MBA552_Johnny_Organization_Analysis

Running Head: ORGANIZATION ANALYSIS 1
Organization Analysis:
Health Care REIT, Inc.
Johnny Yi
MBA 552
Trinity Western University
Prepared for Mark Lee
Word Count: 8014

ORGANIZATION ANALYSIS 2
Table of Contents
Pages
Executive summary………………………………………………………………………………..3
Company Overview……………………………………………………………………………….4
Organizational Strategy…………………………………………………………………………...6
Organization Design and Effectiveness..........................………………………………………...12
Organization Structure…………………………………………………………………………...15
External Environment…………………………………………....................................................16
Internal Environment………………………………………….....................................................19
Organizational Design for an International Environment………………………………………..20
Product and Service being Offered………………………………………………………………21
Information technology and Control System…………………………………………………….23
Organizational Size, Life Cycle, and Possible Decline………………………………………….24
Organizational culture……………………………………………………………………………25
Ethical Values……………………………………………………………………………………25
Innovation and changes…………………………………………………………………………..29
Decision making processes………………………………………………………………………30
Conflict, Power and Politics……………………………………………………………………..31
Summary of Key Findings……………………………………………………………………….33
References………………………………………………………………………………………..34

Executive Summary
The company that is chosen in this essay is Health Care REIT, Inc. The company is a
public company, established in 1970, and belongs to health care real estate industry. Nowadays,
its main products and services are senior housing communities, nursing or post-acute facilities,
medical office buildings, inpatient and outpatient medical centers and life science facilities. In
order to decrease the risk of the investment, the company diversified the targeting market, and
industry. Now the business has expanded to 46 states in the US, Canada, and the UK. The
company’s strategic objective is to own the highest quality heal care portfolio in the world leased
operated or managed by the best operators and tenants. Besides providing the health care
services, Health Care REIT now devoting itself into green energy. From the culture and ethical
perspective, the company has a learning culture, and high ethical value. The employees have free
access to receive skills training and ethical lessons. From the management perspective, the
structure of the Boarder is flexible, and lots of employees can be involved into decision making
process.
The main purpose of this analysis is to generally study this successful company, to find
out how is the company operated, how does the headquarter control the properties overseas, and
what is the key competitiveness of the company in the global competition. The second purpose is
to find out the tendency of the current health care industry. Health Care REIT is one of the most
successful heath care company, we can predict the potential market direction by analyzing their
new services or products. The third purpose is to borrow ideas from their management in
engaging employees, and creating a positive organization culture.
The key findings are the sustainability idea is the tendency of the health care estate,
assigning tasks through different function is a good way, communication between the Boarder
and employees has great influences in the organization culture and decision making process.
During the research, it is obvious that now Heal Care REIT is increasing the investment in
upgrading the sustainable facilities in their properties because the company cannot keep
investing in the real estates all the time, HCN can increase their competitiveness by developing
the related industry such as sustainable facilities & green energy industry. For job assigning, the
company can build professional teams at first, and then give them specific jobs to be more
efficiency. For communication within the whole corporation, some of the employees have better
technic skills or experiences in the certain issues; thus, it is better for the management to hear
their voices.
I believe the company has great potential in future because of its differentiate service
& products of green concept, its learning culture, and its efficient communication.

Company Overview
Health Care REIT, Inc., founded in 1970,1 is an American real estate investment trust
(REIT), and now holds the leading position in the seniors housing and health care industry,2
property management and development services.3 Primarily operated in the Toledo, Ohio, USA
(headquarter), now Health Care REIT has “1,384 properties in 46 states, the UK and Canada”,
and has approximately 438 employees.4
Since the company was founded, Health Care REIT grew rapidly. According to the
Health Care REIT, Inc. Medtrack company profiles (2015), the company’s revenues in 2014 was
$3,343.5 million, and the operating profit and net profit were $384.2 million and $446.7 million,
respectively.5 And in the company’s 2012 sustainability report, it shows that Health Care REIT
“generated a 16.1% average annual total return, including dividend reinvestment”.6
Figure 1.1 Return since Inception7
From the products and services perspective, Health Care REIT’s investments involve
senior housing and health care real estate, which includes “senior housing communities, nursing
or post-acute facilities, medical office buildings, inpatient and outpatient medical centers and life
1 HCN Sustainability Report-Final (2012), p. 9. http://www.hcreit.com/media/19561/HCN_Sustainability_Report-
FINAL.pdf
2 HCN Sustainability Report-Final (2012), p. 9.
3 Health Care REIT, Inc. (2015). MarketLine/ Medtrack Company Profiles, p. 3.

science facilities”.8 And according to the company’s sustainability report, Health Care REIT,
from 4 segments, operates its business, which are “triple-net, seniors housing operating,
outpatient medical and life sciences”.9
Figure 1.2 Diversification of HCN’s Portfolio10
More specifically, from Figure 1.2, it is clear that the “seniors housing triple-net
properties include independent living facilities, assisted living facilities, and memory care
facilities”.11 Other facilities such as “Alzheimer’s/dementia facilities, skilled nursing or post-
acute facilities, and combinations thereof” are also included.12 According to the Health Care
REIT, Inc. Company Profiles (2015), the company achieved this by acquisitions and
development.13
The seniors housing operating properties include independent supporting, such as
central dining facilities, which “provide[s] residents access to meals and other services such as
housekeeping, transportation and recreational activities”.14
The medical facilities include “medical office buildings, hospitals and life science
facilities”.15
The life science facilities include “laboratory and office facilities specifically designed

