Episode #565: Building Winning Teams in Fitness-Tom Johnston on Talent Optimization and Employee Engagement

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0:48 It's easy to use. Go to the prospectwizard.com get a free 30 day trial. Talk to my boy Dave Gallen. He will get you all set up and let the leads flow based on the Wizard. Go get him. This is people on Halo Talks NYC have the pleasure of bringing a friend of mine for a short 20 years coming in from outside of Boulder, Colorado, Talent Optimizer Group. Mr. Optimizer, Tom Johnston, welcome back to the show. Thanks Pete. It's great to be back. Thanks for having me back. Awesome. Yeah, we're on, we're on podcast number 600 around that. So it's good to have you back around the horn again here. As a baseball term, given that we are now past opening day, which we thankful for the KL family for giving us those tickets. I'll send you the fourth row legend stadium view and my, my picture with Boogie in the hoodie from the Bronx. So. So Tom, give us an update.

1:48 You've obviously been giving us a go on having the industry, the Halo sector at large, understanding that talent matters. Talent is a differentiator. And instead of thinking that you can just recruit from ZipRecruiter and hope that you create long term employees, there might be a better way to challenge yourself and actually understand the talent that you could get up front and figure out what positions you're trying to fill and what types of people if you're going to have a winning team. Just like in sports. Exactly. So far away. Yeah, you know, so talent optimization, I think first of all is. Let's, let's talk about what talent optimization is. It's actually a discipline, Pete, where we align a business strategy. Most organizations have a business strategy. They know what results they're looking to achieve, but in between they don't necessarily have a people strategy. So there's a discipline around how do we go about hiring the right people for the right role, how do we go about retaining talent? How do we ensure we've got the right people in the right seats on the team? And then, and then we also look at diagnosing the organization to really find out what taking the temperature within the organization in terms of what are the employees thinking. Feeling like to understand the sentiments, but also let's start to quantify how are we doing as an organization.

3:10 So we put some, we really put some data and some rigor behind the entire props process of a people strategy, you know. And what would you say the percentage of companies in our industry were doing this three years ago before you started? You know, Pete, it's a really small percentage. And most times when I start to have a conversation with a leader, you know, some of the conversations begin with, hey, you know, you're a CEO, you're, you're a founder and you're building this brand. And in today's day and age, the reality is most CEOs look like you and me, but the reality is the workforce doesn't look like you and me. So it's really a matter of taking an approach to, to building a talent pool and building an employer brand. And I would say, Pete, the majority of organizations within the halo sector, and I think outside of the halo sector, they don't necessarily just look at building a, an employer brand and understanding how they're attracting and retaining talent. You know, wrote this book several years ago that your face is, your namesake is in and time to win again. There we go. Thank you, bro.

4:29 Appreciate that. Prop. Yeah, know when you think about a general manager and, and all the money that now is flowing into sports teams at, at all levels and you think about the nil, you know, where you're getting paid now, you know, to produce and, and I was just watching this, I don't know if you watched it, but on Vice Hulu, there's a, there's a show on Rick Patino and, and Cal Party, you know, talking about nil. And you know, Patino's like, yeah, Kedari Mitchell, like we hired him because Seton hall couldn't pay him what we could. So you know, the idea of like a student athlete, you know, is basically non existent anymore as like a term to be used. He's like, yeah, better hit those shots. And we're paying him like he's an employee to St. John's basketball athletic program. And when you think of the talent and the scouting and the recruiting, you know, if you layered that on into a health Club. And you know, you take like Club 16 with, you know, you know, Trevor and you say, hey, that, that guy's a world class hockey player, you know, who's now trying to build a world class regional chain in Vancouver.

5:43 You know, how does he kind of look through a lens with you about if I have the best players, I probably have the highest chance of, you know, winning a Stanley cup, you know, in, in the health club industry in Western Canada. So how did you kind of get him and his team with Carl to say, hey look, this is something that you need to invest in and it actually might be the highest priority thing that you have to do where in the past it was like, yeah, we hire people, we get people to work here and then they leave, then they come back, then they leave. Right. And we're constantly like filling that funnel. Yeah, I think the most. You know, let me just start here and say that you're speaking about Trevor Lyndon and Club 16.

