MedRisk founder and executive chairman Shelley Boyce recounts her entrepreneurial journey.

When Shelley Boyce was a graduate student at Wharton, her professor gave her a failing grade for a marketing plan she put together for a class. The idea was sound, but a lot of questions hovered over the execution. Boyce worked hard to answer those questions, and she turned her idea into a multimillion-dollar company. MedRisk, which she founded in 1994, is a leading provider of managed physical medicine for the workers’ compensation industry and related market sectors.

In 2017, Boyce moved from CEO to executive chairman. She spoke to Knowledge at Wharton about her entrepreneurial journey and why she believes in “stalking” the right people for the job. (Listen to the podcast at the top of this page.)

An edited transcript of the conversation follows.

Knowledge at Wharton: You have a bachelor’s degree in nursing from the University of Virginia. What made you want to become an entrepreneur?

Shelley Boyce: I wasn’t planning to become an entrepreneur, per se. It was just a journey that led me there. I went to school at the University of Virginia, became a nurse, practiced at the Children’s Hospital of Philadelphia, then decided to leave to go into medical sales. From there, I went to work for a company that owned and operated medical clinics. Then I came back to school, came to Wharton, and formalized my education. It was that time that I wrote about this business as a marketing plan. It wasn’t intended to be a business. It was intended to be a marketing plan for the company that I worked for, and it ended up turning into a business. I left the company and went out on my own and started MedRisk.

Knowledge at Wharton: Could you explain the marketing plan and the problem you were trying to solve or opportunity you were trying to uncover?

Boyce: I’d worked for a company that owned and operated physical medicine clinics. The concept was to help manage and control the utilization and cost of physical medicine, particularly in the worker’s compensation space.

I took it to my employer as a marketing plan to help us attract more payer clients. It was not received so well because it was a cost containment strategy. I then took it out to some clients and talked to them about the idea. Again, it was not very well received because it was the chicken in the henhouse. Then I finally wrote about it as a paradigm shift for Wharton.

Knowledge at Wharton: Is it true that you didn’t get a good grade on it at Wharton, either?

Boyce: Oh, yes. That is more than true. The first strike was my employer. The second strike was clients. I said, “Well, certainly, a paradigm shift, a business plan for Wharton. This will be my ticket to make it a go.” I’ll never forget getting that paper back, and it said P-. I don’t know what the grading system is today, but a P- in 1994 was half an inch above failure. I was devastated, although I’ll give the professor credit because he wrote at the top of the page, “Good idea. You’ll never get it off the ground, though. You’ve got a chicken-and-egg problem.” I think I have that verbatim in my head still today. He was right, and that was one of the early objections I needed to overcome to launch the business.

Knowledge at Wharton: What was the objection from all three? And what was it about the idea that kept you going?

Boyce: I think that their objection stemmed from which one of the three I was talking to, so I think all three of them were different. Before I go through each one, the way that I looked at that is that it’s not failure of an idea. There was a problem that I needed to solve for each one of them. If I were able to solve those three problems, I then felt like I could make this a go.

If you think about the early 1990s, most of our health care was delivered through brick-and-mortar clinics. People would go directly to a facility and get treatment and find a lot of those facilities on their own. Part of the concept was to not own these clinics, but to create a network of clinics, which is very widespread today. But back in the 1990s, that was less so. It was to contract with clinics and act as a network, act as a go-between between payers and providers — hence the chicken and the egg. We were the intermediary between those two, creating value for payers by getting them to the right providers, helping to save money, getting injured workers care faster. From the provider’s perspective, they received patients, and we did all their back-end administrative work for them.

The employers didn’t like the idea because they owned clinics, and they just wanted to feed their clinics. The clients didn’t like the idea because they saw us as a company that owned clinics, and therefore you’re not going to be unbiased, you’re just going to feed your own clinics. And Wharton didn’t like the idea because I didn’t have payers and I didn’t have providers. Therefore, I was stuck in the middle; I didn’t have either one to get me off the ground.

Knowledge at Wharton: How did you have to modify your plan to make it fly?

Boyce: If you go back to each of those three groups, it taught me a couple of lessons. One, it should not have been housed inside a company that owned its own clinics. It needed to be its own business. That gave me validation that it should be its own business, and that would take care of objection No. 1 and objection No. 2.

