The Mac and Cheese Millionaire: How I Built a Successful Business That Does Everything Differently (Erin Wade #203)

0:00:03 I had been coming home on a day that was just super depressing.
0:00:05 And all I wanted to do was curl up in front of the television,
0:00:07 was just like a big bowl of mac and cheese.
0:00:12 But I realized that there was no place I could go to get really good mac and cheese,
0:00:13 which is sort of nuts.
0:00:16 I pulled out the recipe that I had grown up making with my dad.
0:00:18 I made this delicious bowl of mac and cheese,
0:00:21 and I’m sitting on my couch and eating it when I sort of have this aha moment,
0:00:24 thinking, “Huh, there was no restaurant I could go to get this.
0:00:25 This restaurant should exist.
0:00:27 I think I should open it.”
0:00:30 And so, when I got fired, I was like, “This is my moment
0:00:33 to try this bizarre idea of opening a mac and cheese restaurant.”
0:00:36 Because if I fail, I’ll just be back to what I was already doing,
0:00:40 which is, you know, to sell my soul to make a lot of money working as a lawyer.
0:00:44 I realized that my worst-case scenario was basically the life I was already living.
0:00:53 Welcome to The Knowledge Project.
0:00:55 I’m your host, Shane Parrish.
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0:01:20 My guest today is Erin Wade, who turned mac and cheese into a multi-million-dollar empire.
0:01:23 We talk about the mistakes she made starting out as a first-time founder
0:01:25 with no experience in industry,
0:01:31 powering employees, open book management, her unique and viral policy on harassment,
0:01:35 how titles can be effective, dealing with disciplinary problems at work,
0:01:39 and how she focuses and reasons around a collective success model.
0:01:43 You’ll walk away from this episode with a different lens around running a business
0:01:47 and a front row seat for what it’s like to start and scale one.
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0:03:24 What are you obsessed with right now?
0:03:26 Oh my gosh, surfing.
0:03:27 Where did that come from?
0:03:30 I’ve always loved the ocean ever since I was a little kid.
0:03:36 After my son was born, he’s currently about to turn 10, but it’s my second child.
0:03:40 And at the time, I was running my company.
0:03:44 So, really busy, have like 100 people reporting to me.
0:03:49 I have two little kids and I’m just not really sleeping.
0:03:52 You know, I just, I feel like I’m just consumed by other people’s needs.
0:03:56 So, I was a bit desperate to find something for myself.
0:03:59 Something that could be just mine.
0:04:02 And I realized that I had always loved the ocean.
0:04:03 I’d always wanted to learn how to surf.
0:04:09 I set up a surf lesson in this town that’s like a half hour from where I live and got in the ocean.
0:04:15 And honestly, I wasn’t really very good at it, but I just felt so happy the whole time.
0:04:21 And I made this promise to myself that I was going to make time for that once a week for a year
0:04:24 and just sort of see what it did to my life.
0:04:25 Honestly, it really changed my life.
0:04:30 It was just the sort of magic time that was just, for me, it was really meditative.
0:04:32 And the following year, I sort of challenged myself like,
0:04:33 “Okay, I’m gonna try this twice a week.”
0:04:36 A year after that, I was like, “I’m gonna do this three times a week.”
0:04:39 So, like, I’m a full-on obsessive surfer today.
0:04:41 Yeah, it’s just my favorite thing.
0:04:44 It consumes my vacations, my free time.
0:04:47 I just was… Yeah, I love watching it.
0:04:50 Do you tend to go all-in to whatever you’re doing?
0:04:53 Like, it sounds like you tried it once, you liked it, and then you’re like, “Boom.”
0:04:55 I’m in food. I’m in restaurants.
0:04:59 So, I think I’m really motivated by things that my body responds to really positively.
0:05:01 That could be a delicious taste.
0:05:04 That could be a beautiful space that you’re sitting in.
0:05:07 The ocean was really something that just engaged all my senses.
0:05:12 We’re taught to do so much in our minds, and I’m a pretty, like, thoughtful person that can get lost there.
0:05:18 So, I tend to try to pay attention to my body and see, you know, what feels good.
0:05:23 And I think we know on some primal level the things that feel right and the things that don’t.
0:05:27 And learning to follow the things that feel right has been pretty valuable for me.
0:05:32 What are the other ways that you shut off, like, that overthinking sort of side of your brain?
0:05:34 Oh, God. I mean, I think that’s probably why I’m obsessed with surfing.
0:05:38 I don’t have a lot of ways. I’ve definitely tried all the things that people tell you to do.
0:05:41 Like, I’ve tried meditating many times.
0:05:46 Yeah, I feel like I really am able to lose myself in things that encompass all my senses.
0:05:48 Surfing, cooking, you know, is one of them.
0:05:50 I think it’s just such a creative practice.
0:05:52 Did cooking start when you were a kid?
0:05:54 My family really loved food.
0:05:59 Actually, me and both of my siblings, we all own restaurants or bars, like, which is so funny,
0:06:03 because I think to, like, my parents’ deep disappointment.
0:06:08 That’s true. But it was, we’re all so different, but the one thread that, like, really held my family together.
0:06:09 My parents were very obsessed.
0:06:12 They both actually were entrepreneurs and had their own businesses.
0:06:15 But every single night, we would have dinner together as a family.