6:24 She's fit in Vancouver BC. And it's important for me to recognize that the conversation and share with you with your audience that the conversation with Club 16 actually began with myself and Chuck Lawson. And Chuck was the co founder in many ways the visionary behind Club 16. And unfortunately Chuck passed away last year. But I'll take you back to our initial conversation that we had. And Chuck and I, we had a conversation at the Club Industry CEO Summit a few years ago and Chuck was, Chuck heard about my work. Somebody up on the stage was actually a client and Chuck came out into the lobby and he said, hey, where's this guy that he was talking about? Like I'm the guy. And so we struck up a conversation that took several months before.

7:14 And I say this, Pete, you, I think you use the word is convincing. Right? Convincing. Chuck and Chuck didn't need convincing. And the work that I do is, I often say this is about attraction, not promotion. So I can't convince you necessarily to do the work. You need to be willing to want to do the work. And Chuck was a learner and Chuck always was looking at opportunities and how he went about improving his business. So introducing my work to then introduce me to Trevor and Carl. You know, we really started with, hey, let's, let's take the pulse of the organization and let's survey the organization. Let's understand where you are today. And really instead of us trying to figure this out in terms of how do we increase employee engagement, how do we hire the right people, do we have the right people in the right seats, do we need to Potentially restructure the organization. All of those things came out in an employee experience survey. But I will say this. You know, Chuck and I, we had several conversations around facilitating an employee experience survey. And what I ensured was, is that Chuck would agree to be 100% transparent with the results, with the entire organization. And, and he agreed to take action. And then the action that we were taking, we explained to the team what we were doing and it was super important why we were doing what we were doing. People want to understand the why and we shared the why. And through this process over the last couple of years, one of the things that Trevor will

8:45 say is talk about a humble leader. Trevor will often say, I don't necessarily have all the answers. So what we do is we really pose the questions to the team and that's also how we help the team to feel seen, feel heard and feel valued. This is Pete Moore. I want to let you in on a little secret. There's this company called promotion Vault. And what they do is they give out rewards from retailers that allow you to incentivize your members without having to do zero down and one month free or giving away shakes or giving away T shirts. What you want to do is build a rewards program that lasts, that people value and that doesn't discount your own products and services.

9:31 So here's the deal. There's something called Rewards Vault. The Rewards vault is going to allow a member to set up their own profile. They are going to answer questions, you are going to get those answers. You're going to be able to target those members and you're going to reward them inside your club, inside your spa, and outside of the club and outside of the spa to get them to become loyal, to get them to pay their monthly dues and to be rewarded properly for the actions. A lot of companies are cutting back on rewards. You shouldn't be Promotion Vault. Your answer, trust me, this is real. Give me some examples of how you go about that fact finding mission. What's the type of questions without giving us like the whole secret sauce of the playbook, but like what's the survey that that allows you to understand what's going on?

10:24 Yeah. And the fact that you don't have to give somebody like here's like 200 questions like, you know, just type of, you know, in depth, like algorithms and everything else. Like I need like 10 questions or 5 things like give me a sense of what's going on. Yeah, great question. So. So first of all, I utilize a tool called the predictive IND and So within the predictive index platform, which is, which is, you know, there is a, you know, the whole idea of predictive analytics is built into the predictive index. So we're using AI and so I often say I've been using AI for years. But the questions are really around understanding how an individual fits to their job. What is their fit with their manager, which is super, super important. That relationship, that one on one relationship with your manager is the important relationship that we have at work. It's understanding fit to the team, understanding fit to the organization, and then also understanding how people are feeling about their total engagement. And we are able to measure each one of those, those factors.

