Leadership Is Paramount
The best lessons are handed down from able mentors, individuals who have manifested practices and philosophies that have resulted in demonstrably effective leadership. My business school professors were my first inspiration, but as time went on, I was galvanized, educated, and coached by a mix of seminars, books, and my fellow colleagues. In retrospect, it becomes clear that a healthy dose of humility can be the best asset in the pursuit of learning and betterment.
A word to would-be entrepreneurs who aspire to a leadership role in their company: apprenticeship plays a major role in the likelihood of success. This became crystal clear to me shortly after I retired and began teaching franchising as an adjunct professor in the graduate school at Babson College.
Family Businesses Pose Unique Challenges
A flashpoint can occur when leadership passes from the founder to the next generation. As a business goes through these transitions, I believe the contribution of the founder must always be honored. It is an unalterable fact that without their vision and fortitude in starting a business, there would simply be no business. That said, unlike a nonfamily business, it is my observation that most founders never see themselves as fully retired from the business they birthed. As a result, the “retired” founder can become a barrier to the change that must occur if a business is to grow.
For example, as a company scales to one hundred employees, leaders—once plugged into every detail—are now required to possess different skills. They now must manage managers. Changing the old ways can often spark conflict between the founder and the new generation of family leadership. In my case, bedrock adjustments in strategy, organization, franchise contracts—even the name of the company itself—had to change if the enterprise was to flourish.
Our quest for quality didn’t end at our ingredients. We were just as serious about teaching franchise owners and store staff the intricacies of producing consistently stellar products in our shops. Within weeks of becoming CEO—never shy about appropriating a good idea when I saw one—I borrowed an idea inspired by McDonald’s University. DDU (Dunkin’ Donuts University) was born in September of 1963.
The first four weeks of the six-week training program were spent mastering the creation of the product itself: how to mix the dough, roll and shrink it, proof and fry it. Sounds simple, but it was tricky. The making of donuts was very much an art. As opposed to hamburgers—the creation of which was always the same (McDonald’s food products were made elsewhere and delivered to the restaurant for grilling or frying)—our owners had to manufacture and adjust for varying humidity and temperature to create an acceptable product.
Then there were the daily realities of the business: One worked fast in a hot kitchen over a fryolator, often getting splattered with sizzling shortening. It took a lot of hand-eye coordination to get the job done. To pass, a student had to demonstrate the ability to make two hundred dozen donuts, up to spec, in an eight-hour shift. If the student couldn’t come up to par, they wouldn’t graduate, and we would return their money. Not everyone was cut out for it.
Suggestions for an Effective Planning Process
The Cheshire cat in Lewis Carroll’s masterpiece, Alice’s Adventures in Wonderland, uttered some of the wisest words I’ve ever heard. To paraphrase, the wise cat warned: If you don’t know where you are going, any road will take you there.
To me, these words meant: whether it be a government, a family, a business, or an individual, if the entity does not have a clear plan as to what they want to be, what they want to have, and the four to six initiatives that will best take them there, the outcome is most likely to be very unsatisfactory
There are numerous formulas and approaches to strategy creation. Many creative ideas are proposed by major strategy consulting firms like McKinsey or Boston Consulting Group. The approach I used and am suggesting here may not be the last word, but it has served me well over the years.
For me, it all begins with precise language and a clear and unchanging definition of terms.
In my experience, terms like vision, mission, objectives, goals, strategy, and tactics can be misunderstood. I have seen these words not only employed differently from one executive to the next in the same company but used differently within a company from one planning cycle to the next. The upshot of this imprecise language most often leads to conflict, misery, misalignment, and failure. The solution is to have an agreed-upon definition of planning terms used consistently and understood throughout the enterprise.
Importance of Striking the Right Balance between Exploitation and Experimentation
Michael Tushman, Harvard Business School organizational theorist and manuscript advisor, maintains that only a small fraction of businesses make it beyond forty years. To make it into that elite circle requires a certain amount of ambidexterity: the ability to simultaneously protect the core, yet experiment and adapt to an ever-changing marketplace. Too many or inappropriate changes or too few can spell the end of an enterprise. Achieving the right balance between exploration and exploitation is the art of leadership. I would contend that the creation of Universal Food Systems demonstrated that my dad and his team were ambidextrous. Unfortunately, I also believe they were seriously unbalanced. With eight separate businesses running the gamut from a small hamburger chain, to pancake houses and a delicatessen, they did a lot more exploration than their small and inexperienced management team could handle. By the same token, by not getting their arms around Dunkin’ Donuts, the “diamond in the rough” in their midst—and getting it scalable—they were way too light on exploitation.
My Take on the Tasks and Character of an Effective CEO
As I worked at my job, I thought a good deal about what tasks and qualities were important to be a good leader or CEO. The following are my conclusions:
- Strategy: The CEO is the steward of the strategic direction of the enterprise.
- Organization: The CEO bears the responsibility of recruiting and retaining talent with the requisite skills and abilities to execute the company strategy.
- Communication: As CEO, you are the Communicator in Chief.
- Crisis Management: The last task on my CEO list.
The Importance of Trust and Mood in Coordinating Action
Trust should be given or withheld based upon one’s observations of the following four standards.
1.The first is sincerity. According to Flores, sincerity exists when: “private and public conversations are the same.” In other words, one does not say one thing to people’s faces while telling a different story behind their backs. In the case of our franchise owners, there was only one story. We wanted and needed them to be successful and to earn a fair return for the risk and hard work they put in. I believe they came to understand we were sincere in this regard.
