Mike Zani – The Science of Transformative Teams – Ep.204

Ravix Group — Ravix Group is the leading outsourced accounting, fractional CFO, advisory & orderly wind down, and HR consulting firm in Silicon Valley. Whether you are a startup, a mid-sized business, are ready to go public, or are a nonprofit, when it comes to finance, accounting and HR, Ravix will prepare you for the journey ahead. To learn more, please visit their website at https://ravixgroup.com/

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Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.

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(00:00:00) – Intro

(00:03:18) – Acquiring Predictive Index

(00:07:15) – The keys to early success

(00:12:28) – Goals and ambitions in the early days post-acquisition

(00:22:13) – Developing HR Teams

(00:37:49) – How do you create a cohesive portfolio of tools to gather team data?

(00:44:28) – The T-shirt analogy

(00:53:00) – Improving yourself: Not listening

(00:57:17) – Preparing for the next CEO role

(01:00:19) – Maintaining high levels of energy

(01:02:50) – The joys and frustrations of growing a company alone vs. with a partner

Alex Bridgeman:  What was Predictive Index like when you acquired it? And what were some of the changes? You mentioned it being more of a software business today versus something that was closer to services early on. I’d be curious what that change has looked like.

Mike Zani:  The Predictive Index is an amazing company. It is 69 years old, 69. Like, it blows my mind. So, our founder, Arnold Daniels, was in World War II in the Army Air Corps. And the Army during World War II was doing a lot of psychometric testing on various aspects of the military. And one of the aspects of the military was success rates at dropping bombs. Especially later in World War II, the Germans were hiding military assets in places like schools and hospitals because they were hoping that the humanity of individuals would keep their military assets safe if they hid them in hospitals or things that looked like hospitals. Well, it turns out that not everyone can drop a bomb on a hospital; like some people intentionally miss. So, they were doing psychometric testing to find out who are the personality types or behavioral types who can do these things versus not. So, Arnold was so fired up by the predictability of psychometrics that after the war, he went to MIT, got a PhD, and built the Predictive Index behavioral assessment for business. And it was pencil and paper. And the output was nothing more than a pattern on a bell curve of four behavioral dimensions, and it needed to be interpreted. And that was the core of our tool; it still is today the most important element. But it he started using it in conjunction with consulting to teach business leaders how to manage their people back in 1955 and did that until 1985, at which point, he handed the company over to his daughter. And it continued on. When we ran into it, and this was in 2006, eight years before we purchased the company, we ran into it. It had a very simple piece of software, which was just an online surveying tool. It was that and a repository for previously taken assessments. It had very, very little sort of data interpretation analysis capability. And so, when we used the tool, we had to be trained in how to read these patterns, trained in how to use the behavioral data. And we just scratched our head and said, this is amazing what this tool can do. It’s incredibly fast, very efficient, scalable across an entire organization. And in ’09, when we sold our first company, we got to buy this thing. So, we tried to buy it in ’09, got close, but weren’t able to do it. But the board remembered us, the board of The Predictive Index remembered us. And in 2014, when the last remaining child of Arnold Daniels passed, they came to us, and we bought it out of the estate. And we sort of rebuilt a software platform, or I shouldn’t even say rebuilt. We built a software platform around what was once just a paper and pencil psychometric tool.

Alex Bridgeman:  And those three other businesses that you and your partner Daniel either ran together and then you each had a separate business at one point of your own that you’re running, what struck me is each of those had similar starting points in terms of like the product, the team, purchase price, and then very similar very successful outcomes. Was there something unique that you saw or have been able to see in opportunities? Or is it more of the after the fact, after you get into the business that at least has some tail winds and structure around it, and it’s the extra work that you put into it to develop the product further, expand sales, hire, you’ve talked about in your book, The Science of Dream Teams, focusing on getting an HR team put together maybe sooner than other folks might? What were some of the ingredients to those earlier successes that you and Daniel had together and separate?

Mike Zani:  It’s interesting, Daniel and I decided to do a search fund together. We were friends, we were in the same section in business school, so we knew each other, but I don’t think we knew each other to the extent that it’s really necessary in order to take the leap that we took. It’s sort of like we decided to get married. He’s my business partner. We have a business marriage. We decided to get married before we knew enough about each other. So, we had very different styles. And this really manifested itself when we were looking for the first company. I was a little more what I’ll call reckless. I just wanted to get in the game. I was like, let’s buy a company that’s not going to be a binary outcome and just get in the game. Whatever we get, we’re going to make it better, period. That was sort of what I wanted to do. And Daniel was looking for something inexpensive that took advantage of some structural thing that someone was missing. He wanted to find the diamond in the rough. And so, I ended up liking more companies, and he really disliked most of the companies that we looked at. And we complemented each other well. So, we realized that it was really important for both of our perspectives, one sort of blindly, not blindly, but looking at the upside, ignoring some of the flaws, and another one really diving into the potential risk areas and really sweating the details on that. But what we discovered was we were running out of time, and I think that’s what got us to buy our first company, just because Daniel finally had to say, okay, this is the best deal we’ve got on the board. Let’s buy it. And I was like, great, we just get to get in the game. That’s what I wanted to do all along. And it was because we were running out of time to make the acquisition. And that doesn’t mean- we had deals fall apart that Daniel was in love with. So, I’m not trying to say that I just wore him out with time. But you fall in love with a deal, it almost closes, either you find something or maybe the deal terms didn’t germinate the way you wanted it to, and the deal falls apart. But that was really the first opportunity. So, I wouldn’t say there was some genius that we had, an investment thesis that was so amazing that you’re like we couldn’t- we bought so well, and the investment piece was so amazing we couldn’t help but make money. I think we bought a good company in a good market that had potential, and we worked real hard to suck out that potential and build a better company. And honestly, when you do your first search fund, most people I think don’t know what they’re doing. You’re kind of snot nosed managers, and you may be smart, you may have gone to a good education, you may be doggedly determined, a lot of good stuff. But are you really ready to be a CEO of effectively what is a private equity backed company? And the answer is probably you don’t have all of the boxes checked at that point. So, we did get in the game. I think when I look back at all of our deals, though, I think we put together an investment strategy before the deal closed that had a lot of the operating strategy built in. And when I go back and read those, what we said we were going to do with the company was pretty much what we did with the company. So, we had a blueprint. It wasn’t 100% right, but it was a guiding light for the investment hold period, operating period. And it mostly came true. It doesn’t mean we didn’t meet weird, hairy obstacles along the way. But it was nice to say we were getting the strategies generally right upon our due diligence phase. And the reason I’m confidently saying this is we’re nine years into The Predictive Index, and I went back to our investment deck of August 2014 and looked at what we said we were going to do just to balance it against our- because I just had an offsite with the senior team, and we were talking strategy, and I wanted to anchor us in here’s what we said we were going to do in 2014 when we bought the company, and it’s pretty darn similar to what we say we’re doing now. So this hasn’t changed. The environment’s changed, but the North star hasn’t. So I feel confident, relatively confident in that, in most companies we’ve done.

