Lee on the Importance of Core Values

8/8/2019 Lee on the Importance of Core Values

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' Academy of Management Executive. 2002, Vol. 16, No. 1

Darden Restaurants CEO JoeLee on the importance of corevalues: Integrity and fairness

/n(erview by Robert C. FordExecutive OverviewJo e Lee has been CEO and chairman of the board of Darden Restaurants, Inc., since ifwas spun off as a separate com pany from General Mills in 1995. Prior to that he was onthe board of directors for General Mills, where he served as vice chairman. Joe began hiscareer in the restaurant industry in 1967 as a team member in the original Red Lobsterworking for his mentor, the namesake of Darden Restaurants and the founder of the RedLobster concept. Bill Darden. Bed Lobster was acquired by General Mills in 1970. andJo ebecame president of Red Lobster in 1975. He served as president of the NationalRestaurant Association and has received numerous awards including the food industry'shighest award, the Golden Plate, in 1995.

Darden is the largest casual-dining restaurant company in the world, serving over300 million meals annually in 1.200 compa ny-owned restaurants across the UnitedStates and Canada. Since it separated from General Mills, Darden has grown underJoe's leadership approximately 7% annually. Total sales for Darden's fiscal 2001exceeded S4 billion in the over $45 billion casual-dining sector of the restaurantindustry. Both Darden and this sector are growing at a 6-8% annual rate. Darden,based in Orlando, Florida, employs more than 128,000 people. Its restaurant brandsinclude Red Lobster, Olive Garden, Bahama Breeze, and Smokey Bones BBQ SportsBar. It has been on For tune ' s list of America's Best Com panies for Minorities for threeconsecufive years.

Because Darden purchases over 100 million pounds of seafood annually, it has aunique interest in wild-caught and sustainable aquaculture resources. Several years agothe Darden Environmental Trust was established to help countries throughout the worJdbetter manag e their wild-caught and sustainable natural resources.

What makes managing a company like Darden,in the service-focused restaurant industry,different from what youwould find inmanufacturing organizations that we typicallywrite about in management?I think I would have to write a book to answer justthat one question.

One key difference between the restaurantcompany and the stereotypical manufacturingfirm is the importance oi a wide variety of peopleworking together in concertin marketing, oper-ations, and finance. For example, with Red Lob-ster dealing with wild-caught seafood, the pur-chasing/distribution arm is most critical. The

operations piece and the service piece of res-taurants are generally far diiferent from theoperations and service pieces in a general man-ufacturing iirm. Most product iirms and manu-facturing companies are really driven by iocus-ing their marketing or technology expertiseon the manufacturing side. In the restaurantbusiness, we need to have the marketing compo-nent working extremely well for an organizationas large as ours, and we need to have the oper-ating, training, recruitment, and human relationsparts of the business operating exceptionallywell also. All the details that go into multi-unitrestaurant management make for a very very bigdifference from manufacturing firms.


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32 Academy of Managem ent Executive Februar

Joe LeeYou are the largest casual-dining company, andall of your operations are conipany owned. Whatare the advantages of your size and ownershipstructure?Being company owned and not franchised al lowsus to be able to really follow through on our goalsand dreams. If we decide that we want generalm an ag ers who are at the top of the group of poten-t ial general managers in the country, we can setthe hir ing stan da rds high an d we can enforce themand make sure i t happens . We are not dependenton a franchisee who may or may not buy into thevalue system and the philosophy, etc. Or, if wehave a restaurant that we have si ted in the wrongplace, we can go ahead and c lose that res taurantand move it to wh ere i t nee ds to be moved be cau seof our f inancial strength. In some cases we canshift it to a diiierent brand. We have converted RedLobsters into Olive Gardens and Olive Gardensinto Smokey Bones. Because of owning our proper-ties, leasing some but owning most , and havingcompany-operated res taurants , Darden has a bet -ter abi l i ty to stay with consumers. We have thetools to identify where the consumer is going. We

hav e the sys tems and processes to give cus tom era great exper ience, and we have the ownershir ights to move the property into whatever the besuse of the property is . Very iew com pan ies h av e athose component par t s .