2.The second standard is competence. Competence is not the same as never making a mistake; rather it is the notion that one performs up to the standards for the job in question. So if one is a commercial pilot, the standard is being able to get your passengers to their destination safe and sound, even if you have to make midcourse corrections. If you are a CEO, some mistakes are tolerable, but you are expected to consistently achieve the objectives to which you are committed. If not, you will be considered not up to the task or incompetent to do the job. I believe our franchise owners voted our management not perfect, but competent to do the job.
3.The third standard of trust is reliability. Reliability occurs when one competently manages one’s promises, completing them on time and satisfactorily. If the person is unable to deliver as promised, due to extenuating circumstances, counteroffers are made, which may be either accepted or declined.
4.The fourth standard of trust is care. Care is evidenced when someone is committed to another’s well-being over time, to his or her identity and future. People are seen and treated not as agents in a transactional sense, as someone who will serve our interests, but with a commitment to mutual satisfaction. This quality of care engenders partnership and intimacy, people working together creating a future. Even when circumstances require that someone be let go, it is done with respect and with an appreciation for the value of the relationship.
The Exceptional Benefits of Franchising
A brand owner has many options to expand his or her business. He or she may elect to open all future units as company owned, financing them with his or her own capital and manning them with his or her own employees. Or, they may select a hybrid system of ownership, with capital provided by the company, and significant profit sharing with local management, creating a virtual franchise. Chick Fil-A has utilized such a system effectively.
Though these options were available, when most of these brand owners faced the decision on how to expand, they overwhelmingly chose the franchise system. This marriage between the brand owner (the franchisor) and the local entrepreneur (franchisee) executing the business in his or her local community brought great benefits to many segments of society.
For the franchisor, licensing to an independent person who has significant “skin in the game” often ensures the business and trademark are distributed in the market with higher and more consistent standards. The franchisor also receives capital from initial fees and often real estate, which can speed growth. The franchisee, who is closer to the customer and competitors, will often suggest adjustments to improve the business.
The franchisee also receives great benefits from this marriage as well. Since the franchisor has an established business and has hopefully perfected many of the operational issues, the purchase of a franchise can dramatically reduce the risk of failure for the aspiring entrepreneur.
The consumer also benefits from the growth of these franchised outlets. Although there may be some consumers who long for their old local diner, dry cleaner, barroom pizza maker, or nearby tax preparer, these small businesses are increasingly passing from the scene. The new brands with their array of products, service delivery systems, loyalty programs, and prices are hard to resist. Consumers vote with their feet. Nostalgia aside, when a better deal comes along, customers show up.
The world is constantly changing, and if an enterprise doesn’t change with the times, it will perish. We had a mindset and processes that encouraged change as a way of life. We were constantly watching our competitors and others in our industry. We listened carefully to members of our own staff, our customers, and our franchise owners, and we were willing to change. We constantly tested many promising new ideas. Those that showed promise, we rolled out quickly; those that showed little or no promise, we shelved. We prided ourselves on our adaptability. Although most initiatives were developed in house, we had no shame in borrowing an idea from others and implementing it in our own way. The changes in purchasing and marketing in the late 1970s, as well as the innovations in store design and broadened distribution developed in the 1980s, all highlight our process of innovate-test-iterate in this era.
Yes, there were times we had to admit failure with one innovation or another and just walk away. Initiatives like our fish and chips chain, a donut factory in Delaware to manufacture frozen donuts to compete with Morton’s frozen donuts, and our investment in a “fully automated” donut machine were just a few of our missteps. But we learned. Our modus operandi became “be nimble with our decisions.” First, jump in early but don’t bet the whole company. Second, if the gambit works, move to iterate. If it didn’t, resist arrogance and stubbornness, admit failure, then close the whole thing down—and fast.
Alignment Is Critical
As a result of my failure to convince my board of the efficacy of the Mister Donut acquisition in the fall of 1989, I learned an important lesson: never go into an important meeting, one where there will be a vote, without getting a vote count beforehand. My board had always voted with me in the past and I expected the same in this instance. That was to prove a bad assumption. Fear of being sued was the concern of a few and tipped the vote. Had I spoken to each of the board members before the meeting and teased out their concerns, we might have come to a different conclusion.
Pick and Groom a Successor
it is very difficult and problematic to bring in a new leader from outside the organization. Yes, there is the rare case when a company is in trouble and current management does not have an answer, and it may take an outsider to turn things around. There have certainly been cases where there is no internal candidate and the end of a CEO’s career is in sight, where it might make sense to bring someone on board a few years before retirement to prepare them. Judging by the actions of the boards of the S&P 250, the wisdom of hiring from the inside is clear. Of the eighty-one newly named CEOs at those companies from 2014 through 2016, sixty-two were “lifers” who’d spent most of their careers with the company. Another ten had been hired primarily as CEO candidates and served several years at the company before being appointed. So overall, during those years, 89 percent of the new leaders (seventy-two out of eighty-one) were insiders.
Some Transferable Lessons for a Life Well Lived
Most retiring executives today still have many productive years ahead of them. In fact, I am now through my “second act” and have embarked on a third. For this to work, however, I believe my focus has to be planned and intentional. Great results are unlikely to just materialize.
As a transition is anticipated, I propose one undertakes a written plan to define a personal mission (what you want to be over the next three to five years). One should also establish a set of objectives or financial goals—in essence, what you want to have quantitatively. Lastly, it’s useful to decide on the four to six strategic levers you plan to pull to allocate the scarce resources of time and money to achieve your mission and objectives.
I believe one should strive in life for a sense of fulfillment and satisfaction and, in the process, a feeling of peace. For me, these goals are most often achieved in service to others. But whatever your goals might be, I believe that armed with this planning process you are much more likely to achieve your dreams.