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Scaling Up: Leading with a Smile with Phil McKenzie, CEO of Pacific Smiles Group
Podcasts
15 Dec 2021
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Phil McKenzie joins us to discuss his role as CEO of ASX listed Pacific Smiles Group. Beyond an industry 101, Phil provides first-hand insight into the responsibilities of CEOs, leadership and  boards of growth companies.

 

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Transcript:

 

Ed (02:47): Phil welcome to the show. I’ve been excited to do this for a while. To be honest, I’m personally very lucky having had great exposure to you as a person and as a leader and having seen how you operate since you started in the job three or so years ago. To me, you are the epitome of a great participatory leader and someone who really engages themselves deeply across the organization, and I’m sure will be able to dig into that. But maybe as a starting point, I’m sure many listeners are familiar with the business. You run Pacific Smiles either as a customer or perhaps an investor, but it’s always nice to set a baseline. So maybe can you briefly just discuss the dental ecosystem in Australia, the main participants and how they interact with each other?

Phil (03:33): Yeah, absolutely, we can. And thanks for having me Ed a privilege to be on board and I’m looking forward to some of these questions today. The ecosystem of dental in Australia is very much a cottage foundation, so very much a mum and pop established a one or two chair practice beside the tax agent next to the laundromat under the Chinese Takeaway Shop. The reality was that for a long time there was no aggregation, there was no corporatisation until our founders decided there was an opportunity for the professional to be able to do it better. Today, Pacific Smiles as a service and facilities provider across 115 dental centers working with 700 dentists, but that is just a very small part of the industry. So, there’s over 20,000 practicing dentists in Australia, about six to 650 graduate each year. There are about 15,000 practices across the Australian ecosystem. And as I said, we have 115 of them. So, there are a couple of other corporate players. Our differentiator is that we would call ourselves a dentist service organization, whereas some of the other corporates might recognize themselves as dental service organizations.

Ed (04:47): I guess one other key attribute is many people would think of the corporatisation of the industry with private equity and rollups, acquisition models, and yet here’s Pacific Smiles with very strategic counter position that is greenfield organic growth.

Phil (05:03): Yeah, I mean, our founders certainly had an early foray into acquisitions and that allowed us to both start to partner and operate the NIB Dental Centers, but also to break into new states such as Victoria and Queensland. Very quickly though, we realized that this isn’t the most effective way to build the business and so that greenfield or denovo rollout style is very much the cornerstone of our differentiation. There are a number of aggregators or acquisitive models out there and, it’s complex when you start putting a number of different cultures, different values, different systems together. That’s where the simplicity of our business as a real strong suit.

Ed (05:39): Feels like you’re underplaying the, the complexity. Imagine different IT systems. I mean, you talk about different cultures, but when there are 15,000 potentially mum and pops to roll up, it can get very cumbersome.

Phil (05:53): Yeah, I mean, it’s complicated. He or she that starts a business, builds it with heart, builds it with soul builds it their way. And when you start aggregating and putting a number of this together, you’ve not only got diverse systems that you’re trying to club together, you’ve also got different cultures, different standards, different expectations and that leads to a complexity and an operating level that can be difficult to dilute and homogenize into a standard methodology. I really guess that’s where our founders found a way to get more capital, to get new centers on the ground, and that ultimately allowed us to establish the culture, the systems off common platform.

Ed (06:29): You touched on the insurers there. What role do they play in the ecosystem?

Phil (06:34): Well they’re the primary payer. So, the insurance companies, love and or dislike them, are a necessary part of the health ecosystem in Australia. Medibank, NIB, HBF, Bupa are all fundamental to most of us as citizens to gaining access to the best in healthcare. About 75% of the people that cross the threshold in a Pacific Smiles are PHI holders, public health insurance holders. It is really important that we’ve got as an operator a great relationship with the health funds, but also for the benefit of the dentist. So, it is actually the dentist that holds the provider agreement, but we facilitate it based on location and the ability ultimately to standardize the service across the group. So, it’s really important.

Ed (07:16): Something we’ll come back to. The other key stakeholder that you mentioned is the dentist themselves and yeah, it’s not a huge number, 650 graduating each year considering the size of the industry. How do you think about making sure the best and brightest are working at Pacific Smiles Clinic?

