Making Decisions as a Leader - Part V

Making Decisions as a Leader - Part V
Tags: Business Strategy and Profitability, Franchising & Growth, Human Resources, Operations Management
November 28, 2011

Over the course of my 37-year-career in the restaurant industry, I have had the privilege of serving in leadership positions at all organizational levels, from restaurant assistant manager to CEO. This is the fifth and final installment of a multi-part blog that will delve into my personal thoughts on leadership, and how it can help shape our industry. (Click here for parts I-IV.)

When you are in a position of leadership, you make decisions. And while the vast majority of us do not make life or death decisions, as a leader, you will make decisions that are of fundamental importance to the well being of your organization. You will also make decisions that impact the personal lives of the people you lead. As a leader, you should not take this responsibility lightly.

There can be a fine line between “bold and daring” and “reckless and irresponsible.” To the extent that circumstances permit, you should be thoughtful and reflective, do your due diligence, and consult with others as part of your decision making process. But there will be times when expediency is of greater consequence, and it is at those moments when great leaders really shine.

General Patton once said it best, and I will paraphrase: A plan that is 80% right, executed at the right time, is better than a plan that is 100% right executed too late. In business, this translates into the old saying “paralysis by analysis.” There are times when leaders must seize the moment. But never forget that it should always be a calculated risk. A bold plan without contingencies risks crossing the boundary toward recklessness.

I have faced moments like this in my own business career. One such instance came in 2008, during the height of the recession. Firehouse was faced with the challenge of negative comparable sales for the first time in our history. We were still growing as a brand because of new store development, but this matters little to the individual franchisee whose sales are down 5% or 10% from the prior year. The franchisee is, in essence, my soldier. If the decisions I make enrich our company, but it is done at the expense of the people I lead (our franchisees), then the brand cannot be successful in the long term. New unit growth will eventually stop, and the existing restaurants will eventually close. For the benefit of the company, I must protect the interests of those I lead. So when sales were running negative 6% the middle of 2008, I had to do something about it.

In the absence of a plan that would lift sales, we did something very bold, but calculated. We allowed the franchisees to stop sending in their advertising dollars, which by contract, is 2% of their sales. Instead, we told them to keep the money. In the absence of a winning advertising campaign, we would empower them, within certain guidelines, to have autonomy on marketing their business locally.

Stopping the collection of advertising dollars that were required by our franchise agreement was an extraordinary move. Some pundits even questioned whether we would be able to reinitiate the payments in the future. Frankly, my main concern was getting our sales turned around. If this plan worked for the long term, I would be perfectly happy to NEVER collect the advertising dollars again.

But before I had ever made the decision, I thought through the contingency plans. In the absence of an effective marketing strategy from our advertising agency at the time, we soon began the search for a new firm. If the franchisees failed to lift sales through their own local store marketing efforts, I had to be prepared to step back in with a solution.

As it turned out, empowering the franchisees didn’t work. In fact, sales got worse! But within six months, we were well on our way to selecting our new agency. And at the one year mark of stopping the collection of fees, I announced to the franchise community that I would not only start collecting the two percent marketing dollars again…I would also ask them for an additional two percent that would enable us to purchase sufficient media weight through the new advertising agency. We demonstrated leadership by testing the advertising and the increased media spending in my own 25 company restaurants in Jacksonville; a classic case of leading by example in every regard.

Did we have a problem collecting the marketing dollars again? Of course not! After all, the franchisee doesn’t want to fail! And after a year of failing to raise sales while having the benefit of not sending in the marketing dollars, they knew that their trust would be well placed with the leadership of the company. We had given them the opportunity to prove that they could move the needle on sales. In the absence of success, I had the moral authority to start collecting the funds once again. And by the way, since that strategy has been implemented, we have enjoyed over two years of comparable store sales growth, have reached an all-time-high average unit sales volume, and have grown our system by more than 130 restaurants.

Leaders are challenged to make decisions at the most critical moments in time. And it is a task they must not shrink from. It is one of the most important distinctions between “managing” and “leading.”