131: Verne Harnish — Are You Being Limited by Your Goals?

Well, with any new the end of a period, the beginning of a new period comes reflection, learning and goal setting. Imagining a new future, a new period. So today's show is really all about that. What's our process? What are all the things that we're thinking about that we're hearing from clients and companies that we work with? We have a very special guest on the show today, Vern Harnish, the creator of the whole Scaling up framework and noted author all around business guru Verne Harnish. On the show today talking about the next year, the next period, what's coming and how to complete the the last year and transition into the new year. Hello and welcome again to the Scaling Up Business Podcast. I'm your host, growth coach Bill Gallagher. On the show with me today, our original growth guru, the founder of Scaling up, the world of Scaling Up, Verne Harnish. Welcome to the show, Vern.

Bill. Glad to be on.

So it's the holidays. We've all just had our Christmas and Hanukkah and whatever else that you celebrate. And you're in Colorado now, right?

I am.

Are you up in the, have you done any skiing or anything like that?

No, doing everything I can to avoid skiing. It's too cold. No, I grew up, I grew up in Colorado. All we did was summer sports. We, we stayed away from the hills.

Oh, interesting. And I love getting there and I love the skiing. I can't wait. I'm going to go buy some skis the next two days and, and get back up. So. All right. So I thought where we ought to start is just, you know, the natural thing about what's happening this time of year. We're looking back. We've just been doing the review and plans with many of our teams. I know I personally in the media, we see the look back over the year, that kind of thing. What are your reflections or what do you do in terms of looking back, examining your life?

Well, I think what's interesting and it reminds me, Bill, my favorite quote, you know, the greatest lesson of history is we fail to learn from history. And so I think first of all it is important to look back and decide what are some of those lessons. And so for me it was one of recognize, you know, I've been to hell and back this year.

Yeah.

And we really was trying to get real serious about, hey, what I've got to do is figure out what deep inside me have I still even I'm about to turn 60, haven't figured out that it's been constraining me from really hitting it out of the park. I mean, look, we've done well.

But.

And that's why I ended up, you know, finishing the year at the Tony Robbins day with Destiny. And as you and I were talking, my head signed. I want to like, sue all of my past therapists and ask for refunds. I mean, they're all a bunch of amateurs compared to Tony's ability as a grandmaster to help you get to the, you know, what's in your way. Because as you know, the biggest constraint is between our ears. And I think that's part of what is important for people to examine is, you know, what got in the way of what you really wanted to accomplish. And try to understand that.

You know, I, when I think about as a younger person, I did all sorts of personal development courses, corporate training, things like that. And I had this notion that I was going to get fixed at some point. I would transcend humanity and I would just sort of glow. I'd levitate, I'd like. And that I wouldn't need anything anymore. And then at some point, I saw someone who I considered fairly masterful. Like struggling and stumbling was something that, that I was learning and should be. He should have like, solid. And I gave up. And I had this insight, oh, I'm never going to be done. And so one of my business values today is never finished. And it's the idea of always being in a state of growth and development until you die. And the photo that I have to bring that to life for me is Jack lalanne, the fitness guru who stayed working out to, I don't know, a ripe, ripe old age. Right. And the idea that I'll always be working. And there's something very liberating and freeing As I look back in the year and examine my year, I look at my calendar events, I look at the things I count, but I also look at my photographs because today most of us take pictures on our phones and then that catalogs them in a photo stream and you can sort of flip through those and remember stuff that sometimes they feel like they were a long time ago. And you don't realize that all that happened this year.

