192: Navigating Growth Challenges: A Conversation with Verne Harnish, Bestselling Author of "Scaling Up"

When it comes to growing your business, we talk a lot of Vern about growing yourself, growing your team, and growing your business. When it comes to all of those, truly, I don't know if there's a better thought leader or a better expert to come and share with you some of the principles than Vern Hars.

Hi, I'm Emmett Scott. And just like you, I've had my ups and downs in the dental industry, but times are changing. The DEO has built a map of how to succeed in one of the most challenging industries to navigate. On this show, we talk to dental industry leaders, solve problems, and get you the answers you need to face these challenging and thrive. Welcome to DEO's Growth Secrets podcast for dental organizations. Now let's get started.

So, hello, everyone. Welcome to another episode of deo's Growth Secrets podcast. I am Jake Poole, CEO of the Dentist Entrepreneur Organization, and I'm filling in for the illustrious Emmett Scott today. But I'm so excited we have our speaker coming up for The DEO Summit 2024 in Orlando, Florida, Vern Harnish. So, Verne, I've got your book right here, Scaling up, one of my favorites of all time. For those who haven't heard of you, which most business owners, that'd be the folks kind of living under a rock here. Maybe give yourself a little bit of an introduction. And what's exciting you these days?

Well, you know, I grew up around entrepreneurs. I then founded the Entrepreneurs Organization back in the 80s. And then today I've got a company called scaling up. We're 283 partners on six continents. So we eat, live and breathe and sleep one thing for 42 years, and that is how do we actually help a business owner scale up, particularly the value, the valuation of the business. And what you and I were talking about as we jumped on is today, literally the inflation rate numbers came out and first quarter of 2024, it did not turn out well. Dow's down 500 points. I think the Fed's going to hold off on lowering interest rates. We thought that was going to come down. And so the topic that we're discussing at your event, pricing and compensation, the strategies there are critical, particularly in these inflationary times. So that's what's got us all focused and excited.

It does. You know, a lot of things we've been talking about inside of dentistry the past six months and really 12 months is this idea of squeezing margins. Now, dentistry is a little example of something a little different, where their top line is sometimes a little fixed for Some practices where they're getting insurance reimbursements, so they have to get creative around pricing strategies. And then compensation is a huge way that you can affect, not just probably bottom line, but really the performance and incentives of your team. So. So for maybe a little sneak preview, you're speaking at the summit in Orlando. Dentistry, Inflation, pricing, compensation, anything else that folks can kind of grasp their teeth into as far as what you're going to get into?

Yeah, well, you know, at the end of the day, it's about organizing people to get stuff done. That's why all businesses at some level are the same and performance is not the same across businesses and across those dental practices. And so to the extent that we can work on the things, and that's what I'll cover, that you can really ramp up the performance. And you can never forget quality. You know, at the end of the day, particularly in dentistry, look, I have had bad dental work and I've had great dental work. And to the extent that you are still able to deliver an outstanding service experience and quality, the key is how do you get everybody organized to do that, particularly under the pricing and compensation pressures that we're facing right now? So that's what we're going to dig into. And, and specifically, you and I were talking about, you know, pricing and compensation are not logical decisions. We keep trying to use logic, but we're dealing with people. And the one thing that we know, a guy won a Nobel Prize for discovering we are not logical, we are psychological. And so understanding the psychology of pricing. And look, even if I'm there under a fixed price schedule, the ability to upsell and some of the other things that can be that extra high margin can make or break your gross margin and thus the value of your practice in the next 12 months. So we're going to dig into those specifics.

Yeah. And you know, it's even more timely because a lot of our dentists are moving away from insurance is because they can't control the price they're going to fee for service only. So now they all of a sudden have a lot more strategies under their belt that are options. So even more relevant. And, you know, one question I want to ask you, so Scaling up, it's one of those books, if you haven't read it, if you're listening, it's an. It's like the first book I would read. If you're trying to grow your business beyond, you know, yourself, really, maybe you get like three or four people. If you're trying to build a team trying to, you know, really grow one and a half million, anywhere from 10 to 100 million and beyond. Literally. It's the first book for, and I remember just I was, I was listening to it and I looked like I'd seen a ghost. I was like, oh, this, these are the ANSWERS, you know, 10 years ago when I started growing that I was looking for. So then, you know, you kind of start growing this. This is like the handbook, right? And you quickly run into an executive, you know, growing your executive team challenge. And so the next challenge becomes compensation incentives. Right. And so I'm curious, I think I kind of know, but I'm curious, what was the inspiration between or for scaling up compensation and kind of how it relates to your scaling up original book.

