Invisible Scale: How to Grow 10X Your Size with Zero Growing Pains with Darius Mirshahzadeh: An EOFire Classic from 2021

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like Side Hustle Pro. Today, we're pulling a timeless EO Fire episode from the archives, so the giveaway may not be active, and we'll be breaking down in visible scale how to grow 10 extra size with zero growing pains. To drop these value bombs, we have brought Darius into EO Fire Studios. Darius is a karaoke singer, pizza lover, pink unicorn enthusiast, super high-growth CEO, and the author of The Core Value Equation, host of The Greatness Machine and a modern day renaissance man on acid.

0:42And today for our nation, we'll talk about how companies don't have core values, people do. We'll talk about the invisible scale and we'll talk about being authentic, meaningful and easy to remember and so much more when we get back from thanking our sponsors. The Gold Digger Podcast hosted by Jenna Kutcher is brought to you by the HubSpot Podcast Network, the audio destination for business professionals The Gold Digger podcast helps you discover your dream career with productivity tips, social strategies, business hacks, inspirational stories, and so much more. One of my favorite recent episodes is titled, How I've Built an Unmatched Team Culture, an insanely important topic for all business owners to dive into.

1:19Listen to Gold Digger wherever you get your podcasts. Wondering how to leverage a virtual assistant to save you time and money all while growing your business? Get Belay's ultimate guide to working with a virtual assistant today. Just text FIRE, that's F-I-R-E, to 55123 to get started. Darius, say what's up to Fire Nation and share something interesting about yourself that most people don't know. What's up, Fire Nation? Something that people don't know about me. I hate onions. If my mother's listening to this right now, she's like, oh my God, I love Darius. because if there's one thing my mother hates, it is onions.

2:04It doesn't matter if they're cooked, if they're raw, if they're a mile away, she absolutely hates them. So the real Darius and Selena Dumas, you have something in common. And Fire Nation, as we shared in the introduction, we'll be talking all about the invisible scale today and just how it's going to help you rock your business in 2020 and beyond. So first off, Darius, what is the invisible scale? break that down for us. In my book, The Core Value Equation, we essentially talk about when you build a core value-driven organization, you have an opportunity. And I say this as nicely as possible. The word core values has been hijacked by marketing and HR people.

2:46And when it gets taken back by the entrepreneur and the business owner, and it gets executed for strategy and execution, what ends up happening is three things happen. You can create the language of the organization through the core values. It creates the ultimate decision-making engine, and it creates basically a magnet for talent that are the right type of talent for the organization while, again, making people who don't want to be a part of the organization, they'll never show up or they'll leave. But you've got to be super authentic about the core values. We talk about that in the core value equation.

3:17When that happens, it creates this thing I call invisible scale. And so what happens is you get organic, holistic, like a growth that happens in the organization because you're essentially removing organizational inefficiency, the friction of people who aren't on the same page, not sharing the same values, not working the same way. They kind of remove themselves out of the equation and you just get this kind of like smoothness. It's almost like when you put WD-40 in a door jam. And what I say is when that happens, there's almost this like, I don't want ether in the air. And it causes everyone to move to center quietly, holistically.

4:01And I call that invisible scale. And it's really where there's an invisible manager, the core values in this case, looking over the shoulder of everybody. And they're looking over each other's shoulders. And when that happens, you start to get really, really high velocity of growth because you're not dealing with all the bullshit, essentially. So most companies have super inspirational and motivational core values. They're just plastered everywhere. They're just meant to just get people fired up. But you are a believer that core values don't have to be nice. Can you expound upon that? I'll go back to what you said before.

4:36Most companies have these really inspirational, I sometimes say aspirational values. But I challenge each and every one of you to, if you're the CEO or entrepreneur or founder or one of the founders, close your eyes and see if you just know them off the top of your head. And the data shows that 50 % of them don't. And they're the ones that created them, which is kind of a joke. And then I challenge you to go grab 10 of your employees, three of your employees, five of your employees, depending on the size of your organization. And don't give them an opportunity to look and say, what are the core values of our company?

