Verne Harnish 7:03
Yeah, I, my grandparents had companies and so I kind of grew up around it. And my dad who was a rocket engineer, literally, with the Martin Marietta Titan program, he and three of his buddies, an intact team, which we know scales further faster than a solo entrepreneur. They laughed and started a company called hire electronics. And it was a rocket ship. It was fun. We, we were installing remote television studios at the time for cougars, and fell south and many other companies. And then the 73 recession hit and overnight, growing rapidly, growth sucks cash, and they were out of business. And so it really was a riches to rags story. And dad never recovered from it. And so I really said, Look, when I get into this business of helping entrepreneurs first launching the Entrepreneurs’ Organization, which is worldwide today about 16,000 members, and then decided to get into the business spinning out of a program I launched at MIT called Birthing Of Giants. You know, let’s be there to really help entrepreneurs navigate through all this craziness. That comes there are no straight lines in business except podcasts. We see on startup it is it’s a crazy journey. And so it’s it really is missional for me, Rolando and Dave, to do what we do with you, right, it’s now about 80,000 companies around the world.
Rolando Rosas 8:32
What a journey. And I really love that story. And I’m sure it’s gonna it resonates with folks that are probably at the beginning. You know, there’s a lot of statistics coming out that this is probably the best time to start a business. If you’re looking to get into entrepreneurship. You know, 20 years ago, when I started, there was no, there was no Facebook as we know it today. There was no TikTok, there were no none of these platforms to help launch. There was no GoFundMe there was there wasn’t any of that you had to bootstrap, get alone, get an investor or hopefully your your your folks had enough money to get you launched it but the opportunities are very ripe. And I want to talk I want to dive into the opportunity side. I want to read your question. Do we have that Ori? Is that what we’re going to now? The opening? Yes. Go ahead. Put that up. I got a little something for Okay. Gotcha. So, I want to read you something that that was in your book Mastering the Rockefeller Habits and where you talk about one of the keys to growth, and the first key was attracting and keeping the right people. Oh, thank you. There you go. That’s what we’re looking for. And what would you say companies need to do in today’s tight labor market? We were just talking about this earlier, and how to attract and keep the right people because you it’s it’s your first key of your book and You know, the environment and landscape has changed so much in the last 18 months, what advice would you have to companies that are, you know, trying to navigate through these times?
Verne Harnish 10:10
When it comes to water ski, I think in a word, it’s to see your people as someone that you invest in instead of its labor to feed your business. I want to go back to the second book, I wrote The Greatest Business Decisions of All Time. And one of those I consider it the number one business decision ever made. I think it really contributed to the United States being the economic powerhouse. It has been over all of these, you know, this last century. And that was when Henry Ford, who would ended up in a very tight labor situation, he couldn’t get anybody to come into his factories. That all right, overnight, I’m going to double wages, double wages.
Rolando Rosas 10:52
Wow, that’s incredible. To do that today,
Verne Harnish 10:54
No exactly, well, you know, who did is The Container Store? Ah, you know, Kip and Garrett have been, you know, friends who have taught for me for many years at that MIT program, and are others. And when they launched the Container Store, they said, look, they have what’s called a three two rule, and we actually share it in the compensation book, they said, Look, why don’t we just pay people twice, what they could normally make in retail, and then let’s invest in them through training and development and support. And as a result, they end up getting three times the productivity anyway, you want to measure revenue per square, wow. And all of those numbers, and as a result, their labor cost per whatever you want to measure is lower. Yeah, they’ve got some of the highest wages. And so as a result, they’ve always been able to attract outstanding talent, and be well known for the kind of customer service that they provide. So that’s what Henry Ford did. And by literally overnight, doubling wages, he also created his market. He said, Look, I want to be able to pay people enough so they can buy the automobile that we’re manufacturing. And I really think that started a revolution in seeing people as someone that you invest in, as opposed to just a cog in some kind of badgering or service process.
Dave Kelly 12:18
If so, if you’re paying double the normal wage, how does it change overnight? How does that affect the culture? In the short term?
