Posted: Jul 02, 2019
When a young restaurateur named Danny Meyer opened Union Square Cafe in New York City in 1985, it was an instant success, combining refined but unstuffy service with soulful food.
A positive review in The New York Times in early 1986 by itself triggered a 60% jump in business. Meyer soon had to learn the power of a complimentary glass of dessert wine to calm a guest irritated at the wait for a table.
He was very much a hands-on boss as the restaurant became more popular, interviewing each potential new employee — down to the lowest-level busboy — personally, and trusting only himself to judge whether they had the emotional intelligence to, for example, read whether the mood at a table was joyous or somber.
Meyer and his team created systematic processes for the kitchen and technical elements of service. The chefs wrote out their recipes rather than storing them in cooks' memories. They crafted a manual spelling-out how a place setting should look, and the proper timing of when guests' cocktail orders would be taken.
But Meyer didn't want waiters and hosts to act like robots. He wanted them to improvise, to give customers a warm, memorable experience, which is why he kept such an iron grip on hiring.
"It was my way of saying, 'I'm casting the play here, and I know what kinds of people I want to hire and what kind of skills I'm looking for," he told me in 2018. "At that point it was only an intuitive feeling … I was hiring people based on how they made me feel."
Nine years later, he opened a second restaurant a few blocks away, to yet more buzz and attention. It was called Gramercy Tavern.
Meyer was only operating two restaurants, but he could tell something was wrong.
"Even though the restaurants were only four blocks apart from one another, I was like a whirling dervish," he said. "Every time I went back to one restaurant, it had gotten off center. It was fine while I was there, and then when I would go to the other one, I would have to correct things that had gone wrong. The things that bothered me that slipped were how people were treating each other, the approach they were taking to guests."
A unique approach
One night in 1999, at which point Union Square Hospitality Group, Meyer and his partners' firm, had four restaurants, a woman named Susan Salgado approached him in one of them.
She was a doctoral student at New York University's business school, studying organizational behavior. She wanted to do a field study of how service organizations can provide consistent experiences to their customers. She was a fan of Meyer's restaurants. Would he consider letting her study Union Square Hospitality Group?
He agreed, but insisted she fully embed to learn how things worked. She went to work as a reservationist at Union Square Cafe and eventually produced a 161-word dissertation titled "Fine Restaurants: Creating Inimitable Advantages in a Competitive Industry."
That might have been the end of it. Salgado could have gone on to teach management at a business school. But she had fallen in love with the restaurant industry and the way things worked at Union Square Hospitality. And the company was on the precipice of a huge expansion — Meyer had signed a contract to open a restaurant in the Museum of Modern Art, was starting a catering operation, and had opened a hot dog stand in Madison Square Park that, though no one knew it then, would become bigger than any of his other ventures.
It was called Shake Shack.
Salgado proposed that she come on board to help grow the restaurant group. The organization, she had seen, was not so much a system that could be replicated, but a reflection of Meyer's own individual approach. She became the company's first director of culture and learning.
Essentially, her job was to formalize a lot of elements of how the organization worked so that they could be replicated far beyond the limits of Meyer's personal ability to meet with people. A big part of the job was figuring out and formalizing what Meyer would not do.
"When I joined, Danny had to be part of every decision," Salgado said. "The menu price was changing by 50 cents on brisket at Blue Smoke" — a barbecue restaurant that Union Square Hospitality opened in 2002 — "and the general manager had to ask Danny first. At a point that is disabling, because he doesn't have the bandwidth."
They sat down and made a list of business decisions, divided into three categories: those Meyer would always be involved with, those he would be informed of but not asked to weigh in on, and those that would be completely delegated.
Meyer had to learn to discipline himself not to micromanage, especially on aesthetic details. Whenever he went into one of the restaurants, his immediate temptation was to point out small problems to staff so they might get fixed — a framed picture slightly askew, a light fixture set too bright.
But this was an operational mess. When he would mention these things to line-level staff, all other work in the restaurant would halt as they tried to fix the problem to please the big boss, and the authority of that restaurant's manager would be undermined. He learned to point out these problems only to the manager, who could perform triage and direct resources to fixing only the most important problems.
And Salgado began a program of operating training sessions for middle managers at the restaurants, turning what had been a philosophy embedded in Meyer's gut into a formal curriculum. They simulated delicate situations, such as reprimanding an employee who keeps making mistakes, noticing a customer who is frustrated, or mediating disputes between front-of-house service staff and back-of-house kitchen staff.
When economists talk about productivity, they mean something a little different than most civilians. When you or I say we had a productive day, we often mean that we got a lot of work done. To economists, labor productivity means something a little more precise: The amount of economic output achieved for each hour of work.
Meyer maturing as a manager enabled him to increase the productivity, in the economic sense, of hundreds of workers. He was able to spread his gift for making restaurants that people like to visit across more and more restaurants — 16 in Union Square Hospitality, not counting Shake Shack, which was spun off as a separate, publicly traded company, now with 218 locations.
A manager in the economic sense
In effect, a waiter or line cook in any of those establishments is, by virtue of the training and systems and processes that Salgado helped develop, more productive in the economic sense than they would be at a worse-run restaurant that achieves lower sales per person-hour worked.
We tend to think of being a manager as being all about the act of overseeing workers. And obviously that's what the job actually consists of in the day to day sense. But what it's really about, in the economic sense, is to create that capacity to systematize and replicate something valuable, making one's workforce more productive.
If you are a manager yourself, that's the thing you can most learn from Meyer's evolution: He became a better manager by learning what not to do, and setting up systems to replicate valuable behavior rather than just trying to do more himself.
And if you're not a manager, there's an even more crucial lesson: The path to higher compensation and more opportunity is in becoming more productive in the economic sense. So seek out managers who will do exactly that.
By Neil Irwin
July 2, 2019
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