5:06And when they don't know them nine out of 10 times, then you'll know that those inspirational words on the wall are kind of meaningless. By the way, there's data on this. 93 % of companies, more than 60 % of their employees don't know the values. So I just say that you don't really have core values. And you have a mixture of core values. You just don't have a common set of core values. So it's one of those things where if you really want to get to having a core value unapologetically authentic. They have to be what you are. Because what most organizations do is they start saying these things like, we're people centric.

5:48And then they treat their employees like crap, or it's all about the owner. Or they say things that their marketing and HR team want them to say to sound nice or vanilla or boring. And boring is not really probably the option, but they're doing it to be safe. And it's just not memorable. And people know it's not authentic. and then they just fall flat on their face. And what I say is, listen, let me just ask a question. Can I curse on this show? I mean, because I'm just going to say it like it is, if that's cool. I prefer you Dennis. Okay, fine. I won't. Well, so basically, if you're a jerk, that's my nice way of cursing.

6:22If you're a jerk organization, then own it. Be unapologetic about it. Because when people get there, they're going to know that's what you are. and when they get there and they know that's what you are well then they're going to say oh this is just like everywhere else they're full of it so when you're unapologetic about the values and authentic and if you're a jerk organization own it like i'll give you an example uh uber went back when travis kalanick was the ceo one of their top core values was toe stepping like literally stepping on each other's toes right and now one could argue that that went sideways on them but the reality is is that they grew into a multi-billion dollar company because they were unapologetic about what they were and they got after it so my whole thing is they don't have to be nice if you're if you're you know a warrior culture own it if you're a rainbow pink unicorn culture own that but be what you are and own it well first off thank you for expressing yourself without dropping too many f-bombs uh i definitely uh do want to give a shout out to all the parents who listen to the show with the kids in the car to get educated as well.

7:28And you're a big believer, Darius, in that every result, I mean, we're talking both good and bad in your business, both starts and finishes from core values. So what do you mean by that? And can you give maybe an example or two? The title of the book is essentially the core value equation. And where that came from was I did work with this renowned performance coach by the name of David Zellman. and what david said was basically i was working with him and three months into working with him he said darius you know what um what do you think creates all all the results in our lives and i said i don't know actions he said okay well what do you think creates the actions that you take and i guessed like 10 times and on and i think on the on the ninth or tenth time i got it wrong i just finally gave up and he said what if i told you it was the conversations we have and at this point I was running you know about a thousand person organization and I was thinking about what he said and it resonated with me so I said yeah you know I could see that I could see that and and then you know we went we ended up finishing the the coaching program after another month and and I I really resonated on what he said for a while and what what I said was how do I talk to myself how does my team talk to each other and I just started being really aware of it and I noticed that the way we were talking to each other seemed to resonate with these results that were happening around us.

8:53And it made sense to me. Okay, well, the conversations we have create the actions we take, which creates results in our lives. A couple months later, we ended up selling one of our businesses. And we ended up, I think, 250 employees went to a company that bought one of our retail departments. And then we ended up laying off the difference. It was about 400 employees left the company in a very short period of time. And I was really having trouble with it. This is early 2019. And so something dawned on me. I'm one of those people, and I don't know if you're like this, John, but when I connect the dots, it really energizes me.

9:27Yeah, big time. Right? So I was sitting there, and I said, wow, what are conversations made of? And so I call up David. I said, David, this is a postmortem we're having. I said, David, I have something to add to your equation. He said, well, what's that? I said, well, I'm going to argue that before you take actions, you make a decision. He said, okay, well, I could get behind that interpretation. And I said, but let me ask you a question. What are conversations made of? And he looks at me kind of befuddled and he said, words? And I said, yeah, words. And what if my argument was that the words of our lives and of our organizations are our core values?

10:05If they have an opportunity to become that, right? If I say that my language of my life is my core values, my language of my organization is my core values. Wouldn't that then be the words that are being used in my organization? It's like, interesting. So I kind of came to the conclusion that your core values equals your words. And this is when they become the immersive language of the organization, which is the opportunity we all have, both in our lives and in our businesses. So if our core values equals our words, and our words equals our conversations, conversations equals our decisions, decisions equals our actions, and actions equals our results.