Phil (07:34): It’s really important. I mean, they are the future of the industry, and we see our role along the lines of our vision, if you will, or our purpose to improve the oral health of all Australians to World’s best, that it starts with the professional. So, in our environment, we have access by virtue of the relationships with other professionals to mentor a lot of these young graduating dentists. So, for example, this year we will take 65 to 70 of those 600 to 650 graduating dentists into Pacific Smiles. And in doing so, we give them a safe place to hone their skills. They do come out practice ready, but we give them a space to hone their skills, work with a mentor and elevate their ability to take on more complex work and ultimately safely. So, it’s a real benefit for Pacific Smiles as we grow, but also a benefit for the industry because again, we are creating that standard which we like to think is the best.

Ed (08:25): And what about in terms of attracting more experienced practitioners? Why would they want to come and work at a Pacific Smiles Clinic?

Phil (08:32): Our founders would say that a dentist primarily wants full books. So, they want patients to see and no idle time. They would say that they want a great dental assistant or nurse in the old vernacular, and ultimately, they want consistency of service. So, in Pacific Smiles, we like to think we have full books and the availability of patients for dentist. We do have excellent nurses and we are in a situation where across the group we have consistent practices and standards from infection control through patient care branding the whole lot.

Ed (09:03): So, you’re taking the hassle out of being a dentist, all the small business management that might have come with owning a practice you can turn up and do what you actually love. And that is practice dentistry?

Phil (09:12): Yeah, exactly. A dentist service organization, ultimately a service and facilities organization. So, we have more than 500 surgeries across the country where ultimately, we provide scrubs, gloves, consumables, a mask, a patient, a billing system, and a practice management system so that the dentist only takes care of what goes on inside the mouth and is responsible for the notes relative to their patient Pacific Smiles does the rest.

Ed (09:39): I think we’ve given some good colour as to the different participants in this ecosystem that you are piecing together. One thing you touched on is competitive advantage, and we talked about it in relation to the dentist. What other competitive advantages do you see? Obviously brand is a big piece of the Pacific Smiles puzzle. It’s a consumer facing business, obviously sometimes your clinics are white labeled for an insurer. How do you think about developing a great brand?

Phil (10:05): The business was bounded as a place for dentists, so ultimately the red thread that draws us all together as the servicing of the professional. When we’re looking for, for people to join the business, we want to make sure that that commonality of purpose runs through them too. No, they may not be in love with dental up front, but if we can show them what we do and then encourage them to want to do what we do, then ultimately, we can build something together that we all believe in. So that belief and common purpose, is fundamental for giving us that human competitive advantage, if you will.

Ed (10:37): And what other competitive advantages do you convey to your team that you are trying to drive throughout the business?

Phil (10:43): We’re a growth business right now. We’ve got the opportunity to certainly double our footprint. So, with growth comes opportunity, challenges, excitement and dares a sense of fun. We’re operating in a space that does good, so not only can you feel good about what you do, but we’ve got over 1700 staff now, over 700 dentists. Everybody brings their own flavor, their own personality. So, the environment has a sense of growth, a sense of drive, a sense of certainty because we are well funded and well supported and a sense of opportunity for the individual. So, dare I say, you put all that together and it becomes quite fun.

Ed (11:17): Let’s pull on the growth thread, maybe as you said, 115 centers, but a massive opportunity. It’s a huge market. How early do you feel Pacific Smiles is on its journey to really capturing a larger portion of this market?

Phil (11:32): Our differentiated approach is certainly the greenfield, which we talked about, but differentiated further by being inside shopping centers. So, we look for 150 to 160 square meters close to Coles or Woollies or Aldi inside a shopping center with a relationship to the car park. So, we’re on the ant trail, as we’d say, to the convenient shopping on a daily basis. So, mum and the three kids, or dad and three kids or the family all see us there. So, we’re early into the journey with that many practicing dentists and that many practices on the ground and our specific focus inside shopping centers. We certainly feel that we can take 115 and be at least twice that, but we can also service others. So, we’ve recently taken on a relationship with HBF in the West and we’re now operating soon to be five centers on a path to 15 under managed services agreement. So, we take our dental knowledge, our dentist expertise, they own the bricks and mortars fund, the capital, and the humans. And we provide the operating system and the mechanism to deliver a Pacific Smiles dental experience inside an HBF dental environment. And it’s working.

Ed (12:36): That it is. One thing that comes to mind and I’m curious to get your views on is head offices in the Hunter Valley in New South Wales is a large population of draw on, but it’s not Sydney or Melbourne or Brisbane. Have you thought that as a competitive advantage or a disadvantage for the business?