Verne Harnish 12:30
I look, I think it’s spectacular. You know, who’s not going to love the fact that everybody around you is making on average twice, what you could in that normal job. The key is you’ve got to really push on the productivity side. But you’re giving people an opportunity here to be a part of something. And so look, you can be quite selective as well, you’re going to attract a slightly better, probably more motivated, self motivated person who’s got the will to learn and continue to do better. And that’s what we’re seeing, even in smaller companies out there in the marketplace. I gotta tell you a fun story. I, one of my early clients was, look, Office products, office furniture, office equipment, we’re not talking about Google or Facebook, or, you know, and we’re talking about, you know, a basic business like that. Harrisburg, Pennsylvania, and Pete had four guys in the warehouse, and they had a fifth, that just wasn’t really cutting it. And so they knew they needed to replace him. But he was having a real challenge keeping this talent because he’s near Carlisle, Pennsylvania, where Amazon and everybody else is just dropping in warehouses. And so the pressures were huge around wages. And so what he did is he went to the four of them and said, Look, is there any chance you think the four of you could do what the five of you are doing? And they’re like, No way, there’s no way. Not only do we need to get that person or place. But you know, you’ve been we’ve been growing 20% a year, we’re going to need a sixth. He said, well, but what if I cut you a deal? What if I take the wage of that fifth person, and we split it? Half of it? The four of you, the company will take back the other half? And I gotta tell you in about three nanoseconds, the forum said, we didn’t like that guy anyway. We could step up and do it. And he said, Look, and we’re probably need to normally hire six. What if I take that wage, and I split it among the interesting and it was interesting. I came back a year later, I come in every quarter, but it was the saw the change over time, but a year later, one of the things that Pete was was facing was a huge capital expenditure to expand the warehouse. They were coming right up to capacity. These for all of a sudden engaged their brains, because there was an incentive to do that. And I’m not saying everyone He needs to be incentivized. But hey, there was real money out there that can be gained if they could find a way to do a lot more with less. And, and as we say, one of the five principles, being willing to share, caring is sharing. And so Pete was willing to share the benefits of their productivity increase. And at the end of the year, they had brought in a new warehousing system that they had researched and sourced themselves installed, that effectively almost doubled the capacity of the warehouse. And these four are making such higher wages about 15% More than they could anyplace else, that Pete also saw the huge issue, which was the turnaround turnover that he was having out in his warehouse. And so that’s why getting the compensation piece is so critical and low. For most of us. It’s our largest single expense. Our view is why not turn it into a strategic advantage in the marketplace?
Rolando Rosas 16:05
Well, let me ask you about that. Because that’s exactly the next piece I wanted to ask you about, which is a company is heading in the other direction, I will really want to get your thoughts on it. That is, you know, saying, Well, if you work outside of the metro areas, because they their practice of hiring was based around location. So if you were based in New York City, and now you move to Connecticut to Stanford, or you moved out to new work, or even further out to Pennsylvania, maybe Lancaster because you’d like you know, smaller Small Town Living, you’re going to be seeing a pay cut. And do we have that video already? Yeah, go ahead. Yeah, that was it. This is this video is gonna be just about that. So I want to get to retirement mentally. Think twice if you work at Google. According to a company pay calculator seen by Reuters, Google’s remote employees, especially those who wants commuted from long distances, could experience pay cuts without changing their address. For example, an employee who works from home full time in Stamford, Connecticut, an hour away from Google’s office in New York City, would be paid 15% less if the employee worked at home. By contrast, a colleague from the same office living in New York City would see no pay cut, even if the employee to work from home. Screenshots of Google’s internal salary calculator showed 5% and 10% differences in the Seattle, Boston, and San Francisco area. A Google spokesman did not specifically address the issue. And Stanford would set employees who work from home in the same city where their office is based, won’t get their pay cut
Verne Harnish 17:44
What do you think about that? Well, you know, I think you would expect me on the surface to say, oh, my gosh, this is going to be a disaster. A couple of thoughts first, one of the things I’ve learned when people bring me an idea of like, even for a business or whatever, they’ll say, What do you think of this? And like, I have not a clue, the market will tell us very quick things I thought were absolutely stupid, proved to be brilliant. And things that I would have guessed would have been a home run, end up being duds. And so look, I think very quickly, the market will tell Google, whether this is going to work or not. But what’s interesting is our principle number two of the five for setting compensation is it’s about fairness, not equal. And what’s interesting is if you’re looking at cost of living, you’re looking at the times for commutes and all of that, at some level, the idea of fairness, I think, sometimes trumps equal. And I think we’ve gotten too caught up in people having the same pay. By the way, we see compensation as the same as the other side of the same coin, as price. And what’s interesting is nobody pays now the same price for a seat on an airline. I mean, I could take the same route, I same time a day, same airplane, it’s the same product, yet we’re all paying radically different prices on that aircraft. And by the way, we’ve all gotten used to it. Same with Amazon. I mean, I watch my own book, the price of my own books are changing sometimes by the hour, based on demand. Same with Uber and Lift. You know, a standard taxi was so much per eighth of a mile or kilometer, depending on where you were in the world. Now Uber and Lyft. It’s all based on demand. And so really, all of the smart companies are adjusting price compensation being the equivalent internally based on demand and based on a lot of factors. And I think that it’s some level because they’ve got the analytics to be able to figure that out just like Amazon’s got it to be be able to adjust price, real time where the poor retailer they’re competing against Amazon puts a sticker on it and the only time they change the price is when they got to try to give it away. So I wouldn’t bet against Google on this. Because I think it aligns with some of the things that we’ve actually seen are trends around compensation. Maybe they read my book don’t blame me.
