How outback steakhouse created a great place to work, have fun, and make money

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  • JOURNAL OF ORGANIZATIONAL EXCELLENCE / Autumn 2004

    2004 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/npr.20023

    HOW OUTBACK STEAKHOUSE CREATEDA GREAT PLACE TO WORK, HAVE FUN, AND MAKE MONEY

    GROWTH

    When the rapid growth of Outback Steakhouse restaurants began to threatenthe foundersvision of a values-driven organization, the companys leaders em-barked on a process to infuse every one of its restaurants with a culture thathas become a hallmark in the industry. At the heart of this culture is a strong com-mitment to make Outback a great place to work, have fun, and make moneyareflection of the founders belief that employees are key to meeting the com-panys commitments to all its stakeholders. 2004 Wiley Periodicals, Inc.

    Tom DeCotiis, Chris Sullivan, David Hyatt, and Paul Avery

    Tom DeCotiis, Ph.D., is founder and CEO of DeCotiisErhard, Inc. in Colorado Springs, Colorado. Chris Sullivan is a founder and chairmanand CEO of Outback Steakhouse, Inc. in Tampa, Florida. David Hyatt, Ph.D., is vice president and a partner in DeCotiisErhard, Inc., as wellas customer leader for its work with Outback. Paul Avery started his career as a restaurant manager at Outback and was recently promoted topresident of the Casual Dining Group, which includes the Outback brand as well as four other companies.

    * * *

    23

    Outback Steakhouse, Inc., now a $3.25-bil-lion company with 65,000 employees and1,100 restaurants worldwide, began modestly inthe spring of 1988. The plan called for fourrestaurants, one for each of the founders. Theidea behind the company was to enable thefounders to run their restaurants in the mannerthey believed a good restaurant should be oper-ated, to generate enough income to fund a com-fortable lifestyle, and to have fun doing it. Afterthe first Outback Steakhouse restaurant opened,it quickly became part of the local buzz, successsnowballed, and within two years the companyhad a stable of 20 restaurants.

    Such rapid growth was evidence that cus-tomers wanted the dining experience that Out-back was providing, which the founders believed

    was a direct result of a high-quality, trained staffwho themselves found being at Outback a richlyrewarding experience. And yet success itself wasnow making it difficult to ensure that every newrestaurant could replicate the winning formulathat had brought the company this far this fast.

    From the beginning, the founders were com-mitted to growing a values-driven company witha strong culture that would enable it to attractthe best and promote from within. This strategywould have obvious advantages in an industryplagued with high turnover and all the challengesthat turnover presented to maintaining a consis-tently high quality of service, product, and cus-tomer experience. But the price tag for Outbacksrapid growth was wobble: Although the restau-rants functioned well, some were simply not as

  • JOURNAL OF ORGANIZATIONAL EXCELLENCE / Autumn 2004

    24 Tom DeCotiis, Chris Sullivan, David Hyatt, and Paul Avery

    good as the founders believed they could bethey didnt have that Outback feel.

    At this critical juncture, the companys lead-ers pondered several questions central to the fu-ture of Outback: What do we want to be andstand for? What are the keys to successfulgrowth? How do we earn the loyalty of our mostvaluable stakeholders, including employees?They recognized the need for a more explicitunderstanding and statement about what Out-back is as a company, where it is going, and howit would get there. The founders, along with De-CotiisErhard, Inc., a consulting firm that hadbeen a strategic partner with Outbacks founderssince the beginning of the company, embarkedon a process called visioneering.1 Our goals wereto (1) create a compelling story of the companysfuture that its most valuable stakeholders wouldbe proud to share and (2) to work together to in-still that story into every aspect of the company.

    A GREAT PLACE FOR ALLSTAKEHOLDERS

    One of the cornerstones of Outback was thefounders idea that a company is its people. Out-backs people are Outbackers (employees), cus-tomers, purveyors, neighbors, and partners. Thefounders wanted customers to think of Outbackas a great place to dine and spend time, whichmeant providing them high quality food for goodvalue in an environment where they felt com-fortable and valued. Quality, value, and envi-ronment all depended on other Outback peo-ple, especially Outback employees. And a placewhere employees were having as good a time ascustomers was a place that customers were likelyto return to time and again.