Phil (12:54): Three years ago, I would’ve said it was a challenge circumstance allowed me to make the decision to move there. And a jolly good decision it was to as the journey to add to the executive team commenced early into my arrival it was complex to start talking to people, but over time a couple of things happened. And I don’t just mean covid. The lifestyle changed, the tree change, the opportunity to attract good talent to a great environment has meant that Newcastle has become somewhat of a haven. So, our chief marketing officer Ciara Rocks, she’s joined us in the Hunter, Matthew Cordingley, our CFO, joined us in the Hunter. The rest of the executives we’ve got are very, very happy and very well placed there. Our most recent persons joined the team and, in IT, our CIO, John O’Connor. He got a foot in both camps, so he is down in Sydney, but he’s also got a place on the central coast. So, it’s become the advantage to have a good operating base with an airport 90 minutes from Sydney. I don’t think we could be better placed at the moment.

Ed (13:50): I thought that might be your answer, and I tend to agree with you. I’m keen to understand how you’re applying your lessons from your past experiences as a leader. The last business that you ran, AMG similar in many respects to Pacific Smiles. You turned that from an acquisition-based model to a greenfield rollout to over 200 audiology clinics in America. Before that, there was a retail experience in rolling out Apple stores in Australia. And I’m sure we can hear about that. But how have these different experiences shaped you as a leader? And also, your thoughts as to how best to run a team.

Phil (14:28): I think as an individual, you’ve got to be hungry for the opportunity. So, if I couldn’t find an affinity in this situation with dental it isn’t going to work. So, you’ve then got to extrapolate that and feel like the business that you’ve got the opportunity to work with has got potential. And then you look at the rest of the raw materials. When I had the privilege to come down and have a look at the business from the US where I was living, I could see the potential immediately because I, I traveled 11 or 12 clinics with the founder. I then spent some time with other board members in the chair and I thought, this is just ripe. I took the environmental learnings of turning businesses around, fixing things that weren’t working and dare I sat a bevy of mistakes that I’d made and really had a clean sheet of paper for a business that was working, but had the opportunity to grow. So, it’s a well said, well talked about reality that you learn more from the mistakes that you make. And I made a lot of them.

Ed (15:22): Let’s hear about some of them.

Phil (15:24): When you have the opportunity to spend other people’s money and buy businesses sometimes you overlook the small things and the small things become investment in IT, investment in systems and structure and finance, you can look at the culture and it feels right and that’s a really big part of it. But if you don’t understand how, it all pieces together properly, you can make some real mistakes when you try and grow on top of that. So, into Pacific Smiles, we’ve needed to invest in our IT, we’ve needed to invest in our finance systems and our HRIS systems because we’re not going to be able to sustain another thousand employees on top of stuff that wasn’t quite right, dare I say it, we’re better than we were. And then fundamentally creating that cultural alignment to purpose. You can have a lot of excellent people, but if they’re not aligned to what you are trying to achieve, then they can all be pulling slightly differently on the same piece of fabric and slightly different directions.

That has certainly been the thing. You come in with a lot of energy. You think you’ve communicated the vision and the path we’re going in. Everyone thinks you’re great and wants to come along, but they don’t really understand where you’re going. So over communicating, simplifying, oh my gosh, simplifying is fundamental and then making sure through, I call it as you talked about before, a deep dive into whether it be centers or departments and people to understand they actually know how to contribute. So, it’s that systems the fundamentals of purpose alignment, but then making sure people know how to contribute probably been some of the biggest learnings I’ve had over the years.

Ed (16:49): That’s a great platform to dive in later into scaling the people and culture of Pacific Smiles because it is an area that you definitely have excelled at. But I want to stick with you for the moment as a leader. While we’re on the topic, you are someone that likes to lead from the front, you’re in your car a lot, visiting clinics, you’re on the frontline. How do you see the importance of visibility in leadership in motivating people and your role as a CEO, particularly having taken over from a founder and having to maybe reframe and reshape the culture while still being respectful to it?

