The Broken Business of Death
Story misalignment makes any company vulnerable to disruption, no matter how big or essential they are.
By Hannah Landers
• SCI built its business around a promise of “empathy and a desire to serve”
• SCI’s strategy relies more on ruthless efficiencies and elevated pricing
• This misalignment has left the way open for a new kind of competitor
Even though you’ve likely never heard of it, Service Corporation International could play a major role in your eventual demise.
Although the death care industry has ballooned to $20 billion, only a few behemoths control the lion’s share of business. Service Corporation International is the largest public funeral services provider in the space, controlling more than 1,500 funeral homes and 500 cemeteries across North America (and manufacturing related products like funeral urns, caskets, and burial attire). In 2018, SCI netted more than $3 billion in revenue. The company accounts for about 16 percent of overall market share—with the next largest death care company earning only $316 million in revenue the same year.
Founded in 1962, SCI has grown under the leadership of founder and current chairman emeritus Robert L. Waltrip, who supercharged his family’s small Texas funeral home to become a major industry juggernaut—seemingly all thanks to the tenderness and care that his company provides to the loved ones of the deceased. “The relationship a funeral director has with the people he serves is very rewarding,” he told Texas Monthly in a 1996 profile. “If you don’t have empathy and a desire to serve, you won’t be very good. You’ll come across as cold.”
What also comes across as cold is treating the care of the deceased and their loved ones like the assembly and delivery of a Happy Meal, yet Waltrip has repeatedly compared SCI’s business model to the popular fast-food chain, insisting the two industries have similarities. SCI’s growth, which has been guided by these similarities, should have instead focused on the crucial differences between the two businesses; after all, no one sees the purchase of a Big Mac as one laden with emotional investment and personal attachment.
With a theoretically never-ending stream of customers who must often act quickly, SCI has long benefitted from inertia. The company’s increasing misalignment between the story it’s telling and the strategy it’s implementing, however, may cause its seemingly immortal success streak to kick the bucket.
What SCI’s highly consolidated model fails to recognize is that death is an intensely personal experience. For most of American history, people passed away in their homes, surrounded by family and friends. The bodies would be washed and dressed by those they lived, worked, and socialized with every day. Family and friends would pay their respects throughout the week before the body was put in a humble pine casket crafted by the local carpenter and buried, either at a local cemetery or, sometimes, in someone’s backyard.
Although society has grown to trust others with the care of their deceased loved ones, most of the funeral homes in the U.S. (about 89.2 percent) are still privately owned or family-run, showing that this is an industry in which a personal touch and a sense of trust are more than necessary. Research has shown that, in general, consumers place more trust in a family-run business. In a time of deep emotional distress, it can be reassuring for grieving loved ones to feel as though they aren’t being taken advantage of—that they and the deceased are both being treated with respect.
Here is where the crux of the disconnect lies between Waltrip’s purported philosophy rooted in care and tact, and the reality of the ways in which SCI has gone about its business for the past six decades. SCI grew from the Heights Funeral Home, which—funnily enough—was owned by the Waltrip family. When the senior Waltrip died suddenly in 1951, the younger Waltrip stepped in to manage the business. He initially purchased two additional funeral homes in the Houston area and realized the potential to maximize efficiency (and profits) by consolidating then-independently owned funeral homes to operate under one umbrella. With a strategy that centered on changing operations behind the scenes, but leaving the well-known family names of these community institutions intact, Waltrip vastly expanded his empire: only 20 years after SCI’s founding, Waltrip controlled more than 250 funeral homes across the U.S.
Although Waltrip understood the immense power that a family name on the sign in front of a funeral home holds to the bereaved, he made a conscious decision to eschew the promise that family name is supposed to hold: one of dignity, respect, and compassion. For all the advantages that its consolidated business structure offers SCI (and its shareholders), there is a great cost: the genuine concern and warmth that supposedly motivates Waltrip’s strategy.