and constructed for use by biotechnology and pharmaceutical companies”.16 According to the
HCN’s 2013 sustainability report, those facilities that mentioned above are located in the “well-
established market” such as Massachusetts Institute of Technology because this market is known
for “pharmaceutical and biotechnology research”.17
Organizational Strategies
Perspective of Miles and Snow’s Strategy Typology
According to Hambrick (1983), Miles and Snow’s Strategy Typology (1978), is the
theory that was based on “field studies in four industries (college textbook publishing,
electronics, food processing, and health care)”.18 In this typology, Miles and Snow divided the
types of the companies into defenders, prospectors, analyzers, and reactors.19
According to the strategy typology (1978), defender is the organization that does not
try to produce new product or to explore new market, and normally, defenders are the
organizations that have competing advantages such as price, quality, and service over its
competitors; prospector is the organization that keeps trying to carry out new products or to grab
new market opportunities, normally, prospectors are the ones that are always trying to be the
pioneer in the industry; analyzer is the one that not as aggressive as the prospectors, but more
active than defenders, normally, analyzers are the ones that do not have so many competitive
products, but are willing to meet new challenges; and reactor is the one that only react to the
challenges and changes passively.20
In addition, Miles and Snow (1978) also examined “interrelationships of various
attributes”,21 and found that defenders “tend[ed] to have a relatively simple coordination
mechanisms, rely on centralized decision making, and to a great extent are shaped by the
influence of production and finance executives”;22 on the contrary, prospectors tended to have a
“participative and decentralized decision making, and to a great extent are shaped by the
influence of marketing and product development executives”.23 Analyzer is the intermediate of
two extremes.
16 HCN Sustainability Report-Final (2013), p. 10. http://www.hcreit.com/media/369225/hcn-sustainability-report-
final-2013.pdf
18 Hambrick, D. C. (1983). Some tests ofthe effectiveness and functional attributes of Miles and Snow's strategic
types.Academy of Management journal, 26(1), p. 6.
19 Hambrick, D. C. (1983). Some tests of the effectiveness and functional attributes of Miles and Snow's strategic
types.Academy of Management journal, 26(1), p. 6.
types.Academy of Management journal, 26(1), p. 6-7
types.Academy of Management journal, 26(1), p. 7

Thus, from the analysis above, people can see that Health Care REIT, Inc. should be
the analyzer because the company now is making progress continuously, but is mainly focusing
on the existing & established partners. More specifically, when comparing the properties and
investment among 2012, 2013, and 2015, we can see that from 2012 to 2015, the properties
increased from 1025 to 1384, and the investments that were invested to the existing partners
increased from 76% to 81%.24 From these data, people can see that Health Care REIT made a
good balance between expansion and stability.
Perspective of Porter’s Competitive Strategies Model
Porter’s Competitive Strategies, also is known as Porter marketing techniques, are used
to “penetrate a market and after penetration then sustain a strong advantage over the
competitors”.25 The strategies can be divided into Cost leadership strategy, Differentiation
strategy, and Focus strategy.26
For Cost leadership strategy, it is the way to make a company more attractive than
others by lowering the operation and production costs, it is very useful for “companies who want
to penetrate a targeted market that’s dominated by a few high-cost companies”.27
For Differentiation strategy, it is the way to develop unique products that are valued by
customers; in another word, the company has to design unique products from their competitors.28
Thus, for the company which is willing to use differentiation strategy, the company should have
an excellent R&D department, reputed brand name, and reputation of the company for
innovation and quality.
For Focus strategy, it is a combination of cost leadership strategy and differentiation
strategy. The company will develop its own unique products, and try to lower the operation and
production costs at the same time to increase the competitiveness.29
From the analysis above, people can find that Health Care REIT is the company that
adapts the Focus strategy. It is because from the differentiation perspective, Health Care REIT’s
products have high reputations and are very unique; from the cost perspective, Health Care
REIT’s products are environmental friendly and can be recycled. More specifically, according to
the HCN Sustainability Report-Final (2013), “HCN’s corporate headquarters in Toledo, Ohio,
holds LEED Platinum and Gold certifications for new construction. In 2013, HCN received
LEED Gold (operations and maintenance) certification for the day-to-day management of the
facility”;30 also, people can see from the Figure 2.1 below, there was an increasing percentage of
the buildings participating ENERGY STAR® benchmarking; there was also an increasing
percentage of Certified Buildings of the total portfolio.31 People can find out the company’s low
24 HCN Sustainability Report-Final (2012), p. 10, 14
Health Care REIT Corporate Presentation (2015), p. 3, 14. http://www.hcreit.com/media/387305/1Q15-
Corporate-Presentation-NAREIT-REITWeek-.pdf
25 Ahmed, G. (2014). Michael Porter’s Generic Strategies. http://www.studylecturenotes.com/management/michael-
porters-generic-strategies
26 Ahmed, G. (2014). Michael Porter’s Generic Strategies.