10:38There's a law in mathematics called the law of transitive equality, which is A equals B, B equals C, C equals D, D equals E, and equals F, A equals F. Therefore, core values equals your results. And when I figured that out, my life changed. It's kind of one of those mic drop moments when you kind of connect those dots, Fire Nation. You're just like, I can see so clearly now when before it was not even foggy. I just couldn't even see. I wasn't even able to look over that next horizon. So that's really cool to share. I mean, I've had a couple of those moments in my past because again, they don't come every day, but when they come, you need to grab onto them.

11:14And Fire Nation, we have some great things to talk about. You're not going to want to go anywhere. We're going to be talking about proving ROI when it comes to actually leveraging your core values in a business. That's return on your investments and so much more when we get back from thanking our sponsors. If you're anything like me, then you're looking forward to a lot of outdoor time this summer. I'm talking about hitting the pool, going on epic hikes, and maybe even getting in a few pickleball matches. But in order to do all that, you and your team need to work smarter, not harder. That's why we're so excited about HubSpot's integrated AI tech.

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12:26And it's so true. You've gotten this far in your business through your own hard work and dedication, but there are only so many hours in the day. If you're ready to stop trying to do it all yourself and start leveraging highly vetted US-based specialists to help take your business to the next level, then Belay can help. Belay has been helping entrepreneurs scale their business and find success for over a decade. Their goal to help busy leaders just like you delegate with specialists like virtual assistants, bookkeepers, social media managers, and more. It's time to get out of the administrative weeds of your business and start investing your time back into things that grow your business.

13:03To help you get started, Belay is offering Fire Nation, the ultimate guide to working with a virtual assistant. It's packed with helpful content about how to leverage a virtual assistant to save you time and money all while growing your business. Just text FIRE, that's F-I-R-E to 55123 to get started. Daris, you make a pretty big claim that nine out of 10 companies have core values that are literally nothing more than words on a piece of paper. Do you have any data to back this up? A lot of the stuff I've done has just been intuitive. And then I go look it up when I have these moments. So this happened originally, I went to this program at MIT that's now called the Entrepreneurial Master's Program.

13:48But back when I did it, it was called Birthing of Giants. And there's a, I don't know if you know Vern Harnish, but he's a great, great author. Yeah. And he runs Scaling Up and he's a mentor of mine. So he's founded Birthing of Giants. And I did the program in 2006 through 2008. And at the end of 2008, we graduated. And on graduation night, I know I'm mind you, like the first thing you learn in the program is I need to have core values for my business. And so there's 60 of us in a room and two gentlemen, one by the name of John DeHart and one by the name of Ken Sim. They're founders and they used to be co-CEOs of Nurse Next Door, which was one of the top rated places to work in Canada.

14:27They did an exercise with the entire class and they said, please stand up if your company has core values. So we all stand up. They said, please stay standing if you can say core values of your company off the top of your head. Half the room sits down, right? I'm one of the half, by the way. They sat down? Yeah. And by the way, probably half of the people that are still standing are begging they're not going to be called on. right right by the way when i do this with people i say um i'm gonna ask you to say them so if you stay standing be prepared right then they said please stay standing if your employees know your core values half the remaining half sits down now at this point 75 of the room sitting down and they said please stay standing if your customers know your core values the whole room sits down with the exception of john and ken and it was just this moment where i'm looking around the room and i mean one of my classmates was he's the outgoing governor of kentucky this is like a And he had sold his company for almost, I think, a billion dollars.

15:19And yeah, really, really impressive group of people. A lot of nine-figure, ten-figure companies in this room. And so I'm sitting there looking at this, and I couldn't believe what I saw. First of all, I sat down in the first group, which really upset me. And then secondly, I realized everyone sat down. Now, one could argue it's hard to get your customers to learn the core values. But still, despite that, 75 % of the room sat down. And these are super users, right? This is not necessarily a representation of the whole. And so I started doing this just to my friends. And I noticed over and over again, nobody knew their core values.

15:56Their team didn't know their core values. And then I started looking at the data. And there's some really – Gallup has data on this. And it's like I said earlier in the show, it's 60 – I think it's 90 % of companies, no more than 60 % of their employees know their core values. And my whole point is that if they don't know them, are they really there? Are they really happening? You know, it's as simple as that. If our words become our actions and our decisions, and you don't know the words, then what do you really have? And the conclusion I came to is, it's real simple. Companies don't have core values.