Dating as far back as the 1970s, SCI has been plagued with accusations of deceptive or fraudulent industry practices. In 1976, the Federal Trade Commission filed a complaint against SCI alleging the company had been paying kickbacks to medical examiners, morgue and hospital employees, and police officers to notify the company “when certain deaths occurred,” and that the company had been overcharging customers for funeral services. In the 1990s, SCI came into the spotlight again for its involvement in a coverup scandal centered on lack of licensing among its embalming staff, which resulted in disturbing mistakes in the handling of dead bodies. And throughout the 2000s and 2010s, various brands owned by SCI have been involved in instances of grave desecrations and mishandling bodies.
Even aside from these specific instances of misconduct, it seems as though SCI has always operated its business in a way that pays respect only to the bottom line—not the deceased or their loved ones. SCI has had the highest funeral prices in the nation since the mid-1990s, despite its ability to operate more efficiently than the average family-run funeral home: Buying fixed–cost goods like caskets or chemicals in bulk and consolidating services like embalming to one mass center that serves multiple (SCI-owned) funeral homes ensures that the company can maintain and increase its profits.
In the profile of Waltrip in Texas Monthly, an independent funeral home owner in La Grange, Texas reported paying $25 wholesale for a cremation container, which he sold for $100 at the time. In contrast, the SCI-operated Memorial Oaks Funeral Home in Houston priced its least expensive cremation container at $392. According to a 2017 report from the Funeral Consumers Alliance, SCI’s prices constantly fall at an average ofrange from 47 to 72 percent higher than those of competitors. With one-third of American adults reporting that they would struggle to cover an unexpected cost of $400 (as of 2018), jacking up the prices on these services only puts the bereaved in a more difficult spot as they try to balance their need to honor their loved one without slipping into irreversible debt.
Further, much of this money is directed not toward improving services or raising the pay of workers on the frontline, but rather goes to executives. Corporate compensation expert Graef Crystal studied nearly 900 large and midsize companies from 1992 to 1994, ultimately estimating that Waltrip made an average of $9.3 million a year throughout that period—313 percent more than the average CEO at a comparable company.
Although many fear the widespread misinformation and deception in the industry (such as pushing unnecessary embalming services on those who wish to have the deceased cremated, or telling outright lies about burial procedures), SCI’s business practices and model rarely speaks to the “empathy and a desire to serve” that the company’s very own founder claimed was key to success in the industry. Buoyed by advantages such as the fact that few people choose to shop around for better prices and that everyone will need its services eventually, SCI has been successful despite its missteps. But this might not be the case for much longer, thanks to an increasing number of Millennials and Gen Zers adopting a “death positive” attitude and doing things on their terms.
Sarah Wambold, for example, was a funeral director in Texas when she learned about green burials, a process that allows the body to decompose in the earth without any chemicals, resulting in the least harm to the environment. This shaped her decision to open Campo de Estrellas, a conservation cemetery near Austin that combines green burials with natural conservation. Jeff Jorgenson operates a green funeral home in Seattle called Elemental Cremation & Burial that champions ease of arrangements, environmentally friendly options, and affordability—which has become a major selling point as funeral costs have risen: In 2019, the average funeral cost about $9,000 and the average cremation came in at more than $6,000.
Although SCI is far from buckling under the pressure of these industry upstarts, grappling with the pandemic has already made an impact on the giant. In an interview with Forbes, CEO Tom Ryan lamented the ways in which social distancing and stay-at-home orders have hampered the company’s business, making customers less likely to purchase any services beyond the basics, since they often weren’t allowed to hold a large funeral anyway. “Our ability to get in front of the consumer is limited,” Ryan said.
“The consumer gets to dictate what they want out of a funeral home—that’s what I see changing,” green funeral home operator Jorgenson told CNET. “Once you crack that door, a lot of other funeral homes have to respond on some level. … Because it’s got the death label, and because there’s fewer of us offering these services, there’s been a slower change.”
Even seemingly bulletproof industries where the consumer need is consistent and, in some cases, dire cannot stand the pressure that builds when the strategy simply doesn’t align with the purported messaging—especially in a space so rife with emotion. Building a strategy that is both rooted in an organization’s purpose and considerate of the circumstances of the industry itself is what will ultimately keep a company from going belly up.
Hannah is the Director of Product at Woden. Want to stay connected? Read our extensive guide on how to craft your organization’s narrative, or send us an email at connect@wodenworks.com to discuss whatever your storytelling needs may be.