Rolando Rosas 20:27
They may have now you had said that the market will determine this. But you know, the market right now is red hot for labor and other CEOs like James Gorman and and you’ve got the gentlemen at Goldman Sachs as well. Just name is just escaping me. But they all are, are pooh poohing a little bit of remote work, even though the labor market is tight. Now Google’s gone on said they’re going to cut pay, you know, I would imagine if your top if you’re looking for top talent, all these companies are always looking for top talent. And if talented people are saying you know what, I want to stay in Stanford. But I don’t want to get a pay cut. And companies like Zillow, I’m looking for top talent too. They’re saying we’re not going to freeze, we’re not going to, we’re not going to pay you less, if you work for us come over to us. And that would seem very attractive in in the labor market that’s already tight. So although I think the labor markets or the markets and as a whole may dictate if they’re right, I would think that at least on the surface of your stay on the surface, it would seem a little bit counterintuitive, given the environment we have under a normal and normal economy, pre pandemic, they probably could still get away with it. But I can’t see how they would that would last forever.
Verne Harnish 21:44
You know, what i said i Time will tell and are actually first principle for Rolando and Dave is to be different. If by the way, it’s the same with everything. If you really want to drive a successful company, in any industry, you have to be different, you have to hire different people than everyone else does. You need to deliver the product or service in a different way than everyone else does. And you need to compensate in a different way than everyone else. And those differentiations are the keys now look, they could have made a fatal mistake. And my guess is they’re not going to lose some of the key people that they want it if that talent that really matters comes to him and says, Hey, this is a no go. I’m heading over to Zillow or something like that. They’ll make adjustments. And that’s one of the things we recommend in the compensation book as well. I mean, when you know who your A players are, you compensate them in any way they want to. And that could be more vacation time, more flexible hours. And in this case, for you to be able to remain at work, I mean, at home and not have to commute. So let’s see how this plays out. The media loves to kind of dramatize everything, and you know, in order to sell their ads. So I, I you know, I don’t want to be quick to criticize until we see this thing play out. And yeah, and I wouldn’t bet against Google. The other thing they’ve got is stock options.
Rolando Rosas 23:12
And very good stock of very good stuff,
Verne Harnish 23:16
right? I own it, I should let you guys know, I’m a owner of alphabet. And I appreciate it, you know, the job that they’ve done. And but that’s the big thing that I’ve been talking to a lot of smaller companies about. We traditionally went public at 40 million. And I am really pushing companies to get public with the SPAC. It gives you this opportunity to let the public give you a pay raise. I mean, the whole reason Microsoft went public Bill Gates didn’t need the cash or any of that.
Rolando Rosas 23:49
It was for folks that are uninitiated very let me just step in explain what a SPAC is because it’s still fairly new. A lot of people don’t know what it is unless you’ve been following the business trends and CNBC very closely. You’re probably not aware of what’s happening in that market.
Verne Harnish 24:04
Yeah, it’s exploded. It’s a it’s an acronym, I think for special purpose acquisition company. It’s been so buddy mine, Haggerty insurance, who was on the phone with this morning is just going public with a SPAC and it’s a much quicker way to get public. And there’s a lot of other advantages. But the point is this. We’ve got a client that launched in 2014. They went public at 20 in 2016. At 3 million in revenue, not 30 million, not 300 million in revenue. They’ve got $125 million market cap here just five years later, but the having that tool as part of your compensation plan. There’s no way that Outback Steakhouse we’re talking about a restaurant chain, not Google, Facebook, Randy’s restaurant chain, they couldn’t have done what they did from a compensation standpoint that made 20 year olds millionaires running a restaurant not having to work for one of the tech companies, if they had not been,
Rolando Rosas 25:07
that’s exciting. So that opens the door for a lot of small businesses that probably, you know, you hear about small business owners getting to five or even 8 million and then throwing one to throw in the towel, because it takes a lot of work just to get there. But you’re talking to a much lower threshold $3 million, a lot of businesses could get the $3 million.
Verne Harnish 25:27
Well, and what’s interesting is there is a law on the books in every state in the United States, that if you are a local business only doing business in that state, you can actually offer public stock by fill out one piece of paper. This is what Ben and Jerry’s did in Vermont, and they ended up with I can’t remember, it’s like 40% of the Vermonters own stock in Ben and Jerry’s room, you know, he’s actually taken advantage of this as a lot of local brew pubs. Hey, what’s better than having your best customers, as owners and those owners saying, Hey, that’s my brew pub, and bring in all of their friends there, this sense of ownership has always been a big part of particularly the, you know, the American culture. And so there’s a lot of ways to skin this guy, I just don’t want anyone to close their mind on any option, which is why we kind of cover all of them in our latest book.
