Interview with Stanley Bergman, Chairman and CEO of Henry Schein:
It’s All About People
Stanley Bergman has been the Chairman and Chief Executive Officer of Henry Schein, the world’s largest provider of health care products and services to office-based dental, animal health and medical practitioners, since 1989. During his career at Henry Schein, Mr. Bergman has led the organization from sales of $600 million in 1995 to $9.6 billion in 2013. Beyond his executive title and professional accolades, Mr. Bergman serves as a board member or advisor for numerous institutions, including New York University College of Dentistry, the University of Pennsylvania School of Dental Medicine, the Columbia University Medical Center, World Economic Forum's Health Care Governors, and the Metropolitan Opera. Mr. Bergman is a graduate of the University of Witwatersrand in South Africa. Business Today: Can you talk about how your career path led to your leadership position at Henry Schein? How does your background shape your vision of the business? Stan Bergman: Well, I'm from South Africa. My parents have a store in a place called South Endport Elizabeth. That community was one of the last communities to be desegregated by the apartheid government. So that community gave me the opportunity to understand people from different backgrounds and how they work together. But then it was also important to watch the untangling of that community, or the dissolving of that community, and the negative impacts of that. At the same time, I was involved in summer camp programs, where I saw the best leaders were those that could get everybody to play together. It’s not necessarily who’s the best sports person, but instead, the person who can be the coach, the facilitator, and the mentor. Those are the best leaders. BT: How did you get involved with Henry Schein, and what do you like most about the company? SB: When I came to America, I was an accountant and then became a consultant to an accountant. My job was to bring the systems into Henry Schein. Henry Schein was the first company to put out a catalog of all dental products and put a price next to those products and have the products in stock. This was in the '60s, and it may be a bit odd now when you think of going to the Web and buying products, and whatever they have is what they have in stock -- but we were the first to do that in dentistry. The business grew so the accounting and consulting group that I was involved with was brought into Henry Schein to implement the first computers. That’s what I did in the late '70s. Then, I joined the company in 1980. What is very special about Henry Schein is that it started [in 1932] as a storefront pharmacy business owned by Henry and Esther Schein. They were very engaged with their customers; there was a special atmosphere in the company. Henry used to work at the end of the shipping line. These were the days before the computer, so he knew what products were in back order and what products were popular. Henry was with the people in the warehouse and Ester was in the front office, making sure the orders were received and processed properly. One of the important lessons I learned from the company's origins was that business is really all about people. Henry and Esther also had a deep emotional connection to social responsibility. It wasn’t what you call Customer Service today. They would make the prescriptions for charities in their community, to charities where they thought they could make a difference. So what I see in action is detailed engagement with people and at the same time a commitment to social responsibility, and the people working in the company, back then and today, are very proud of that. Therein lies so much of the modern-day Henry Schein and why I think we’ve been a successful company. Plus, Henry was a great entrepreneur. BT: That’s great. One thing we have been hearing a lot about is Henry Schein's corporate culture. Do you think that the culture is persistent throughout your time as CEO? SB: Well, there are two factors. There are values, and there is culture. Values rarely change. They may shape as you have more information and as the business develops. They may shape, but they don’t change. What changes and has to adapt is the culture. As a company develops, going from environments with 140 people in 1980, to a one thousand or two thousand or fifteen thousand person company, the values have to remain constant, but the culture has to adapt. And you'll see that culture has to adapt when we move from manual automation to telesales to e-ordering to having sales people in the field. Today, the values are important, but obviously, no single executive can know everyone in the company. When you know people, it's a lot easier to ensure that the culture remains consistent, and the values remain consistent. But as the business grows, engaging with everyone becomes harder. But it doesn't mean the values change. BT: The theme of our magazine this fall is innovation. So what do you do as CEO to ensure that your company continues to innovate or develop innovative products? SB: Innovation is not about brilliant ideas. There are plenty of brilliant ideas. They're all over the place. I often tell people that come through with ideas - they have a new drug, or they have a new device - and I say, "That's good. The science is good, it's logical. Can