Hi Chad,
If you are inserting a "Relative Scale" text element from the Dynamic Text gallery on the ribbon you don't have to change anything to make it dynamic. It is by default.
If you want to format the result you will need to adjust the text item. For example, below I have a simple map layout with a Relative Scale text element in it's default state.
I want to change the scale text to be 1 inch = X feet. The first thing to do is ton open the properties of the text element.
The text underlined in red is static text. You can type anything you want here. This includes international characters. The tag "scale" is the dynamic part of the element. Clicking this opens a window in which you can view the dynamic elements.
It is here where you will specify the map units and decimal places.
Once this is done you can change the static text as you wish.
The scale value should update as you change the scale of the map.
Hope this helps,
Tom