0:06:19 And so I think cooking and food was a very, like, central part of my youth
0:06:22 and certainly something I still do with my kids today.
0:06:27 So, yeah, I’d learn how to make things, mostly from my dad, who actually would only cook, like, five things.
0:06:31 One of those things was macaroni and cheese, so it ended up serving me very well later in life.
0:06:38 I’ve always felt, like, a deep connection to food as a source of, you know, not just, like,
0:06:42 nourishment from a physical perspective, but also from an emotional perspective
0:06:47 as, like, a way to bring, like, diverse family members together or a community together.
0:06:52 I think it’s really just a much deeper thing than just physical nourishment.
0:06:57 If you close your eyes and imagine what it smelled like back in the kitchen, what smells come to mind?
0:07:00 So, my mom was actually physically disabled.
0:07:03 She had polio as a kid, and so she couldn’t really do much cooking.
0:07:05 So, my dad was really the big cook of the house.
0:07:08 And, like I said, he only made sort of five things.
0:07:12 But one of them was chocolate chip cookies, which he made just all the damn time.
0:07:16 Like, I feel like there was, like, always cookies or brownies in my house growing up.
0:07:23 And so, yeah, I have a really deep nostalgia for sort of these, like, American, you know, desserts.
0:07:27 And the smell of them wafting through the house is definitely, like, the smell of my childhood.
0:07:29 You didn’t start running a restaurant.
0:07:35 You went to law school and then became a lawyer and you were fired from that job.
0:07:35 What happened?
0:07:41 Yeah, I had a very circuitous route to becoming a lawyer in the first place
0:07:44 that had actually taken a detour in food first.
0:07:46 I had actually really tried.
0:07:50 I wanted to be a chef, and I learned how to cook when I was an undergrad.
0:07:54 And I worked in restaurants in New York, but honestly, it was a really dead-end job.
0:07:56 I was making minimum wage.
0:07:58 I really could barely afford to pay my rent.
0:08:03 I looked around me and I just didn’t see a future in the industry.
0:08:10 And so, I did what I think plenty of smart people with a complete lack of direction choose to do,
0:08:12 and I decided to go to law school.
0:08:19 It seemed like a prudent choice on the surface, but it was really not something that I felt passionate about.
0:08:24 So, I was working as a corporate attorney, so I’m getting paid, you know, really an obscene amount of money,
0:08:27 like an amount that seemed crazy when I had been cooking in restaurants,
0:08:29 like 10 times what I would have made in a year.
0:08:34 Working in a beautiful high-rise, you know, very respectable.
0:08:39 Like, I looked good at cocktail parties, but I really hated going to work every day.
0:08:49 So, I was fired, and it was a real wake-up call for me because I had always been just a super overachiever.
0:08:53 And it was the first time that I was like, well, I can’t say the first time,
0:08:58 but it was probably the biggest time where I was like, wow, I am not doing well at this,
0:09:01 and it’s not even because I couldn’t do well.
0:09:02 It’s because I don’t want to.
0:09:06 I don’t care enough to be good at this.
0:09:09 It’s hard to excel at a job you hate.
0:09:09 Oh, my God.
0:09:14 I mean, it sounds so basic, but I think a lot of us don’t pay attention to that.
0:09:22 You know, we’re taught to, you know, do the thing that’s going to, you know, pay the bills or look good or that feels safe,
0:09:27 but not necessarily, you know, to my earlier point about like, what makes you feel good in your body?
0:09:32 We’re not trained to be like, oh, like, what makes me feel, you know, real joy inside every day?
0:09:35 Or at least that was not what I was trained to, you know, to pay attention to.
0:09:41 So, when I got fired, it was like, I had this moment of, you know, asking myself,
0:09:47 am I going to keep doing this because I could have easily been hired, you know, somewhere else doing the same thing.
0:09:52 Like, am I going to choose to get back on this wheel or am I going to choose to do something else?
0:09:58 A few months before that moment, I had been coming home on a day that was just super depressing.
0:10:00 Like, I just had hated my work day.
0:10:04 It’s raining outside and all I want to do is curl up in front of the television.
0:10:06 It’s just like a big bowl of mac and cheese.
0:10:13 But I realized that there was no place I could go to get really good mac and cheese, which is sort of nuts.
0:10:16 I mean, I live in Oakland, California. It’s a major city.
0:10:21 It seems like someplace that you should be able to, you know, get a good bowl of mac and cheese, but there wasn’t one.
0:10:27 I pulled out the recipe that I had grown up making with my dad and went shopping and got the ingredients
0:10:31 and made this delicious bowl of mac and cheese and I’m sitting on my couch and eating it.
0:10:36 When I sort of have this aha moment thinking, huh, there was no restaurant, I could go to get this.
0:10:39 This restaurant should exist and I think I should open it.
0:10:42 I had been sitting on that idea and sort of thinking about it.
0:10:47 And so when I got fired, I was like, you know, I think this is my moment.
0:10:53 Like, I think this is the moment to try this bizarre idea of opening a mac and cheese restaurant.
0:10:58 And the truth is, if I fail, I’ll just be back to what I was already doing,
0:11:02 which is, you know, have to sell my soul to make a lot of money working as a lawyer.
0:11:06 I realized that my worst case scenario was basically the life I was already living.
0:11:08 So, so what did I have to lose?