Alex Bridgeman:  What were some of the elements of that 2014 plan for Predictive Index? What were the different goals and ambitions you laid out for the company?

Mike Zani:  Well, there’s a lot to that that is context. So, Arnold Daniels, when he built the company, he built what looked like a franchise model. So, he did not like to personally travel a lot. So, he was a consultant and used the Predictive Index to help business leaders run their sort of talent strategies better and with data and analytics, and we can get back to your data question in a bit. But he created a franchise where he recruited other individuals like himself to be consultants in different parts of the country and then the world. And he gave them a license to sell, service, train, and consult on the Predictive Index. And basically, he trained them for like five days and said, okay, now you’re on your own, you go do it. And they would pay him a royalty. So, it wasn’t quite- it looks like a franchise, even though it wasn’t technically a franchise. It was just a license to resell the tool that he invented.

Alex Bridgeman:  Kind of like Traction EOS?

Mike Zani:  It got traction, got traction internationally.

Alex Bridgeman:  Or no, I meant like the Traction platform, like the entrepreneur operating system. It’s run similarly with the implementers and whatnot.

Mike Zani:  Yes, it is similar to the EOS model. So, we have a distribution system. When we bought the company, there were 47 we call them Certified Partners. But they are value added resellers, to use a vernacular that might have more meaning. But our Certified Partners, there were 47 of them. Most of them were trained in the 80s and 90s. So, they’re pretty aged at this point. And it’s not that their kids weren’t in the business, and there weren’t growing concerns. It was just they were recruited when it was pencil and paper. And we were turning it into a software company. We now have over 500 Certified Partners. So, we identified that we have to understand what it takes to make a good Certified Partner, and then we knew that we had to really scale that model. And we made the assessment that we couldn’t get rid of this model. The contractual obligations that were set up by the family before we bought the company were such that you wouldn’t buy the company unless you embraced this channel. And the channel is fantastic. I mean, most people who have really successful channel businesses love their channel, but there’s also a love hate in all of it. Because they’re independent contractors. We would be like, hey, try this. And they’re like, we don’t want to try that. You’re like, we really think it’s a good idea. And they’re like, well, we don’t have to. And you’re like- So we’ve learned how to work with them to make our collective really amazing. So that was sort of the biggest point was understanding the channel and how do we grow the channel? The next biggest point was our product was really hard for people to understand. Like some people even on this call, this podcast would be like what is the- I still don’t even know what you do. And it’s hard to understand that we needed to really make sure that our product was easier for people to understand. And we have a pre-hire solution that people get immediately. Like, oh, you psychometric tools to make sure people are a good fit for a role. Got it. That is a red ocean product. People get that. But the post hire stuff, which is, let’s just say, Alex, you’re my new boss, and I’m meeting you for the first time. You’ve heard good things about me. I’ve heard great things about you. We can use psychometric tools to find out what are the joys and frustrations of our individual relationship. And we can actually even coach ourselves to modify ourselves so that you get what you need out of the relationship, and I get what I need out of our relationship and communication. And that’s on the individual basis. We also have tools that help people with teams. So now you have a six to eight person team. So now we have Alex’s team. Is your team homogenous? Is it heterogeneous? What does it look like? What’s the sort of culture and style of that team? Is it a good fit for the work that you need to do? We built all those tools into the software. This was the domain of our partner. Partners used to do that manually. They used to literally go, Alex, let me show you what Mike is going to be like on day one. And you’d be like, if you had been- if you had the time, energy, and inclination, you would welcome that input from a Certified Partner. But more than likely, we wanted to really just give you those tools at your fingertips whenever you needed them. Why do you need somebody to come to your office and explain what Mike’s going to be like when you could just push a button and read the highlights, which is what we built. So, we started calling this thing a talent optimization platform, where you’re trying to optimize your talent both pre and post hire to make sure that you have super competitive teams and individuals and companies because businesses don’t execute strategies, people execute strategies. And we had to make it clear for people to understand what we did.

Alex Bridgeman:  You talked about this being kind of, in some ways, a red ocean, but it feels like the potential for this to be applied in like so many more companies. Like even in your book, you were talking about how like 85% of a typical labor force is unengaged in the companies they work at or some statistic like that, there’s a lot of companies that don’t engage their teams in the same way or in an effective way. It feels like it’s still a company with a huge potential market share available to it.