you turn it into a product?" And not only can you turn it into a product, but also can you turn it into a product that has the insert to tell you how to use it, and a box that's easy to look at and to understand how to use the product? And this may seem trivial, but at the end of the day, it's not only about the idea, but also about turning it into reality. So I'll give you an example: today, you can go to a dentist, and have a scan taken of your mouth, that scan can be sent to a computer, and a crown and a bridge can be built right there, and you can be out of there in under an hour. I'm sure neither of you have crowns or bridges because your generation doesn't have them because of fluoride in water, but when you look at Baby Boomers, we have lots of crowns and bridges. Today, it's a three step process - you go in, you get an impression with an impression material, you come back and they fit it, and send it to the lab and fix it. When you come back, it's finally put in. Even then, maybe there's tightening, so maybe that's four visits. This is all automated today. Somebody came to us with this idea. Many people came to us with that idea, but somebody came with the idea - and this was an entrepreneur - and he was able to put a team together and get it done. I'd be happy one day if he tells us how he got it done, but he got it done. So, it's not as if that idea didn't exist - this fellow came up with the product in three years and was able to work with competitors on the material side. These people on the material side (because you use materials to get this done), to competitors, to very large companies: they were prepared to work with this person who was a great orchestra leader. He could run summer camp. So, innovation is: "How do you take all these great ideas and actually turn it into something?" It's not so easy. Why did Apple come up with iPad, and the leader, Blackberry, has not been able to have a user-friendly device? It's all teamwork. Innovation is not about brilliance, it's about people. BT: I think we see that a lot in terms of technology today, in terms of the apps that people are creating. SB: There are so many apps out there. We have the leading base of dental practice management software. Our system is very good, but it's not necessarily the latest. We had robotic-type products, and machines that were moving products in our warehouse, and we could never make them work. Better take them out; we have more manager positions. We have the best fulfillment rates in our markets, but we do not necessarily have the latest age of technology, because we know how to get people to work together. BT: Going back to our discussion on corporate responsibility, we've read a lot about Henry Schein Cares. Can you elaborate on that? SB: We're involved in a group called the High Ambitions Group. It was born out of Harvard. It brought together companies that believed that a value-based culture and the responsibility to society can help you grow shareholder value. And there have been some studies which proved that if you have the right kind of culture, the value of your company will go up. Earnings will go up, and earnings with shareholders correlate highly. The issue with earnings is that you can have a company that has a lower growth rate in earnings but is consistent, and that is going to be worth more than a company that had terrific growth rates one year and not so good in the next year. But consistency, in the end, ties into the value of the company. And this High Ambitions Group has proven that if you have consistent earnings, you have great value. And that's important to the environment, the atmosphere of the company, the culture, and the motivation. People are looking for something more than money. They're looking for higher purpose. BT: PricewaterhouseCoopers just released a study on the millennial generation, and found that looking for higher purpose is the number one priority in our generation, above salary. We're proud of that. SB: Your generation has that going for you. The only problem you have is impatience. I'm not saying you shouldn't be ambitious. It's okay to change, but you also have to listen. Your generation is so computer-driven. My generation played chess. Then there was the generation that played video games. Now it's cyber, and the speed is very fast. Sometimes you have to stop, listen, and reflect. And the good news about your generation is that you generally view values as critical. You should be proud of it. That's important. Having said that, I think your generation also has to slow down periodically and reflect. BT: I completely agree. So, there's been kind of a trend from smaller medical practices to larger practices. How has that impacted the way you serve your customers? SB: Right. So, healthcare reform is driving the consolidation of healthcare practices. We're moving from the 'S' as in 'SME', you know, small and medium-sized enterprises, to 'M's, the medium-sized enterprises, and then into very large enterprises. That's the way it's going, and we are moving towards the industrialization of healthcare. The word industrialization, in a context of a neutral connotation, doesn't mean that it's good or it's bad. But we've seen larger enterprises, and we've seen the movement from the making of one car to the conveyor belt of cars. It doesn't make it bad or good, it's simply a