0:11:11 Which give you some safety to sort of take a risk.
0:11:15 The moment when you were fired, what was that moment?
0:11:17 Like, were you like finally they caught me?
0:11:22 I was slacking and I knew it or were you like, oh God.
0:11:25 At the moment I was fired, I was like, oh God.
0:11:29 I mean, I’m, I’m sort of embarrassed to say this because I really hated what I was doing.
0:11:38 But I mean, I think I, I think I start crying, you know, I just, yeah, I felt lost.
0:11:44 I think that the deepest part of that moment of failure wasn’t so much losing the job.
0:11:50 I think it was realizing that I was doing something that I didn’t care about,
0:11:52 that I wasn’t good at it because I didn’t care about,
0:11:58 and that I was spending sort of precious years of my life doing something that I hated.
0:12:01 Also, frankly, that I had had to rely on someone else to tell me that.
0:12:03 I think that felt bad.
0:12:07 Like I knew it already for myself and I didn’t at the time have the courage to act on it.
0:12:09 So you decided to start a homeroom.
0:12:11 Yeah, pretty much right away.
0:12:18 I, I decided to start homeroom and you know, and it was not just because I had this love of food and cooking,
0:12:23 but I honestly looked back at that earlier time that I had been cooking in restaurants and thought,
0:12:28 you know, what would it be like to create the kind of place I wish I had been able to work where I could,
0:12:32 you know, see a future for myself where I would love coming to work every day.
0:12:38 It was really sort of this personal odyssey to create the job that I had wanted to have,
0:12:43 but also where other people would feel a similar like passion that I did.
0:12:47 I don’t know about you, but I had, I mean, I’d worked many jobs and not had that experience
0:12:52 of being excited to wake up in the morning and go to work and that feels like a sad way to live life.
0:12:54 So I really, really wanted that for myself.
0:12:58 But I also really wanted that for other people because it felt pretty empty if I created my dream job,
0:13:00 but then other people felt like it was a slog.
0:13:02 So how did that work there?
0:13:05 Like walk me through sort of the initial year of that.
0:13:08 Like, how do you find people who are excited by mac and cheese?
0:13:10 Do you hire differently?
0:13:11 How does that look?
0:13:16 Having an ideal of wanting to create an incredible workplace, an incredible restaurant,
0:13:21 yet having never run one and also never worked in one that I’d want to emulate
0:13:24 meant that everything I learned was really through trial and error.
0:13:29 And so it means that the first couple of years, if I’m honest, were like a bit of a shit show, you know?
0:13:34 Talk me through some of those lessons and mistakes that you made early on that you’re like,
0:13:37 “Oh, like I had to figure this out because I didn’t have the background.
0:13:41 I’m coming from a law degree and I’m trying to run a restaurant.
0:13:44 And while there’s people in my family who do, I don’t want to run it that way.”
0:13:50 I just kept thinking like, okay, what are the values that I want to live here?
0:13:54 And I would try to take a stab at what I thought it meant to live those values at work.
0:14:03 So, I mean, an example would be I felt like a lot of jobs I had had don’t give you a lot of autonomy.
0:14:05 And it’s something I had really dreamt of.
0:14:11 I wanted to have a lot more trust in the system and I wanted to be able to, you know, be myself at work.
0:14:17 I thought, okay, let’s do away with so many of the rules and structures that I had found so confining.
0:14:22 We had no dress code, no vacation policy.
0:14:27 It was very much like, wear what you want, like take a vacation when you need to.
0:14:32 And these ideas, like honestly, a lot of tech companies run that way, but a restaurant is not a tech company.
0:14:37 Like you actually can’t have people gone just whenever they want all the time.
0:14:37 It’s a disaster.
0:14:41 Like you need people physically there every day to serve customers.
0:14:49 And what was interesting is I was creating, you know, all this freedom, but it was actually like just moving from one dystopia,
0:14:54 which is, you know, so many rules that people can’t be themselves to a very different dystopia,
0:14:57 which is like no one knows what to do.
0:15:02 There’s so much freedom that it’s actually constricting in its own way.
0:15:05 You know, people didn’t know, is it okay for me to wear this shirt?
0:15:07 Is this going to offend somebody?
0:15:09 Are these the kind of shoes that are acceptable?
0:15:10 Am I taking too much vacation?
0:15:13 Like, are people secretly resentful?
0:15:19 Like it really created a lot of chaos and confusion and, you know, I was not more beloved for it.
0:15:22 People were actually looking to me for guidance.
0:15:29 I sort of have had this, you know, after much trial and error breakthrough that actually I think the right kind of freedom for people is.
0:15:37 I think it’s your job as a leader to create the structures and boundaries that within which people have freedom.
0:15:42 For instance, you know, if it’s something as silly as like terms of guidance for what people can wear.
0:15:44 Have some structure around like, here’s what you need for safety.
0:15:46 Here’s what you need to not offend customers.
0:15:51 You know, here’s the basic rules, but within that, you know, assert your own independence.
0:15:56 We didn’t have uniforms and things like that for people who are out on the floor and they love being able to express themselves.
0:15:59 But knowing, oh, if I wear this kind of thing, it’s not going to offend people.
0:16:01 My boss isn’t going to, you know, be upset.
0:16:04 And there’s so much more freedom within the right kind of boundaries.