Mike Zani:  The pre hire stuff is red ocean. The post hire stuff is actually blue ocean. People are not shopping for relationship tools. They’re not shopping for team dynamic tools. It’s highly fragmented. You’ve got coaches. You’ve got consultants. You’ve got Myers Briggs disk type products that you might use at an offsite. It’s coming at you from everywhere. You might have the EOS system. It’s really super fragmented, super blue ocean. People are not shopping for it. And when you address their pain, they might go, wow, I need to buy you immediately, I need this. And other people might be like, I don’t have that pain. That’s not my pain. But it is a massive TAM. Every organization, and I don’t just say business, I mean, we’ve got megachurches, we’ve got sports teams, we’ve got for profit, not for profit. We look like a cross section of all industry. We are blue collar, white collar, high tech, low tech. Every organization with people has people problems. And they need people strategies and tools to help them. So, it is a massive opportunity. But at the same time, because it’s so fragmented, because it’s so blue ocean, there’s just, a lot of people have to be like, I really need to think about this. I don’t know if I need to implement this tool today or tomorrow or next week or next month or next year. But there’s a lot to think about.

Alex Bridgeman:  Yeah, I bet because before all of the post hire stuff, I imagine folks would just use Predictive Index whenever they’re making a hire, and it’s kind of a one time purchase. But now there’s a reason to subscribe to Predictive Index over a much longer, more regular cadence. Maybe it’s something closer to a subscription today versus a one time expense in the previous business model.

Mike Zani:  Interestingly, it’s always been a subscription. It has always been a subscription. I actually have the subscription pricing from 1955.

Alex Bridgeman:  Oh, what was it?

Mike Zani:  It was laughably inexpensive. It was like $100 a year for an entire company of 50 employees. But it was done in brackets of employee count. So bigger companies paid more, but it was a one time fee paid up front annual. And it was amazing that it was a subscription business back then. And the reason I saved the pricing, actually we have this sort of- since the company is 69 years old, we have this beautiful cabinet that has archives of all of our old stuff.

Alex Bridgeman:  That’s really cool.

Mike Zani:  It’s really cool. I have the contract, Maersk, the largest shipping company, logistics company in the world, has been a client since 1971. And I have the original contract on my wall. Because it’s like oh, 1971, it’s like $3,500. You’re like this is a global 200 company and they’re paying $3,500 for all of their people management. But it is funny to see old subscription pricing.

Alex Bridgeman:  Yeah, that’s incredible. The one thing you’ve talked about in the book as well that I’m really curious about is the HR team, HR hiring. So, in a company that’s almost 70 years old now, you’ve mentioned getting to it, and the company was kind of built around being a company of stability versus high growth, high ambition. The HR hire is interesting to me. I’m trying to learn more about some of these individual C suite roles. Like for next year, I’m going to be having conversations with a really good CRO, someone who has been a CFO at lots of different companies before. The HR side is one I’ve not explored to the same degree. I’d be curious how you’ve developed HR teams and made those hires especially earlier in a company’s growth cycle versus what it sounds like other peers might do.

Mike Zani:  I think we made the mistake that most small companies do. So, when we bought our first company in 2004, the company was called LED Co, it stands for Law Enforcement Development company. It was, I think, 45 people. Most 45 person companies don’t have anyone in HR. Basically, they have finance and accounting run it, like do payroll, accrue for time off, go buy or build or find an employee handbook, and that’s it. And that’s what we had when we bought the company. And Daniel and I started doing the strategic HR, which we did it poorly at first but got better over time, but how to build a world class team, how to out compete with just better people, getting people in the right roles. And we tried a bunch of things. We tried top grading. We started with MBTI; it didn’t work. We found The Predictive Index eventually. We also used a cognitive assessment because cognitive is a huge component of predicting workplace performance. We used to do the case study questions, the Fermi questions. We tried, literally, almost everything. And we got better over time with our strategic HR. We were still terrible at the tactical HR. We sold the company, and they had a claim out of our escrow account because we miscategorized 1099 versus W2 employees incorrectly and had to pay a fine. I mean, to say that we were bad at the tactical HR was underestimating. So, we were great. We became great at the strategic HR. We were terrible at the tactical HR. So, I promised myself – by the time I realized we were making a mistake, we were about to sell the company – I promised myself, I’m like in the next investment we make, my first hire is going to be strategic HR who can also manage the tactical piece, at least for a bit until we’re big enough to warrant both. And that’s what happened. I made an investment nine months later after we sold LED Co. And my first hire was Jackie Dubey. She has been with me at Shape Up, which is the second company I invested in. And she’s actually my Chief People Officer now at The Predictive Index. I was lucky to find the right strategic HR person. She taught me a tremendous amount about HR. And I taught her a lot of the tools and tricks that I learned as a strategic HR person. But really, I just became a CEO who cared about talent, and she became the strategic HR person who implemented a lot of these wishes, desires, complications. And the interesting model here is Daniel bought another company, Examsoft. It was his second investment. So, he put capital into Shape up, and I put capital into Examsoft, but we ran them independently. He didn’t hire strategic HR. So we had this sort of like AB test. Two leaders who thought a lot alike, one who went that way, one who didn’t. And it’s funny, I would always- we would we call each other a lot. We were probably each other’s first call when we were frustrated about our jobs or leadership or had questions. And I was always lobbying him like you’ve got to do it, you’ve got to do it. It’s so good over here. You’ve got to get someone to help you with this. And he was always more fiscally- he’s sort of like, no, I’m not sure I want to spend that much money there now. It’s kind of an overhead. I eventually won the debate with him on the importance of having strategic HR. But I think when you do that, when you have strategic HR, even on a small company, what you end up doing is you make fewer hiring decisions, you create internal marketplace so you can really develop and cultivate your talent and let them go into stretch roles sooner, you’re able to develop a culture that can be a competitive advantage, you have tools and processes to eradicate bad behavior that can be really corrosive, and you can address and scale because as companies go from nine people to 50 people to 250 people to 500 people to a thousand people, the amount of org and reorg you need to do is massive. And you can be ahead of the curve on that, even when you make acquisitions, you might do little tuck in acquisitions. And how are we going to manage this tuck in acquisition? What’s the size? What’s the scope? Who are the people? Like that’s really important stuff. And I think if you have someone dedicated and talented to think about that as your key Lieutenant on people issues, it is just so much better. I really think the new modern triumvirate, the CEO, holder of the strategy, the CFO, holder of the financial plan to support financially that strategy, and the third leg of that stool is the Chief People Officer who holds the keys to the people who implement that strategy. And I think that triumvirate is the modern triumvirate that really out competes today.