Objection No. 3, which was probably the toughest, was, “You don’t have payers and you don’t have providers, so how are you going to leverage one to get to the other?” We went out to payers because they have the leverage. We found an early adopter and asked, “Do you like the concept? Do you believe that it will help injured workers get back to work faster, and they will get good care, and that it will save money for you” They said yes. “So, if we build this network, will you buy?” And they said yes.

They basically wrote a letter. It was typewritten, one paragraph. We took that paragraph to every provider in the tri-state area. I think we started with the Delaware Valley region. Sure enough, they said, “Wow, this is a really big payer. I’m going to get patients from this payer? I’ll sign up.” That’s what leveraged one to get to the other, and then it just kind of grew from there.

“If you’ve got a good idea, and you’ve got great people who are completely compassionate and passionate about the idea and totally committed to it, you will find money.”

Knowledge at Wharton: That’s a remarkable story. People say that entrepreneurs need to win supporters in order to make their business fly. But in your case, it seems like those who objected to your idea actually helped to improve your idea and make it stronger.

Boyce: They certainly helped me feel stronger in terms of the conviction of the idea, no doubt. But I think that having to solve those problems and overcome those objections ultimately helped leverage getting the business off the ground.

Knowledge at Wharton: Many entrepreneurs talk about the difficulty of raising the initial capital and hiring the first team to help execute on the idea. How did you deal with both those issues as you were launching MedRisk?

Boyce: If you back up for a second, you think about how you need to have a good program or product, you need to have great people, and then you need resources. People don’t necessarily view these three requirements in the right order. If you’ve got a good idea, and you’ve got great people that are completely compassionate and passionate about the idea and totally committed to it, you will find money. I hate to say that money is cheap, but you will find money if you really focus on No. 1 and No. 2. I think one was making sure we had the right idea. Then secondly, whenever you’re hiring people — whether you’re starting up, or you’re a $100 million company, or you have a market cap of $1 billion — it’s really about finding the right people for where you are in your life cycle. And that will change.

Who you are and what you need as a startup is oftentimes very different than who you are and what you need as the company grows. But finding the right people and putting them in the right place — it probably sounds like a cliché, but it is true. Our philosophy at MedRisk is, when you look to hire people, don’t look for people who are looking for a job. Go talk to everybody you know to find out who’s the best and the brightest. Find a way to hunt them down, and then stay on them until they agree to come on board with you. Stalk them.

Knowledge at Wharton: What kind of people do you go hunting for?

Boyce: Obviously, a great team needs to have a lot of diversity. And that also changes over time in growing a business. I think you can always teach people a skill set, but you can’t teach them a demeanor, a culture, a personality, and whether that fits within the culture of your organization. I think that is so true to what we believe in, in finding the right people. Many of those tend to be people who have external-facing responsibilities.

Knowledge at Wharton: What defines the MedRisk culture?

Boyce: I think we’ve been pretty consistent over the years, no matter how big we grew, to always have an open door, treat everybody equally with respect, and recognize that everyone has a role to play. I was reading emails early this morning, and the motivation of people and how we treat each other. They were saying, “You rock!” I think that type of spirit and that type of inclusion and open communication has really defined who we are as a culture. And it has created great strides for the leadership position that we’ve taken in the industry.

Knowledge at Wharton: As you went from being a startup to a national network in 49 states, what were some of the key issues you faced in scaling up? Could you share any stories about the challenges you faced and how you dealt with them at different stages?

Boyce: I would say the first one is a lack of scale. Our second client, we actually lost. We were getting this great momentum, really starting in the business, and the client came to us and said, “You don’t know what you don’t know. You haven’t figured everything out. Call me when you get it right.” We were devastated, but we didn’t look back.

I remember that day very clearly. The client’s name was Mary Beth. There were seven of us who worked at the company at the time. We were scaling up to about 20 for this. I said, “Mary Beth, can I have seven business cards?” She gave me seven business cards, and we put one on everybody’s phone. We said, “Every time you answer the phone, you’re going to look at this business card and think of her. You’re going to think of having lost this client. And we’re going to get her back.”

“Who you are and what you need as a startup is oftentimes very different that who you are and what you need as the company grows.”

That propelled us to the determination of doing what we needed to do to figure out many of the lessons that we hadn’t figured out in the first round. And the client did come back. They’ve been acquired multiple times over, but they’re still a client today, 25 years later.

Knowledge at Wharton: That’s a great story.