Dave Kelly 26:28
And I’m sure I’m sure business leaders that are asking you your opinion, you know, if they’re able to shift some of their top line, operational expenses away from that top salary, there’s other ways or that I would think that they’re asking you other ways where they can reinvest or kind of shift those funds to also assist with, you know, attracting and just keeping your employees and keeping that culture, you know, a positive culture, what are some ways that that money can be used?
Verne Harnish 26:59
Yeah, that’s one of our chapters is called Gamify. The game itself, I’ll tell you a quick story of a small business. So they were they happen to be manufacturing, architectural steel, so the kinds of things that go into fancy railings and homes, you know, like we’d have in this one, and, and the like, they had about 60 employees. And they had this bonus program, and one of the things that we really warn against are these bonus plans, because it very quickly become like entitlement. And if all of a sudden somebody doesn’t get the bonus, now, all of a sudden, you’ve got a demotivator in the organization. And so we had set aside about $60,000. For a bonus program, it would roughly mean $1,000 per each of his six employees. And the reality was he Dave, for a lot of he wasn’t getting any bump at all, productivity or energy or anything that you would want. He felt like he was just pouring the money down a rat hole. And so what we did is we changed it up. And we we gamified it in order to kind of create a much more fun culture inside the organization. And so they set goals for every person or team in the organization, monthly. And if they achieve those, then they would get a chance at the end of the month. And they had this old bingo, we’ll gather everybody together. And by the way, if you exceeded your goal, you got two chances. And we’ll and what he did is he said, Alright, I’m going to take that same 5000 a month that I was just giving out in bonuses that nobody really seemed to be excited about. And instead, I’m gonna give out prizes. It’s why people love Vegas. It’s the intermittent reinforcement schedules, not the consistent reinforcement that makes it exciting,
Rolando Rosas 28:51
like a one on that one.
Verne Harnish 28:54
Maybe I got a chance to win a car. So I’m there one of those months. And first it was like dinners for two. And then we’re gonna have movie tickets to the movie. And then hey, let’s give out a flat screen TV, he’d spent about 3000 of the five in prizes. And by the way, it was so much fun. And people will remember experiences much more than they will remember, you know, some cash that they end up like spending right away. But the final price every month was $2,000. And he’s spinning the wheel. And all of a sudden, in this case, having another guy in the warehouse, his name gets drawn. And all four guys in the warehouse are cheering. What did they do? What did they do? Just like guys do playing the lottery. The four of them said, look, let’s support each other and not only just hitting our goals, but exceeding them that way, we’d get eight chances. Four times two, we’re gonna get eight chances in the wheel. And if any of us wins, we’ll agreed the big prize. We’ll split it in Nice, the owner of the companies like, you know, I could have put those guys through every team building exercise program and workshop. And we wouldn’t have got the cooperation we did, by really gamifying this whole thing. And so we’ve really encouraged companies to do some more gamification. And there’s a lot of, again, examples of that in the book. That’s awesome.
Dave Kelly 30:23
I was not expecting that outcome. I thought it was more towards that first, kind of that first story that we were talking about, where you had five, and then they went down to four. So it seemed like, you know, getting people to come together creates positive culture. Yeah, they want a little bit, you know, they got a little bit of cash, and everyone’s happy, because they’re all doing better for the organization. I love it.
Verne Harnish 30:47
Yeah, for sure. By the way, who’s just been in the news is Dan Price. You know, Dan was the guy with gravity payments, we actually use gravity payments to our credit card clearing here at our company Scaling Up. But Dan’s the one I think it was five years ago, that made that crazy decision that he’s in Seattle.
Rolando Rosas 31:08
We got a lot of press for it. And the base lot of press and the people wanting to work there and all kinds of stuff.
Verne Harnish 31:14
Yeah, well, what’s the result that an article just came out? About a month ago, and revenues tripled, number of customers have doubled. And their business really took a hit in the pandemic, but because of the loyalty that he was able to build up among his employees, by the way, the number of employees now they can own their home has been, you know, tremendous. They were really willing to stick in there with them, they all said, hey, we’ll take a voluntary 20% pay cut worked four days, we’re going to help the company get through this. So I think it really aligns with why Dan said that, you know, the research is pretty clear. Once you make over, I think the research has 60,000. So I think that’s why you put it at 70. You’re not any happier, you know, you just end up spending more. And so it’s, it’s also about really helping your employees use their money more wisely. And we’ve got some good examples in the book where it’s not so much what employees make. It’s the lifestyle that they can have with what they make. And it’s interesting, not a lot of folks have trained people. That’s why there’s all these gurus like Suze Orman and others out there that we see, even the wealthiest athletes and others end up broke, because nobody really taught them how to manage their money, and how to buy right. So there’s another component here. That’s on the other side of the compensation coin.