16:31People have core values. I'll repeat that. Companies don't have core values. People have core values. So if we have a situation where people have core values and you're in a room full of people that don't know what the company core values are or aren't living them or aren't using them in the language, then really what you're getting is a mixture of a bunch of different people's core values, which is fine. But that's not necessarily serving the business. And so my takeaway from that is nine out of ten companies, they have words on paper. They have words on the wall. They have these, you know, quote unquote core values.

17:04But they're not the language of the organization. Therefore, that's not really the core values that are being lived in the organization consistently. People have core values. I mean, that's just one of those aha moments, Fire Nation, that you just have to get into your heart, into your soul, and into your company for sure. Now, Fire Nation, Darius, they want to crush their competition. So let's talk about how a core value-driven organization will smoke their competition this coming decade. We're at a very interesting time. And we're in this time. I have a show that I do called The Greatness Machine.

17:40I had a guest on there named Jeff Booth, who wrote this really great book all around, essentially, that Moore's law has this exponential effect, essentially, that you're doubling the speed of technology every 18 months. And most people have a hard time wrapping their head around the doubling of the last double. Right. Right. And so if you think about look at even this, John, if you look at how much technology has improved even in the last 10 years, how much cheaper it is to start a company. Right. I mean, it's amazing. Like when I started my last business, we grew this business literally from 30 to a thousand people in three years.

18:13Prior to that, I was in another business and we probably spent a million dollars building our server room out. Right. A million dollars. It's not a huge company. A couple hundred people. Now, the next business, I didn't do that. So let's just go on AWS. And we just clicked a button every time we needed more services. Right. So the barrier to entry for companies keeps getting cheaper and cheaper and cheaper and cheaper. Technology keeps getting more commoditized and more commoditized and more commoditized. And so if you look at that and say, OK, learning is getting more commoditized. Learning is free, essentially, now.

18:45Technology is more commoditized. So platforms are going to be more similar. And so what really separates one business from the next? Well, one could argue marketing. but I would say marketing just is a microphone for what's really happening internally, right? Then the differentiator is the human beings. That's where you get the differentiating effect. So if I can motivate my people more than you can motivate yours, if I can get them to execute better than you can execute yours, if I can get them to make better decisions than you can get them on your side, and if I can attract clients that align with my people better than you can, I'm going to smoke you.

19:20And that's what it's all about, Fire Nation, beating, crushing, smoking your competition over the next 10 years. Employ these principles to make that happen. And we're all about return on investment. I mean, Fire Nation's like, if I'm going to spend time, energy, and effort on X, Y, or Z, I want to know there's going to be ROI. I mean, that's a huge part about running a successful business. How do you, Darius, prove the ROI when it comes to leveraging core values in someone's business? Let's just back up for a second. My last business was a mortgage servicing business, and we were what's called a correspondent lender.

19:55Now, most people are like, what the heck is a correspondent lender? A correspondent lender is when we're buying the loans from other lenders. So if you've ever had a mortgage that got bought by another bank, we were the guy buying the loans. We used to buy, I mean, last year we bought$10 billion worth of loans. so um the reason i say that is that i have 20 years of hardcore business experience in the banking world b2b banking world which is not necessarily known for its quote-unquote culture right and if you look at my business partners i wasn't the only owner of the business i had three other business partners these were hardcore integrators like if you pull up an eos or you do retraction my business partners are hardcore integrators so i come to them and say hey guys I want to do this core value stuff.

20:40We're going to have a pink unicorn as our mascot. What do you think they said? That you crazy. They looked at me like I was crazy, right? I said, just trust me on this. And so what ended up happening was I had kind of in the back of my mind that I have to prove this. I have to show that there's real like ROI on this or else as a scales, they're not going to let me keep doing it. Like, and I wouldn't let me keep doing it either. And so I started pulling I started using systems that I knew had a lot of essentially backing that they worked. So the first thing I did is I did NPS, which is Bain's tool called Net Promoter Score.

21:17And I started doing the Net Promoter Score with our customers. Then I flipped it internally and Bain has a tool called ENPS, which is Employee Net Promoter Score. And you guys probably all know what this is. This is where it says on a scale of 1 to 10, would you recommend the service of this company to a friend or family member? That's NPS. And it's a great tool because it's done by many, many companies all over the world. And so you get a lot of baseline metrics. So in 2013, when I started doing this, the number one NPS in the United States was with USAA Bank and USAA Insurance, excuse me. And then number two is USAA Bank.