cost strategies from its recycling program. According to the HCN Sustainability Report-Final
(2012), “HCN has a robust recycling program in its corporate offices and most of the company’s
operationally controlled buildings”.32 For example, in the headquarters, “the janitorial staff
sorts’ recyclables from trash in an on-site facility to ensure HCN diverts the maximum amount of
material from landfills”.33
Figure 2.1 Total Certified Buildings34
Objectives
According to the HCN Sustainability Report-Final (2013), “HCN’s strategic objective
is to own the highest quality heal care portfolio in the world leased operated or managed by the
best operators and tenants in the sector”.35
Strategies
According to the HCN Sustainability Report-Final (2013), Health Care REIT now “use
a 10-year outlook to evaluate investment decisions and evaluates asset quality on three primary
factors: physical plant quality, location and operating partner. Sustainability criteria are an
integral component of investment decisions”.36
1. More specifically, from the physical plant quality perspective, according to HCN
Sustainability Report-Final (2012), “[i]n response to these tumultuous changes,
HCN has implemented a thoughtful strategic that requires a corporate culture
focused on entrepreneurship, excellence and performance, and a well-balanced
health care and seniors housing portfolio with the highest-quality facilities located
in the strongest markets and operated by the best, most progressive operators and
health”.37

a. From the Figure 2.2 below we can see that, in 2012 “HCN received four
LEED® certifications including: New Construction (Silver) at Paramount
Senior Living in Peters Township, Pennsylvania, New Construction (Gold) for
the company’s North Wing headquarters’ project in Toledo, Ohio, and Pre-
Certified Neighborhood Development (Silver) for a project in Nashville,
Tennessee”, and “HCN continues to grow its ENERGY STAR® partnership
and outreach program, adding 19 buildings to the company’s ENERGY
STAR® certified assets in 2012. As of December 31, 2012, HCN had 48
buildings in its portfolio certified through LEED® or ENERGY STAR®,
representing 5% of the company’s total portfolio and 30% of its operationally
controlled portfolio. HCN also participates in an industry-wide effort to
improve environmental performance through its membership in NAREIT’s
“Leader in the Light” working group”.38
b. From the Figure 2.1 above, we can find out Health Care REIT was making
continuous progresses because when comparing the progresses in 2012,
during 2013 there was an “18% increase in percent of buildings participating
in ENERGY STAR® benchmarking; 10% increase in percent of Certified
Buildings as a percentage of the total portfolio; and 13% increase in percent of
Certified Buildings as a percentage of total portfolio SF”.39
Figure 2.2 Awards and Certifications in 201240
2. Secondly, from the location perspective, Health Care REIT mainly invested in
well-established areas.41 For example, “HCN’s portfolio is concentrated in
affluent, infill locations on the east and west coasts and Top 31 metropolitan
statistical areas”.42 It is because “[t]hese markets have significantly higher
average home values and household incomes, which leads to rental rates and net
operating income per unit in excess of industry averages”.43

a. From the Figure 2.3 below people can see that the top 5 markets are all
metropolises which are New York, Philadelphia, Boston, London, and Los
Angeles.44
Figure 2.3 Top 5 Markets (by Total Portfolio Investment Balance)45
b. And from the Figure 2.4 below, it is clearly that in US, 92% of the portfolios
are located in the top 31 MSAs or coastal states; in UK 84% of the portfolios
are located in southern England; and in Canada, 77% of the portfolios are
located in the top 10 MSAs.46
Figure 2.4 Premier Locations and Details of Total Portfolio47
44 HCN Annual Report-Final (2014), p. 17.
45 HCN Annual Report-Final (2014), p. 17.
46 Health Care REIT Corporate Presentation (2015), p. 18.

3. From the operating partner perspective, “HCN seeks to partner with leading
operators and health systems that have proven their ability to deliver better care
outcomes and value to residents and patients”;48 also, “HCN focuses on acquiring
modern, purpose-built facilities operated by the best operators and health systems
that deliver consistent NOI growth and resilience during all economic cycles”.49
a. During 2012, there was “68% of the assisted living federation of America
Best of the Best 2012 award winners were HCN operators”.50
b. During 2013, from the Figure 2.5 and Figure 2.6 below we can see that the top
5 seniors’ operators are Sunrise (14%), Genesis HealthCare (17%), Revera,
Emeritus, and benchmark (4%).51 The top 5 seniors’ operators are slightly
different between 2012 and 2015.
Figure 2.5 A Leader in Portfolio Quality52
Figure 2.6 Partner Diversification53
Health Care REIT Corporate Presentation (2015), p. 8.

Evaluations
From the analysis above, people can conclude that the company’s strategies of
focusing on the physical plant quality, investing in well-established locations, and cooperating
with well-known operating partner works well.
Organizational Structure Design and Effectiveness
Design
The objective of the organizational structure design is to make sure the organization
runs well and to project stakeholder interests.54
In 2013, the Independent Director Timothy J. Naughton was elected by the Board, and
by the end of the 2013, “9 of the 10 members of the Board were independent, non-employee
directors”.55 And in April 2014, Tom DeRosa was appointed as CEO, and Jeffrey Donahue as
Chairman by the Board. Tom DeRosa also had responsibilities “to contract to align with CEO
compensation best practices”.56
According to the HCN Sustainability Report-Final (2013), “separating the role of CEO
from Chairman is consistent with HCN’s commitment to corporate governance that reflects best
practices and the highest level of business ethics.
Also, there are six standing committees of The Board which are “audit, compensation,
executive, investment, nominating/corporate governance and planning”.57 And each of the six
committees is responsible of “the development of the company’s economic, environmental and
social policies; also, HCN reviews annually its committee composition, committee charters and
Corporate Governance Guidelines”.58