Alex Bridgeman:  So why do you think that would out compete today? Was there a different kind of group of three earlier that would have been better for the times? Or what do you think has changed that has made that the winning model?

Mike Zani:  It’s just been the trend towards knowledge-based businesses. So, I really think in the 80s and 90s, the triumvirate would be take out the Chief People Officer, put in Chief Operating Officer because you were competing on effectiveness, operational efficiency. We don’t make stuff anymore. I mean, not all companies. There are, thankfully, some really amazing manufacturing companies still left in North America, in the United States. But really, the majority of modern companies today, 60% of their cost structure are people and people related. They are people businesses. If you’re not out competing with people, it’s not like you’ve got something else. It’s just people. Now there are- and even our manufacturing, they have robots, they have automated processes, but people-related expense is really number one in almost every company’s income statement. And if you don’t have someone managing that largest asset, the largest expense line item on your income statement, it’s foolish.

Alex Bridgeman:  So, you mentioned strategic HR as compared to something that’s maybe more compliance heavy as a role. What is the strategic HR leader doing with your team? And it sounds like there’s an internal training evaluation coaching component, and then an external recruiting component. But can you go into a little bit more depth on what that role looks like beyond just the compliance 1099 W2 type basic HR work?

Mike Zani:  Yeah, I’ll even put benefits predominantly in the tactical side of things, and it’s really important, so I don’t want to minimize getting all of the tactical stuff right. But on the strategic side, it is from where you recruit, how you recruit, how you make selection, how you actually train your people, how to interview so that we are doing structured interviewing, not unstructured interviewing, that you are able to make the investments so that you take- the majority of companies get it right a third of the time. So, you can take- really good companies are getting it right 85, 90% of the time, still not 100. And we’ve got room to improve, but that you’re getting the person you need or the person you thought you were going to get 90 plus percent of the time. That is currently world class. Hopefully we get better at it. But then it leads to onboarding those individuals and onboarding individuals differently based on their roles and based on their behavioral styles. Some people want to be onboarded fast, just drown me with a firehose, and other people need to be onboarded more slowly with more data, more reading, and a more patient metered approach because they have different preferences to how they learn. And it goes from you just go the entire employee lifecycle, from onboarding to setting their first 90 days on what great looks like. Because after 90 days, you know whether you’ve got the right person or not if you shared what does great look like after 90 days. And if they’re not great, maybe they’re in the wrong role, or maybe you got that 10% that’s not the right person, and you should make decisions early. You shouldn’t live with a bad decision for two, three years, saying, oh, I knew from the beginning this person wasn’t right. And you’re like, why didn’t you do something about it? And why didn’t you do something proactively? And then investing in mentorship programs and internal learning and development and having an internal marketplace for talent so that people can apply for roles internally and recruit people into roles internally because they see talent and letting your best and brightest really rise. I call it sort of like buoyancy. You can find early career individuals with very little experience who are super buoyant. You give them more responsibility, more resources, more people, and they can keep crushing it. And if you do this, you’re actually getting people who are loyal to you because you’re giving them this opportunity, training them. They are probably less expensive than the person who’s been there, done that four times. And you’re developing some dynamicism within your organization. So, the strategic talent person is owning the employee – I don’t even want to call them employee, they’re owning the talent in your organization, the full lifecycle, even to succession planning. And when people are struggling, which they sometimes do, not because they’re the wrong person, again, you’ve already solved that in the first 90 days, but maybe there’s something going on in their life where they can no longer be the performer they once were. Or maybe you put them in a role where they’re not as good as you were hoping, and instead of firing them, getting them back into a role where they can be successful. Or maybe someone has, they’re doing 90% of the job world class, but 10%, it might be critical, is not quite there, you either need to pull that 10% away from them or give them some mechanism to bolster the 10% that they’re not as good at. So don’t throw them away, but support their gaps. I think when you do that entire thing incredibly well, you generate healthy cultures, very sticky, loyal employees, and you outcompete because you’ve got talent firing all over the organization.

Alex Bridgeman:  Yeah, it sounds like that was a central piece of your kind of shaping the team around having a growth oriented mindset and folks who are excited about new processes and new things and change. And the HR just felt, just reading through, it just felt like that was a really big component that is often under discussed with some of these early companies where you’re changing things and growing teams and whatnot.