11:30 And then within the platform it also is making suggestions, recommendations that we can take in order to increase engagement over time. And of course we survey, we take action and then we come back and survey again. And you know, what we see is through a case study, we've actually been able to prove and show that we've increased our employee engagement across every one of those categories over the last year. Gotcha. And by the way, Pete, it's 50 questions. Sorry, it takes about less than 15 minutes to complete and it's completely anonymous. So to kind of hearken or pull this into what we do. You know, everyone here on the show knows that, you know, our, our day job is, you know, we do mergers and acquisitions, help people buy and sell companies. And I had a conversation with one of our clients the other day and we're trying to sell his business right now we've got a term sheet at, at five and a half times cash flow, which is basically for a, a multi unit chain that doesn't have new locations coming to market. You know, it's a strategic sale, like five and a half times. And the guy says to me, he's like, how do you value the fact that I have like the best team probably like within 300 miles of my two locations? How do I get, how is someone paying for my team? And my answer was, you know, they're not, you know, they're paying for your cash flow, which is generated by your team. So it's kind of like

13:04 embedded in the multiple at five and a half times on what your team's generating. He's like, well, I don't know if that's really fair. Right. Because I built this team over 10 years and I've got people here that started with me from day one that I will put up against anyone in the industry. So how would you respond to that? Or do you think going forward There might be a narrative that I could use that says, yeah, these clubs, you know, if these clubs were, if these clubs were run by a different team that you would have to replace, you should pay four and a half times for it. Or I'm bringing you a team that actually could go from 2 to 10 and here's their background and interview them, do pull predictive index on them, show me where they rank as like professionals and you got to pay me six times or six and a half times. How would you help me respond to that? Yeah, part of how I would respond is help me understand your process. I want to understand your process for acquiring and retaining the talent that you have.

14:06 What does that look like and how, how scalable is that? Right. Do I have a system in place that I can then prove, if you will, and show that. Here's the playbook, right? Here's my talent acquisition here and retention playbook. And here's how we go about build, here's how we've gone about building this high performance culture. And what I would, what I would want to do is I'd want to actually be able to exhib at that system and I'd want to also have the data to, to show to a potential suitor investor to say, okay, here's how we do this, right? Here's how we, here's how we operate our business. And oftentimes the playbook that may be missing on the shelf, if you will, is that, that playbook on how we've gone about building this high performance culture and then theory then how we're going to go about the ability to scale and replicate this. Pete, so in the article that came out there was kind of your case study that was, you know, put out across social back in December, maybe November, saying like, hey, we help Club 16, you know, Saver generate, you know, an extra $2 million, you know, in actual hard, you know, income statement amounts, right? If that was the case with my deal, right, that's an extra $2 million times 5.5 is $11 million, which is double the size of the actual purchase price.

15:32 So is there an argument or is there an idea here that as we're talking to say, if you're going to kind of gear up your company for sale, and I get this all the time saying like, hey, I don't have a succession plan. I'd like to optimize what I've done and generate material wealth for myself. And I'm not going to build this out, not taking in private equity. Like I've done. Which is a fair thing to say. You know, if you're an owner, been doing this 25 years, you know, you should get rewarded for Guy Brockway, man. You say Peter Brockway. Look, I'm going to build value and when I want to sell, someone's going to pay me for the value that I have created. That was his private equity playbook. Is there an argument or is there like an intermixing of if you're going to go sell your company, why don't you take a year. I'm going to tell you XYZ things you need to do with your business. And what I want you to do is I also want you to plug in Talent Optimizer Group for this segment because it's going to generate X amount of potential return on investment on its own. And also whatever that investment return is, multiply by 5, 5.5 or 6 and do the math on your own to figure out, hey, it's going to be worth an extra million.