Phil (17:25): Visible leadership is paramount if you want to galvanize people on a journey. So, whether that’s your board and your chair regular meetings, whether it’s Zoom in some environments, coffee, a meal that post board meeting, chat, your management team, being present with them, having them in the car with you, taking them on the road, visiting centers, looking at things through the same eyes is really important to make sure you’ve got that decision making platform aligned. And that takes a leader. So, you have to be prepared to stand up and be counted, stand up and be wrong, stand up and be corrected. And then ultimately taking it out to the people. So, if we make decisions in a boardroom, an email doesn’t cut it. In fact, I’d suggest that most of the young new employees that we have, don’t use email as a primary communication.

Don’t use text messaging as a primary communication. There’s a whole raft of apps and technology that I’m just not using. So that frontline visible representation, hello, how are you? Handshakes, cup of tea in the lunchroom, spending time in the center, talking to dentists, talking to staff allows people, some will ask me questions, but most will listen to hear what we’re trying to do. And I learned it by just doing it and then compounded it by understanding it was having traction because where I’d been people understood what we were doing. And it becomes quite clever when you can get the rest of your executive to want to do same. Then all of a sudden if you’ve got a half a dozen people in your executive team, you’ve led by example, then they get out in centers as well and hopefully it proliferates in terms of communication and education.

Ed (18:55): Just to pick out something you said, there almost feels though it’s back to the future and you talk about the main means of communication that many of your younger employees have is not necessarily the technology that you and I are being of different generation are using different platforms and various forms of technology that might not necessarily be business friendly. And so, you’ve actually taken it right back to probably where it all began, and that is face to face.

Phil (19:20):Well, if you think about it, the dentist is providing an intimate service in the oral cavity right in your mouth and if they don’t have a great chairside manner, the patient experience is ordinary. Well, same goes for most healthcare environments. So, if you can get out and meet people, have a coffee talk, say good morning, good afternoon, observe things, then all of a sudden you can articulate on the spot what’s either fantastic or could be improved or ultimately needs to be fixed on the spot. You can’t do that if you’re not present. You can’t do that over Zoom, and I think it’s something that we can all do better.

Ed (20:11): Let’s move on to the people in culture. What did you find when you turned up as CEO in terms of the culture of the business?

Phil (20:20): People were busy. So, a very well-established business that had grown quickly but had not perhaps achieved its potential in all areas because people were very busy doing lots of things. And for a minute it was overwhelming in terms of, well, where do we start? Working with the board working with the long-standing executives, we paired back to, well, we’re a dentist service organization. We need to open more centers for scale, and then we need to make the centers that we have move to profitability quickly. And once we form that as what I call the basic framework behind the vision of improving our health of all Australians, the world’s best, then it became, I won’t say simple, but less complex in order to establish what we do next.

Ed (21:07): And just touching on this mission, how important has that been to galvanize the people that work for Pacific Smiles?

Phil (21:15): If during the engagement process of either senior leadership, dental assistants, even engaging dentists in terms of wanting to practice from Pacific Smiles, if that doesn’t register any form of dare I say, inspiration for them, it’s probably not the right place. I’m not saying that people get out of bed to run through brick walls to improve their whole health, but if people are at least a bit excited about the opportunity to grow a business that will do that, then I think we’ve got a person we can talk more with. So, it’s the simplicity of the purpose to engage the person that ultimately facilitates alignment so that it matters.

Ed (21:48): Absolutely and the values of the business, can you name them for me?

Phil (21:52): Yeah, I mean, we simplified it right back, right back. And the first, and ultimately the hang point for the Pacific Smiles way is play to win. There has to be the concept of playing to win. And that’s not conquerable at any cost, but collectively the team can win and winning can be commercial goals. Winning can be professional goals. Winning can be personal goals. And that means we can’t all pull on the same piece of fabric in slightly different directions. And we have to understand that we’re we actually have to be aligned and pull together and then fundamentally adapting. And whether it’s a pandemic whether it’s fixing a problem, whether it’s tackling an opportunity or whether it’s realizing that the success that we had needs to be brought about in different methodologies now adapting. So, we want to play to win by unifying and adapting.

Ed (22:39): Of course, your job as the leader of the business is to bring these values to life. I’m fascinated how you think about that rather than just having them as platitudes on the wall, ensuring people are living and breathing these values on a daily basis.

Phil (22:55): We built a lot of the vocabulary for the business at a leadership level out of a book called Legacy. James Kerr embedded with the All Blacks for a period of time, and I’m sure a lot of businesses have used it, but there’s some very simple principles that he derived from his time of the All Blacks that just worked for us.