0:16:11 I found time and time again that actually that was really my goal as a leader was just what kind of boundary should we create?
0:16:18 Something I’m really proud of is actually how we do customer service or like one of our sort of customer service rules.
0:16:24 At many restaurants, there’s scripts that would be like a highly constrained form of leadership where you give people no independence.
0:16:28 The other would be to give them no guidance, which is something that I was doing at the beginning.
0:16:31 And I actually had a really great team member.
0:16:32 The idea he came up with was great.
0:16:36 I started talking to him figuring out, okay, how can we give better guidance on service?
0:16:41 He told me he was like, hey, I’m always trying to, you know, be the best part of people’s day.
0:16:47 But I realized we serve thousands of people a day, so I can really do a great job with like five tables a shift.
0:16:49 Like I just go crazy.
0:16:55 I do anything it’s going to take for those five tables to walk away being like that was one of the best meals of my entire life.
0:16:57 And he would do that to five tables a day.
0:17:00 So that became sort of a service challenge that we gave to people.
0:17:04 We’re like, hey, our value is to be the best part of people’s day.
0:17:11 What that’s going to mean and how you’re going to create that experience for someone can be your own creative journey and a part of expressing yourself at work.
0:17:19 Our expectation is you need to be able to do that for five tables a day or if you’re working at our takeout location for five customers a day.
0:17:24 They should be able to come in and leave being like, this was the most magical experience of my life.
0:17:29 And it’s so cool because within that I’ve seen so much creativity.
0:17:37 Anything from, you know, drawing art that they send home with people to singing them a song to, you know, comping their meal to, you know,
0:17:46 doing some like really over-the-top birthday celebration, spelling out a special message with, you know, condiments on their mac and cheese.
0:17:55 I mean, all sorts of funny stuff that I never could have come up with in a million years that’s really their own mark of individuality.
0:18:00 There is a boundary and an expectation with which they are allowed to express that.
0:18:02 It’s almost like intelligent autonomy.
0:18:07 If you just give someone a blank piece of paper, everyone’s going to create art that’s totally different.
0:18:13 If you give people, you know, a paint by number, everyone’s going to create something that is exactly the same.
0:18:20 And I think my goal is actually to be like a coloring book where it’s like, here are the outlines of what I expect from you.
0:18:23 But within that, you have complete creativity and freedom.
0:18:28 So everyone’s page of a coloring book is going to look different, but you’re going to have the same structures.
0:18:35 And I think that’s actually really the key to creating great culture within an organization is like, am I handing someone a coloring book?
0:18:37 Because I think that’s what you should be doing.
0:18:42 It’s interesting because when we’re working for somebody else, we often feel if I only had autonomy,
0:18:49 if they only sort of gave me freedom, then I’d be happy, you know, then I could excel and then you end up with freedom.
0:18:52 But there’s almost like too much freedom in a workplace.
0:18:58 You don’t ever really feel like you have complete freedom to my point about the vacation policy.
0:19:06 If you tell people they can take however much they want, like studies have shown they actually take less than at companies where there’s just a set amount of weeks.
0:19:10 And it’s because people are actually afraid, like even though in theory, they can take as much as they want.
0:19:12 They’re afraid that maybe they’ll take too much.
0:19:20 So I think in a workplace having some guidelines and structures, the right ones, the coloring book has the most freedom.
0:19:23 There’s also an element of like paying attention, right?
0:19:31 It’s like, if I have complete freedom, initially that start off as fun, but then you’re like, look, look at all these amazing things I’m doing and nobody’s noticing.
0:19:32 Totally.
0:19:36 What are some of the other lessons that you sort of like trial and erred your way through?
0:19:49 I knew that I wanted us to have a really collaborative work culture, which is again, a really fabulous ideal but can be harder to pull off in reality.
0:20:04 Something I ended up learning about, which I thought was really fabulous was open book management, which is basically where you open up your financials to your team and you teach financial literacy.
0:20:12 And then you engage people in improving those numbers and then you share the results with the team.
0:20:25 That was really such a game changer because, you know, business is really just like a sport, but the way that most companies are run is that like no one is really sharing with you how you’re doing.
0:20:28 It’s such an odd way to run a team or a company when you think about it.
0:20:34 But I think we’re always afraid like, oh, if people know too much, you know, maybe they’ll just want more for themselves.
0:20:37 But I think it’s hard for them to be a part of something bigger than themselves.
0:20:41 And I think that’s much more important than the risk you take by sharing information.
0:20:48 At what point did you start this and what happened in the following sort of like 60 or 90 days?
0:20:55 You know, started using it a few years into the business.
0:21:01 I think first I had to figure out some foundational things, you know, to my point about like creating some really basic rules and structures.
0:21:15 And I really wanted a way to engage people with growth, not just in the financial sense, but of all the things that we cared about, finding ways to measure it and improve on them.
0:21:23 I studied up, took my team to take a lot of classes on how you do open book management, and we just started using it.
0:21:31 Sort of roughly the way you do it is like we would have a meeting every week where managers were required to attend, but they were open to all staff members.
0:21:37 So any staff member would be paid to come and just sit there and eat snacks, and, you know, learn about numbers.
0:21:45 And what you have is basically a P&L meeting, but different people within the company are watching those numbers.