Mike Zani:  I do think it is under talked about and invested in in organizations. And so, I’m in a group called Vistage. Vistage is the largest CEO peer advisory organization I think in the world. There are similar organizations like YPO. They’re slightly different in their founding stories and how they operate. But Vistage for me is a group of 15 plus or minus CEOs who meet monthly and talk about business issues. The number one issue, without hesitation, that we have and we’ve consistently had over 15 years of being in Vistage has been people issues. They come in different forms and shapes. It might be like, oh, I’m frustrated with my partner, or XYZ is not getting it done, or the salesperson I hired, they interviewed really well, but a year in, we haven’t moved the needle, the whole smorgasbord. But that’s our number one. If you categorized issues, number one and by a landslide are people related. And I don’t think my Vistage group is anomalistic. I think a lot of companies have people related issues. And there are not a lot of tools that help you turn that around. And what’s funny is sports is 20, 30 years ahead of us in this. If you bought, let’s say you and I bought the Boston Red Sox tomorrow. We wrestled control from John Henry. And the first things we would do is we would find out who is going to be the head of our talent, which is going to be the- usually it’s the president of baseball operations. They’re in charge of recruiting, the farm system trades. And then the second person we would get is the manager. So basically, a sports team realizes this. They’re like, number one hire, who’s getting us the best people. Number two hire, who’s going to manage those people on a day to day basis. That’s basically the Chief People Officer and the CEO. The ownership is usually the CFO because they’re the money. But it’s the same structure. Sports teams have been doing this for years. They call it Moneyball. And business organizations are a long way behind. They don’t have the data. And getting back to your question on data, it’s the access to the data, it’s the access to performance and engagement and fit. And I don’t mean fit from a DEI perspective, I’m talking about deep behavioral fit for the role at hand.

Alex Bridgeman:  So, there’s a bunch of ways to gather that data on a regular basis about your team between Predictive Index and you mentioned a whole bunch of other survey tools to get more data and stuff like two by two matrices or even just basic performance reviews. How do you stitch these all together? In your mind, what’s a cohesive portfolio of tools to use to get data about your team?

Mike Zani:  Therein lies one of the biggest problems; I don’t think one really exists yet. There are a couple of companies that are really trying to develop these tools. And it’s because there’s a broad spectrum of things that you need to do from performance, performance surveying across your organization – how do you really measure performance? Engagement surveying, and how do you measure engagement? And more importantly than just measuring engagement, it’s like, how do you identify the forces of disengagement, like what’s causing that disengagement in a very actionable way? And you can continue on like how are you actually managing your people in terms of giving them goals, tracking, tracking process to those goals, even managing them on their one-to-ones. So, the biggest step that we’ve made recently to fill that gap on the post hire is we just made an acquisition. It was a company called Charma that really specialized in one-to-one meetings. And when we were doing our due diligence with them, we realized that it all starts with a one-to-one meeting. Everyone has a one to one of some way, shape or form, everyone. And if you can make that one-to-one better, and it’s pretty simple to do because a lot of one to ones are not run very well. But if you make that one-to-one meeting better by jointly working on an agenda before the meeting, tracking those agendas, making it easy to take notes within the software, being able to easily have recurring agenda items or setting action items. And hey, Alex, you said you were going to get me that PowerPoint deck on Thursday and just easily be able to say that so you get a reminder, hey, you owe Mike a PowerPoint deck. On Wednesday, you get a reminder like, oh, yeah, I got to get my PowerPoint deck. It all starts with a one-to-one. And this company was able to get what I call non-HR and non-administrative usage, just regular people, managers, individual contributors to use their one-to-one meeting software. And once you got them using people, once you get employees to use the one-on-one meeting software, this is where you can feed them, this is where you feed like feedback, reviews, behavioral science, where you could be like, hey, Alex, since you’re having a one on one with Mike, wouldn’t you like to know Mike’s style? Wouldn’t you like to know how to coach Mike better? Wouldn’t you like to know how to get Mike to do things better? Like that I want to do better as opposed to you telling me. So, we’re really excited about the platform, which gets the, I’m just going to call them eyeballs, gets the eyeballs of the non HR and administrative user. We hope to be able to build that platform, which is more holistic. But to your answer, I don’t think one really exists. And there are a bunch of companies running at this really hard.

Alex Bridgeman:  So, there’s not like one central tool, are there maybe two or three, not even necessarily software platforms or survey tools, but just things that managers and CEOs can do internally to help manage performance or measure performance better? What would be the two to three that you’d reach for first?

Mike Zani:  So, I think if you’re going to be successful at this, people do not need another piece of software. It’s not like I said, Alex, wouldn’t you be excited to have another login? You’d be like, not really. What we need to do, the company that’s going to be successful is going to meet managers where they’re already working. They’re already in Slack, or they’re already in Teams. They’re already in Google or Outlook Calendar. They’re already in Zoom. They are in those places. If you meet them where they’re already working, then you get adoption. I think that the data store won’t be in those things. You’re not going to keep all that data in Slack. But the usage by the line user is going to be in the pieces of platform, in the tools they’re already using. And then you get that data back towards the administrative users so they can do the analytics on it. They’re like, wow, that onboarding class that came in four months ago, four out of five of them quit. What happened? You have that data versus you’re like, wow, when we recruit from XYZ school, they all turn out to be the fastest movers. Or you’re like, this manager has the lowest engagement, but they are high performing, how do we coach this individual on their style because they’re disengaged in their team, even though they have good output? All that data has to be done really at the administrative level. And this is the equivalent of in baseball, you have your statisticians who are going, yeah, Alex is having a really good July. He’s on fire. And you’re like, what has Alex been doing in July? Or maybe you’re having a terrible August, you’re like, you should really go back to doing what you’re doing in July. Baseball and a lot of sports have those tools. Amazingly, business does not.

Alex Bridgeman:  Well, hopefully, between Predictive Index and Charma, you can get something put together that’ll be more comprehensive. One thing I thought was really interesting about your experience evaluating teams and measuring was measuring yourself first and starting with yourself and working down from yourself, then to the executive team before going to the broader organization. And you mentioned a few things that you’d learned about yourself, kind of that front of T-shirt, back of T-shirt concept. What stood out to you most about each side of your T-shirt? I’d love for you to explain that analogy too which I enjoyed reading about.

