But the “secret sauce,” if there is one, is its team culture, according to Bergman, a quiet, self-effacing leader. “There’s no room for Heisman Trophy winners here,” he says. “The best team wins. You can have people who are not great individually but can really win when united, and you can have the greatest people who are not functioning as a team, and they lose.”
Now, the biggest challenge Bergman faces is ensuring the culture adapts. The company has 21,000 people spread over 33 countries and serves one million customers through 3,000 suppliers. Its dental business accounts for 48% of revenue, followed by animal health at 28.7%, medical at 20%, and technology and value-added services at just under 4%. An average of 174,000 cartons are shipped daily through 62 distribution centers. The business is heavily regulated, and product recalls are often a problem to execute. It also has formidable competitors in companies such as McKesson, Amerisource Bergen and Patterson Cos., many of which have taken a page or two from the Henry Schein playbook. The business today has many more moving parts than when Bergman took control in 1989.
Chief Executive caught up with Bergman at the company’s headquarters in Melville, New York. Excerpts from that conversation follow.
Q: Ninety percent of what you sell is what others sell. Why are you double the size of your competition when everybody has access more or less to the same products?
A: The success of Henry Schein is largely dependent on our philosophy of balancing the needs of our constituents. On the one hand are our suppliers. We want those who work closely with us to be very successful. For example, we are the exclusive distributor in this and other countries for Colgate, one of the best brands in the world. They really know how to do marketing. In the dental space, they have an outstanding sales force. But we are their exclusive distributor in the dental space, not in the retail space. And they work with us because we help them. Of course, we carry P&G and all the rest, but we have a special relationship with Colgate based on a kinship of philosophy as it relates to the societal role of business. They are very philanthropic, as are we.
“if you only worry about the clinical care, you will not be around in a competitive market, and if you only care about making money, well, you’re not discharging your responsibility.”
In addition, there are our customers. Yes, we want to sell more product to them, but our goal is to help our customers succeed. Most of them are small to medium-size businesses. We want to help them operate a better business so that they can provide better clinical care. Because if you only worry about the clinical care, you will not be around in a competitive market, and if you only care about making money, well, you’re not discharging your responsibility. Our philosophy is based on the notion of what a good family financial advisor does: People don’t buy stocks anymore—yes, you can do that, but generally, families seek somebody who will help them manage their assets.
And then we have our field sales consultants, who are trained in SME management for each of the different specialties. So we have our suppliers and our customers, and bringing the two together is our Team Schein philosophy. This is what I mean when I say we “industrialized” our culture. Our third constituency is our investors. We’ve been clear with Wall Street from day one: We promise our investors we will do everything we can to provide them with a consistent rate of return. It’s not necessarily going to be the highest,
but we’re focused on consistency. And we promise to take our earnings and turn them into cash.
Q: You’ve said that your secret sauce is your company’s devotion to social responsibility. But almost every company has a social responsibility program. Do you feel that what you do directly helps the company enjoy bigger profit margins or higher returns?
A: Yes, absolutely. It’s not about issuing the check. Yes, we do that. It’s about engagement of the company in making a difference. You’ll find Henry Schein people in American Dental Association meetings. There’s somebody from Henry Schein in that building in Chicago working with dentists to advance the profession several times a week.
One of the most successful philanthropic community service programs in dentistry is a program called Give Kids a Smile. Until healthcare reform was passed you had to be very poor to get dental care, or you had to be one of the fortunate people who had dental insurance, or you had to have money. So we worked with the American Dental Association to found Give Kids a Smile, where we arrange for dentists to provide kids with free dental care at 2,000 sites around the country. We’re not providing the procedures, but we’re there bringing in supplies and sitting at the tables shoulder to shoulder with the dentists. I would submit to you that this put us in a completely different relationship with our customers than just writing a check would.
Now, you can’t say to people, ‘Part of your job is to do philanthropic work or social work.’ People need to want it. I believe people are at Schein because they see something special in our culture that encourages this. I mentioned our close relationship with Colgate. We get together with them based on shared philanthropic ideas. I met the CEO of Colgate sitting at the table of the dean of NYU dental school. NYU’s dental school graduates the largest number of dentists in the country. It does outreach with many clinics, and Schein and Colgate work with them. Working together with our constituents is not only a good thing, I believe our shareholders appreciate it. There are studies—one from Babson and one from Harvard—that show that companies with a purpose that are engaged in finding ways to make society a better place have higher rates of return.