0:21:53 So instead of me as the CEO or a CFO running through those numbers, different people are responsible for tracking them.
0:22:00 So, you know, we would watch things like our food costs, but we would also measure things that normally people only measure.
0:22:03 Maybe once a year, like our employee happiness.
0:22:14 We measured literally daily and weekly, and we’d report on those numbers too and have people tracking them and talking about not just the number, but what’s behind it?
0:22:15 Why were those sales up this week?
0:22:17 What did people notice?
0:22:20 Why was our employee happiness or satisfaction low or high?
0:22:21 What’s going on?
0:22:22 What could we change?
0:22:27 And then we’d send out like a little newsletter that would come out once a week being like, here’s the suggestions we saw.
0:22:28 Here’s the trends we’re seeing.
0:22:30 Here’s the ways we’re going to improve.
0:22:31 Here’s the things we’re doing.
0:22:33 Here’s the things we’re actually also not going to act on.
0:22:36 And what’s amazing is that then everyone is engaged.
0:22:41 They start knowing not just like, what are the numbers, but why are they getting better or worse?
0:22:46 They see that the things that they suggest can become enacted.
0:22:54 Staff members that aren’t even attending that meeting but are just, you know, filling out forms every day to sort of report back or seeing suggestions that they make be enacted.
0:22:59 I mean, we saw not just, you know, huge financial gains.
0:23:04 I mean, we were always in the sort of the top, you know, 1% of performance for the industry.
0:23:09 But we saw that number go up and up and up and up every single year for the decade that I was a CEO.
0:23:15 We also saw, you know, huge movements in staff happiness in restaurants in America.
0:23:17 Anyway, the average tenure of an employee is 90 days.
0:23:19 Our average tenure was two and a half years.
0:23:21 The work we do is monotonous.
0:23:22 We’re making mac and cheese every day.
0:23:32 But when you get to be part of something that is bigger than yourself and like see changes that you suggest happening and see a place get better and better and better every week, every day.
0:23:35 Like that’s something that’s really magical to be a part of.
0:23:36 I mean, this sounds great.
0:23:37 I’ve never done it.
0:23:41 But like, I’m in a way, public companies all do it, right?
0:23:49 They publish their financial statements, but they don’t sort of work with their team to understand what that means and like how to control it.
0:23:54 I’m so curious as to like, okay, you’re like food costs are going up as a percentage of sales.
0:23:54 Then what?
0:24:00 Like I tell you that and like how do how does that transfer into without me telling you what to do?
0:24:05 How does that transfer into change in behavior that leads to increased profitability?
0:24:13 And the reason that that’s important is so that you can provide jobs so that you can keep going so that you can do all these things and people understand that as a system.
0:24:14 Yeah.
0:24:17 I mean, I think actually the thing with the food cost is so great.
0:24:21 Like if you think about the way even a public company is run, you’re right.
0:24:30 Certain numbers might be public or all staff members could know them, but there’s a difference between that information coming from the top and maybe trickling down.
0:24:38 Maybe not, you know, like I don’t know how many like Chipotle employees are like, you know, reviewing their financials on a weekly basis, you know.
0:24:44 But I think something that is really magical about this way of operating is that it’s much more flat.
0:24:45 It’s not hierarchical.
0:24:49 And so, you know, everyone is involved to your point about the food costs.
0:24:52 That is actually an issue that we did have happen.
0:24:58 We watch not just our food costs, but we line item our dairy costs because the biggest part of running a mac and cheese restaurant.
0:25:06 They were skyrocketing one year and we could not figure out why our costs of like cheese and milk had not gone up substantially.
0:25:09 We were just running through stuff really, really quickly.
0:25:18 And so, you know, at most companies, you’d have someone sitting in an office looking at that, like, I’m honestly not super sure how they would have gotten to the bottom of it because they’re not there on the ground.
0:25:27 But because we’re looking at it in the context of these meetings every week and having people who are on the ground and working seeing this stuff, you know, someone at the meeting suggested they were like,
0:25:32 hey, I’ve been noticing, you know, we portion out the cheese in every single mac and cheese.
0:25:36 So each one gets exactly a quarter pound of cheese, which is a rather insane amount of cheese.
0:25:48 And they were noticing that there had been some really like sloppy work on the part of folks who were coming in early in the morning to do this that didn’t look like they were actually measuring it to the ounces they’re supposed to be.
0:25:49 They’re just sort of throwing it in there.
0:25:56 And so we went down, we started measuring out like we pulled some of these, you know, baguettes of cheese out of a fridge and started measuring that are weighing them.
0:26:01 And sure enough, they are off by like some pretty large amounts, honestly, sometimes less than they’re supposed to be.
0:26:03 There’s a lot of variability.
0:26:13 Totally, but there shouldn’t have been like we’re paying people to sit there and like literally weigh out cheese portions so that everyone gets consistent food, but also so that our food costs remain stable.
0:26:15 And they were just not really doing it.
0:26:23 So that became something that we then started tracking and we started like pulling baggies out randomly every week, you know, and measuring them.
0:26:26 And sure enough, when you start measuring it, that number magically improves.
0:26:28 We never had to like go talk to people and discipline them.
0:26:32 We’re like, hey, these are not coming out the same and we’re going to start looking at it.
0:26:34 And like magically, the problem solves itself.