Rolando Rosas 32:47
Well, I want to ask you about lifestyle you hit hit on that. And I think with with everything going on, people are are seeing me my lifestyle needs a little bit of change. And I want to ask you, as people have been reevaluating and wondering how they can make maybe they get the entrepreneurial bug. ask you something, because it’s in your book, you talk about John D. Rockefeller, what would somebody like John D. Rockefeller say about what we’re going through in this current environment where people are saying, I want to work from home more, versus going into the office? What do you think? What do you and we’ve have some some other I think we may even have a graphic on there on a survey that was done by Bloomberg, or do we have that? Bloomberg put out a survey and they found two very interesting results were 39% of the 1000 respondents said they’d rather quit if they were told to go back to work in an office. And then that number was higher among the Gen Z, which is close to 50% thing. I don’t know if I want to go back to the office or rather work from home. And our last guest that we had had a lot of very interesting take on this where she said, she said let me add you even further color that most of the babies that are going to be born here moving forward in the next 10 years, I think it was the next 10 years are going to be the younger crowd. And so having a work environment tied to an employer that values what you’re that aligns with your goals is very important or more important was two years ago.
Verne Harnish 34:25
There’s a lot there. So the first thing, the first thing I’ll mention is you know, I was talking to my daughter about that she’s 18 just went off to college, Webster, they’re in St. Louis in the music theater program. And we got talking about this whole thing and the first thing she said is love. Technology is my management. And what’s interesting if the pandemic is exposed anything, nobody needs manage. Nobody wants a boss. I mean, one of the reasons a lot of people don’t want to go back to the office because they don’t want that person kind of lording over them. And what’s interesting is that middle, Dave and Rolando of that middle management costs about a third of a company’s total payroll. So we’re going to be doing a big event, February 22, where we’re going to talk about how real companies have cleaned out that middle. Gary Hamel’s book, Humanocracy is really, you know, has brought this to life, I named it the best business book in 2020. And then what you can do is take that and spread it among the people that are working wherever they are. And so that’s one of the things that the surveys are not picking up, but we are, is that one of the reasons I don’t want to go back is I don’t want to, I don’t want to be with that person. Who and we know people don’t quit companies that quit their boss.
Rolando Rosas 35:57
I agree with that. I agree with that.
Verne Harnish 35:58
That reason has always been clear from from Gallup. That’s part of it. Number two, look, I think sometimes these surveys are as accurate as presidential election survey. I really do. I think what people say, and then what they really do, are two different things. And, and I think we got to see how that’s playing out. But what we do know, seems to be clear is they really do want to work with a company that is purpose-driven, that it’s not just a feel good thing to say they, they really do want to come to grips with that what I’m doing is really making a difference out there. And that’s why the culture piece is so important that you have to wrap around this. And if you’ve got that, that typically can really trump a lot of the pressures that you’ve got on wages. So we’re clear in our book, that we’re only dealing with the kind of the monetary compensation side of your decisions, but there’s a lot of other factors that go into whether somebody really is enjoying working for your company. And a big part of that is are you willing to invest in me training and development is now used to be a nice to have, it is now a an essential? If you want to really attract the right talent because they want to they want to have an opportunity to grow when they joined the firm.
Dave Kelly 37:24
But are successful leaders willing to adapt to this ever changing? Employee culture, not not so much work culture, their culture may need to change? Are they are they willing to adapt to attract the new best talent that’s out there?
Verne Harnish 37:44
Those two really great question. They let me think those that are learners, you know, Leaders are readers. Now, that was interesting when they asked Charlie Munger Warren Buffett’s partner on their 50th anniversary, hey, you know, how did Warren beat the market by a factor of 10? over five decades? You know, you can maybe do it in any particular year, like, you know, people have been able to do this last year, when stocks, you know, tanked last May. But how do you sustain that over 50 years? And what’s interesting is, Charlie didn’t hesitate. He said, Look, it’s been Warren’s first priority. To set aside much quiet reading and thinking time, you know, he forth to about 500 pages a day. A more modern example, I’ve known Mark Cuban, from his early days when he had little IT, company in Dallas. But I didn’t know until I read his book, when it came out decades later, that since he was 20, he has had a routine of reading three hours a day. And all he’s looking for is one idea that can help one of the 150 plus companies he owns or is invested in. And I can continue on with those examples. But the leaders that are willing to learn, they’re the ones who are going to adapt. And you’re right. It’s it’s the most adaptive, that survive, coordinated Darwin’s research, not the strongest. And so this ability to adapt is critical. You’ve you’ve named it.