One of the themes for this i ssue of AME ispositive behavior in organizations, howorganizations can encourage their people to thinpositively, and the importance of being positiveto organizational success. The restaurantindustry understands this better than anybody.What do you do, or what does Darden do, tofocus on enhancing the positive aspects of theorganization because of the importance of apositive attitude to Darden's success?Well, one of the first factors is in the hiring decision. This is going to sound very basic, but if yofocus on hir ing people who share your companyhum an va lues , and hav e the value s of your sys temthen even with so many employees, you can counon your employees to exhibi t those values as yoperform your business. So if your company idriven by core values that are strongin our casthat includes such values as integri ty and fairnessand respect and caring for peoplethose thingcan real ly bring out the best in your employeteams. We also s t rongly value and welcome people of diversity. And we mean diversity of botpeople and ideas. We real ly respect , endorse, andesire to have diversi ty within our compan y: divesity oi ideas, diversity of cultures, diversity oraces, diversi ty of gender. We are passionatabou t the se things. So by hir ing to those v alues , ware on our way to having al l oi the various interact ions with Darden consumers occur posi t ivelyproperly, and in such a way as to get them cominback over and over again.

We really respect endorse, and desire tohave diversity within our company.Many companies are having trouble attractingand retaining the employees they need to remaincompetitive. What strategies does Darden use tohire and keep the best?We have interview techniques we have tested witpsychological firms that help us identify peoplwho have compatible values, as we just spoke oand people who love being of service. Because iyou have the r ight values and you love being oservice, then we can train the technical ski l ls . W


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2002 Lee 33invest a lot into the trainingmore than most com-pa ni es do. That pa ys off with a bette r-train ed em -ployee. I really think it is unfair to expect superiorperformance out of people without giving themsuperior tools with which to perform, and that ofcourse starts with education and training.How does Darden balance hiring from outsideand promoting from within?Leadership development is one oi our core strate-gies . As the largest in the busine ss, we are go ing tohave to grow our own talent predominantly. Webelieve in promotion from within, augmented withmoderate amounts oi recrui t ing irom the outside.Working with various schools to help them pro-duce bet ter people, and continuing their develop-ment within our company, is a big iocus.What are some of your other core strategies andstrategic inperatives?Another core strategy revolves around culinaryand beverage excel lence. We want to create a newparadigm oi excel lence in the cul inary and bever-age areas. You see these eiforts brought togetherespecial ly in our two newest concepts, BahamaBreeze and Smokey Bones. But, you can also seethe improvements and changes going on at RedLobster and Olive Garden. Another strategic im-perat ive relates to service and hospital i ty. Wewant to cha nge the whole paradig m oi service andhospital i ty in the casual-dining restaurant . Twostrategic enablers are helping us do this. One isthe whole area oi welcoming and celebrat ing di-versity. We think this will help give us an edge inachieving our strategic imperat ives. Another stra-tegic enabler is to leverage technology. We havebeen a long-t ime pioneer in the development oipoint-oi-sales iniormation systems and other tech-nology for resta ura nts. We are rea dy to move up toanother level in the area oi technology.

What do you see as your greatest currentchallenge as leader of Darden?The greatest chal lenge is to continue to keep thestan da rds oi excel lence g oing up. And to keep our-selves motivated to keep hi t t ing those higher andhigher s tandards . Once you get the momentumheaded in that direct ion, the pride and excel lencecome in and i t becomes a l i t t le easier to keep theposi t ive momentum going. The hardest thing I dois centered around keeping our leadership teamperpetual ly hungry to set and achieve new stan-dards oi excel lence in everything we do.

What are the common mistakes you see made inmanaging businesses? Or to phrase it in apositive way, what are the things you try not todo because you've seen others do them and sawthat they didn't work?General ly speaking, whenever people get intotrouble in business, i t 's because they are not an-t icipat ing co nsum er n eed s or are not taking care ofproper hir ing and training efforts with employees.And then not promptly dealing with these two fac-tors allows the business to driit away from thecompany values that made i t successiul .What do you see as your organization'scompetitive strengths and core competencies?What are the things that Darden doesparticularly well?We are part icularly good at at t ract ing strong lead-ers and providing a work environment that isr ichly rewarding ior themboth in a f inancialsense and from a balance-oi- l i ie perspect ive. Wehave a passion to real ly t ruly be the best in casualdining and to do i t now and ior generat ions. Thatmeans we will be the first choice oi consumers orguests or customers in every market we operate in,and that means with al l types oi diverse consum-ers. We usually shoot ior a very broad consumerbase. Secondly, it means we will be the first choiceoi employees when they are thinking of changingjobs or graduating from school and looking for afirst job or a part-time job. When these people arelooking to find a job, we will not only be on theirlist, we w ill be first choice they a re go ing to wa ntand desire to work at one of our restau rant comp a-nies or Darden's Support Center .