0:26:43 If we have each single mac and cheese that we sell being over by even like a tenth of an ounce of cheese over the course of a year,
0:26:46 we would have given away a ton of free cheese, like literally a ton.
0:26:51 We’ve figured that out, solved that problem, saved ourselves all of that money.
0:26:53 I don’t know how that would have gotten solved in a bigger company.
0:26:57 I think it would have been figured or not in a bigger company, but one which works more hierarchically.
0:27:01 It would have been figured out, but it would have taken a lot of time, a lot of effort.
0:27:07 And I think what’s more is all the people on the ground were able to feel empowered because they were like, oh, I just made a difference.
0:27:08 Like I caught this problem.
0:27:12 I just saved us, you know, tens of thousands of dollars for the year.
0:27:15 And I think that is really empowering.
0:27:16 And it feels good.
0:27:19 It feels like you’re part of something larger than yourself too.
0:27:20 Totally.
0:27:27 What other problems have you solved sort of counterintuitively through radical transparency or open book management?
0:27:30 I’d say sort of building on it, like how I was saying that, you know, we started out figuring like,
0:27:34 how do we create sort of the structures upon which people can be successful
0:27:37 and then sort of built upon that like open book management.
0:27:43 I think when you start having a lot more transparency and a lot more collaboration,
0:27:48 you also start to need, honestly, structures to sort of help you, you know,
0:27:51 think about how to make good decisions.
0:27:58 And so we started to use, I call it collective success, but it’s basically just like a stakeholder analysis.
0:28:08 And we would start measuring decisions that we were making through how is this going to benefit the customer or in the community?
0:28:10 How is this going to benefit the employees?
0:28:12 And how is this going to benefit the company?
0:28:18 Because we’re measuring all these different things all the time, it’s pretty easy for us to tell, you know,
0:28:22 like by our metrics, what are the effects going to be?
0:28:31 And we started making decisions by needing to maximize the largest degree of overlap for benefit to those three parties.
0:28:34 And I think that was that has been really, really helpful.
0:28:38 Giving people like data and the ability to improve it is really helpful.
0:28:46 But also giving everyone a framework for like, how are we going to decide what we’re going to maximize is so important.
0:28:50 Is there a particular decision that comes to mind when you think of that?
0:28:57 That you’re like, oh, this really helped me see or solve this problem in a different light looking through this collective success model?
0:29:05 One of the huge benefits of running a company that’s very employee centric and really empowers its people is that you have all these empowered people.
0:29:15 And one of the downsides is like, you have all these empowered people, you know, so you have a lot of folks who have a lot of opinions and are very vocal.
0:29:22 One example is we used to have a language on our menus.
0:29:31 We had a service charge and they could leave an additional tip and a number of servers came in and wanted to speak at one of the open book meetings
0:29:39 because they wanted to propose a change to that language because they felt if there was different language on the menu, people would leave far bigger tips for them.
0:29:48 Good suggestion. But the problem is this group of people, servers within most restaurants are actually people already making the most amount of money.
0:29:56 And so having this language is actually really helpful because we didn’t have to say like, oh, no, we don’t want to, you know, no one had to be like, no, I don’t want to do that.
0:29:57 It didn’t become a battle.
0:29:59 We actually just walked through the analysis.
0:30:04 We were like, OK, if we’re going to make this change, what is the impact on the employees?
0:30:11 And they were like, well, it’ll be great for servers because we’ll make more money.
0:30:13 And then we’re like, OK, well, great.
0:30:16 How about the folks in the kitchen who are not going to see a part of those tips?
0:30:18 You know, what do you think that’s going to feel like to them?
0:30:22 And they had to be like, oh, yeah, I guess maybe that won’t feel great.
0:30:24 We walked through and looked at the customer.
0:30:28 OK, how’s this going to feel for the customer who’s now paying more money?
0:30:33 And they’re like, oh, I guess that’s maybe not actually of a benefit to them.
0:30:36 And then we’re like, all right, well, so for the company, you know, what’s the impact there?
0:30:40 And they were like, oh, well, I guess if the kitchen is disgruntled and the customers are paying more,
0:30:43 maybe we won’t ultimately make more money.
0:30:50 If you run things traditionally and hierarchically, people bring suggestions that are perhaps self-serving.
0:30:55 And your job as a manager is to be like, no, or maybe to explain why.
0:30:59 And it creates like a pretty divisive dynamic where you’re at odds with each other.
0:31:05 But having people walk through this for themselves and understand, hey, OK,
0:31:06 I might want this thing for myself.
0:31:10 But I can see how this is not good for a system that’s bigger than me that I care about.
0:31:14 And decide for themselves that this is actually not the right choice.
0:31:20 I think that was really powerful and reasoning out loud too goes a long way, right?
0:31:26 Which is like, instead of saying yes or no, it’s like, let’s walk through this problem and reason about it.
0:31:31 Totally. And I think sometimes when I tell people about these various management practices,
0:31:33 they’ll be like, oh, that sounds really time consuming.
0:31:38 And I’m like, well, that conversation I just described took maybe five or 10 minutes.
0:31:41 And yes, that’s more time consuming than saying, no, I’m just going to not do it.
0:31:45 But you know what would have happened if we hadn’t had that conversation
0:31:51 is they would have spent months complaining, like, hurting morale, being like, this is wrong.