Mike Zani:  Thank you, Alex, for bringing that up. I’m going to give credit to front of T-shirt bag of T-shirt in a second to the creator, Jim Allen. But it starts with this concept that I think a lot of leaders need to buy into first, that if you’re going to lead an organization and you want to create a culture of openness, transparency, one where you can talk about your developmental areas or your weaknesses in effect, that has to start from the top. I can’t be a CEO that says, I’m perfect, but you suck and you really need to fix all these things. It’s not believable. You have to be like, listen, I’ve got a lot of great stuff I do, and I’ve got a lot of stuff I wish I didn’t do that I’m working on. And so do you, by the way. But it’s up to the leader to create the environment for openness, transparency, and vulnerability early in the relationship. Like, listen, if the CEO of the company could admit that they’re working on stuff, then I can be more open to also agreeing that I’ve got some things I can work on. So, if you believe that, and not every CEO listening here, I’m sure there are some people in high finance in New York who are like show no weakness, that’s not how you get through this organization. And maybe they know their industry better than I do. But if you’re going to lead people and you’re going to develop world class teams, it starts with kicking off that positive virtual- you get a positive virtual cycle out of it. So, getting back to Jim Allen, Jim Allen, senior partner at Bain, in the UK office, and he came up with this concept of front of T-shirt, back of T-shirt. And he did it when a Bain Manager, which is the position before partner, when like you are standing on the door of getting let into partnership and unlocking a lot of wealth and a lot of prestige and a lot of other stuff. Like this is the table you want to be at. When they’re evaluating who to let in as partner, it’s never the front of T-shirt stuff. The front of T-shirt stuff is all the things that you’ve been given jobs for your whole life. It’s all the things your mother would brag about you and that you probably are very familiar with. You’ve heard them before, and you’re proud of them, and you might even puff up your chest when you hear them. And you’re like, yeah, that’s me. And everyone’s just different. The back of T-shirt stuff are just as clear, but they’re clear to other people, and they only talk about them when you’re walking away, which is why the back of T-shirt analogy. You’ve got another list of things that really are detrimental to your performance and your effectiveness, and they’re often related. And they’re so related, you can’t eradicate something on the back without affecting something on the front. So, it’s not about eradicating it. It’s about identifying it and knowing its triggers and managing it, so it’s in control, not out of control. And the reason that Jim Allen brought this up is he says, for the Bain situation, this isn’t true for every situation, it was never the front of T-shirt stuff that kept people from being partner, never. If you made it to the partner table, you are definitely creating value. It was their back of T-shirt stuff that was out of control that prevented them from becoming partner. There was something there that says no, you are not going to represent us in the hallowed halls of Bain partnership. So, my wife did some consulting; she was a former Bainy. She did consulting work at Bain. She met Jim Allen, and she ran into this framework, and she brought it home. And I heard it for the first time and was like, holy smokes. Like I want to find out what’s on the back of my T shirt. I wanted to go on this self-awareness journey. And I hired a coach and said, okay, find out what’s on the back. Like, we’ve got to find this out. Ever since then, that was in 2006, I’ve been sort of carrying this framework around with me and brought it into the organization. We’re actually building a tool around it on the platform. But the idea is to help people understand what’s on the back of the T-shirt, identify the triggers for those things and manage them so they don’t manifest in a really bad way. And it’s interesting that if the boss says, hey, I got some stuff I’m working on, look at this stuff on the back of my T-shirt. I want your help. I’m recruiting you, Alex, to help me with this. And that showed vulnerability. Then, that way when I talk about your back of T-shirt, you don’t think I’m some sort of psychopath. You’re like, yeah, you’re working on stuff. I’m working on stuff. You’re not perfect. I’m not perfect. And you, the boss, is interested in making me better. Yeah, I’ll follow you into battle. And it’s a very powerful and effective model. I mean, it probably doesn’t work for every CEO, given their style, but it can work for a lot of leaders if they embrace it.

Alex Bridgeman:  So, you used an executive coach to help identify what those back of T-shirt things are. What are some other ways you’ve seen CEOs and peers of yours start to identify that other list, maybe with or without coaches?

Mike Zani:  It was easy for me as a CEO to hire a coach and do that, and I think I spent $3,000, which seems amazingly cheap by today’s standards. But back in 2006, you’re not going to just shower $3,000 of coaching on to anyone who’s outside of the VP level. So, you definitely need a more scalable way to do it. A lot of our employees, it’s just asking. Like, Alex, I’ve asked you and six other people to take an anonymous Google Form survey to please help me identify my front of T-shirt and back of T-shirt things. And then you just look at that feedback. And you start coming up with themes. And you literally put them on a document. And you’re like, yeah, six people said I do this. They said it in different ways and gave different examples, but maybe I do this. And then you bring that list home to your spouse. You’re like, hey, what do you think of my front of T-shirt, back of T-shirt? And they’re like, oh, yeah, you definitely do that a lot. You show it to your parents. And maybe your mom doesn’t want to talk about your back of T-shirt, but get her warmed up, maybe she can say yeah, you did a bunch of that stuff. You probably did it since you were a kid in various, different ways. So, you keep refining it. I kicked off this journey, gosh, it’s 16 years ago, 17 years ago, and I’m still refining the stuff on the back. Some stuff has become harder to manage, some stuff has become a lot easier to manage. But you don’t necessarily need a coach. And obviously, behavioral assessments, not just ours but a lot of types, will help you put those in context. There are certain behavioral profiles and styles which are prone to that. Yeah, obviously behavioral assessments can be really powerful in helping you put your front of T-shirt and back of T-shirt into context, might even give you suggestions on like, yeah, people with this type of profile are- like one of mine is running people over and not listening. That’s endemic to my behavioral profile for the Predictive Index. But there are other tools, whether it’s MBTI or DISC or the FIRO-B or the Berkman. There’s a lot of really great tools out there that will help you identify that and I think even emotional intelligence that these things can help you put them into context.