Boyce: One of the lessons we learned is that clients have different attitudes about their ability to take risk, so finding the right clients for where you are in your product life cycle is extremely important. Theoretically, we probably should have never brought her on as a client because she wasn’t a risk-taker. Those who want to be on the front end, be innovative and really grow are the kinds of clients you want when you’re just starting out … although you’re so hungry, you’ll take anybody.

I’ll fast-forward to another story. We were about $200 million in revenue and trying to scale. We had hired some new operational folks who came from a background where outsourcing was very predominant. We decided that to scale and create efficiencies, we were convinced that it was OK to outsource. We spent close to a year outsourcing many of our job functions. It was so hard letting team members go as a result of that. During that process, we also let some of our customer service-facing folks be outsourced. It was a disaster. Absolute disaster.

Knowledge at Wharton: How so?

Boyce: These were (outsourced) people who were scripted. Even though we’re in the health care business, we’re really in the relationship business, too. If your job is to work with payers and injured workers, you don’t want to hand that off to someone with a script. They were all about the numbers and not about the person on the other side of the phone. I can tell you that it almost took us down. It was that devastating. It almost tanked the company.

Knowledge at Wharton: How did you recover?

Boyce: Once again, it involved rallying to get the right people. We made some employment changes, hired the right people, focused on insourcing everything that we had outsourced. It took us three to five years to fully get that back, have clients and ramp up to the $500 million, $700 million range and take the company to the next level. It paid off, but boy, what a painful lesson.

Knowledge at Wharton: One of the ways in which companies try to grow is through acquisitions. You had your own experience with the acquisition of Medical Diagnostic Associates Management. What was that like? What lessons did you learn through that experience?

Boyce: That was another big lesson for us. We were probably $300 million in revenue, and we were trying to decide: Do we grow deep, or do we grow in breadth? It was a breadth-or-depth question. In our space, there are lots of ancillaries. What several other people in the business were doing was acquiring businesses and going across the ancillaries and being more of a conglomerate or an aggregator. We, too, thought, “Gee, this is a great time to do that as well. We think we’ll buy a radiology company. Radiology and physical medicine are very synergistic, so we’ll put those together. We’ll get client synergies, revenue synergies, and great breadth and diversity to grow the business.”

It sounds great in theory, right? But this was primarily a California-based company. They were national, but they really didn’t have much of a national footprint. A couple of things happened. Probably the most shocking was, about three and a half months after the acquisition, California implemented a new fee schedule and turned a profitable business unprofitable overnight. It was a small acquisition, and we had financed it internally. We didn’t have to raise capital for it. But we went from making a small profit to losing money literally overnight. We still thought, “OK, there are several other states in the country,” so we started the footprint of expanding it into other states.

I think the other big lesson we learned from that was that it was coming into the market as a startup when that segment of the business was maturing more than others. To be successful in that business, you needed scale and fast. That was difficult to achieve given the situation in California, given the fact that we didn’t have providers and clients and a national footprint.

“I think you can always teach people a skill set, but you can’t teach them a demeanor, a culture, a personality, and whether that fits within the culture of your organization.”

Third, and probably most important — and the one that, I don’t want to say forced our hand, but helped us understand why it was time to let go — is we then pulled back and realized how much opportunity we had to do what we did in physical medicine and do it better. Do it so well that we could narrowly focus on that business and really not have the diversion of a small startup that was struggling. So, we chose to peel back and narrowly focus on going deep. And we doubled our revenues in a couple of years.

Knowledge at Wharton: In 2017, the Carlyle Group acquired a majority stake in MedRisk. How did that come about, and how did your team handle that transition?

Boyce: It was seamless, and I’ll talk a little bit more about that in a minute. But how that came about — it was actually our second bout around with private equity. When the company was first started, we raised money with angel investors. That money carried us for about 21 years, and then we decided we were going to go into the private equity space and raise some capital, do a minority recap to get our angels their investment back. We did a minority recap with a group called TA Associates, a high-growth fund out of Boston. Great group. We were with them for about 18, 19 months and did almost a three-times return, so everybody was happy on that first round.