    What all Outback stakeholders have in com-mon is the need for a sense of place and the needto feel valued. Thus we focused the visioneeringprocess on what would be required to make Out-back a great place for all stakeholders. No oneamong the leadership team doubted that success-fully growing the company would depend on

    achieving this. And we knew intuitively that theanswers as to how to achieve it could not comefrom the companys perspective but had to reectthe perspective of each of Outbacks stakeholders.

    THE OUTBACK THEORY OF SUCCESS

    Another guiding idea that informed the vi-sioneering process was the founders theory ofhow to successfully grow a company. It is simplystated: We are a company of Restaurants, not aRestaurant Company, and focus on individuals,individual restaurants, teamwork, and success.Success of the company depends on the successof its restaurants. As illustrated in Exhibit 1, thepath to success (dened by the founders as salesand prot) starts with high quality employees whoare fully trained, who perform, t into the culture,and stay. This makes for a compelling customerexperience, and so customers come back oftenand recommend the restaurant to friends and fam-ily. In turn, this causes sales and prot to increase(success) and creates opportunity for Outbackers.The competitive key to making this happen is sta-ble quality management, that is, having a com-petent leader who develops the staff and buildsthe sales and prot of the restaurant. Thus, in thefounders minds, a company has to rst excel withemployees before it can even think about excellingwith customers or any other stakeholder.

    Considerable experience in the hospitality in-dustry told us that meeting our goals for Outbackstakeholders and having successful, profitablerestaurants could not happen in the context of highemployee turnover. Indeed, we concluded that oneof the reasons there are so few large and consis-tently successful restaurant companies is that theirleaders accept high turnover as an inevitable costof business. For example, employees have tradi-tionally been thought of as passing through the in-dustry on their way to a real career. The foundersof Outback took a contrary position: The industryis a viable career, and high turnover is unaccept-able. Rather than being nice to have, low turnoveris one of two strategic imperatives that have re-mained unchanged from the beginning of the com-pany. (The other is quality, particularly as it relatesto obtaining the best raw ingredients for the foodserved in the restaurantsfor example, our parme-san cheese comes from Parma, Italy; our beef is

    What all Outback stakeholders have incommon is the need for a sense of place and

    the need to feel valued.

  • How Outback Steakhouse Created a Great Place to Work, Have Fun, and Make Money

    JOURNAL OF ORGANIZATIONAL EXCELLENCE / Autumn 2004

    25

    PRINCIPLES AND BELIEFS

    The story of why Outback is a great place for eachof its stakeholders and how these goals are to beachieved is told in the Principles and Beliefs, a51/2-page proprietary document created in 1990 asa result of the visioneering process. As an elabo-ration of the values of the founders, this documentdescribes the culture that all Outback leaders areexpected to create and maintainwithin the restau-rants and throughout the company. This responsi-bility is summarized as leaders eat last, meaningthat partners are expected to put the needs of Out-backers, customers, suppliers, and neighbors beforetheir own needs.

    An Overview. The Principles and Beliefs doc-ument presents a vivid description of how toachieve success through people. It states the com-panys purpose as being to teach Outbackers toexercise good judgment and live the Principlesand Beliefs. It articulates ve founding princi-pleshospitality, sharing, quality, fun, andcourageand six dening beliefs. The rst vebeliefs, which are directly derived from the

    USDA Choice or higher; the chocolate for ourchocolate sauce is imported from Perugia, Italy.)

    Rather than make low Outbacker turnover anexplicit human resource objective, the leaders sawthe Outback culture as the means to attract, re-tain, and energize high quality Outbackers, a cul-ture that emphasizes the ideal that each Outbackrestaurant is compelling and different, a greatplace to work. Compelling means that people inthe labor market tapped by the company really,really want to work for Outback. Differentiatingmeans that whatever Outbackers derive from theirexperience of Outback cannot be found with anyof its competitors. The visioneering team wantedto provide compelling and differentiating answersto the question Why should I work here?

    We also recognized that because growth madeit impossible for the companys leaders to main-tain hands-on involvement with every restaurant,culture was the key to infusing the founders val-ues into the day-to-day operations at each restau-rant. Here again, leaders within each restaurantwere vital to nurturing and sustaining the desiredculture and the values embedded in it.

    Exhibit 1. The Theory of Outback Steakhouse

  • JOURNAL OF ORGANIZATIONAL EXCELLENCE / Autumn 2004

    26 Tom DeCotiis, Chris Sullivan, David Hyatt, and Paul Avery

    founders personal values, also pay homage to thefact that successfully growing a company requirescommitted and enthusiastic people who feel theyare valued and belong:

    We believe that if we take care of Our Peo-ple [Outbackers, customers, purveyors,neighbors, and partners], then the institutionof Outback will take care of itself.