Well, you know, it reminds me when I was at Joe Polish's 25k event, maybe I've heard him say it before, but this like, you're either winning or you're learning. There's no losing. You're just winning or learning. And you know, we share the, the great t boom picking story in our scaling up work. And that's what I love it because, you know, t boom was worth hundreds of millions. They lost it all at the turn of the century. I mean, he was down to like his last 2.8 million. But for him, he was broke and is in his 70s, and he dared to ask the question, all right, what haven't I learned yet that I need to. And he, as you know, he figured it out. And in the next six years, he took that 2.8 million and turned it back into 4 billion. But the fact, I love the story, first, he didn't achieve his first billion till he was in his 70s. So look, Bill, you and I still have time to hit that billion. And I always love the title of his book. Then he wrote about it. You know, the first billion is the hardest. So for all your listeners out there, yes, it's a grind to get to the first billion, but trust me, the second, third, and fourth come a lot easier. But he's such an inspiration that he's willing to still learn after experiencing such massive business failure in his 70s.

You have this slide that you often show with Picasso painting, his masterworks, all after the age of 50. And I forget all the other examples of people who did extraordinary things. But as we look back and we consider at every stage of the game, one of the things that led me to scale up more was a corporate job I had. And I was on vacation in Mexico, very, very hungover, and I realized there was some call or something that I had and I had to make some decision. I realized, oh, in this hungover state, I'm responsible today for $1.67 million. And I just was like, it was overwhelming, but also empowering. And then I thought about our chairman of the company I worked for at the time. And I'm like, he's a guy with marital problems and physical ailments and kids issues. And like, it's all. It's just another way of playing the game.

It is. You know, in the big line I got, you know, Tony's is, you know, you don't think about what life does to you. It's what life does for you. And as long as everything you view has been done for you and your job is, it either helped you win or helped you learn on what's going to take for you to win, whatever winning is for you. So it's been a great. It's been a great learning year, and I'm super excited now to. To look forward because that is what most entrepreneurs love to do, is we like to keep our heads. I was, you know you mentioned photos. Everyone's like, like laughs at me, but I have like no photos. All the, you know, famous entrepreneurs I've had a chance to meet and spend time with and all that, I have no photos with them because I'm, I'm not a guy that actually cares to look backwards too much.

Uh huh huh. You're on to the next thing and so on, right?

You bet.

Yeah. So we want to be informed by the past, we want to learn from it, we want to make our peace with it and then be ready to move on. And you're having some change of thoughts of imagining the future. I think that one of the things that I have always really loved to do is to imagine a future and sort of invent directions or things that I want to accomplish. And some folks are really rabid about breaking them down into steps and things like that. And you're having a little change of heart about envisioning something, right?

Well, it's what I've gotten a little rabid about is first I think there's no doubt if you're not figuring out your business plus artificial intelligence or machine learning, you're going to get replaced by some 22 year old who does. It's the hottest topic in this 2018 moving forward. And what's interesting is the real barrier to implementing this is cultural. And the cultural barrier is all this objective setting that we've got obsessed with. And it really drives in a broader topic about the need to bring both the masculine and the feminine. It's not a man woman thing, it's a masculine and feminine thing into the business world. And we've been driven for so long by a masculine approach, mission driven, objective setting where in reality, and we had a great speaker at this last summit who shared the fact that if you really look at your life and where you are today, I guarantee you it wasn't because of any objectives you set. It was more serendipitous in nature. And it's the serendipitous discoveries that end up really being the massive breakthroughs that drive our lives and our companies. And so I'm reading this book called Greatness Cannot Be Planned. And the point is, look, you don't give up objectives. They're very powerful in the short run. Back to the original Rockefeller habits the night before. Figure out the next day, what are the five things you're going to do? What is number one? And don't go to number two until number one is complete. So it really is that idea. If you can get one important not urgent, important thing done every day you're going to be way ahead of the game. So objective setting in the really short run, the sprint, if you would, the one or two week sprint of Silicon Valley that drives that entire region. But you really are in some sense dangerous to yourself to think that you can have three year objectives. This whole I'm every day I'm more and more convinced. This idea that you ought to be sure where you're going to be in the next three to five years is very limiting. This book makes a great case for that. So I think, look, I come back, there's two things you need to be sure of. Where are you going to be in the next 10 to 25 years? That standard big hairy, audacious goal, what's the hill you want to take? And then what do you have to do next? And everything else in between really is a wild ass guess. And the more that you can allow yourself to be open to what do I need to learn? What's life teaching me right now? And serendipitously, what do we need to do next? I think you're going to get further faster and I think have a lot more fun.