We have a passion to really truly be thebest in casual dining and to do it nowand for generations.Third, we wan t to be first c hoice oi investo rs. Welike to run our company with the strength andstabil i ty to hav e an inve stmen t-grade bond rat ingas w ell as high-performing equity. So whe ther youare an equity investor or a bond investor, Dardenwill become one oi your first choices. The finalgroup where we want to be iirst choice is our com-munit ies. By that we mean our stakeholder com-munit ies such as our vendors who are part of oursupply community, and the communit ies andneighborhoods in which we operate, and f inal ly

our community at large because we l ive andbreathe and have a thriving business as a resul t of


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34 Academy of Managem ent Executive Februarclean air, and great food, and the oceans, and theseafood from those oceans. We are involved inprudent and good management of those resourcesas well.

Tell us about some of Darden's unique features,as you see them.Unique to Darden is the fact that our size gives ussuch a great cash flow. We are the only restaurantcash-generating company in the country that hastwo core brands that are approximately $2 billioneach in sales per year. Olive Garden is just a littleunder that, and Red Lobster is just a little over that.They are both growing in restaurant sales and arebuilding more new restaurants. We also have twoemerging brands called Smokey Bones and Ba-hama Breeze that are expanding in percentagesales a lot more quickly, and they have much oi theUnited States yet to grow into. So those are tremen-dous strengths that diiierentiate us irom othercasual-dining restaurant companies.

We are the only restaurant cash-generating company in the country thathas two core brands that areapproximately $2 billion each in salesper year.Additionally we have recruited and developed

really deeply seasoned management teams. Wehave over 8,000 general managers and managersin our restaurants throughout the system. No othercasual restaurant company has that many man-agement members out in the iield. Then we havesome of the top leaders oi the industry leading ourcompanies. We have Dick Rivera, Brad Bloom, BobMock, and Gary Heckle. Fach oi those companypresidents has extensive business and industryproven expertise . . . plus they are just great peo-ple. I could go on and on. You would be surprisedat the people we have here. Like the president ofNew Business Development, Blaine Sweat, whobrought Olive Garden into being and also createdBahama Breeze and Smokey Bones. Blaine hasbeen with us ior over 25 years.

They are all respected leaders. They are re-spected by our internal teams, they are respectedby external people who view our company in theindustry, and they are respected by investors, ven-dors, and academicians.

Looking out about 5 or 10 years from now, wheredo you see Darden going, and how do you thinkyou are going to get there?We think that Darden has plenty of room to growAs I said earlier, growth continues at Red Lobsteand Olive Garden, and special growth remainfor Bahama Breeze and Smokey Bones. But driving this growth is emerging internal capacitieand our internal strengths. We are also competing in a marketplace that is growing rapidly. Whave deliberately selected to be in the casualdining sector of the restaurant industry. It is thfastest growing sector, has been ior severayears, and we believe will continue to be for aleast the next 10-15 years. The projected growthrate is in the 6 to 8% range per year in an industry that is over $45 billion in size right now. Nowwhy are we forecasting that kind oi growth in thindustry? The heaviest user group ior casualdining restaurants is people 45 years old oolder, and that's the baby boomers. The babyboomers, as we all know, have been "the pig inthe demographic python," and that group is nowgoing to be moving into their prime heaviest useyears for casual-dining restaurants. They use casual-dining restaurants more because they havmore money. They are at a stage in their livewhere their income is the highest. They alsdon't have as many necessary expenses. Theikids are out, in college or graduating from colege. A lot oi their main economic needs are meat a time when their income is the highest, anthey also have more leisure time to spend inrestaurants.

All of this comes together and causes casuadining restaurants to really come into a sweespot. Now and for the next 15 years, these demographics will really work in our favor. So itreally an exciting place to be, in casual diningAs a result we are forecasting growth that is little better than the 6.8% segment growth I mentioned earlierwe will gain share, growinsales in the 7 to 10% range over the next teyears. Our earnings-per-share growth rate is projected to be in the 15 to 20% range because whave great leveraging opportunities as we builup our two smaller companies, and for the biggecompanies the infrastructure costs will not growat the same rate as volume and same restauransales. We also have opportunities to increase ouadult beverage sales, which have better profmargins. So there are reasons we will be growing earnings faster than sales.


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2002 Le e 35How do you go about finding new opportunitiesfor Darden to pursue that fit your organizationand what it does well?We are a company that does an extens ive amountof consumer research. Our company is , as I saidearl ier , customer an d consumer driven. We areconstant ly monitoring our exist ing customers, ourcompeti tors ' customers, and potent ial customers.With all this information, we not only know how totweak our exist ing posi t ions, brands, and menus,but we also know where there is unfulfilled de-mand in the marketplace. We monitor these gapsoi uniulf i l led demand, and when we see a largeenough gap, we set about creat ing a concept to f i tin that marketplace gap. This is an exci t ing pointof difference ior Darden in comparison with mostother res taurant companies .