Good. Well, one of the things I might mention, Jake, is I previously wrote a book called Mastering the Rockefeller Habits. Literally last Tuesday, I released the 22nd anniversary edition, 2024. I brought it totally up to speed and it is much simpler to read. So I encourage folks to read it first. And if there's a book that they have the rest of their team read, I would have them read Mastering the Rockefeller Habits. Scaling up then is really the masterclass. You know, It's Rockefeller Habits 2.0. But if we go back to your question around what was it scaling up

compensation and what was the inspiration there? Because I have a feeling once you start mastering some of the scaling up principles, you quickly have a new problem, which is how do you compensate all those people around you that you've recruited and you've onboarded.

Quick interruption to your podcast.

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Now back to the episode.

Well, first of all, for most of us, it's our largest if not one of the largest expenses. Yeah. When it comes to setting it, we kind of like pricing, lick our finger and put it to the wind. Now, we will obsess on the cost side of the business, but this particular cost, I just felt like we needed to bring a bigger, a better sophistication to that practice. So let me give you an example. One of the things that we talk about is kind of gamifying the business. You know, I was amazed where I walked into a casino for the first time years ago, and I saw a bunch of people sitting around, not wanting to take a break, willing to work all night, if you get my drift. If they could just pee right there without having to move and somebody bring them drinks and they're putting money in the machine, they're not getting paid. And I'm like, what does the gambling industry understand about human behavior that we're missing? So I'll give you an example. We have orthodontist down in Florida who, if one of his team really delivers on something extraordinary, delivers on a core value, goes the extra mile for a patient, a great upsell, whatever the case might be, that's appropriate. He'll give an instant hundred dollars. But here's what he does. He doesn't just give him the hundred dollars because they're likely. Most of the people in his practice were women. They're going to go spend it on their kids. He would then have a limo waiting for them to take them to lunch with a friend. And on lunch break, they had to buy something for themselves for that hundred dollars, and they had to then come back and do a show and tell with the rest of the team. That kind of use of a few dollars that creates the stories, the experience and the memories versus just giving out some spot bonuses can have a tremendous impact on reinforcing, again, values and quality and the kind of things that you need to have happen if you're going to increase those gross margins. So we're going to talk about the importance of gamifying the place.

Yeah. It's almost like there's other currencies besides just just money. Right. There's a lot of currencies to think about when you're compensating your team and your. In your executive team. I love that. Right. I love that. So. So another must have. By the way, you're coming to Summit. Get that book. Read it as well. It was another one, Vern, where the way you mapped out, there's like the different levels of compensation, there's like different spectrums of different types of conversation. It really maps out the whole thing. It's like there's not much more after that. So it's another. It's another must read my final and a very.

In a very thin book.

I know.

I mean, literally, I joke, you can read it between blushes, you know, in one sitting. So hopefully they'll dig into. It's like 100 pages.

It's. It's so good. And there's nothing out there like it. That's another one. I was searching for those kind of answers for a long time. There's absolutely nothing like it. So another must read for, for those of you out there and again, for our audience is, you know, on the low end, they're doing about a million and a half in revenue. Maybe have, you know, 10 team members. We'll have folks at the, at the conference, up to 100 million that have grown full executive team. So. So really, that scaling. That scaling range. Last topic I'd love to touch on. Vern, I know you're. Because you've been doing it so long, I think, and you really, the reason you talk about these things is because you've probably realized that these are the crux, which is your executive team and leadership development. Right. Like, we can get kind of enamored sometimes with some systems or whatever, but. But really, 80, 20, a lot of time is your. Is your team, your leadership team, and you talk a lot about developing your team.