16:41 2,5 in purchase price, right? Yeah. Well, here's the. So. So I love the fact that, you know, you wear that hat, Pete, because Chuck was always about having his finger on the pulse of the EBITDA of his organization. Like he, he knew that number because he was always thinking about it in terms of what's the value of my, my company. And through this process, what we look at, and oftentimes what I'll say is, look, if you're looking at your P and L, oftentimes the greatest expense, the biggest expense you have is payroll. So if we think about how do we go about instead of necessarily cutting payroll, then how do we actually maximize the payroll that we have, if you will, and how do we make sure that we're not. We're looking at the hidden cost of employee turnover costs. So we can actually calculate what that cost is. If we look at your turnover, your retention rate and we look at your turnover, we can put a number on that. So if we reduce the employee attrition and we know that we're going to, we're going to save you dollars. But also think about the opportunity cost that we have that we get out of this spiral of just constantly trying to, you know, we're churning employees and we're constantly looking at replacing constant looking at how do we go about training employees.

17:58 I think that's the other piece, Pete, is yes, taking that pause and looking at it that the, the, you know, what's our hiring process look like, but then also understanding what does our onboarding process look like, and then how are we going about managing performance? So putting the systems in place to really look at not only talent, talent acquisition, but talent development. And then you speak to things like succession planning. So it's. Succession planning also means that we have a plan in place to train and develop the talent that we have in place so that we can position them for that next role.

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19:50 You know, I'm all for one for coming up with new acronyms. Feel like that could potentially be my day job. But there's like a return on talent or like a return on employees. Instead of like, ROE is like return on equities. Like, it's really return on employees. No one ever asked you that question except in the guise of like, how many employees do you have? And what's your. What's your retention? Or like average years of service. And I hearken back to this place that I used to go to. It's called Ponchos Mexican Restaurant on a quarter of Rosecrans and Highland in Manhattan beach, okay? And it's a great, great Mexican restaurant. Every employee has their name tag, okay?

20:32 And there's not one employee that's been there less than 20 years, okay? And I was thinking to myself, like, they wear that with pride. They don't. They probably don't have a LinkedIn account, right? But they never update their resume, right? Because they're there and they've been trained and they're part of a family. But this family is a high performance family. There's no one that's like a B player, that works at this Mexican restaurant and it'll hopefully be there forever. So when you take a look at, you know, indicating to your potential buyer, like, here's how long these people have been here. And one, I pay them well, I treat them well. You know, they perform. And then the other thing is that the guy from Nvidia always says, like, I don't really fire employees. I just, I just make them better and I'm going to stick with them and they're going to stick with me. And if I hire them right, then I know that they have the ability to be amazing. Which, which kind of dovetail in dovetails into like, if you get in with, with talent optimizer group, give you a little commercial right now there's like an unintended consequence of a commercial for you. Like, if I help you hire the right people, you basically are going to have into perpetuity to an extent, you know, the ability to grow faster than you ever could because you made the right decision. And it's not from ZipRecruiter and it's not some fucking. Indeed, it's not from Craigslist, but, but it's actually like, figure out the players that we want on this team. Let's go and recruit players, right, that are franchise players. Let's pay them well. And actually if I pay somebody really

22:04 well, I think they probably do the job of five people. Yeah, correct, Pete. So thanks for the commercial, Pete. No problem. Happy to do it unintended. You know, I love you, but like this just came out. Thank you. I love you too, brother. Yeah, I think, I think the, you know, the comment that I'll make is, is the example of Club 16 is when we, when we facilitate Chuck, Chuck knew he needed to make some changes, he needed to make some organizational structure changes, but he didn't know exactly what he needed to do. And so when we facilitated the employee experience survey, it was very, very clear that the team, the employees were looking for greater leadership and at the, at the club level. And so we went about restructuring the organization, but we didn't, we looked at it through the lens of, hey, let's take a whiteboard and let's look at what are the position that we need in this organization. And then we were able to take the, the existing team looking at their behavioral profiles right through the, through the behavioral assessment that we've had facilitated. And we were able to position those people into this specific role. So it's important, Pete, that I want to point this out is when we hire and I'll Give you a quick lesson on talent optimization. When we're looking at the hiring component, we talk about hiring for the head, the heart in a briefcase. Right? The briefcase is typically what we would look at. The resume, the experience. Right. The cv, if you will. The heart is, tell me what you're passionate about. How does this person potentially align with our culture, our