Well, so years ago I ran a BHAG for some years and I had a very specific date number and all these kinds of things on it. And I've since learned not to do a BHAG the way we did it. Now it lit some of us up. But the first thing is that our bhag, at least in the, in the beginning, was financial. And I've learned since that the people that really care about the financial bhags tend to be the owners of the company and their spouses and almost nobody else. So the more purpose oriented kinds of Bhags tend to be. And then the other one that surprised me in that tenure thing that you just spoke to is that I had a specific date. So instead of saying we're out to conquer this mountain and you know it's a 10 year plus goal, we had a specific date, like 2010, it's gonna be this. And as 2009 kicked in, we were deeply depressed by the whole thing and threw it out. Cause we're like not even in the ballpark. Especially 2009 was the year after things melted down or in the middle of the meltdown.

Right?

Yeah. So I think that like setting aside the exact path to those long term things we envision it, I created BHAG for myself to help 5 million business leaders. And the main thing that it said is that I'm not going to achieve that by just coaching 10 companies of 10 leaders at a time. I've got to do other kinds of things like this podcast or whatever, where I reach a bigger audience. So as you're looking ahead, then how are you imagining and creating what do you do for the next year personally and with the business?

Well, there I think you can actually be. You can start to dial it in. I've set one both personally, professionally for 2019, and it's been fun as part of our general, our form process is to hold each other accountable then on a monthly basis to that one thing, and then you kind of work backwards. So I think he can generally have some visibility about 12 months out and then be real, crystal clear what you've got to do over the next 90 days. And that, I think is the important part of the plan that everybody ought to be getting down and riding here for 2019.

So on the minds of every one of my teams this year is what's happening in the economy right now. The feeling that we're overdue time wise for a down cycle, seeing all these signs of softening, instability politically, trade, et cetera. What about planning for that, Thoughts that you have about that when that arrives all the world?

Well, I think, first of all, Bill, all seriousness, I think it's a mindset issue and I like to remind everyone We've got an $80 trillion global economy this coming year, up from 35 trillion at the turn of the century. I mean, it's been a great run. And if we had what's considered a great recession, that is the global economy dropped by 5%, we'd still have a GDP that's greater than what it was last year. And if you can't figure out how to make a million or a billion out of an $80 trillion global economy, it's your fault. So it is. And I've been, you know, I've been opening up with this slide that shows this horse, you know, standing on a Model T and the idea that the automobile was to put the horse out of business. Yet last year it was a $300 billion global thriving industry, the equine industry. And so there are no bad industries, they're just bad leadership. You know, they pivoted from transportation, entertainment, and it's thriving. And so I think first is a mindset that there's plenty of business to be had out there. And then what I love during a recession is it cleans out the riffraff, it gets rid of the weak. You know, those, those Ankle biters that just kind of irritate you in the marketplace. This is the time to take them out and you can get assets for half price. The key though is to load up on cash. I think one of the big reasons why the stock market is down so much. A lot of folks don't realize that there's these opportunity zones that got passed this year that allow the baby boom to pull their money out of the stock market tax free. It's like the biggest going to be redistribution of wealth in the history of our country. And the smart folks right now are massively loading up on cash and praying, enforcing a downturn so that they can take advantage of the weak and the poor. And that's just the circle of life.

So that is the basic thing, right? Shore things up and maintain a good.

Cash you got so that you can.

Be on a buying spread upon cash.

Buy competitors and, and get laser focused on who are your best customers. We've, we've identified our, you know, roughly 2500 that we're interacting with on any daily basis. There's 600 that we know are critical. And I have, it is my daily focus is to reach out and connect with those 600 and make sure that we've got a great nurtured relationship with them as our best customers.