Ed (23:12): Have you been sweeping the sheds?

Phil (23:13): Yeah, yeah. Well I’m not the oldest. But yeah, you’ve got to, and it’s as simple as tying back to the principles of the piece of paper. You step over on the floor as the culture that you allow. It’s the standards that you keep as a senior person do you take the trash out? Do you clean up the kitchen when you’re in a center all the way through better people makes better All blacks. So how you bring the best people into Pacific Smiles no pressure, no diamonds. Are you in a situation where you actually thrive under sensibly engaged pressure? What are the principles of kaizen in terms of just doing a hundred things, 1% better? So those things run through the team thinking, but ultimately for us it starts with having that hunger. If you are not hungry, it’s just not the place to be in a growth business. I mean, it’s not a maintenance business, it’s a growth business. So, we’re try and look for what stimulates and motivates the individual and steer them in that direction because that will ultimately bring about the best from them.

Ed (24:08): You’ve certainly struck a chord my affection for high performance and there’s no better performers over a long period of time than the All Blacks talking about bringing them to life. What about recognition for people that are living the values? Yeah,

Phil (24:20): Well, we’ve picked up program around medals, tokens you could call them, or tokenism you could call it. But where we see people with regard to play, to win or unifying or adapting, we minted a coin, would you believe with Pacific Smiles on one side and then the relevant value on the other. We tell stories when we present them to a person. So, if you were to have done something to unify the team and not just your job, but something that lifts the team you’re presented sometimes privately, sometimes collectively with this medal and the story is told as to why you’re getting it, and it means a lot to people. I never thought when Emma introduced it, Emma’s our head of people in culture. I never thought it would get the traction that it’s got. Recently through Covid, we introduced one around execution. It’s a much smaller medal, it’s just got an X on it, but there’s some people that have made an impact and a difference to the business that just can’t be believed. So, we have execution excellence as well. So, there’s four metals and they proliferate around the business-like wildfire.

Ed (25:19): As you say, it speaks volumes to you and your team that there has been buy-in to that because it is such a small gesture, but it’s the meaning behind them that can really be quite emotive and formative in terms of the culture you’re trying to build.

Phil (25:33):Well then, they started to do things that we never expected. So, these coins are maybe slightly larger than an old school 50 cent piece. So then what people were doing is they would put them in frames and present them to people. I mean, these coins are, and they’d get a Kmart frame and put them in, or they’d take photos and send them, and it’s become, some of them have become legend around what people have done. Then we started purely by chance the staff members were giving them to dentists and the dentists don’t work for Pacific Smiles, they contract our services. So, then we’ve got staff members giving dentist medals and these dentists are tearing up over being part of a team and the customer’s patients, they ask about it. So, it’s got a life of its own that we didn’t really anticipate, but it’s quite special within the business.

Ed (26:15): It’s a great lesson on how storytelling and not mythology as such, but symbolism can be so powerful.

Phil (26:23): Yeah, and simple. It has to be simple. The more complex it becomes; the less people will galvanize to it. So that simplicity and making it all about them and giving them the opportunity to proliferate it rather than it being handed down from on high I think is what furthers it.

Ed (26:38): You’ve reflected briefly on lessons that you brought previously to the business. So, you didn’t make the same mistakes twice. How have you personally grown in this role and how has your role changed as the business has grown?

Phil (26:52): Surrounding myself with people that are much better at what they do than I am is really important. So, whether that’s finance, whether that’s marketing whether it’s HR has been fundamental to shift. Pacific Smiles from that founder led very paternalistic, maternalistic environment into a true budding corporate listed entity. So, you get that subject matter expert in place, and I’ve really enjoyed building a more sophisticated team for the future. The other is ultimately listening. So, I’ve always been in a hurry and sometimes not listened as much as I should. So, the boardroom environment is particularly exceptional for that. When you have got the caliber of the board members that sit around the table at Pacific Smiles, whether it’s a Mark Bloom ex CFO of, Westfield or a Hilton Brett Ex CEO at Accent Group, you start to have huge periods of time where you should just listen more and speak less. That learning becomes something that you can share with your team. Then if you get the right board, and this is what I’ve had the opportunity to do, they’re prepared to engage with the executives and a mentoring relationship starts to happen and that’s special.

Ed (28:00): The irony of you running in audiology business and having only just learned the power of listing is not lost on me, but I love it and any advice you’d give yourself three is on. If you were going for this job today, what would you tell Phil McKenzie?