Alex Bridgeman:  What’s been the hardest one for you to work on of your back of T-shirt items?

Mike Zani:  It’s not listening. And in ’06, it was one thing that sometimes I’m not listening. And then since then, I’ve broken it down further into four modes of not listening. One is getting distracted. It’s a squirrel and just not being disciplined. And that one’s pretty easy. The second one is I’ve already made up my mind and your point may be counter to what I’ve made up my mind on, and I don’t want to hear it. And that one’s actually been pretty easy. I’ve given my employees a safety word, called [inaudible 55:00]. They say that, they’re like, listen, you’re not listening. And I’m like, okay, you’re right, I’m not. Like, just give me five minutes, I’m going to give you my best pitch, please be as open to this as possible. And it gives them a way to basically tell me to shut up and listen in a nicer way. And I want- I’ve asked them for help. So, I’m like, okay. And that’s another mode. Mode three is I’m listening and then I pivot to my response, and I don’t finish listening to you. Now, you might have a two part statement. You might start with A, and then I’m thinking about the response to A, and then you go to B. I miss B because I’m thinking about my response to A. And it’s just like the idea of listening to understand, as opposed to listening to try and respond. And we’re not in a debate. Like, I’m not trying to score points. I’m actually trying to understand. And the fourth mode, and this is the worst one, this one is one I’m not proud of, and it’s the hardest that I have found to change, has been when I don’t respect you on the topic. If I don’t respect you the topic, I turn off, and I’m not listening. And you see this a lot in political discourse, where someone who has a very different political view, they’re not listening, they don’t respect your opinion, and they just keep going back to their opinion as opposed to really listening. And I use the political discourse because I think people can relate to it. So, listening has been the problem. But as you’ll notice, I went deep on modes of not listening because they each have different triggers, and they each have different solutions.

Alex Bridgeman:  What’s been a helpful solution for the fourth one?

Mike Zani:  Man, it’s hard. I think that is a very internal one about wanting to expand yourself, being like, am I really going to be such a jerk that I’m not going to take a few minutes to listen to your perspective on something, and maybe I could learn something, maybe you really do have some genius that I was discounting or discrediting, or maybe you could move me off my point, and I think just being human to other people. I think another thing is, if you do a good job of who you surround yourself in the work context, you shouldn’t have a lot of people around that you don’t respect their opinions. Now, you get to the personal context where you’re in your social environments or your community environments, you might have a neighbor who walks over who has- that you’re just like, I might be all pompous and, oh, I went to a fancy business school, and someone walks over and wants to talk to me about business, I could just be like, I don’t want to listen to what you have to say. Or you could be like, come on, let’s talk neighbor, and maybe I’m going to learn something, maybe I should be a good person and listen to my neighbor.

Alex Bridgeman:  Certainly. One thing that stood out too is I haven’t met a lot of CEOs who were CEO for a period of time and then did it again afterwards, after being CEO of their first company and their first CEO role. You’ve now done it three times, though, which stands out to me a little bit. What makes you excited for the next CEO role after being CEO at other companies before? It seems most folks, they enjoy the experience, they learn a ton, but they’re like, yeah, I don’t really want to be a CEO again, and you’ve gone the opposite way. Why is that?

Mike Zani:  I really, I love the role. I cherish the role. It’s like I get a lot of positive energy from building great teams, leading people. I’m super competitive. I used to be a competitive sailor, crushing goals. So, it has a lot of ball of clay. And I tell people that. I’m like, the reason I love my job so much is because every morning I wake up to a ball of clay that I can pound on and shape into my own thing. So, you have a lot of power, control, and you get really good visibility into how you’re doing. That’s on the plus side. There are obviously hard days. There are hard months. There are hard quarters. There are even hard years. Certainly, most CEOs who went through COVID and managed through that, that was certainly a hard year. It takes a lot out of you. You do need a tremendous amount of energy. And I think if you want to make it sustainable, you have to make sure you have outlets. And the forms of outlets are family, they’re friends, they’re faith, they’re hobbies. It can be a multitude of that. But I’m not sure I can do it again. I mean, maybe I can after a break, but it does take a huge amount of energy. I envision after PI, I think I’m going to look forward to more being sort of a chairman role, where you aren’t the CEO, but you get to invest in companies and CEOs in their development. Maybe become a mentor, hopefully, sage advice, maybe it’s crappy advice sometimes, but advice nonetheless. And one of the things that I’ve done is, even if people aren’t- we no longer work together, I think I’ve built a really good bench of talent, both at PI and other organizations, that I would love to fund other great leaders, entrepreneurs, managers on ideas. And hopefully, I will be in a position to bring that knowledge to bear for them. And I’m wondering if I don’t have the energy because it does take tremendous capacity to do that. You’ve got to manage your investors, you’ve got to manage your board, you manage your people. And you have to make sure that you come home at night, and you’re not an angry dad, spouse, neighbor, all of the above.

Alex Bridgeman:  So, what gives you energy? What keeps your amount of energy high over you’ve run PI for nine years now and been CEO twice before? I’m sure you’ve learned a few things about making sure you always have energy to continue being an effective CEO.