I heard an ER doc speak at a conference with Guy Kawasaki years ago, and I can't remember his name anymore. But his lesson was pretty simple and straightforward. He said, listen, what you learn from an ER is that the most important patient is not the noisy one. He said, the most important patient, the person screaming and wailing, has pretty good vitals. It's the person quietly dying in the corner that you need to be on the lookout for. And he said the same is true of our businesses. As he'd moved into entrepreneurship, he said, and I realized, wow, that's really true. The customers that fill our email inboxes and ring our phones all day and night are not always the most valuable ones. And so we've got to figure out what are the top ones and then proactively reach out to them. Whether it's a 4Q question rhythm or something like that, where you're, where you're touching the most valuable customers on a regular basis and then getting to the rest of the noisy bunch when you have time available but not being pulled around by the noisemakers.

Well, that's exactly what Andy Bailey, our partner, did when he had NationLink Wireless right in the depths of the recession and the whole industry was collapsing. He set a quarterly theme to just reach out and thank 2000 of his customers and reconnect with them on a very personal basis. And first of all, when's the last time your seller, carrier really did reach out and want to connect with you? And he said it was an amazing. It ended up being one of the smartest things that they did that both pulled him through the recession and powered him forward until he sold the company.

So a recession, right, is typically, you're going to see the whole economy shrink 3 to 4, 8% or something like that. It's never double digits even. And we all think, well, we could survive that, except the dislocations are massive. My last business went down by half overnight. And so we had to cut and shrink and do lots of things. But then we pivoted. We looked for, well, where is the money going? And then we innovated along those lines. And everybody, whether they went down by half or not, that did that kind of an exercise that looked at, okay, what's the shift that's happening? And then pivoted to wherever things were going, saw great growth. And of course, we came roaring back out of that. And I think about my friends, companies, people that were in my forum and so on, that employed that kind of an exercise on once the thing had hit. So being in a great cash and operational position before the downturn so that you're stable, and then after it hits, looking for where's the action, what's happening? That exercise you teach always that we use with folks is the strengths, weakness, trends. And if you look at trends in the world, you see something.

Yeah, for sure. Yeah. And it's that idea, whether it's grapes or roses, if you stress them and prune them properly, then, man, they come back stronger and better than ever. That's what I think are great about recessions. They just, they. They force you to prune back. The big mistake leaders make is they don't prune soon enough. You know, when it starts to go south, you've got to make the tough cuts and, and, or, you know, you could. The alternative things, these are where you use things like you go to your employees and say, hey, is everybody willing to kind of cut back to 30 hours? So we save everybody's job. And it's coming through some of those things together that really strengthen the culture. So they're just super opportunities to strengthen.

Well, and a big complaint this last year, right, has been hiring the availability of staff as people have staffed up, and our clients have added hundreds of jobs this year. But really Struggled to find the best people and keep them engaged. And, and that'll change a great deal when the economy's change because even good people will leave companies that were bad and fail for one reason or another.

Well, and it's a good excuse to do the thing. You know, I've been ranting about lately. You know, I think I was sharing with you as we were prepping this. If I read one more article or one more book that references that old Gallup study or they updated every year that, you know, there's only 19% of your workforce that's income engaged, I just want to stab myself. You know, this stat hasn't moved for two decades. Why don't we wake up and figure out why? And my solution is, you're not going to fix leadership, just get rid of all of them. You know, it's one of the reasons why Starbucks had a massive layoff, you know, about a month ago. If you look deeper at that, it was all the vice presidents they got rid of. And you know, I just last week put out my list of the top five business books for 2018. Actually my top five and top one of five. And clearly to me the number one business book was Ron Lovett. You know, he's one of us. You know, a serial entrepreneur who scaled a 15%, 1500 person security guard, private security guard company up throughout Canada, sold it for 24 times earnings this year. You know, when it was all said and done, Ron maybe had eight people in the entire company that you would call a leader or a manager. You know, again, the best way to up engagement, he called the, the book outrageous empowerment. Giving his employees their brains back is just get rid of all of the management. They cost about 30% of your payroll. They're driving everyone else in the company crazy and they're just slowing stuff up. And so Ron's book is a how to book of how he cleaned all of that out of his security guard company and created one of the most outrageously empowered workforces on the planet. And so I encourage everyone to take a look at it and use the pending recession as an excuse to clean that middle management out of your company and don't let it creep in.