Phil (28:16): Oh, that’s a good question. I would’ve simplified further faster, then ultimately doubled down on what was working well at the time. We could have compounded the success around some of the greenfield attributes and we could have made other areas of the business more effective sooner. Why did we not do it? Why did I not do it? You have to learn and so it would be the benefit of knowing then what I know now that would facilitate that. Yeah, I think you would do a lot of things differently, but ultimately, I think you’ve got to trust yourself with the decisions you’ve made and learn from what didn’t go right. So that’s where I’m at.

Ed (29:00): That’s a great answer. It’d be remiss me not to talk about the pandemic and the impact on the business consumer facing business in many respects, obviously dental services, but still, you are requiring customers to physically turn up at a location for their oral health. Let’s dig into this at a top line. Would you say Covid has been a net benefit or net loss to the business?

Phil (29:25): Oh, net benefit in so many ways and painful in so many others? I don’t necessarily think at this point we’re at a lost point either commercially or personally that it’s been complex and perhaps added a complexity at a time when all I wanted to do was simplify. If you were looking for lessons with all the news and all the information and all the Facebook and all the stuff that was out there, we had to very quickly find a source of truth and we chose to only follow what the various State Department of Health were publishing or more recent times the public health orders because you can get lost down what ABC is saying. CNN is saying, Fox Media is saying, Facebook’s saying, your auntie is saying you can get really confused really quickly. And that at least gave us a galvanizing point for the business and somewhat of a lightning ride upon which to base decisions on from there.

Then from the first to the second pandemic, we learned that the concept of decentralizing decision making, you’ve got to give people a framework to make decisions and then push that out to the center level because you cannot make effective decisions from Newcastle for band style for Ocean Grove. You just can’t do it well. So, we’ve got a school of people making decisions and making them feel safe that even if their decision is wrong, we’ll support them to fix it and that then gives humans confidence to do the best that they can in the circumstance.

Ed (30:45):Yeah, that certainly sounds though, from a personal growth point of view, you can have more leaders in the business over the medium term and we’ll dig into the lessons that you learned between lockdown one and lockdown two, so to speak, but just operationally give some color as to what does it take to wind down and then wind back up a hundred plus centers, 1700 staff, 600 dentists.

Phil (31:08): Yeah. Well, we took at that time about a hundred dental centers, and we closed or built 17 in the first lockdown. I had no idea what’s involved in decommissioning a dental center that has airlines, gas lines, infection control, patient systems. It was complex. It’s actually a couple of days to decommission and a couple of days to recommission a center, do it safely and hygienically so that you can then see patients. So that the sheer operational component was complicated. I think the worst day of my career was standing the business down, far out on Zoom, having something in the vicinity of, oh, I forget now, but the actual number of staff. But we had to stand the vast majority of staff down. Wow. And I think the resilience that the human being showed is just phenomenal.

And that’s a powerful thing to build on because if you can take a person that is having the darkest period and demonstrate to them how this is actually their opportunity to rise and they’re doing it actually galvanized the business. So as hard as it was to decommission operationally and have the functional conversations of, well, I don’t know how long we’re actually going to be closed and you’re going to be out of work but look at the opportunity because in six weeks later we opened back up again, and these people were already run through brick walls for the business. It was quite phenomenal.

Ed (32:28): We’ve got many listeners internationally and to give some color, there were long periods of time, various parts of the country were in fact locked down, but not all at one time. And so, the lessons that you learned in that first period, let’s say March to June 2020, and how you then applied them to 2021 when various parts of Australia were lock down.

Phil (32:49): So, some things worked. We went from having our, our weekly executive leadership team meeting to every day before opening, and every day before closing, the exec team would meet, and we would update on things so that that communication velocity as an executive leadership team and briefing the board was reestablished that then settled into a routine. And that was a carryover, same, same, we made a different decision on the closure of centers. We decided to keep all centers open; A, because they were beacons in the community. B, it gave people somewhere to be and something to do and see oral decay doesn’t stop because there’s a pandemic. So, people had emergency care and urgent care and we could still see them. So that was phenomenal. And then fundamentally, the ability to retain all staff. So, we kept all staff at 1.0 in terms of pay gaining many access to government subsidy, but it’s allowed us to be in a position this time through where we can essentially return to operating without having to stand the business back up. So complex but valuable in terms of long-term operation.