Rolando Rosas 39:23
what? Speaking of adapt in the the last four or five years, we’re seeing an enormous rise in the social media landscape, where you even see within the social media circles. The Giants Facebook, are chasing TikTok, which is risen to just like a media or just and what would you say to entrepreneurs that are they’ve got this changing landscape of social media. I mean, you’re you’re all about scaling. How can companies as well as entrepreneurs, you Is this these tools for themselves to scale their business? What would you say about that?
Verne Harnish 40:07
The so the number one question that even Bill Gates considered the best he’d ever been asked. It was the one that Regis McKenna asked Steve Jobs and I was one at an early client of, of Regis is back when I was launching the Entrepreneurs’ Organization. And that is one of the top 25 influencers. And to me, the number one KPI for any startup to senior leader of a major company, is to have the list of influencers that you need to build a bridge to you need to build a relationship with, as a way to really scale the business.
Rolando Rosas 40:43
You know, we’ve got that video. Can we play that already? We’ve got that video. Before it. Here you go talking about that
Guest Speaker 40:52
Set aside an hour for a marketing meeting, separate from sales I hate, I hate to get so practical. But marketing is the critical function if you want to scale and it starts by if you don’t have a weekly marketing meeting, set it up now later, Steve Jobs, it was the only function he chaired, which was three hours every Wednesday afternoon. And then he asked me this question that Bill Gates considered the best he’d ever been asked it was the one that Steve Jobs used regularly. That was alright, take a piece of paper out, Verne. And I want you to make a list of the top 25 influencers, brands relationships that you absolutely need to bolt on to this enterprise. If you’re going to scale. Now. Look, I’m a student. And I remember I’m saying the bigger the names, the faster you’ll scale. So I’m like mid 80s, the president of the United States and Steve Jobs and Michael Dell. And there are a couple of major publications that look I went for it. And it was crazy. In 36 months, all of them. Were on board, I was invited to the White House got Reagan to be the first president out of the word entrepreneur. And the rest is history.
Rolando Rosas 41:59
There we go. Your own That was funny. You mentioned that because I’m like, wait a minute, we got that video.
Verne Harnish 42:05
Yeah, that was my last public in person event. Before the pandemic, it was in Amsterdam, we had 7200 in that arena. So that’s why it’s a little weird. You have to be quite animated. When you’ve got that big of an audience. It’s a little embarrassing to see that that close on, on on camera in the recording, but yeah, and I literally flew back that week. And then march 13 is when everything kind of shut down. But yeah, that’s the key. What’s what’s interesting is now the new influencers are on TikTok, and Instagram and YouTube and other places that they traditionally were. So it’s the same idea. It’s just a different mechanism by which they’re able to be influencers. And that’s what you need to tune into.
Rolando Rosas 42:55
And, you know, that’s that’s kind of what we’re trying to navigate now. It’s just trying to navigate that landscape, because it’s, it’s, it’s very fast moving. It’s, it’s really changing things because people could get on. And if you’ve got some content that people want to hear, listen, it’s really, it moves people, where, before all the money really was in Madison Avenue type ads. TikTok is just your cell phone and you and YouTube to some extent you can do some of that. But seems like that’s where the action is. And a lot of money’s moving in that direction. How did want to ask you something you brought this up? That was the last conference that you were at? What has changed now that you are not able to go and see 7200 people? Now how does that change? How has that changed you and your business?
Verne Harnish 43:46
Yeah, we were actually interesting able to 10x our reach last year. So you know, we do a planning session every January. So January 2020. We have these big in person events twice a year and in the United States. And so we thought it would be clever to say let’s have 2020 attendees in 2020 at those events, and then the pandemic hit, and we ended up paid not not free paid, hosting over 18,000 for a series of virtual events that we spun up. So we almost 10 reach now, the price point was considerably less so the revenue was down, but the profitability was the same. And it’s interesting, we’ve decided, at least in the short run, not to go back to the in person for our multi speaker Summit, because it’s much easier for me to get who Hubert Joly, whose book I’m calling the best this year called The Heart of Business. He’s the one who turned around Best Buy. It was so much easier to get Hubert Joly to come on with me for an hour and a fireside chat that we could share with almost three 1000 people than it is to convince him to get on an airplane fly to Dallas to be at the event to do the same hour that he would. And so it’s been a real revolution for us. Now on the on the flip side, we’ve had online education available for years. And we had our best year ever as you can imagine it. So we felt in some sense, prepare. By the way, my own company has been remote for years, I lived in Barcelona for eight years, just before moving back. And that was a real forcing function for me to sell the headquarters. Everyone works from home. And so we were already set up to be remote in this environment where remote work is, is now the thing.