Figure 3.1 Key Employees59
Mechanistic or Organic
The organization design of Health Care REIT is more organic because the structure of
The Board is more flexible, and “HCN adopted the following significant corporate governance
policies and practices that in the judgment of HCN’s management and Board of Directors”:
1. Significant majority of independent directors.
2. Annual election of all directors.
3. Diverse Board (as to gender and experience).
4. Majority voting for directors.
5. Annual Board and committee self-evaluation.
6. One-half of Board retainer compensation is in company shares.
7. Minimum shareholding requirement for directors.
8. Disclosure committee approve financial reporting and SEC filings.
9. Required nominating committee approval for any related-party transactions.
10. Succession planning for both management and Board.60

The Operations of the Company Actually Designed
According to the HCN Sustainability Report-Final (2012), Health Care REIT specified
its team into experienced investment and capital markets team, portfolio management team,
property management team, in-house property management team, and administrative team.61
Each of the team has different roles.
For example, the company’s experienced investment and capital markets team
“efficiently execute HCN’s real estate investment strategy, while advancing the objectives of its
stakeholders”.62
The management team is responsible of “preserving and creating value in the portfolio
complements the investment team”.63
The in-house property management team which is also known as Management
Services Group (MSG) mainly helps the majority of the HCN’s medical office building portfolio
to solve problems, and “through Frauenshuh HealthCare Real Estate Solutions, HCN provides
comprehensive planning and development services that allow HCN to develop and own state-of-
the-art medical facilities with leading health systems”.64
And the company’s administrative team mainly makes decisions on how to provide the
best workplace.65
Evaluation: Effective or Negative
The organization structure design of Health Care REIT is effective. According to the
Green Street Advisors, “HCN received the highest ranking among health care sector REITs and
the second highest overall ranking in Green Street advisor’s annual corporate governance
ranking”.66
It is because the structure is organic, the reporting system is advanced, and the HCN’s
Enterprise Risk Management (ERM) program is helpful.
From the structure perspective, as it was mentioned above, the flexible structure can
help to stabilize the organization through the significant majority of independent directors, the
annual election of all directors, the diversity of The Board, the process of the majority voting for
directors, and the different management teams that are assigned to different missions, etc.67
From the advanced reporting system perspective, HCN accepts Global Reporting
Initiative (“GRI”) standards, and this standard can help the organization be more effective.68
“HCN is committed to providing regular disclosures about the company’s economic,
environmental, social initiatives and governance. HCN has operational or split control over 152
buildings in its Medical Facilities portfolio and its corporate headquarters. Environmental
metrics, such as energy consumption and greenhouse gas emissions, are limited to the sites that
fall within the operational control boundary as defined by the Greenhouse Gas Protocol: A
Corporate Accounting and Reporting Standard (Revised Edition)”.69
67 HCN Sustainability Report-Final (2012), p. 9, 35.
69 HCN Sustainability Report-Final (2012), p. 9, 35.

From the ERM perspective, this organization design can help to improve decision-
making processes, to ensure the accountability to stakeholders, to protect assets, and to provide
for more efficient and focused sustainable growth in the future.70
Organization Structure
Organization Structure
HCN Sustainability Report-Final (2013), “HCN approaches environmental
sustainability based on the level of control or influence the company maintains over each asset
class in its portfolio. The company’s operational control of a facility correlates directly to the
level of control HCN has in implementing environmental sustainability initiatives”.71 From the
Figure 4.1, people can find out HCN’s level of control throughout the portfolio.
Figure 4.1 HCN’s Level of Control throughout the Portfolio.72
Operational Control means “HCN has operational control over the activities in these
spaces” because HCN is “the sole owner and occupant of HCN’s corporate headquarters building
and the sole tenant of its corporate office suites”.73
Split Control means “[i]n facilities managed by MSG, the company has operational
control over building systems and common area spaces”, but cannot control the leased areas.
“However, HCN does have the opportunity to influence tenants with respect to sustainability
initiatives”.74
Limited Influence means for the facilities that the third parties wholly lease or manage,
the company does not have operational control.75
Influence means HCN has no operational control over the activities of the company
managers for the “facilities that comprise the company’s seniors housing portfolio. However,

through proactive engagement with the managers, the company can influence their
implementation of sustainability efforts”.76
Type of the Operational Structure
From the analysis above, people can conclude that the type of the operational structure
is functional. It is obviously in the Figure 4.1 that the four types of operations are operated under
different approaches because these operations has different functions.
Evaluation
The organization structure works well for the Health Care REIT because it is more
reasonable and more realized. Although all of these properties are owned by the Health Care
REIT, the company gives up some of the ownership by leasing it to the third party. From the
Figure 4.1 we can see that the more power that the company gives up, the more percentage of the
revenue the company will get. Thus, by adapting this organization structure the company can
save human resources and energy, and can earn more revenues. Also, from the third party’s
perspective, it is more convenient.
External Environment
Economy Perspective
According to the cooperate presentation (2015), the investment in the UK market will
have a great growth potential, and there are many certificated and influenced companies such as
Aspen Heath Care, Tenet Health being acquired by the HCN. Thus, it is not only easy for HCN
to break through the entry barriers, but also easy for the company to grow smoothly77.
Human Resource Perspective
From the human resource perspective, we can see from the Figure 5.1 that in the next
20 years, the population of the old people will increase significantly. More specifically, in the
next 20 years, the population that over 75 years old will double, increasing from 28 million to
55.3 million; also, for the population of over 85 years old, the number will increase from 8.6
million to 16.9 million78.
As a health care estate company, Health Care REIT’s products and services mainly are
real estates, health care delivery systems such as senior housing communities, nursing or post-
acute facilities, medical office buildings, inpatient and outpatient medical centers and life science
facilities79. Thus, there is a great potential for the Health Care REIT to grow bigger in the next 20
years.