23:35 values? Right. Are they going to be aligned with our mission? The other thing I talk about is empathy or compassion. Is this person going to be a compassionate leader? And if they look at the head, the head is how are they wired for work? And that's really where we start to look at the behavioral assessment as they fit to a particular job target. So think about it from a sales. Sales role. Simple is, am I looking for a hunter? Am I looking for a farmer? And so they're very, very different behaviors that I might be looking for, but I'm looking for a salesperson. So if we can help to determine that, we look at that resume, that briefcase, if you will, and then we can kind of fit that person to the job. And I'll say this too, Pete. It's never red light, green light, meaning the behavioral assessment, because anybody can flex into any job.

24:27 But then we also want to be able to provide coaching tools. Right. And. And so we're able to provide those types of tools as well through the platform. I would like to be considered a compassionate hunter, if you can give me that, because I'm trying to find deals, but I'm also always understanding what the seller needs. And we just worked on a deal, and it's. It's close to closing. I said to the private equity guy, because I became friends with him as a buyer, I'm like, you have to be more empathetic to what's going on here. Like, this guy ran his business through Covid. He's got personal debt on the business. He's got obligations. We have a fair deal with you, but when you deliver something, like, you have to deliver it more delicately, and you have to put yourself in the shoes of. Of who you're buying a business from. And that credibility and that compassion gets you over the finish line. So not only deals, not only business on your side of, like, hey, let's build an awesome team. But if you're doing a deal, you kind of have to overlay a lot of the definitions and, like, the philosophy that you're putting out there and make sure people know, like, what they're defined as and why they were hired. Yeah, well, you know, the compassionate part, Pete, is You know, compassion is defined as empathy, empathy plus action, Right. So it's really understanding meeting the person where they are and then taking action. And the action that you take needs to, you know, help to help to meet that person

25:59 where they are. Meaning that the action that you're taking needs to be meaningful. And if we're able to do that, then we become more likely to be a compassionate leader. And so becoming a compassionate leader is actually something that I help organizations and, and I teach that to organizations because compassion can be scaled. And interestingly enough, when we use the tool like the predictive index, you know, when we take that behavioral assessment, what we talk about is it creates self awareness at speed and scale. So the first thing I want to understand is myself and how do I show up as a leader? So if I'm the deal maker, I need to really understand how I'm wired and then understanding how I'm wired. But also that's going to help me to understand how I might be perceived by whom, whomever I'm working with. Right.

26:46 The, the team that I'm working with, that interaction that I'm having, and that's going to give me the potential opportunity to adjust my approach. Right. And if I really, if I also had under, and if I understand the team that I'm potentially working with and, and the group that I'm acquiring and I had those folks take that behavioral assessment, that's also going to help me understand do I have the right people in the right roles today and then being able to. The last thing I'll say about this, Pete, is create the psychological safety for people. Right. Go ahead, Pete. No, and I would say just for the audience, when we use the word compassionate, we're not talking about allowing losses to happen. We're talking about winning with compassion, with empathy and with understanding, but also saying, like, this is how we're going to run the culture and this is going to be a winning team. So compassion is not like an angel investor saying yes to everything or letting things, you know, go by the wayside. Like, we're going to perform, we're going to execute, we're going to listen, we're going to be compassionate, but we're going to win. Yeah. I mean, there's data out there, Pete, around compassionate leadership and how you actually will outperform over time. Whether you look at it through compassionate leadership, through, you know, conscious capitalism. Like there's, there's plenty of data and there's plenty of case studies out there on organizations that are winning and they're and they're consistently winning with. With that approach as a compassionate leader. Yeah. So look, man, great to talk to you again. We're going to keep this to 25 minutes, which exactly what we hit just now for our people that like to run

28:18 or walk their dog for 25 minutes. So you've just been optimized talent wise. Talk to you soon, brother. Thanks, man. Sam.