Rolando Rosas 45:43
Well, it certainly has changed the certainly certainly changed the landscape. And I think we’re not done yet. It seems like every every week, I’m reading about some some type of changes, whether it’s in the actual conditions, or announcements from companies like Google saying they’re delaying the in person return or Apple, I think some of this will stick, you know, I think what you’re saying is that you can be as profitable, being remote, and you can do as much if not more, with technology today, you know, maybe four years ago, five years, 10 years ago, these conditions could have really put a big dent in the economy. But people can be mobile, like you and I are talking we’re in two different places. Business can keep going, you can work from virtually anywhere right now in business can keep going.
Verne Harnish 46:38
Yeah, you know, and I also think what’s interesting is, in a way, we’re gone back to the future, before the Industrial Age, we all worked from home. And then that that age pulled us all into these centralized buildings. So in a way, we’re just kind of going back to the way we worked decades ago, or centuries ago, I think the other thing that’s changing, and maybe it’s applicable to some of your audience, is this notion of division of labor. We didn’t again, have that, you know, if you had a farm, you also, you know, repaired your equipment and, you know, raised the horse that pulled the plow and you know, fed it kind of did it all. Then we moved into these factories, and we divided up labor. And what’s interesting, particularly with brain work with professional services, I really think it’s critical, and we’re pushing a lot of our clients to get rid of that division of labor. And the pandemic sorta was a forcing function for that. I’ll give you a quick example. First, go ahead.
Rolando Rosas 47:45
No, no, you go, I’m just saying, Go for it,
Verne Harnish 47:46
Yeah. So, you know, in the manufacturing side, I remember when Harley Davidson had all of their messes, you know, they were leaking oil all over the place. And Richard teerlink came in, and he said, Alright, we’re gonna change it, rather than have the assembly line, we’re going to have two people that maybe it’s two or three, now I’m going blank, whether it’s two or three, but they’re going to build the entire motorcycle. And in fact, they’re going to engrave their names in the frame underneath the seat, so that you can see who actually built it. And all of their quality problems ended. After that, if you speed forward, a good friend of mines, mortgage broker, you know, the kind of job where they’ve had a heyday over the last year, you can make a quarter million dollars a year. And as a result, there’s a lot of attitude that, hey, since I make a quarter million a year, you can’t expect me to do administrivia. Yet, it there’s typically 15 People that are touching a mortgage. And, and what happens is like, one of those steps, is when the file is totally complete, it now needs to be uploaded. And so then a DocuSign or whatever can be generated so the client can sign it and they can lock in, you know, the rate they you know, you’ve got deadlines in order to get this done. Well, to load up that file is about five minutes. But what would happen is she would send it to that person, they’re backlogged with, you know, 100 of these got offload, so it sits there in the queue for hours. Now in the meantime, your clients going crazy texting or you know, time back, she’s trying to get a hold of a hub quick again, that’s Look, I’ll get it there by six. By the time she loads it, it sticks. Now the clients had dinner. So now my my friend, the mortgage broker is going crazy trying to get a hold of them, hey, you know, look for the document, you gotta get them signed, but it’s hours of interruption over a 10 minute thing. So what she decided to do is just figure out how to do the whole thing herself. And what’s interesting is the speed goes up dramatically, the quality goes up. And most importantly, the service to the client improves, and her life improved. And so this, this idea of division of labor, I think is one that we finally have to give up. And it’s much better if you can have fewer people do the whole thing than having a bunch of different people. You’ve got a divided among and again, with remote work, it makes it much more difficult for you to kind of get up and go into somebody’s office and you know, knock on the door, hey, where is that file, you know, that I’m expecting you to get to us. So those are, I think some of the changes that are taking us back to the future, in some sense.
Dave Kelly 50:43
Alright, interesting. It’s
Rolando Rosas 50:44
a mess. You know, we could we could talk for another hour, because there’s so many more things I want to pick your brain about on your books and a few other things. So if you have been sticking around all the way to the end of this hour, whether you’re watching us live, or during the playback, let us know if we’re on topic. I like, subscribe, share, and comment below on what you thought about today and what you thought about Verne. Should have mind again, Dave, maybe we could we could go on and maybe two hours here, talking about all this business stuff with him. And what before we wrap we want to let you take a look at this trivia Verne and see if you know the answer to this question given that Rockefeller is in your book. Take your best guess at it. You may know you may not. We’ll see. Go ahead, Dave.