Figure 5.1 Compelling Demographics80
Financial Perspective
From the rate perspective, from the Figure 5.2 below we can see that from 2006 to
2015, the GBP/USD, we can conclude that the GBP depreciated. Which means it is a good
timing to invest in the UK market from a currency perspective81. More specifically, the ratio
decrease from 1.8 in 2006 to 1.6 in 2015, and is becoming more and more stable around 1.6.
Thus, the US Company can be benefited from the two perspective, one is the better ratio than 10
years ago, and the other one is safe, they do not have to over concern about the currency change.
81 http://www.xe.com/currencycharts/?from=GBP&to=USD&view=10Y

Figure 5.2 GBP/USD82
We can see from the Figure 5.3 below, hospital is the most expensive place to live, and
seniors housing is the cheapest place to live, the cost is almost the same with live at home. We
can also see that the post-acute care continuum is the majority business in the health care
industry. Thus, from this perspective, Health Care REIT invests in the seniors housing and post-
acute care continuum is a good decision.83
82 http://www.xe.com/currencycharts/?from=GBP&to=USD&view=10Y.

Figure 5.384
Internal Environment
Advantages
A. One of the significant advantage is the properties are newer than those of in the
market. We can see it from the Figure 6.185
B. The second advantage is the company’s strategy is focusing on the physical plant
quality, location and operating partner.
C. The third advantage is the diversification of the investment to lower the risk, it
includes the investmeng in different countries and different markets.
Disadvantages
A. 70%+ of the revenue is from outpatient services, this is too risky.86 Because
according to Markowitz's portfolio theory, enriching the diversity of investing
industries can lower the unsystematic risk.87 It is better for the HCN to invest into
more industries to lower the bad return from the single investment.
B. Currency depreciate. As HCN is an international company, the company may be
suffered with losing money because of the foreign currency depreciate.
87 Doupnik T. (2015). International Accounting. McGraw-Hill.

Figure 6.188
Organizational Design for an International Environment
Although the U.S.A is the main investing market for the Health Care REIT, the
importance of its oversea properties in UK and Canada cannot be ignored. From the Figure 7.1
below and Figure 2.4 in section 2, it is clear that UK and Canada have significant position in the
company’s investment strategy.
Figure 7.1 Net Operating Income by Countries89
From the Figure 7.1, we can see that UK accounts for 8.3% of the NOI;90 also,
according to the Figure 2.4, the greater London’s NOI ranks the 1st in the Senior Housing
Operating at 9.7%.91

How to Run International Operations
HCN operates the international operations by identifying the different functions of the
properties.92 According to the HCN Sustainability Report-Final (2012), Health Care REIT hires
400 professionals in its core business functions, and specifies its team into experienced
investment and capital markets team, portfolio management team, property management team,
in-house property management team, and administrative team.93 Each of the team is responsible
for its own affairs.
The investment & capital markets team is responsible for the “efficiently execute
HCN’s real estate investment strategy, while advancing the objectives of its stakeholders”.94
The asset management team is responsible for “preserving and creating value in the
portfolio complements the investment team”.95
The development Management Services Group (MSG) is responsible for helping the
majority of the HCN’s medical office building portfolio to solve problems, and “through
Frauenshuh HealthCare Real Estate Solutions, HCN provides comprehensive planning and
development services that allow HCN to develop and own state-of-the-art medical facilities with
leading health systems”.96
And the corporate team is the administrative team, mainly makes decisions on how to
provide the best workplace.
Thus, it is not the head office that makes all the decisions, the international operations
are not empowered to make their own decisions, neither. Also, the net operating incomes are
calculated and evaluated at the city level.
Products and Services that being Offered
Real Estate & Health Care Delivery Systems
From the products and services perspective, Health Care REIT’s investments involve
senior housing and health care real estate, which includes “senior housing communities, nursing
or post-acute facilities, medical office buildings, inpatient and outpatient medical centers and life
science facilities”.97 According to the company’s sustainability report, Health Care REIT, from
4 segments, operates its business, which are “triple-net, seniors housing operating, outpatient
medical and life sciences”.98
A. More specifically, from Figure 1.2, it is clear that the “seniors housing triple-net
properties include independent living facilities, assisted living facilities, and
memory care facilities”.99 Other facilities such as “Alzheimer’s/dementia
facilities, skilled nursing or post-acute facilities, and combinations thereof” are

also included.100 According to the Health Care REIT, Inc. Company Profiles
(2015), the company achieved this by acquisitions and development.101
B. The seniors housing operating properties include independent supporting, such as
central dining facilities, which “provide[s] residents access to meals and other
services such as housekeeping, transportation and recreational activities”.102
C. The medical facilities include “medical office buildings, hospitals and life science
facilities”.103
D. The life science facilities include “laboratory and office facilities specifically
designed and constructed for use by biotechnology and pharmaceutical
companies”.104 According to the HCN’s 2013 sustainability report, those facilities
that mentioned above are located in the “well-established market” such as
Massachusetts Institute of Technology because this market is known for
“pharmaceutical and biotechnology research”.105
Healthful Workplaces
According to the HCN Sustainability Report-Final (2013), HCN had devoted itself into
improving workplace quality and limiting environmental impacts.106 In order to achieve the
goal, MSG insists to use the environmentally friendly products, and to operate in “green cleaning
practices”.107 Also, the company “limits exposure to potentially hazardous chemical, biological
and particulate contaminants”.108
Corporate Office and Medical Office Recycling Programs.
In the company’s sustainability report (2012), HCN continues to develop its corporate
office and medical office recycling programs.109 From the Figure 8.1 below, we can see the
efforts that HCN has made in the recycling programs. For the medical office building, the full
recycling program and the partial one accounts for 39% and 27%, respectively.110 However, all
of these offices are electronics ones, and are participated to bulbs and batteries recycling
program.111