Are there any special role models or education orbusiness experiences that heavily influencedhow you developed a s a leader and manager?Well, surea lot oi things influenced me. It startedwith my mom and my dad and also with the min-ister in our local church wh en I w as you ng. Theyha d great influences on me to esta bl ish the valu esthat I hav e. Then as far as b usin ess va lues andbus iness e thics and bus iness pract ices in the res-taurant business. Bil l Darden, the namesake ofDarden Restaurants and the founder oi Red Lob-ster, is the person that gave me most of my busi-ness experiences early in l i fe. General Mills wasan excel lent employer and provided a way ior meto learn about business i inance and to learn moreabout product market ing and service market ing.I 've had just a great wealth of training opportuni-t ies and exper iences leading me to where I amtoday.

What unique learning did you get from BillDarden himself? Can you point out anythingspecific in your development that he wasresponsible for?I think he was a great teacher for a lot of us. Billtaught me this core lesson: if you give people goodfood and good service in the restaurant business,and constant ly improve your standards, and do i tin a clean and safe environment, you will be suc-cessiul. Ii you do it with price points that are iairand give the consumer a good value and add alevel of service in there that surp rises an d del ightsthe customers, then you have a winning combina-tion. Bill stood ior food people love, that they can

count on, and that is consistently good, providedby a team that is prompt, eiiicient, and friendly.Looking back over your years as leader ofDarden, what would you like to say is yourgreatest contribution or legacy?It will be the team that I leave here. It really is assimple a s that . I hope the legac y that I leave hereis a team of people that are so excited about theirjobs and what they do and their opportuni t ies thatthey continue to propel Darden Res taura nts and al lof our individual businesses. Red Lobster , OliveGarden, Smokey Bones, Bahama Breeze, and oth-ers that wil l be added, into greatness ior genera-t ions. Let me add that the legacy oi this companygoes back a long ways. This is the year that Dar-den Re stau rants beco me s 65 yea rs of age . Bill Dar-den op ene d h is first res tau ran t in August 1938. Iha d the priv ilege of joining him 29 ye ars later.Then I w as p rivi leged to be on the team thathelped to develop the first Red Lobster. I openedthe original Red Lobster as opening manager. I 'vehad the opportuni ty to grow and become presidentoi Red Lobster, and you know the rest oi the story.If you can summarize your managerialphilosophy in one statement, what would it be?I have a lot of thoughts about management , but atthe core of my thoughts is to operate with integrityand fairness. Treat people fair ly and give them anenvironment that they can work in and trust. If youdo that , you then can take care of your businessobject ives and your employee needs and every-body can win. In my mind it 's a particularly goodwin for the restaurant business because the res-taurant industry is al l about the total experiencethat the customer has, not just about serving food.When you come into restaurants , you get nourish-men t, you get food, but you also get m ore; you ha venourishment of the soul by who you are with, bywho you invite in, by how you are served, and howyou are t rea ted. Res taurants are a p lace wherepeople go to connect. They gather there in times oicelebration and in times of grief and all the situa-t ions in between. Restaurants supply a needed setof experiences ior this country, and I 'm so proud tobe a leader in providing themwe do have theopportuni ty to change l ives.

/ have a lot of though ts abou tmanagem ent, but at the core of mythough ts is to opera te w ith integrity andfairness.


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Academy of Managem ent Executive FebruarFinally, could you tell us about your participationin the Dine Out America Program?It came out of the Septe mb er 11'^ trage dy a nd re-sulted in the October 11 ' ca m pa ign ior Dine OutAmerica. We committed to the Dine Out AmericaProgram when it was just an idea in a restaura-teur's mind out on the west coast of the UnitedStates. We banded together with some other com-panies and developed the Dine Out America plan.We ga ve 100% of our profit pro cee ds irom tha t d ayto the S eptem ber 11*^ Fund. That pla n collectedover $14 million for the relief eiiort. It was iinan-cially very significant, but it was also a healingthing for our company employees, and I think iorthe nation. Because across the nation, employeesand customers were looking for ways to do some-thing. They didn't know what to do or how to do it

but they wanted to do something, and they foundthat by coming into our restaurants and other part icipating restaurants on that day, they wouldhave a good meal in a safe environment, and theyknew that the proceeds from that would go to provide help in New York, Washington, and Pennsylvania. It was just a terrific outcome.Thank you for your time and for sharing with usthese insights about the restaurant industry.Darden is a unique organization, and it has beena pleasure to have this opportunity to talk aboutit with you.About the AuthorRobert C. Ford is editor of The Executive.


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Lee on the Importance of Core Values