21:52Number three was Apple Computers. They had 81, 80 and 79%. And the way NPS works is if you, the highest score you can get is a positive 100%. The lowest is negative 100%. So it's a 200-point scale. My score in my company was 83%. I was better than the number one in the United States. And the internal, the ENPS, where you're measuring, you ask the employees, would you recommend a friend or family member to work at the company? It's scored the same way. Typically, that's about 20 points lower. Same thing. I was above 80%. And I knew right away, I said, man, I'm onto something here. Now, let me just back up one step.

22:29the reason i was so excited about all this stuff was i had grown from 30 to 300 employees in 18 months and i had zero growing pains well i mean let me repeat that zero none it was like a bunch of people like kumbaya right and i said what the heck did i just build i i like i mean i knew i was doing all this core value stuff but i'd never seen it work like that before and they got me extra inquisitive. I was like, wow, this is something that's special. So the other thing that I started doing is a thing called Q12. And you could check it out. It's Gallup's engagement tool. And it's a really, really good tool if you want to measure the engagement of your team.

23:10So I took these tools and I combined them into a quarterly survey I did with my staff, Anonymous. And then I started adding other questions like, how would you rate our core values on a scale of one to five, five being strongly agreed that they're alive and well, one being strongly disagree. And I just started measuring this stuff by the basis points. So on the Q12, on the 12 questions, one question, for instance, is do I have the tools to do my job effectively at the company? Five strongly agree, one strongly disagree. Anytime I had a score of 4.2 or below 4.2, I knew there was something up in the company.

23:43And I started numerically to see are they rating themselves engaged or strongly engaged, engaged or disengaged. and I started seeing these little pockets in the company. This is where my mind got blown. We had a thousand employees, 13 offices, I don't know, 30 departments, seven divisions. I mean, this is a very dynamic organization. And I'm not the integrator. I'm the visionary in my company. I don't know what's going on in the day to day. I'm out there like talking culture and stuff like that. And I go to my business partner, who's the hardcore, the president of the company, hardcore integrator and i said hey i think we have an issue in our quality assurance department um in you know birmingham michigan and he's like what i said yeah i think we got an issue there i'm seeing that the you know our q12 data dropped by 11 basis points from last quarter now we're talking basis points because i'm a i'm a finance guy right and he goes do you understand that we just we just wrote up the manager in that department and i said no of course i don't know that, but the data says that something's wrong there.

24:49And I started doing this all over the organization. I could pinpoint where we were having problems without knowing anything that was going on because I was looking at the engagement data and I was looking at the loyalty data. Then I asked them, I said, hey, go grab our traditional KPIs and I want to triangulate them against these. If we had a 20 % increase in engagement, I'd see a 20 % increase in productivity. If we had a 20 % decrease, I'd see a 20 % decrease in productivity. I started doing this against our P &L. I started doing this against our revenue. And it was like line for line. And these guys were like, minds were blown, blown.

25:19They couldn't believe how spot on my data was. And it became the Bible by which we ran the company. When we saw anything move, we would dig in. And I called it a full body scan for the organization. So for me, if you can't measure it, you can't improve it. And that's Peter Drucker. And my thing is, don't just do this stuff to please your marketing and HR people, do it because it makes you money. And that's the way I look at it. Fire Nation, I really hope you're understanding the whole process that's behind what Darius has been able to do over and over again when it comes to really being this core value-driven organization.

25:54I mean, being able to pinpoint the things that he pinpoints just based off of some data is like, that's very powerful stuff. So you shared so much on this, Darius. What's the one thing that you think Fire Nation really needs to take away? Maybe even the first thing they need to be implementing, if they're just nodding their heads at everything you're seeing here today, that can really make the biggest impact. Then, of course, we want to know where we can learn more about you, any call to action you have for us, and then we'll say goodbye. The main thing with core values, and this is my belief, I believe every single thing that happens in your life, good, bad, or indifferent, and in your business, good, bad, or indifferent, every result is a direct correlation of the core values that are alive and well.