have to look away from them if we didn’t succeed. I’d also made a promise to my mom that I wanted to keep.”
Parks started Change Healthcare in 2007 after both his parents died of cancer. Before his mom succumbed to the disease in 2006, she was overwhelmed with stacks of hard-to-understand medical bills. Parks promised her he would do something to make it easier for people to figure out if the charges on their medical bills were correct and fair.
The passion behind Parks’ promise to his mother is what drove the company’s core product, a cost-transparency software tool that helps employees with health plans find critical information that can help them make cost-effective decisions about their health care.
That same passion helped Parks do something rather remarkable. Along with Vic Gatto, a partner inthe Nashville-based venture capital firm Solidus (a major investor in Change Healthcare), Parks participated in the search for new C-suite leaders who could replace him.
“Once you get to a Series C round of funding, most investors start to think about bringing in new management,” Parks says. “They want their person to come in so they can take things to the next level. I thought of Change Healthcare as much bigger than one person. If I was truly going to be a servant-leader, I had to figure out a way to check my ego at the door and help in the transition to a new team.”
Parks says he wanted the company’s new top brass to have to pass benchmarks of professional criteria and experience, but he was even more concerned about the personalities involved. If he felt like a candidate couldn’t get behind Change Healthcare’s mission of transparency and cost-effectiveness for customers, he didn’t want that person.
“To me, Change Healthcare is much more than a business. It’s a legacy,” Parks says. “I wanted to find the talent that had the track record to move us forward. But I wanted to know if they really cared. Personality, mentality and emotional investment were more important to me than experience.”
Parks remains a significant shareholder at Change Healthcare as its founder and chief development officer. He likes to call himself “guardian of the culture” at the company. To his credit, Parks admits he may not have been able to stay on at Change Healthcare if it hadn’t been for his relationship with Gatto, who has a very hands-on approach with Solidus-funded companies. Gatto counseled Parks from Day 1 of the company and told him early on that Solidus (Disclosure: Solidusis an investor in SouthComm, the parent of the Post.)was throwing its support behind the company’s mission and vision, not behind Parks or any other specific individual.
“Change in a company can be gut-wrenching,” Gatto says. “But it can’t be all holding hands and singing Kumbaya. One of the hardest things about building a startup is navigating a leadership transition, which is usually inevitable.
“Christopher needed to decide if he wanted to stay as the company’s CEO, which would mean working through other people to achieve goals, or to take on a role that would keep him close to customers and products like he’d been doing all along,” Gatto adds. ”It was my role to get him to decide. I didn’t want to see him rolling around in the middle; I wanted him to intentionally choose the role he was going to play.”
Parks decided to stay as close to the entrepreneurial edge of the company as he could in a role that has him overseeing and launching new product development.
“I do think he could have continued as CEO and gotten more and more into the operations and management, but he would have had to change his spots,” Gatto says. “That’s not an easy thing to do. Even when the company had 20 employees, he’d say to me, ‘All I do is sit in HR meetings.’ He’s really ideally suited for being close to the customers and finding out what they need.”
Despite the fact that Parks was a full participant in bringing in new management to the company, Gatto describes a six-month realignment period in 2011-12 as “a hard transition.”
“It certainly wasn’t always easy,” he says. “There were some bumps in the road and some people lost their jobs. But Christopher made the transition work.”
McLure felt from the get-go that the morale and commitment among employees would suffer unless Park’s personality, vision and distinctive skill set remained part of the company.
“He had really been the face of the company, and he really built a solid culture,” McLure says. “He has a huge amount of institutional knowledge. We needed some management in order to succeed on a much larger scale, but we wanted to keep Christopher’s passion and productivity.
“Keeping that passion in the company is key,” he adds. “It creates a better company and a culture that creates people who really believe in the mission.”
“I really think most of the credit for the successful transition goes to Christopher,” Ghertner says. “He built a company that has an environment of empowerment and creativity, a place where relationships matter. We want to make sure we don’t stray too far from that core.”
During the past two years, Change Healthcare has transitioned from impacting thousands of insurance consumers to impacting millions. Since the executive transition from Parks to McClure and Ghertner, the employee roster has grown from 20 to 70-plus staffers.
In August, Change Healthcare completed a $15 million Series D funding round led by HLM Venture Partners and Noro-Moseley Partners. Existing institutional investors BlueCross BlueShield Venture Partners, Sandbox Industries, Mitsui & Co. Global Investment, Inc., West Health Investment Fund LLC and the aforementioned Solidus also participated in the round. Since its inception, the company has raised $32 million.
Parks says he is particularly proud of the breadth of the recent Series D round.
“It’s significant that it brought in some West Coast investment,” he says. “It shows we are not stuck in a bubble. Not many companies started in Nashville have investment from the Southeast and the East and West coasts. I think it speaks well for our traction and where we are going.”
Despite the progress Change Healthcare has made and the success Parks has enjoyed reinventing himself and his role with the company, the questions remains: Does he miss sitting behind the CEO’s desk?
“Not much,” Parks responds. “Being CEO sounds glamorous but it can be a big emotional weight. That has been lifted from me; I get to share the weight with everyone.”
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