fact that there's a more scientific management to healthcare that has taken place, coupled with the driving of prevention. The whole concept behind healthcare reform is wellness and prevention. So much of the Healthcare Bill, as payment, can be reduced by no smoking, eating better, and exercising. And seeing a doctor regularly to make sure that these issues that are related to the non-communicable diseases can be prevented from becoming admissions to hospitals. A lot of this involves a different kind of medicine which is more effective in a larger group practice. It doesn't mean that small practices can't operate, but this is what's driving the industrialization of healthcare. From our point of view, these are our customers, the people involved in prevention and wellness. BT: Henry Schein has also had a lot of geographic growth in the past year. Where do you see growth moving in the future? SB: Firstly, our expansion will continue to become global, and there are two big drivers of that: one is the growth of the middle class, and the middle class is growing at a faster rate in the history of the world. Of course, the population is growing, as well. But the middle class as consumers want preventive-type products, which is dental and medical prevention in an office practice. At the same time, they're buying more paste. Secondly, there are the Baby Boomers. This is the most educated generation the world has ever seen, plus, the generation that has more wealth than any generation has ever seen, and more power at the ballot box than any generation has ever seen. So those are the big demographics that are driving the globalization of our business. BT: We've heard about the Henry Schein Mosaic of Success. Can you explain more about that? SB: What we tried to do, and we worked at it significantly, was to make sure our values remained constant. Our values are about balancing the five constituents that make up the Henry Schein mosaic of success. Second, we want our suppliers to view Henry Schein as the best way of bringing products to market. We want to say, "You know what, we're going to give Henry Schein a good deal." Third, on the other side, our customers, these SMEs that are becoming bigger now, we want them to say, "You know what, I've got a very good clinical education - I became a doctor, I'm a dentist, but I really don't understand how to run a business. I want to call Henry Schein to help me run my business so that I can provide better clinical care." And then, of course, we want to keep this culture going, so that our team can grow and it can feel engaged - bringing together suppliers and the customers, in that unique culture. Fourth is our investors. And I've told Wall Street from day one that Henry Schein does not exist for our investors. We make commitments to our investors to provide them with good rates of return, and we do that. Then, the fifth constituency I think is the secret sauce of Henry Schein, and that's our commitment to society, where we are committed to our communities, the professions we serve, and even distant lands. Henry Schein's real pride in being part of something that is bigger than making money. A higher ambition. If you ask me how we're able to cope in this growth, it's that people are proud of balancing these constituents. BT: The question we'd like to ask all the executives is if you were giving advice to undergraduate students, what would be your one piece of advice? SB: It's all about people. You have to be a great coach, facilitator and mentor. Someone who knows how to run a summer camp works as hard as they can to get everyone engaged. If you like people, you'll be successful at being a president of a university, running an NGO, running a hospital, being a CEO of a business. That's the only advice I have for anyone. And when we interview people, it's the only thing we care about. We have people in our company that don't even have a university education, but are sitting on our executive committee today. They're great leaders, and they know how to take a dysfunctional group and get them lined up. The key is, you have to have consensus, and the quicker you can get to consensus, the better leader you are. There's no room in the year 2014 for bosses. If a person can convince everybody to work together, that's the leader. The leader has to have passionate inspiration and a little bit of nerves.

  • Richard

    I agree. A wise businessman in the Caribbean named Sir Kyffin Simpson always said that the key to success is progression and humility, and clearly he’s done very well for himself as a self made man!

  • John Andrews

    The Airgain IPO launches this week, and they’re a one-brand company.

    Some investors don’t think it’s a good stock though:

    http://seekingalpha.com/article/3997291-risky-signals-antenna-maker-airgain-launches-ipo

  • Cincinnati World Cinema

    Well said, Joe, and worth rereading on a regular basis! Another advantage of small-to-midsize city living is pace and competition. Living in NYC, LA and SF entailed a hectic pace, hallmarked by capital S striving, as one realized there were a ton of others doing what I do. Spending so much time in one’s car in SoCal meant much less time for quality pursuits and pleasures. A smaller pond with relaxed pace allows one to savor life and special moments.


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