For an introduction to the 9 Cs Enterprise-Perspective Model and discussion of the first two Cs—customer and capabilities—please see Part 1.
Pal’s Sudden Service is an iconic drive-through hot-dog-and-hamburger chain based in Kingsport, Tennessee, that has achieved industry-leading results: one car served at the drive-through every 18 seconds; customer satisfaction at 98%; only one mistake in every 3,600 orders, compared to the industry average of one in 15.1 How have they done this? A big part of the answer, according to Darden Professor Elliott N. Weiss, an authority on operations management, is culture.
“The culture of an organization describes its norms, values, and beliefs,” explains Weiss. “It defines how people behave and work in teams to achieve results. It also affects the attitude toward change and new initiatives.” Pal’s offers a simple yet compelling example of how having a culture that’s aligned with the company’s mission and capabilities is critical to sustaining breakthrough performance.
A Culture of Continuous Improvement
To boost speed, quality and order accuracy, the chain’s founder Fred “Pal” Barger and CEO Thom Crosby built a culture of operational excellence and continuous improvement. To support that culture, Pal’s adopted tools from manufacturing; specifically, the company applied the Toyota Production System to design “lean” systems and processes.
Crosby first saw the value of lean production methods 20 years ago after he’d realized that Pal’s wasn’t really in the food-service business. As he put it, “The most important dimension of Pal’s business model is manufacturing. We believe that, first and foremost, we’re a manufacturing concern.”2 Once Crosby saw Pal’s kitchens as factories and menu items as customized individual products, he established a goal of zero defects and focused the organization on controlling Pal’s processes and eliminating waste.
But Crosby and Barger didn’t just roll out the tools of improvement; they became fanatical about instilling lean behaviors across the entire organization. “It’s every leader’s and manager’s responsibility to assess our processes,” said Crosby. “We teach them to constantly be in the ‘on mode’ and to start assessing the processes from the moment they drive in, as soon as they can see the tip of our flag pole.”
A Learning Culture
Pal’s is also known for its commitment to talent development, which is unrivalled in the fast-food industry. “The second most important aspect of our business is education,” said Crosby. “We truly feel that we’ll never be able to thrive as a business unless we out-hire and out-educate the competition.”
Pal’s managers are required to read and discuss with Crosby books from the company’s Master Reading List, including classics like Sun Tzu’s The Art of War and technical tomes on quality and lean management.
New hires receive more than 100 hours of instruction, compared to the industry average of just two hours.3 All employees are certified for each skill, including cooking burgers and working the shake machine. Crosby believes that people can “go out of calibration,” just like machines; so front-line employees are constantly being tested. If their score drops below 100 percent, they lose their certifications and need to be retrained.
Moreover, Pal’s managers are expected to be in a “coaching mode” while they’re on the clock. “We require every leader to have a training target every single day,” said Crosby. “It has to be a specific person and a specific topic.” Even the CEO teaches promising employees, devoting 10 percent of his time to that activity.
In 2000, the company launched its educational arm called Business Excellence Institute (BEI). Located in Kingsport, BEI offers executive-level education in workforce capability, process excellence and leadership development. In addition to Pal’s managers, BEI offers courses to Fortune 500 companies and local community organizations.
The Enterprise Perspective
According to Weiss, leaders with an enterprise perspective understand the importance of building not only strategic capabilities but also creating the right organizational culture. In addition to developing an effective operating model Crosby and Barger built a unique organizational culture that differentiates Pal’s from McDonald’s, Hardee’s and other competitors in the fast-food industry. They ensured that Pal’s culture is aligned with the company’s customer focus and dedication to process improvement, error elimination, and employee training and engagement. As a result, Pal’s became a model of operational excellence and financial success.