Figure 8.1 Recycling Program in HCN’s Medical Office Building Portfolio112
Encourage Sustainable Practices
According to the HCN Sustainability Report-Final (2013), besides the business areas,
HCN also keeps connections with its closed operating partners on environmentally conscious
practices.113 “The best practices covered in the Executive Forum include energy and water
benchmarking, energy conservation measures and sustainability operations. MSG’s proprietary
Green Arrow program offers a platform for HCN’s 48 property managers to reduce
environmental impact through capital improvements or operational changes, and offers learning
and development opportunities regarding sustainability best practices”.114
Manage Energy Consumption
According to the HCN Sustainability Report-Final (2013), HCN takes the
responsibility of managing the energy consumption “in the implementation of its strategic
objectives and thoughtfully balances it with investing in the facilities that meet evolving
consumer demands”.115
Information Technology and Control Systems
IT in HCN
Although the Health Care REIT does not have a Chief Information Officer, and they
do not have specific security measures to protect both company and customer data, the company
still rely on the information and control system to monitor energy consumption, and to avoid
risks.
A. Monitor Energy Consumption
According to the sustainability report (2013), “HCN uses the EPA’s ENERGY
STAR Portfolio Manager® system to track electricity, natural gas, renewable
energy and water consumption data”.116 HCN also rely on this system to detect
the consumption of the energy, and evaluate the performance in its “medical office
and seniors housing portfolios”.117 Besides that, HCN applies the benchmarking

program “to include recycling and waste stream performance indicators during
2014”.118
B. Risk Management
ERM that is short for Enterprise Risk Management program can help HCN “to
manage the risks that result from its rapid growth and increasing influence in the
seniors housing and health care sector”.119
The benefits of the ERM program is to improve the decision-making process,
to ensure the accountability of stakeholders, to protect assets, and to grow in
future.120
ERM program is involved into reporting, treasury, information, and data
management areas.121
IT Impact in Decision-making
The reason why IT can impact the decision making process is because the ERM
program firstly can identify the risk. By identifying the risks that are related to the organization’s
goals. Secondly, ERM can evaluate the risks through its annual basis. Thirdly, ERM can lead to
communications between different levels of managers, and the regular communication can help
to find out the problem. Final, the risks will be solved after being identified.122
Organization Size, Life Cycle, and Possible Decline
What is life cycle
According to Richard Daft in Organization Theory and Design, “life cycle is
organizations are born, grow older, and eventually die. Organization structure, leadership style,
and administrative systems follow a fairly predictable pattern through stages in the life cycle”.123
Also, the author mentioned that life cycle has four stages, which are “Entrepreneurial stage,
Collectivity stage, Formalization stage, and Elaboration stage”.124 Each stage mentioned above
has its own problems. For example, in Formalization stage, the problem is there are too much red
tape; thus, it is better to simply the management team, and assign the missions by function.125
Thus, from the definition above, I believe that Health Care REIT falls in the
Elaboration stage. It is because Health Care REIT has specific investment team, asset team,
manage team to deal with the business affairs, just like the textbook says “formal systems may
be simplified and replaced by manager teams and task forces. To achieve collaboration, teams
123 Daft R. L. (2008). Organization Theory and Design. p. 340.
124 Daft R. L. (2008). Organization Theory and Design. p. 340-342.

are often formed across functions or divisions of the company”126 Also, in Health Care REIT,
there is a mature auditing and reporting system,127 and the power of The Board has been
weaken.128 Thus, combine the theory and the example, I believe that Health Care REIT falls in
the Elaboration stage.
Organization Culture
What is Organization Cultural?
Organization culture is a shared goal in the company; although the company can have
sub-culture in different department, the shared goal must be built.
For Health Care REIT, it organization culture is mission-driven and teamwork.129
“The company strives to deliver excellent financial returns while improving seniors housing and
care and health care delivery. These values, coupled with the company’s partnership philosophy,
create a cultural environment that promotes teamwork, approachability and a deep feeling of
engagement. Employee programs that support this culture are an important part of the company’s
strategy. In 2013, HCN developed key initiatives to measure employee engagement and
expectations and to enhance the company’s strong and collaborative culture”.130
Besides that, I also find that the learning is also another organization culture in HCN.
According to the sustainability report (2013), 3/4 of employees joined the Learning Map session
during 2013.131
Also, the employees in HCN are willing to donation and offer help to others. It is
because the employees are under the influence of the leader. According to the Sagner (2013), the
founder or important leaders have great influence to the company’s culture.132 In HCN’s case,
the HR manager engaged the employees in United Way Campaign. As a result, the employees
now are more willing to help others than people in other communities.133
Organization Ethical Values
What is Organization Ethical Values
Organization Ethical Values is part of the organization culture, it is a kind of
“atmosphere of corporate governance and ethical behavior”.134 According to Sagner, the ethical
behavior cannot be scripted.135 In terms of Health Care REIT, the ethical values can be
132 Sagner J. (2013). Fast-Track Management and Organizational Behavior. p. 54.
134 Sagner J. (2013). Fast-Track Management and Organizational Behavior. p. 62-63.
135 Sagner J. (2013). Fast-Track Management and Organizational Behavior. p. 62-63.