Mike Zani:  I think if you surround yourself with amazing, amazing people with amazing talent and also amazing energy, they inspire you to have energy. It’s pretty amazing. I don’t know if you’ve ever run or ridden like road bikes or mountain bikes where sometimes you’re riding with riders who are better than you. They push you. Like, well, I worked hard today just to keep up. And you might even be like, wow, that was the most challenging ride I’ve ever been on because I was just trying to hang with the peloton. I think there’s some of that. If you surround yourself with really talented people who inspire you to be as good as you can be, who inspire you to bring your best self to work, that is a start. But I also think having outlets, being a CEO, especially of a software company, you’re not really making stuff that’s super tangible. So, I actually have a shop, which is a small two car garage that I build stuff. And it’s really nice to actually do stuff with your hands to counterbalance the intangible work that you might do. That’s my outlet. Other people may have outlets that might be sports or other hobbies and what have you. But I do find it pretty cathartic on a weekend to go spend half a day to a day in the shop making stuff. And I think people need to find outlets for creative energy that’s healthy, meaningful, that’s outside of what they do to be balanced. If I meet a CEO who’s staying on the gas for 80, 85 hours a week, I mean, that’s a recipe that you’re going to do this once. You’re going to leave it all on the field and you’re probably not going to do it again. Now, there are people like Elon Musk who he’s been doing 85 hour weeks for his whole life and maybe he just has so much capacity that it shames us all, but that’s rare.

Alex Bridgeman:  Yeah, that seems much more rare. What have I not asked you so far that I should have asked you?

Mike Zani:  Well, that’s an interesting question. I guess maybe the most interesting thing is the joys and frustrations of doing it with a partner, both the search fund, running a company or doing it alone. And Daniel and I had the chance to do it together and alone and then together, and now I’m alone again. So, it’s very- you get these periods of time where you can see both sides of it. And it’s really interesting. So, that’s a curious aspect. I don’t know if you have any interest in hearing more about that.

Alex Bridgeman:  Yeah, of course. What have you learned about developing that key partnership over time? I’m sure time away learning how you work solo versus together was also helpful, too.

Mike Zani:  I think not everyone has a partner. Like, I could hire a CFO, and I have a great CFO, and my current CFO I’ve worked with at two companies. And he is a tremendous employee. He is a friend. He is loyal. But he’s not my equal. Daniel was my equal, even though I took the title of CEO. We were 50/50 partners. He often took the title of President, Chief Operating Officer. But we really ran the companies together. So, I think I’m making this distinction because it’s great to have an employee that you really trust and is your counsel. That’s great. But they never forget that they’re your employee, and you should never forget that you’re their boss. But I think when you have a peer relationship, it’s pretty special. And it can be rife with joy and frustration. And the best analogy is probably raising kids in a two person parenting situation, where you may have really big disagreements on how to raise the children or discipline or whatever, education, pick something big. And you’ve got to fight through that and come to some sort of agreement. And I think that differences can make you better, especially when you have a really trusting- you trust each other, you respect each other, you listen to each other. Those things can really make you better. But sometimes it is easier, it’s easier to run a company alone. Like you don’t have to debate with anyone, for better or worse. But there are times, so it might be easier, it might not be better. And there are aspects that if you get the right partner, you balance each other, you have all those core components, trust, respect, listening, that it can really be fantastic to work out, even though there are times when you’re like, man, I would like to get in a room and choke you out. And I’m not a violent person, and I wouldn’t do that. But you’re like, that’s how I feel. And you’re like, wow, that’s pretty violent. Well, when you really are passionate about something and you disagree, and also people who get that close to each other, you know how to either intentionally or unintentionally push each other’s buttons. But then again, Daniel and I promised each other before we started in 2002 that we’re like we’re going to be friends through this. So, if you commit to that, you can say like listen, we might disagree, even be mad at each other, but we’re going to be friends in the end when the dust settles. And hopefully, the thing we really like is we try and let no one know who won or lost the debate. You come out and say we’ve decided to do path A, and I’m not coming out sour grapes going, and I’m pissed. It’s like no path A is the right path. We’ve chosen path A. Path A is going to be amazing. And that’s hard to do as well. But I would- you know how people go through premarital counseling about things like risk and finances? Before anyone out there gets into an equal partnership, think really strongly about whether this is the person that you really are compatible at doing this stuff with because it can be a long road. And I’ve really enjoyed this road, but it can have some real length. Daniel and I’ve been partners for 21 years.

Alex Bridgeman:  That’s awesome. That’s exciting. And through so many different companies and situations and now in a unique spot with Predictive Index too.

Mike Zani:  Yeah, and also in different states and different economic environments. It’s been a lot. I actually asked him to co-write The Science of Dream Teams with me. I was like, come on, let’s write this book together. And he was, he thought about it; he wasn’t up for it. He’s like, no, no, you write this book. That’s more your thing. But a lot of his ideas made it in the book, too. We’ve been through so many of the challenges together.

Alex Bridgeman:  Yeah, I loved it. It’s a really good book. I’ve enjoyed it so far. It’s been a lot more- It was really tactical, too. I really enjoyed there’s the strategic, how you build teams, but a lot of the- you’re bringing a lot of the experience that you’ve had shaping teams into the book, which I really enjoyed reading about.

Mike Zani:  Alex, I appreciate you saying so. I did want CEOs and senior talent leaders to be able to relate to it. And execution is a big piece of that. And just because I said it in the book doesn’t mean it’s the right way, but it’s one of the ways, or I give you a suite of ways that you can think about it.

Alex Bridgeman:  Yeah, certainly. Well, Mike, thank you so much for coming on the podcast. I really enjoyed getting to chat with you more. And I hope we get to chat again here pretty soon, hopefully at another conference in the near future.

Mike Zani:  Alex, thank you. It’s great to get an opportunity to think like an owner and spend some time with you on this. It’s an important cause, you helping people be better managers, leaders, CEOs, make the world a better place.