0:31:54 It’s really interesting because when you think about it just from the time consumption,
0:31:58 it’s like, well, the visible time consumption five or 10 minutes.
0:32:00 If I said no, it’s like zero.
0:32:04 But the invisible time consumption is huge and hard to measure.
0:32:06 And so we don’t tend to think about that.
0:32:10 And I think we don’t tend to think about a lot of things that we maybe don’t measure.
0:32:15 You know, and how much does having that conversation contribute to someone’s sense of satisfaction,
0:32:20 which contributes to their longevity and how much money do we spend on things like turnover?
0:32:24 Like all those things add up to make a huge difference over time.
0:32:28 What would you say to a small business owner right now who’s listening to this,
0:32:31 thinking about, oh, what would it mean for me to open my books?
0:32:33 And, you know, I’m scared to do that.
0:32:35 And I don’t know what the next step is.
0:32:37 You could start really small.
0:32:42 You know, you don’t necessarily have to start by opening up everything all at once.
0:32:45 Maybe you just pick something that you really want people to work on.
0:32:50 I would say pick a number that you care about improving that is dynamic
0:32:53 and is that employees can make a difference on.
0:32:57 Start measuring it and then set a benchmark, you know, like that you’d like to reach
0:32:59 and share the success.
0:33:02 I mean, that is part of it is if you’re going to do this.
0:33:06 If you think that improving that number could make a difference to the tune of,
0:33:11 I don’t know, $10,000 that year, share $1,000 of that with the folks who helped make it happen.
0:33:14 You’ll still be $9,000 richer at the end of the day.
0:33:20 So you do have to teach it, involve people, but also, you know, share in the success.
0:33:25 Was there a moment with homeroom when you wanted to give up or, you know,
0:33:28 when you’re sitting on your kitchen floor at home after the end of a long day
0:33:31 and you’re crying and you’re just like, I can’t do this?
0:33:35 I think that’s the beauty of like having been quite unhappy in my work
0:33:40 before doing homeroom is I think I knew what the alternative looked like.
0:33:45 My worst days at homeroom were still better than my best days as a lawyer.
0:33:48 I think it helped give me perspective that like everything is hard, you know,
0:33:55 and what kind of hard do you want and I’ll pick meaningful, hard any day over meaningless, hard.
0:33:57 Most things in life worth doing are hard.
0:33:59 You know, I know you have kids as well.
0:34:00 Like that’s hard.
0:34:02 It is really hard to be a parent.
0:34:06 Studies on human happiness like show that people who choose not to have children
0:34:10 are on average happier because they can just like do whatever they want all the time.
0:34:14 You know, for me, my kids are also one of the most meaningful parts of my life.
0:34:19 So I think things that are hard often accompany things that are meaningful.
0:34:22 And if something’s hard and meaningless, like that’s the worst thing.
0:34:26 And I think for many people, unfortunately, work falls into that category.
0:34:31 I think the kids thing is interesting because I’ve seen a lot of people go
0:34:35 through this cycle of I don’t want kids and they’re really happy.
0:34:39 And then they hit late forties, early fifties.
0:34:42 And then all of a sudden it’s like I kind of wish I had kids.
0:34:46 Yeah, because there’s an element in the tail end of life.
0:34:47 What you really want to be doing.
0:34:50 And maybe we don’t articulate this or maybe not everybody wants to do this.
0:34:54 And I’m not projecting, but it’s like, I really want to have dinner with my kids
0:34:57 and I want to have dinner with the grandkids and I want to watch them play.
0:35:02 And I mean, I look at how much joy my kids bring to my parents.
0:35:05 And I think, wow, like I want that.
0:35:11 We all have an innate drive to have some kind of impact that’s bigger than ourselves.
0:35:13 And for some people that comes through children.
0:35:18 And for some people that comes through how we spend our days, you know, maybe at work,
0:35:21 I prefer to do both, you know, I love my kids and I love my work.
0:35:28 And I want everywhere that I’m living in my life to be about creating meaning with more people.
0:35:34 Did your law background ever help you in business aside from like reading contracts and stuff?
0:35:40 But like, was there an element of like, oh, I approached this different because I have a legal background?
0:35:44 I’ll give you one way that my legal background helped and one way that it hurt.
0:35:47 And I guess we’ll start with the hurt one because I had to overcome it first.
0:35:54 Think something we’re thinking about whatever your job is, is, you know, what is the worldview of this profession?
0:35:58 The legal worldview is at least in America, it’s an adversarial system.
0:36:02 Two people take very extreme positions.
0:36:09 You’re in fact duty bound to take only that side and they duke it out and someone wins at the end.
0:36:11 So there’s no gray, there’s no meeting the middle.
0:36:14 It’s very destructive, honestly, you’re literally fighting.
0:36:17 I found that quite demoralizing to do over time.
0:36:18 It’s certainly not a good way to run a company.
0:36:25 I think that’s something I love about business is that it’s like literally and figuratively creative.
0:36:29 Like you make something, but you also to make something, you can’t be fighting with people.
0:36:32 You have to be generative, you have to create something with them.
0:36:37 Moving from this destructive mindset to this creative mindset was a big shift.
0:36:41 So I think in that way, my legal background gave me something to overcome.
0:36:48 But a way that it really helped me was I was really struggling to understand how to do punishment
0:36:51 for lack of a better word.