concluded as anti-corruption, managing energy consumption, devoting to charity, encouraging
sustainable practices, and taking care of its employees.
Anti-Corruption
According to the company sustainability report (2013), HCN developed an associated
training program to let employees be familiar with the regulations and laws. It is one of the
professional international law company that leads the training and the policy development.
Besides that, there is also a standard operating procedure being established to evaluate
individuals’ behaviors136
Managing Energy Consumption
According to the HCN Sustainability Report-Final (2013), HCN takes the
responsibility of managing the energy consumption “in the implementation of its strategic
objectives and thoughtfully balances it with investing in the facilities that meet evolving
consumer demands”.137 From Figure 12.1, it is clearly that in 2013, HCN launched 56 energy
use reduction projects, which in total worth than $2.9 million.138
Figure 12.1 HCN 2013 Energy Use Reduction Projects139
136 HCN Sustainability Report-Final (2013), p. 33

Devoting to Charity
According to the company sustainability report (2012), there are approximately 166
charities were supported by HCN, among these charities, most of them are arts, education and
health care.140. In 2012, HCN was the largest Art’s corporate supporter in Toledo Museum; also,
“HCN created a learning series with the museum to promote employee engagement and the
development of visual literacy skills”.141 The Figure 12.2 shows some of the organizations that
received HCN’s donations are United Way, PROMEDIC, America Red Cross, etc.142
Figure 12.2 Some of the Organizations Benefiting from HCN’s Charitable Giving143
Encourage Sustainable Practices
HCN keeps connections with its operating partners on environmentally conscious
practices.144 “The best practices covered in the Executive Forum include energy and water
benchmarking, energy conservation measures and sustainability operations. MSG’s proprietary
Green Arrow program offers a platform for HCN’s 48 property managers to reduce
environmental impact through capital improvements or operational changes, and offers learning
and development opportunities regarding sustainability best practices”.145

Taking Care of its Employees
In terms of taking care of its employees, the manager of HCN announced that the
corporate headquarters, which is LEED® Platinum certified, will be implemented to the best
sustainable building to provide his employees with the highest quality working environment.146
Evaluation
There is no gap between what they say and what they do because HCN realizes what
the company says. From the Figure 12.3, we can see that among all the properties, there are 37%
buildings (379) participate to ENERGY STAR® benchmarking, and there are over 1/4 of the”
certified building square footage as a percentage of the total control boundary square footage”.147
Figure 12.3 The Boundary for HCN’s Environmental Disclosure148

Innovation and Change
Innovations
A. According to the CEO Tom, innovate a new conceptual home for the world aging
population, and innovate a scientific way to realize better outcomes in health care
are the main objectives of the company’s research with “the most innovative health
care providers”149
B. According to the CEO, the company’s innovative employee program should work
well because the company hopes to attract, or to train smart employees, to become
the potential leaders in future.150
C. Green Arrow Program is developed through the four pillars lived by HCN’s MSG,
which are “rapid responsiveness, reliable results, can-do attitude and proactive
communication”.151
D. HCN’s sustainability programs are also innovative program. In this program, HCN
minimize the environmental impacts by adopting sustainable building practices,
adopting proactive energy management initiatives, doing green cleaning practices,
and participating recycling program.152 For example, “HCN employs best practices
such as LEED® and ENERGY STAR® to guide its investments in sustainable
building development and renovation. The company uses environmentally friendly
materials and equipment, such as low volatile organic compound paints and energy
and water-efficient technologies”.153
a) Another example is “Biltmore Medical Facility, a 4-story and 152,600 square
foot building located in Phoenix, Arizona”.154 This assessment was used to
identify whether or not applying for the green technology can reduce the
energy consumption. And at the end of the work in 2012, HCN successfully
reduced 23% energy consumption during the first half year of operations.155
Handle Changes
A. Risk Management. In HCN, the management of all levels take risk management
seriously, and “HCN takes a systematic approach to identifying and managing risk
across investments, operations, governance, social and environmental issues”.156
More specifically, “the Senior Vice President and Treasurer, who serves as the
executive sponsor of HCN’s Enterprise Risk Management Committee, or the Vice
President, Internal Audit, reports on enterprise risk management efforts to the

Board. Management also reviews and reports on other potential areas of risk at the
request of the Board”.157
B. Additional Funding: In order to meet the challenges, HCN invests additional
funding to reduce the energy consumption. The management believes that this
strategy will work in long term.158
C. Investment in upgrades. HCN “invests in building envelope upgrades, HVAC
upgrades, system commissioning, energy management systems and lighting
upgrades”.159
D. Executive Forum. HCN develops Executive forum to keep the company stay close
to its strategic partners. It is a value-add program.160
Decision Making Processes
Decision Makers
The decision makers in HCN is the management and Board of Directors. As we have
mentioned before, there are six standing committees of The Board which are “audit,
compensation, executive, investment, nominating/corporate governance and planning”.161 There
is a high level of independence among the Board.162
Besides these responsibilities, the Board also “conducts evaluations of its committees
annually. The Board reviews the results of these evaluations, and agrees upon further
enhancements for each committee”.163
Decision Making Processes
For the regular executive sessions, only independent directors can attend, and an
independent lead director is responsible of send the information of the meeting to the Board.164
When making decisions, the one that is the most knowledgeable to the current affair
will present to the Board under an open and informal environment, regardless the seniority. 165
The Board can also meet the management or employees in the company without CEO,
and the senior managers keep frequently contact with Board members.166
After making decision, the Boarder will assign the missions to the specific team. As we
mentioned above, these teams are investment and capital markets team, portfolio management