Dave Kelly 51:34
All right. So Verne, to recap at the beginning of every episode, we’d like to do a trivia question today’s trivia question. John D. Rockefeller, founder of Standard Oil Company, markedly celebrated this day annually. Was it his birthday? Was it Labor Day? Or some mysterious holiday called job day that I think our producer just threw in that make?
Verne Harnish 51:59
You know, I have not a clue by the way John D wealthiest guy ever in history. Why became kind of a namesake quite disciplined did it in his 20s like Steve Jobs did? I’m gonna guess if I remember right. It is actually his birthday. But you know, I have no idea.
Dave Kelly 52:16
All right, so Ori wants to show us but what the correct answer is, job day.
Rolando Rosas 52:21
So it wasn’t some mystical thing. Rockefeller High was hired as an assistant bookkeeper, he celebrated job day every September 26. commemorate his interest into the business world, then Rockefeller considered the day more important than his birthday. Wow. You got us, Ori.
Verne Harnish 52:39
You did? By the way? How old? Was he? I think I remember this right? When did he get that job?
Rolando Rosas 52:45
Was on 8/16.
Verne Harnish 52:49
He was 16. Exactly, um, belong. And that’s what I think, is also interesting. folks had already, in some sense, had got their degree by 16. And we’re in the workforce. Now we’ve got folks stuck in college. And if there’s something that is radically going to change, because of the pandemic, I think is the university and college system. I’m actually working on a new college model. With a college a friend of mine bought up and oh, Wattana, Minnesota. So stay tuned. Oh, we think there’s a new business model to be the short answer. None of the students are missing college. They miss campus. So they want a great campus experience. But there’s a lot better way to deliver the college part without having to deal with tenured faculty.
Rolando Rosas 53:40
Will you know that you’re you’re on onto something because I’ve heard Professor Scott Galloway of NYU talk about that he’s got some some monies that he’s trying to get some funding towards something very similar. Sounds very similar to what you’re doing there as well. So you guys are on to something?
Verne Harnish 53:57
Well, I’m a big fan of Scott. He’s been kind enough to be on our summits and our events. So and I encourage everybody to take his online course. I had our chief marketing officer go through it and she loved it.
Rolando Rosas 54:10
He’s a he’s not only he’s a great guy. He’s funny as hell. Yeah.
Verne Harnish 54:14
Yeah. If only.
Rolando Rosas 54:18
Well, Verne, thank you for being such a good sport. Thanks for being on today. And we’ve got well, we go to end screens, right. Oh, there we go. Thank you for reminding Ori. Before we go, we want to know if how can people get a hold of you if they want to follow you? They maybe they want to look look up a class or or you’re unlikely. Where should people go if they want more of your content?
Verne Harnish 54:43
Yeah, you know, we talked about brand is owning a word or two. So the company used to be Gazelles, but nobody can spell it. Yeah, and I think a lot of us have done company names I would be in one of them. So we change it to Scaling Up the name of the book. So you can just go to scalingup.com. And we’ve got a site called scaleup.com, where we’ve got all kinds of news and stories on scale ups. So that’s how you get a hold of us. And my email is verne@scalingup.com, I don’t mind it’s in the book, and send me an email, and we’ll get you signed up for my weekly insight.
Rolando Rosas 55:17
Wonderful, we will learn for sure. And we’re going to put that in the description too. So if you’re watching us on YouTube, it’ll be at the bottom, and you’ll be able to get to Verne, and his wonderful courses as well and get a hold of him. If you want him to do maybe advise advice you on your company dealings, or anything else that Verne is doing. He’s a master of several trades from reading those books and, and falling here. Verne, is there anything else you want to leave us with any other thoughts to wrap up?
Verne Harnish 55:49
Understand price as we did compensation, and maybe we can have another show? That is the other side of that same psychological point. And the reason? I think I’ll leave you with this, the reason getting price and compensation, right is so difficult, is that we’re dealing with people. And the one thing we know people are not logical, they’re psychological. And so you’ve got to really understand the psychological aspects of setting both price and compensation.
Rolando Rosas 56:19
I like it, Dave, I’m in. I mean, we just have to, we have to find a way to bring Verne back on. All right. All right, we’re gonna take a well, you know, we’ll just have a we won’t live revealing these triggers. But we’re gonna have Verne again, we’ll make the schedule works that he’s on. But while you’re here, and if you stuck around to the end, there’s a couple of extra videos right over here, where the future of work, Dave and I will join you. And we’ve got another special on the entrepreneur journey. That’s my own journey in starting Global Teck Worldwide and what it’s been like for the last 20 years. I’ll see you in those videos.
Outro 56:55
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