AIB Featured Business Leader – Judith Faulkner
Judith Faulkner is known as the most powerful woman in healthcare. As the founder and CEO of Epic Systems, she keeps a low profile and rarely grants interviews, but commands great respect within the healthcare industry. Her motto is “do good, have fun, make money” and it’s served her well: Faulkner is worth $US2.5 billion. In May 2015, she signed the Giving Pledge (an initiative spearhead by Bill and Melinda Gates in conjunction with Warren Buffett) and has started making arrangements to transfer the bulk of her wealth to a foundation which will fund health care and education for disadvantaged populations. And as to whether she’s had fun along the way, her length of tenure would attest to that as well. Faulkner founded the company in 1979, meaning that it will soon reach its 40th anniversary with Faulkner remaining firmly at the helm.
Faulkner was born in 1943, and did her undergraduate degree in Mathematics at Dickinson College in Pennsylvania. In 1976, she was completing her master’s degree in computer science, then an emerging field, when she was recommended for an opportunity in the psychiatry department of the university who was looking for someone with her skill set. She wrote them a program that tracks and centralises patient information, which had historically been kept in hard copy in bulky filing cabinets. The code was written using a language known as MUMPS, developed by the founder of Meditech in 1968, and standing for Massachusetts General Hospital Utility Multi-Programming System. Today, Epic’s products are written in Cach, MUMPS’ successor.
The patient database she thus created was in high demand, with other university faculties and private providers wanting to buy the product. In 1979, Faulkner formed her own company to sell the product. Then called Human Services Computing, it was set up with a $6,000 loan from her parents. Once set up and with orders coming in, Faulkner sought investment from colleagues and family members, raising $70,000 to fund Epic’s expansion.
That expansion was slow. Originally, many of the employees, including Faulkner herself, retained their day jobs, working part time or after hours on Epic. For the first decade it remained a small, steady software shop, with sales of $1.7 million by 1990. But computers were still increasing in capacity and popularity, and Epic’s fortunes were to increase with them. In 1995, Faulkner focused on large physician practices and sales began to take off.
By 2000, 21 years after the company’s inception, Epic had 69 customers and did not yet feature on any top-20 vendor lists for health providers. Its major competitor, Cerner, had three times the revenue that Epic boasted. And then two things changed. Faulkner began to concentrate on hospitals instead of physician practices, and in 2003, when the award-winning HMO Kaiser Permanente was looking for a new system to replace its old IBM program, Epic was shortlisted. Kaiser talked to both Epic and Cerner, noting as it did so that Cerner’s marketing arm controlled who Kaiser could talk to, while Epic gave them free access. Kaiser also sought feedback from Epic’s customers, who were unfailingly positive about the company.
This experience is right in line with Epic’s known strengths. Faulkner runs her business in a low key, intuitive way that puts a lot of faith in her staff and reaps the rewards. Epic has no dress code, no marketing arm and no formal budget structure. Faulkner trusts her employees to know what you’re doing and to make judicious calls. “We teach people how to judge appropriately”, she explains, so that the system isn’t complete chaos, but the lack of a formal budget means that people don’t feel obliged to spend up to that budget and so costs are kept down. It also helps that the hiring process Faulkner puts her applicants through is gruelling, including personality and IQ tests, and the standard of qualification is extremely high.
Of the 5,200 employees at Epic, only 1% are in sales and marketing, with five senior salespeople in total. Nobody is paid a commission. That, says Faulkner, is because when she started the company she knew nothing about marketing, so she focused on making a good product instead and word of mouth took care of the rest. These days, her sales people are trained to select customers based on whether they’re a suitable fit for Epic. The customers come to them, not the other way around, and in the process Epic has gained a reputation as a status symbol amongst health care providers.
Back in 2003, Kaiser was impressed. They offered Epic the contract, but with one rider: due to Epic’s inexperience and the huge scope of the works, they asked that Epic give Kaiser some equity in return. Faulkner’s response was decisive and brief. She said no. Kaiser awarded them the contract anyway and the two companies continue to enjoy a relationship which is, to date, Epic’s most valuable customer. Joining Kaiser on the customer list are a group of well-to-do, prestige health care institutions like John Hopkins and Cleveland Clinic. Faulkner also sits on the board of a government-appointed policy board which makes recommendations on how to deal with patient records and information. She’s the only head of a company to do so, with the position giving her significant influence within the sector.
Epic continues to be privately owned, and Faulkner has no plans to list the company publicly. “When you’re public”, she explains, “you can never forget your fiduciary duty is to increase shareholder value”. To that end, she is creating a foundation to receive most of her stock when she retires or passes on, which will both serve as a vehicle to keep the company privately owned, and to run non-profit organisations in health care and educational fields. The foundation will also receive the vast bulk of her own wealth, a gesture that won’t mean a lifestyle change for the thrifty Faulkner. Along with her husband Gordon, a paediatrician, she lives in a house in a Madison, Wisconsin, subdivision. She drives a 5-year old Audi wagon, and keeps no other cars. Preferring not to be recognised on the street, she shunned all interviews until recently, when the company’s success made it impossible to avoid entirely. She still prefers not to have her picture taken. But does she still live up to her motto of having fun? At 72 years old, she has no plans to step down from her role, which she continues to relish. And with her Giving Pledge backing up her strong social conscience, she is ensuring that her wealth will do good long after she is gone.
This article was written by Tanya Ashworth-Keppel on behalf of the Australian Institute of Business. All opinions are that of the writer and do not necessarily reflect the opinion of AIB. The following sources were used to compile this article: Forbes, Milwaukee-Wisconsin Journal Sentinel, Epic Systems, Becker’s Hospital Review and Wisconsin State Journal.
Image credit: National Review