Well, we're seeing more and more examples of this where we're flattening things out. We're giving people a set of principles and things to work towards and then empowering them to think for themselves against a set of values using simple ideas like checklists rather than elaborate policy manuals.

Bill. Perfect. You got it. And so again I think a recession gives an excuse to make those kind of pivots internally as well as market pivots.

That's really great. So many. What's the Dutch nursing firm that.

Yeah, Bozard.

Yeah.

Started slow over a decade ago with four nurses. Today, 14,000 nurses all in special op size teams and 50 people at what you'd call a headquarters. And 18 coaches, no one in the middle, none of this area nurse, regional, you know, district nurse, regional nurse, country nurse, you know, and they've expanded throughout Europe, into China, into the United States, and they don't have any of that middle management that you would typically see in a 14,000. And you know, the November issue, the COVID story of Harvard Business Review was an article written by the famous Gary Hamill and, and a colleague of his, and it's titled the End of Bureaucracy and it's the Story of Hire. You know, they're the largest white goods manufacturer in the world, China based. I mean, you know, surely you can't do this in, you know, communist countries. And with 74,000 employees, about a year ago, they cleaned out the 10,000 managers. There's usually a 7 to 1 ratio of managers to employees. And they cleaned all 10,000 out and put the balance of the employees in 4,000 kind of little 10, 15, 20 person micro enterprises. And that's driving the company globally. So this stuff isn't theoretical anymore, Bill. It's really happening.

Well, you know, we have such great speakers at our scaling up summits, and you've done such a good job of curating those over the years. One of my favorite ones, recent memory, Stanley McChrystal, and he talked about changing the whole way, using their global daily huddle and, and less of that oversight of the operations, but giving people objectives, sharing information, and then turning them loose against a set of engagement rules, but. But letting them run and authorize their own things. And I mean, that was an amazing kind of a revelation that goes right to that whole thing of empowering and freeing people up to do the job.

Yeah. General McChrystal's book Team of Teams is one of those two or three most important books I think, written this century around where we're going with organizational structure. And the way I like entrepreneurs to think about it is last century, it was about organizing muscle. We had to organize our might to go to wars, and we had to organize our might to build, you know, automobiles to manufacture. And therefore it made sense. You know, form and function need to match. And so our organizational structure mirrored that of our skeletal system. You know, There was the head and the shoulders and the arms all the way down to the fingertips and toes that were the front line where the rubber met the road. And that really worked well. The problem is we're now in a century where we've pivoted from our backs to our brains, from our muscles to our mind, but our organizational structure didn't change. And today we need to be structured more like our brain is just kind of this multi cross wired set of nodes that are multiply parallel processing decisions that need to get made without a whole lot of hierarchy. And so these organizational structures that General McChrystal created for our military boots are created for these nurses and Ron Lovett did with security guards. Mirrors the fact that we're doing brain work today, really, instead of back work.

We had also Dr. Thompson talking about the approaches in nature, like how ants organize, and looking at that, I mean, we think of a guy like Stanley McChrystal and masculine and military and hierarchical. Of course he was talking about deconstructing that. But then we also look to nature and we see the same kind of thing, don't we?

Yeah. Tamson's book Teeming T E E M I N G I consider one of the top books written last year and her five what are kind of, you know, aspects of these superorganisms that have survived and thrived for millions of years literally are the recipe for how we ought to be structuring and running our organizations in the 21st century. And so I'm just super excited. There's so much new with machine learning, organizational structure, and finally bringing the feminine energy of serendipity back into our companies as we move forward over these next several decades.