team, property management team, in-house property management team, and administrative
team.167
From the information above, we can see that although the Boarder has the final
decision making power, the Boarder empowered the lower level managers and employees to give
their own suggestions. Thus, it is not a typical top-down decision making process.
Authority and Responsibility or Not
Employees are giving authorities and responsibilities because they have to complete
the assignment independently.
For example, employees in investment and capital markets team have power to deal
with the HCN’s real estate investment strategy and advance the objectives of its stakeholders.168
The employees in the management team have power to preserve and create “value in
the portfolio complements the investment team”.169
Conflict, Power, and Politics
The objective of the organizational structure design is to make sure the organization
runs well and to project stakeholder interests.170 Generally speaking, the corporate governance
in Health Care REIT is very advanced. It is very persuasive that “HCN received the second-
highest overall ranking in Green Street Advisors’ annual corporate ranking for the second
consecutive year in 2014 June”.171
Conflict & Power
A. 9 of the 10 members of the Board were independent, non-employee directors.172
B. And in April 2014, Tom DeRosa was appointed as CEO, and Jeffrey Donahue as
Chairman by the Board.173 It is the practice to “separate the role of CEO from
Chairman” because this behavior shows the best practices and the highest level of
business ethics.174
C. There are six standing committees of the Board which are “audit, compensation,
executive, investment, nominating/corporate governance and planning”.175 And
each of the six committees is responsible of “the development of the company’s
economic, environmental and social policies”.176

D. Only independent directors can attend the regular executive sessions, an
independent lead director is responsible of send the information of the meeting to
the rest of the Board.177
E. When making decisions, the one that is the most knowledgeable to the current
affair will present to the Board under an open and informal environment, regardless
the seniority.178
F. The Board can also meet the management or employees in the company without
CEO, and the senior managers keep frequently contact with Board members.179
G. After making decision, the Boarder will assign the missions to the specific team.180
Political or Not
From the information above, Health Care REIT is not a political environment; on the
contrary, it is a very easy environment because the company carried out lots of activities to
engage the employees.
For example, in the HCN’s United Way Campaign, “HCN makes every effort to
ensure that the annual United Way campaign is fun and engaging. Employees often support their
colleagues by directing funds to charities where they actively volunteer. HCN offers a match for
every employee donation”.181
Another example is the Learning and Development program. “HCN provided an
average of nine hours of formal professional development training per employee on business
acumen, manager development, communication effectiveness and technical skills”.182 We can
see the result from the Figure 15. 1
Figure 15.1 Employee Training and Reviews183

Summary and Recommendations
Advantages
A. One of the significant advantage is the properties are newer than those of in the
market. We can see it from the Figure 6.1184
B. The second advantage is the company’s strategy is focusing on the physical
plant quality, location and operating partner.
C. The third advantage is the diversification of the investment to lower the risk, it
includes the investment in different countries and different markets.
D. The fourth advantage is the learning organization culture, and high ethical
values.
E. The fifth advantage is the efficient communication across the whole
corporation.
F. The sixth advantage is the development of green energy, and reducing
operating and cost consumptions.
Disadvantages
A. 70%+ of the revenue is from outpatient services, this is too risky.185 Because
according to Markowitz's portfolio theory, enriching the diversity of investing
industries can lower the unsystematic risk.186 It is better for the HCN to invest
into more industries to lower the bad return from the single investment.
B. Currency depreciate. As HCN is an international company, the company may
be suffered with losing money because of the foreign currency depreciate.
186 Doupnik T. (2015). International Accounting. McGraw-Hill.

Reference
Ahmed, G. (2014). Michael Porter’s Generic Strategies.
http://www.studylecturenotes.com/management/michael-porters-generic-strategies
Daft R. L. (2008). Organization Theory and Design.
Doupnik T. (2015). International Accounting. McGraw-Hill.
Hambrick, D. C. (1983). Some tests of the effectiveness and functional attributes of Miles and
Snow's strategic types. Academy of Management journal, 26(1), 5-26.
Health Care REIT Corporate Presentation (2015), p. 3, 14.
http://www.hcreit.com/media/387305/1Q15-Corporate-Presentation-NAREIT-REITWeek-
.pdf
Health Care REIT, Inc. (2015). MarketLine/ Medtrack Company Profiles.
http://web.a.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=9030bcc7-c6a3-4519-9da1-
bb25f347ccdd%40sessionmgr4003&vid=3&hid=4209
HCN Sustainability Report-Final (2012).
http://www.hcreit.com/media/19561/HCN_Sustainability_Report-FINAL.pdf
HCN Sustainability Report-Final (2013).
http://www.hcreit.com/media/369225/hcn-sustainability-report-final-2013.pdf
HCN Annual Report (2014). http://www.hcreit.com/documents/HCN_AR_2014.pdf
Sagner J. (2013). Fast-Track Management and Organizational Behavior.
http://www.xe.com/currencycharts/?from=GBP&to=USD&view=10Y

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