Yeah.

What are some of the specific ways you've seen to develop leaders? You mentioned maybe your book. Right. A book club internally. Anything else that comes to mind specifically?

Yeah. By the way, we are partnered with the better book club and anybody can kind of Google that organization. And it's a nonprofit and they provide a way to set up, really gamify learning within the organization by giving out points and having fun and keeping track of people. So first and foremost, I think creating a learning environment instead of a know it all environment, and in setting people to read and learn whatever they want to, I think we get caught up in, well, we've got to read stuff and learn stuff that's applicable directly to the practice, but anything that's exercised in their brains and allowing people then to share in some kind of a brown bag lunch or whatever the case is, might be important. I think the other thing is we have got an online company university that's got a hundred little mini courses because people really are as much into or more into video than they are into reading. And so we've created a very inexpensive kind of Company, university, that practices can just install that give people access, the kind of thought leaders that only the Fortune 500 are able to provide to their employees. And I don't, I don't want folks to forget that a big part of what you're offering is a way to attract the talent you need. They may not take advantage of it, but because you have it, you're going to attract a better person. And we forget the importance of that piece of psychology, Right.

We launch a pro, a program, and maybe only half our team takes advantage of it. And we're like, oh, it's not a success. Actually, it's a huge success. And you can now use on the front end for attraction.

You got it. You got it. And then I think we're gonna, we're gonna talk about the importance of the daily huddle. And you can't miss the fact that in that eight minutes, you can create a tremendous amount of learning every single day that is gonna get lost if it's not captured at that moment. Because what is the greatest way we learn through experience and through debriefing that experience. And if you don't do it on a daily basis, man stuff is quickly forgotten. And so at the heart of our work is this daily huddle that our competitors, as you know, have kind of discounted. But that has probably had one of the biggest impacts in a positive way on dental practices than any one of our. Our routines.

Yeah. And if you're in the business of growing, I think that's something that you're mastering, Right? Like our, our best members are, you know, quickest growing members are mastering that they're continuing to work. It's not kind of like, oh, I've got a morning huddle. It's like, no, no, you really have got to get this thing optimized every year, make it better and better.

Yeah, you got it.

Exactly. So what I love about you, Vern, is, you know, business sometimes is just a. It's almost like a facade for behavioral change, for understanding humans, for psychology. And I love your approach, really does that. There's obviously a lot of systematizing, a lot of finance involved, but really you're in the game of making humans better. And I think your work kind of embodies that.

Yeah, well, and one of the things that we're going to talk about, Jake, we hosted, we run a CEO summit with Harvard every year. And last year we hosted the famous CEO, Hubert Jolie. He's the French CEO who turned around Best Buy, and his book, the Heart of Business is A book that I highlighted literally every sentence in that book. And one of the things that he mentioned is I'm not even sure anybody wants leadership. You know, we've. There's 6,000 leadership books written every year, but the engagement scores have not gone up 2%, you know, over 50 years, according to Gallup and Jim Clifton's work. And so he got up in front of our CEOs and he said, look, I think it's time to replace the word leadership with the word careship. And that, that is really what the senior leadership team has to exude to everybody else. There's no way that they're going to take care of your patients, your practice, and you if they don't feel like you're taking care of them. And so I think that four letter word care is got to be at the heart of all of your human practices within the organization. And we'll give a couple of examples of how you can do that in a practical way.

I love that, Vern. So one of my business crushes. Vern, I love your work. I actually was. Was certified as a gazelle's coach too, as well. So I'm delving deep into it. So everyone attending this summit, first of all, if you're not get on the list, get registered. We're super excited. And when it comes to growing your business, we talk a lot about Vern, about growing yourself, growing your team, and growing your business. When it comes to all of those, truly, I don't know if there's a better thought leader or better expert to come and share with you some of the principles than Vern Harness. So we're so excited. Personally, I'm very excited to Vern, thank you for all the work you do for all of us business owners that are out here kind of in the arena fighting the good fight and can't wait to see you in June.

You bet, Jake. Thank you.

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