I've been working with a writing coach for the last little bit on a book that I'm working on and, and looking continually at unifying masculine and feminine men and women. Bringing more diversity is only in every single case improving the quality of our decision making, the creativity, the competitiveness, evolving the way that we do and think about business.

Yeah. You know, as we wrap here, Bill, it ultimately comes back kind of your first question, which is where are the constraints? And a lot of them are first of all between our ears. And a lot of the constraints are just as you described and as we begin to kind of remove those and one of those. And to me, the ultimate constraint is you thinking that you alone have the answer. And when that starts to creep into a business, that's when it's over. And the more brains that you can engage and the more Diverse brains to your point, you can engage to help you make decisions. Your job really is to get the right question and then get out of the way and let the world help you find the right answer. That's, I think, the approach of the 21st century.

One of my best moves as a business leader, as a former company, as a CEO, was when I was faced with a real existential crisis, like we were going to get shut down. And I went to the team and after some delay and I said, look, I don't know how to say this, but I, I don't have, I don't, I don't know how to get out of this problem. And this is embarrassing and upsetting and I feel like I should have the plan. But, and I understand if you need to quit, but if you, I'd love to have you stay and help me fight this challenge and I'll share things with you like I've never done. So they were left with first, certainly my vulnerability in the whole thing, but also, and respect and honor, but then also my commitment. So I said, look, here's my promise. I'm going to fight to the end. The sheriffs will come and lock us up and throw me out before I'll quit. And that was really inspiring. And then together that team figured out a solution to the challenges at hand and produced a breakthrough. We doubled in the next year and it was awesome. But it was really like empowering the team, freeing them up and leaving them my commitment and a different kind of leadership, like a servant leadership, where I was, look, I'm here to empower the team to help you to. And it really changed me that, that focus, that approach.

Bill, what a, what a great story. That is precisely the, the vulnerable leader approach that's going to drive success this century for sure.

Yeah. So thanks so much for getting on the show. I want to remind folks that we have fantastic summits twice a year, two day summits. We bring the best authors, speakers, gurus, business leaders who have the most thought provoking, engaging things. It's not just reading, scaling up to you time after time, but expanding and growing the whole world, the whole body of work that's there. Our next one is 5-21-22 in Atlanta. Any previews of anybody coming up for that one, Vern, that you want to call.

It's going to be another amazing. Well, first of all, we always have an amazing speaker around artificial intelligence and we probably. And we have the most women authors we've ever had in the history, so they can get all that information at Scaleup Summit Biz.

Scaleup Summit Biz. And then of course, we'll also have one on the West coast in October 1516 Anaheim if you want to calendar that in. But it's time to now plan for for the 5-21-22 in Atlanta. We do workshops continually on Scaling up all over the country and the world. Our next one in San Francisco that I'll be Living is January 24th. So you should go and register that. You can find the list of all the workshops and stuff, of course, @scalingup.com right.

You got it. That everything we've now coalesced around that one brand.

Scaling back to scalingup.com well, thanks again so much. I know everybody's thinking about and planning the next year for themselves personally and for their business. And whether it's the next year, the next quarter, this process of imagining and creating your future is core to Scaling Up. So thanks again for spending some time with us and our listeners today.

You got it, Bill.

Well, I want to give special thanks to Verne Harnish for joining us on the show today. Our show is produced by Crystal Carson, audio production by Podfly Productions and audio notes, audio editing by Albert Burge, which is show notes compiled by Ein Codena and proofread by Tim McGowan. If you got some value out of our show today, please, you know, share it, like it, pass it along, share it with somebody else so we can help more people. If you'd like to find our free tools, downloads and subscribe, go to scalingcoach.com where you'll get all the information. We put out a show like this every week, so go there. Scalingcoach.com you can also drop some line info scalingcoach.com tell us the parts that you loved so we can give you more of that. Thanks again for listening and keep scaling up.