    We believe that people are driven to bepart of something that they can be proudof, is fun, values them, and that they cancall their own.

    We believe in the sanctity of the individ-ual, the value of diversity, and in treatingpeople with kindness, respect, and under-standing.

    We believe that caring for people indi-vidually results in their emotional in-volvement in Outback.

    We believe in working as a team: havingshared goals and a common purpose, serv-ing one another, and supporting the suc-cess of the team.

    When an Outbacker says the phrase peoplerst, which has become part of the vocabularyof Outback, it is immediately understood in termsof these beliefs. The phrase is given even moreanimation by the Principles and Beliefs descrip-tion of Outbacks environment as being tough onresults, but kind with people.

    The Principles and Beliefs document articu-lates the key goal for each of Outbacks stake-holders:

    Outbackers: A great place to work, havefun, and make money

    Customers: Favorite place to eat, drink,relax, and be with friends

    Purveyors: A great customer and sourceof comfort and pride

    Neighbors: A valued corporate citizenand neighbor

    Partners: A superior nancial and emo-tional investment opportunity

    The companys commitments to each stake-holder group are spelled out in detail.

    There is nothing in the Principles and Beliefsthat speaks to industry rankings or a comparativestandard of success, such as being best in class.Rather, words such as belonging and indulgenceare routinely used as standards for taking careof our people.

    The pages in the Principles and Beliefs that re-late to Outbackers were later turned into an Out-backer positioning statement, shown in Exhibit2, which denes Outbacks culture from an Out-backers perspectivethe Outbacker Experi-enceand include the nine commitments thecompany makes to all Outbackers. Given the basicbusiness beliefs that (1) employees are the faces,hearts, and hands of the consumer brand and (2)growth in sales and prot is the result of havingemployees who are passionate about taking careof customers and one another, it is not surprisingthat the Outbacker experience aspects of the Prin-ciples and Beliefs have received the most attentionover the years. The company has focused on earn-ing the trust of Outbackers and, through them, thetrust of its customers.

    Living the Principles and Beliefs. We werenot exactly sure what to do with the Principlesand Beliefs at the time the document was created.Over the years, however, it has evolved into the op-erating manifesto, constitution, map to success,and conscience of the company. The challenge forthe leadership team has been not only to live thePrinciples and Beliefs but also to build them intohow the company conducts its business, recog-nizing that the challenge of moving the reality ofOutbacks stakeholder experiences closer to thestandards set forth in the Principles and Beliefswill never end. Three primary avenues have beenespecially helpful for embedding the Principlesand Beliefs into the fabric of the organization: ed-ucation, integration, and measurement.

    EDUCATION

    There is a denition of being a leader that is stillevolving within Outback and gaining credencewith use: A leader is someone who creates a cul-

    The company has focused on earning the trust of Outbackers and, through them,

    the trust of its customers.

  • How Outback Steakhouse Created a Great Place to Work, Have Fun, and Make Money

    JOURNAL OF ORGANIZATIONAL EXCELLENCE / Autumn 2004

    27

    such as leading by example are brought to life.The principle of Sharingwhich is also one ofthe nine commitments to Outbackersis stronglyreinforced by teaching managers that it is theteam that achieves successsales and profitand thus responsibility, authority, and accounta-bility are to be shared, as are the fruits of suc-cess. Building a strong team also means trainingand developing Outbackers and providing ad-vancement opportunities within the restaurantand within the company.

    Regional Walkabouts. While the Walkaboutin Tampa has been, and continues to be, an inte-gral component of transmitting the culture tomanagers, we also felt the need to share the re-sponsibility for teaching the culture and to carrythe cultural education into the eld. In 1998 weintroduced Regional Walkabouts, in which thearea Joint Venture Partner (akin to a regional man-ager who also has an ownership and partnershiprole in the business) teaches the Principles andBeliefs. True to the Outback culture, these re-gional meetings have taken on a life of their ownand continue to evolve in response to the style

    ture that earns the loyalty of enthusiastic and com-mitted Outbackers who achieve results. Thus wefocus heavily on educating the companys lead-ers and managers in the meaning of the Princi-ples and Beliefs and how to provide a positiveOutbacker experience in their restaurants.

    The Walkabou...