Jenny Morgan headed a health care IT company for years before jumping to private equity, but she realized her passion wasn't investing in firms — it was being in the trenches, running one.
So when the founder of Linthicum-based basys wanted to bring in a new CEO, she happily took the job in 2009. The timing — during the rough recession — wasn't ideal. But she says the benefits-administration software company made good use of the downtime and positioned itself for growth.
Basys, which employs nearly 100 people, focuses on a very specific niche: helping "Taft-Hartley" funds, entities that manage union members' benefits, with their administration. That's given Morgan a front-row seat on rule changes mandated by the Affordable Care Act.
She's also chairwoman of the Baltimore branch of the Federal Reserve Bank of Richmond.
Morgan chatted with The Baltimore Sun recently about health care reform, her hiring strategy and what exactly the chairwoman of the Richmond Fed's Baltimore branch does.
You've been both an entrepreneur and a private-equity executive. What's your take on the long-running frustration in the local startup community that there's far too little venture capital here?
We've got some really good venture capital firms here. But the problem is — putting biotech aside, because obviously we have a very strong biotech community here in Maryland — it is hard. The small-company startups are just not extensively here.
And I think part of that is just sort of the industry that is here. We're in a real government sector of the market, which doesn't really lend itself very well to entrepreneurial companies. And I don't really want to bash the business tax environment here, but that isn't very friendly. I mean, I get calls … from Virginia trying to recruit me down there, and I wish Maryland would do a little more.
I really do like Maryland, I like being here, I love the culture of Baltimore, but from a business perspective, I wish they'd focus a little bit more on really helping particularly small and mid-sized businesses. I'm just a believer, for whatever it's worth, that that is how the American economy grows.
How has health care reform affected your business and your clients?
The devil is always in the details of how these programs are implemented, so the Taft-Hartley funds are really trying to get the Obama administration and Congress … to think about how they're implementing these things so the union members aren't disadvantaged in terms of things like subsidies for low-cost wages.
Some of our funds … have a lot of part-time employees. So they're a little worried that the part-time employees will stay part time and will move to the exchanges, because in the exchanges they can get some subsidies to help them afford health care insurance. And the funds would prefer they stay in the fund programs because that's really where the benefits are better for employees. So there's a tension in that.
How [the law] has directly impacted the basys approach right now: I would say it's driven more business than it's taken it away. … There are some legislative changes that do effect the way our software processes claims and eligibility, and we're busy putting in the appropriate changes to stay ahead.
I like to say when you've met one Taft-Hartley fund, you've met one Taft-Hartley fund. … Our software needs to be able to be configured to manage these very complex benefit plans.
So our system allows a fund to collect the money from the employers who are hiring the union members, we calculate eligibility for the union members, for example for their health and welfare and their pension benefits; we can process their claims, we can process their pension benefits.
What did the recession do to your company, and how did you bounce back?
It was tough the first few years I was here. … Most of my customers are in construction trades, and construction was one of the most wounded parts of the American economy during the recession.
As the union trades saw a lot of their workers not working anymore … it was difficult for these funds to go to their trustees and say, "Let's spend hundreds of thousands of dollars on software."
We didn't see as many procurement opportunities, and we didn't see as many upgrade opportunities — things got very quiet.
It had a silver lining. … It allowed us time to do work on product enhancements … with the understanding that the recession would end at some point. It actually turned out to be exactly what we needed to do — it turned out to be a very good decision for us. And we've seen the market bounce back quite a bit.
I really want to take advantage of that quiet time [during the recession] to really gain some market share as the market continues to grow.
One of the challenges that goes along with that … is we've gotten so much business that finding the talent and training them on this very complicated business is really where we really focus our time on now.
We have to obviously hire technology people and analysts and people with very analytical minds, and I have to tell you, it's hard in this marketplace because there's a lot of competition. … We made a decision in the company that we were really going to focus on recruiting out of colleges.
We hired about 20 people in 2013, and I think most of them came out of the college system.
When you hire for culture, aptitude and skills, and not for "I've done .NET programming for 10 years," you get people with a lot more enthusiasm. They value getting that experience. And … I'm acutely aware of the issues in terms of getting these young people employed, so I do like the idea of giving these guys opportunities.
What does the chair of the Baltimore branch of the Richmond Fed do — what's your role?
Richmond has a branch in Charlotte, N.C., and it has a branch in Baltimore, and the purpose of the branches is really to provide information on the economic conditions in those areas. … How are the businesses in Baltimore feeling? Are they hiring? How are sales going?
We're a bit anecdotal, of course, but we're providing some insight to the Fed about whether conditions look to be going up or going down.
I love it because … it gets me back to my economics roots. It requires me to converse with a lot of businesses in Baltimore to get a good sense of the economic conditions.