Ed (33:46): And can you give some insight into the industry and maybe outside the corporatized structures, how the mom and dad dentist have faired?

Phil (33:56): Regulations in terms of checking people in, keeping data protecting people. Running hygienic environment is complex and even more complex running, you’re running a health facility. So, a number of people have decided that practicing in dentistry as a mum and pop shop, it’s time to close. Some people have gone by the wayside. Number of dentists decided they’d like to come and work with Pacific Smiles because we offered structure and safety and certainty. A number of other corporate competitors, if you will, partners made the decision to close there, a number of their practices for a period of time. And for them it was the right decision. We saw the world a little differently, everybody’s approach was a little bit different relative to their circumstances. We feel that ours is stood us in good stead to get dare say, going again and while we arguably lose a component of a cycle where people aren’t going to all attend twice before Christmas, we’re in a good place to understand exactly what we have gained in terms of new patients by being open through emergency care, but also galvanizing the staff. We are not as concerned about the mass resignation that people talk about because people trust that the business will remain open and remain stable.

Ed (34:59): Yeah, great insights. I don’t love dwelling on Covid, but the lessons that can be learnt, mainly because what I’m hearing is that you invested in times of darkness to allow to re accelerate when the opportunity provided itself. Many people would have withdrawn themselves compulsory or otherwise, but the opportunity to then really accelerate is only provided to those who invest when potentially others are running in fear.

Phil (35:29): Oh look, the first time around we, the fear of unknown was, was substantial. So, we closed, we pulled back on spend, we pulled back on staff, we pulled back on everything. This time we sat down and realized it was going to go on longer than we thought which surprised us. And we thought, well, let’s take a risk. So, we sat with the board, and we said, well, we’d like to continue to open centers and communities that are at low risk because those communities still need to be serviced. Dentists still want to practice and can under the law. So, we opened four, five dental centers through the period and have put ourselves on path in the first half of this financial year to be able to open 10. We left ourselves in a position where we gained patients because urgent emergency care, we were adding about a thousand patients a week and we gained dentists. So, the risks calculated and supported were taken, not everything paid off, but by and large we’ve put ourselves through the good work of good people and in a better place than we could have been if we just stayed still like last time.

Ed (36:22): Wonderful lessons for a range of circumstances, not just a Black Swan event, like a global pandemic. One last larger theme on a touch on is being a public company, people underestimate what goes into a whole range of activities, whether it’s investor relations or the whole reporting function. We speak to a lot of private company founders that are very fearful of the public markets. I’d love to dig into your experience as a public company CEO. Maybe some insight to start with in terms of reporting twice yearly, obviously in Australia, how much time that takes you and your team and the process that goes into that, and is it distracting for you, or do you find that it actually creates great rigor for you and your wider management team?

Phil (37:12): Yeah, it’s a really fair point. So, I’d worked in private companies previous or not necessarily had the same responsibility that we have as a relatively small but important public listed business. I find the periods is planned time to reflect. So, it’s complex, it takes up time, but it’s important because it sets the course for delivering on strategy. Because you have to share with the investors the performance of the entity and the shortcomings of the entity. So, first step is get a good framework. You have to have a framework that allows you to replicate with consistency because the investors want to see a consistent trajectory from point A to point B and on. Whereas if you’re changing all the time, it becomes dare say, discombobulated or confusing, then get yourself some good partners. So, you need partners that can dig in and make sure that what you think you’re saying is what you’re actually saying whether it be in written form, numeric form, or presentation form.

And then fundamentally, you’ve got to practice and test, practice and test, because what I have the responsibility of going out and doing is representing 700 dentist output 1700 staff and some really trusting people that are holding a few of 160 odd million shares. To get that right as a responsibility as myself and Matthew take very seriously, and you don’t always get it right, but you’ve got to acknowledge it double down and go for it again. And dare I say, it’s actually quite enjoyable. It’s a privilege to do it.

Ed (38:36): And how do you think about telling the Pacific Smiles story and the type of investor that you are trying to attract ultimately to the business?

Phil (38:43): Establishing that consistency of message, the confidence and your ability to execute on the strategy and the plan, and ultimately being brave enough to say this is a longer-term story that requires trust, conviction and a desire to be part of something bigger. It’s not a quick hit, it’s a growth story that will reveal itself. More and more over time. We can tell the story and the evidence will be part of coming on the journey with us.