Then we decided to go from TA to do a majority recap. We had already learned many of the lessons of how to deal with that type of an investor, so we felt more comfortable about taking the next step. We interviewed several folks and chose The Carlyle Group. That was, again, moving from a minority to a majority. We judged folks on two main factors. One, is it the right culture fit? If you don’t have the right culture fit with your financial partners, and you know you’re going to hit some bumps in the road, that could certainly lead to an unpleasant time. Then second, you want to find investors who can help you grow. Carlyle met both of those criteria, and they’ve been great partners so far. They are much more into transformative type of growth, while TA was much more about small tokens and acquisitions. The Carlyle Group is very large and really likes to do large and transformative types of things.

In terms of the team, Mike Ryan was the president at the time. We had transitioned him before we started the Carlyle minority to majority. I moved Mike from president to CEO. In many respects, he was already acting as the CEO. He and I have a great relationship, so it wasn’t a difficult hand-off at all. It really was very seamless. You hear so many stories where that’s not the case.

Knowledge at Wharton: Why did you pick him as the CEO?

Boyce: Oh, that list could go on and on. He is just truly a dynamic leader. I don’t know if I can name one person, either in the company or outside of the company, who doesn’t respect and like Mike Ryan. He was working for an insurance company when I hired him about seven or eight years ago. I asked a friend of mine, “Who is the best leader of sales in the industry?” And he said, “I know a person, but you’ll never get him.” I said, “Just introduce me to him.”

“Clients have different attitudes around their ability to take risk, so finding the right clients for where you are in your product life cycle is extremely important.”

They introduced me to Mike, and it took about six months before he accepted the job. Before he accepted, I was on vacation and waiting for a callback. He called to tell me he was going to reject the job, but my voicemail was full. He never got to deliver the message. I then got back to the States three days later, and he then accepted the job.

He came in during that very transformative transition period, where the business had been outsourced and we needed to insource, and getting clients rallied first because his job started in sales. He then moved on to be the president, really rallying the team members around getting that hunger and that passion, and bringing all that back in-house. It’s just remarkable to see him in action. He’s probably one of the few people I know who can fire somebody, and they’ll thank him for it.

Knowledge at Wharton: When you think back about your entrepreneurial journey, what do you think is the biggest leadership challenge you have faced? How did you deal with it?

Boyce: I would say there were two, and they both relate to people. One is about other people, and the other is about myself. One of the biggest leadership challenges, and I mentioned this earlier, is that as the company grows, so do the needs of the organization. Therefore, so do the talents and the needs of the people. That can go both towards other people and towards you.

There were certain points of time where people who had started in the business needed to change roles, or someone needed to be higher than them in the hierarchy of the organization, or maybe they needed to go do something else. Those were personally painful decisions and very difficult decisions as a leader to make. But I think for the health of the organization, that’s what a leader has to do.

The second one is around me, in that who I was and what I did when we started the business was not going to be what the company needed at certain milestones throughout its growth. To be the CEO when there’s zero revenue, and to continue to be the CEO when it exceeds $500 million in revenue, I had to be and really enjoy being a professional learner. Not only did I have to learn, I also had to adapt and change. I think that it’s been a wonderful journey for me, learning and growing and always seeking to do better, but it’s not easy. It’s not easy to let go of things sometimes, you know?

Knowledge at Wharton: How has your experience at MedRisk shaped you as an entrepreneur?

Boyce: I would say it shaped me in that it has probably defined me. You meet a lot of entrepreneurs out there who are sort of serial entrepreneurs, who like to take a company to a certain point and start over, then go to the next one. For me, it was about taking this and growing with the business, and watching the business grow, and feeling like you’re a part of it.

Knowledge at Wharton: Have you thought about what you will do next?

Boyce: I don’t really know. I’m still involved in MedRisk, and I enjoy that. I’m not ready to retire my brain yet, so I’m not ready to exit into the sunset or sit on the beach. I’m enjoying dabbling in a few things, enjoy still hanging around MedRisk and looking at what my options are for what’s next. I’m not sure, but more to come.

Knowledge at Wharton: What advice would you give aspiring entrepreneurs?

Boyce: I think most entrepreneurs have some defining moment where they don’t doubt themselves as to whether they’re going to do this or not do it. Is it going to win? Is it going to fail? Am I making the right decision? There is some tipping point or turning point, and you’ll know when you get it. And when you get that, you’ve got to have complete conviction and not look back. You only look forward. It’s a wild ride. It’s a life-changing experience, and you just have to keep going and looking forward. Surround yourself with really smart people — people who are smarter than you. Constantly look for the best of the best. And when you need capital along the way — whether you do it with angels or minority or majority investors — just make sure that it fits right.