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People = Profit: One CEO’s Decision-Making Scheme


People = Profit: One CEO’s Decision-Making Scheme

If there’s one lesson I’ve learned as a CEO, it’s this: People are the most important asset you’ve got and need to be at the center of every decision.

My first experience as a CEO was as president of Rusty Pelican Restaurants, a Southern California-based upscale seafood dinner house chain facing some real trouble. Rusty was at the tail end of several years of conceptual neglect, overmanagement of costs at the expense of the customer, and poor personnel decisions. It seemed to me that I was offered the job because nobody else would take it.

The company was a semiautonomous subsidiary of a larger restaurant chain conglomerate, and I was called to my first meeting with the other CEOs who made up the entire group a few days after my appointment. I was pretty much faking it those first few weeks since I didn’t have the slightest idea what I was doing. The others probably sensed that—nobody smells blood in the water faster than a school of sharks.

Each of the subsidiary presidents was jockeying for the first-among-equals position, and exercising their “experiential” power was one way to get there. So, one of them took me aside for a little lecture.

Using a board, he drew me a diagram with four circles at the top. Inside each was a title: Profit, Customer, People, and Physical Plant. In the least condescending tone he could manage, he explained.

“These are the four areas of how I manage my time. Profit is always first, and all decisions about cost management come from there. The Customer is second…”

I would learn later that separating the wheat from the chaff when it comes to advice is a key aspect of any CEO’s job. I intuitively knew my would-be adviser had a giant ego and a less-than-selfless motive, but I also knew that I desperately needed a structure from which to make decisions. Could there be a kernel of real value in his pontificating?

The answer was yes. He had a decent basic idea, but in my opinion, his construction of it was all wrong. I believed even then that any decision-making parameters I employed had to play to my strengths as a manager and a leader, so I set about developing my own framework.

Even then I considered myself more than proficient in business, but there were others on my team as good or better. In truth, I wasn’t the best on the team at anything, except for one area where I excelled: I was really good at identifying, developing, and retaining excellent people. Consequently, my framework had to reflect that. People would be the first and most important circle in my structure.

In consumer business generally and the restaurant business specifically, the most important metric by a wide margin is same-store sales , also known as Revenue. I had seen other CEOs try to save their way to same-store prosperity—a fool’s errand, since a restaurant’s sales are largely a function of its positioning, food and service, value perception, and location. Revenue was a function of all of the decisions made about those and a myriad of related issues, and as such it needed to be the close second circle in my diagram.

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I have already committed management heresy when I did not place Profit in the number-one slot, so it will probably come as no surprise that it did not even rate number three. The location, look, feel, and continual development of a consumer business’ physical plant are paramount to its success. All of those elements are amalgamated into what I call Place—the third circle in my decision-making scheme.

Profit is the ultimate report card for any business. If People, Revenue, and Place are being handled intelligently, Profit should come. Like all good businesses, the best restaurant chains need to consider the pennies; it comes with the territory. But the smartest operators structure it rather than attempt to manage it. They do everything they can to eliminate money-wasting possibilities by creating methods and procedures that make noncompliance difficult or impossible, and let the rest play itself out.

Given that I put Profit lowest on my decision-making ranking, “antiestablishment” is probably a good word to describe my management style. I follow the law, but in my world, rules are meant to be broken. I don’t care about how my people dress, if they follow protocol, or what choices they make in their personal lives; in my , it’s better for them ask forgiveness than permission. I only care about their ability to work as a team. I like to empower people deep into the “hierarchy.” It is why People are the most important component of my decision-making process.

As a case in point, Leslie Miller was a brilliantly creative member of my team when I was the CEO of Bubba Gump Shrimp Company. Independent and a free thinker, she was unwilling to take direction from anyone she considered confining in their management style. Thankfully, I escaped that label. Leslie’s title was Director of Beverage Operations, but I also gave her responsibility for much of the construction side; her unofficial title became “Vice-President of Booze and Buildings.”

We were already a well-oiled machine in the kitchens (the “manufacturing plant”) of Bubba Gump with systemic approaches that surpassed most of our larger competition. But we had a deceptively freewheeling, unstructured appearance in the front of the house (the “sales department”). The reality was that nothing happened by chance. In a business that pursues fast nickels instead of slow dimes, there had to be a choreography to the chaos.

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That choreography identified bar sales as a weakness for us since they only accounted for 15 percent of our total sales. We had drink menus (point of purchase collateral), but they were like everyone else’s. I challenged Leslie to increase bar sales—and that was the extent of my guidance. With her approach, anything more would have been gilding the lily.

In the movie Forrest Gump, Forrest becomes a champion ping-pong player. It is an iconic and memorable element of the film. Leslie returned a week after our meeting with a ping-pong paddle. Attached to it were laminated pages with photos of our signature cocktails. We immediately implemented it, and overnight our bar sales moved to 20 percent—an increase of one-third. Leslie’s idea was a home run. The menus became so popular that we had to chain them to the table to keep them from being stolen.

The drink menus were Placed in a key position. The customer was entertained and moved to buy, bringing us Revenue. Moreover, they were buying products that were very high margin, thus ensuring better Profit. All because of People.

There are many avenues to success as a CEO, but I think have a tendency to seek the “magic bullet” when they should be looking at themselves and their own strengths instead. I have known very successful CEOs who participated in every decision down to the most minute detail. I just did not have the time or brainpower for that. My decision-making process started with People, because I did not have all the answers—but my people did.

Written by Scott Barnett.

Scott Barnett was President and CEO of Rusty Pelican Restaurants, Inc. from 1992 until 1998. As Founder and CEO of Bubba Gump Shrimp Company Restaurants from its inception, Barnett grew that internationally known brand to 40 restaurants and $250 million in revenues.

His book, Gumption: Taking Bubba Gump from Movie to Restaurant (Solana Press, May 2015) is the story about how Scott gambled his reputation on an idea of creating a restaurant chain out of a single movie, a concept that had never been executed before. This book is not only an inside look at how an iconic restaurant was created, grown, and sold, it also tells the inside story of movie studio machinations, corporate politics, and the trials and tribulations of expanding a global business with built-in brand recognition and goodwill.

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