Ed (39:11): Long term growth stories, the old overnight success, people look back in 10 years time and say, wow, that what a wonderful business this has been. But during the time it’s the little 1% moments. How do you think about optimizing for this long-term growth? But every day there’s a share price that’s listed on the ASX and I’m sure some of your investors put pressure on you wrongly around short-term ism. How do you think about those two contrasting features?

Phil (39:39): You have to respect that you’ve got a variety and a multitude of shareholders, but to get trapped in a share price chase every day I have been taught is naivety in the extreme. My biggest charge is actually to run the business and set the course of direction along with the board for where we’re delivering as a business. So, it’s my job when pressed to actually have a look at the strategy to actually have a look at the performance at the business level and make sure that’s on track. And if we’re not galvanize the team to get on with it. But chasing, share, price, chasing individual shareholders hopes and dreams is not effective for the larger charter that we as a management team have responsibility for.

Ed (40:15): You talked about some of the mentors that you’ve found on the board. Can you talk to the role of the board in your mind as a public company, obviously a lot of people align boards with governance and that is obviously one purpose that they serve and a very important purpose, but in growth companies, they need to be almost entrepreneurial in their mindset. And when you come to them wanting more money to roll out stores in the middle of a pandemic, they need to be thinking as a business owner. With that growth hat on, can you discuss if you can, the interactions maybe that you have with the board and the push and pulls that that go on?

Phil (40:52): Sure. I mean, in coming into Pacific Smiles, we had an established longstanding board that I’ve had the privilege of being able to evolve over time. So, Bob Cameron was 17 years chair and was exceptional through its founding stages. And now we have the delight of having Zita Peach ex CSL, Fresenius on the board of Monash IVF has got a really strong background and being able to make sure that things that Pacific Smiles do is rooted in excellence. Then the rest of the construct of the board is around specialization. So, if you’re a growth company, particularly in property, go find yourself a guy like Mark Bloom. If you’re a multisite retail operator, which is essentially where we are as an operator in shopping centers, get yourself a guy like Hilton Brett, if you are learning the ropes as a new public listed CEO, get yourself a Ben Gisz who can steer you with regard to investor relations. Simon Rutherford, 17 years on the board knows the business better than anyone because he saw it from inception. So, each board member has a role relative to the specialization, and I think a good management team is humble enough to ask for help, vulnerable enough to learn and ultimately partners as appropriate. Because the board does have a delineated job for management, but partners is appropriate to make sure that we’re learning about the mistakes as we’re doing them rather than as after we’ve done them and that works really well for us today.

Ed (42:11): That’s a great call out in terms of having that relative domain expertise. And then I guess the role of a great NED is to actually know where their lane is and to make sure that they’re swimming in that lane and helping you navigate that lane and not necessarily other people’s lanes.

Phil (42:26): Well, we recently added Scott Kalniz or Dr. Scott Kalniz from the US to our board, one of our significant supplies. Henry Shine helped us create that relationship in the US and now we have a direct line to the very best in our industry being the US market and a sophisticated dentist and DSO owner and manager being able to influence Pacific Smiles and little old Australia. So again, harnessing the potential of the right people in the right place in their swim loan becomes incredibly powerful for the company

Ed (42:55): You touched on that relationship with the chairperson. Zita a wonderful operator and her own right. What to you makes a great chair of a board as a CEO?

Phil (43:06): You want strength of conviction, but malleability of understanding. So you need a person that can hold the line, but if you if you belly up to the table after the board meeting and say, Hey, Zita, I think we’re on the right path for now with what we’ve said, but I would like the opportunity to revisit this in 90 days, the next board meeting, the next half, a willingness to act or to listen is incredibly appealing for a management team and that’s what we have.

Ed (43:33): Let’s wrap this up in a bow. We’ve talked about the huge opportunity ahead for the business and for you as its leader, what would success look like both personally, professionally, and as a business with Pacific Smiles in 10 years’ time?

Phil (43:48): Well, I certainly think at least double the size of the business as a true service and facility offering perhaps service and facilities to other allied health professions, ultimately, perhaps seeing if we can take this a little further afield than just Australia, but more than anything, sticking to our netting of having the right people in the right place doing their best work to make sure that we can improve health standards for all of Australia. We think that we’re on the path to doing that and it just takes a little bit of time, a little bit of trust, a little bit of confidence.

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