0:36:56 Every company or organization has the issue of people misbehaving.
0:36:58 I’ve been the person misbehaving at various jobs.
0:37:00 I mean, that’s, you know, why I got fired from being a lawyer.
0:37:02 I just wasn’t really doing my stuff.
0:37:03 I have empathy for both sides.
0:37:08 I feel like I hadn’t really seen a system that worked very well, like places I had worked.
0:37:12 If you weren’t doing well, you’d get a write up or some kind of punishment.
0:37:15 Maybe you’d be, you know, like Doc Schiff sent home.
0:37:16 You won’t get a raise.
0:37:20 Like there wasn’t something that felt like it was going to meaningfully change behavior
0:37:24 except with punishment, which just didn’t feel effective to me, to be honest.
0:37:26 So I actually did draw on my legal background for that.
0:37:32 I had had some exposure to a system called restorative justice, which is not about punishing something.
0:37:35 It’s about trying to fix a wrong or make it right.
0:37:38 And it’s a really interesting system.
0:37:42 And so we started trying to use that in our discipline at home room.
0:37:46 It was incredibly transformative and really effective.
0:37:49 Can you give me an example like so it makes it tangible for me?
0:37:51 Something really common in restaurants.
0:37:54 In fact, probably at many workplaces, people showing up late.
0:37:57 If you work at a desk job, maybe it doesn’t matter so much.
0:38:00 If you work in a restaurant, if someone’s late, again,
0:38:03 you need people to actually physically be present.
0:38:05 There’s just less people to help customers to cook food.
0:38:08 It makes the experience for the guests worse.
0:38:10 And, you know, we have like a hundred people.
0:38:13 So it’s a lot of people who could be running late at any given time.
0:38:16 Traditionally, if someone was running late, you probably write them up.
0:38:19 If they do it a few times, maybe they lose their job, right?
0:38:24 I had found it was not effective at all with a restorative discipline approach.
0:38:28 What you do is you sit down for a conversation.
0:38:32 You basically are like, hey, you know, what happened?
0:38:33 Someone says I was late.
0:38:36 And then you talk about who is affected.
0:38:41 Well, turns out, you know, you sort of walk them through like who was affected.
0:38:45 It’s the, you know, servers that have to cover more tables.
0:38:46 It’s the cooks that have to cook more stuff.
0:38:49 It’s the customer that has, you know, worse service.
0:38:53 It is the manager that is now wasting their time having this conversation with you.
0:38:55 It affects lots of people in a lot of ways.
0:38:59 And then you ask them the question, well, what are you going to do to make it right?
0:39:04 And I think that’s like the most interesting part of it because it’s not about punishment.
0:39:06 It’s literally, oh, shoot.
0:39:10 I think for many people is the first time they’re realizing that they’ve actually caused harm
0:39:11 versus that they’re like in trouble.
0:39:14 And we’d have people come up with all sorts of creative stuff.
0:39:18 Honestly, they could go over the top like things that once they’d realized
0:39:20 that they had like wronged their fellow staff members,
0:39:23 they would try to like pick up their side work or cover a future shift.
0:39:24 They’d go apologize.
0:39:28 They’d bring customers like, you know, little like gifts to say sorry,
0:39:31 it took so much longer to get to your table today.
0:39:34 It generated all these creative things and back to that point about empowerment.
0:39:37 That person now feels like, oh, okay, I made a mistake,
0:39:41 but I can make that thing better.
0:39:46 That is so much more of a fun place to work to be a part of when you see people
0:39:49 actually making things better for each other rather than just getting in trouble
0:39:52 and then, you know, maybe doing it again, maybe not.
0:39:55 Do you have that conversation when they show up for work late
0:39:57 or do you have it sort of like the next day?
0:40:00 It’s going to depend on someone’s workplace for us often.
0:40:02 It would be at the end of the shift because at the point they show up,
0:40:06 we really just want them to work.
0:40:10 For some people, sometimes it takes a little while like to get them to be
0:40:13 in sort of a calm space to like have that conversation.
0:40:17 We found it was really effective because when most people reflect on the impact
0:40:23 to other people that they hopefully care about, you know, they tend to create change.
0:40:26 And when they don’t, then it’s also, frankly, an easier conversation to say,
0:40:33 hey, you know, you’re not caring about the welfare of your fellow staff member
0:40:36 or the customer or the company and that’s our culture and we’re sorry,
0:40:37 but you can’t be a part of it.
0:40:41 Is there another example that comes to mind where this has been like really practical
0:40:43 and meaningful at changing behavior?
0:40:45 I can say it’s certainly like on a personal level.
0:40:48 It’s even like changed the way I am with like friends or family.
0:40:50 And I think people would say that a lot.
0:40:53 Like this is a technique that they would bring not just into problems
0:40:56 that we had within the company, but that they’d bring home.
0:41:00 Because I mean, think about how many times like we fight with friends or partners
0:41:02 over, you know, how big of a deal was this thing?
0:41:05 But when you take it out of like right and wrong and she be punished or how do you make it?
0:41:09 Like, but when it’s just like, oh, shoot, like, how do we do this better?
0:41:11 How do I help right or wrong?
0:41:16 It builds, you know, closeness and intimacy and accountability.
0:41:18 And I think that’s something you can bring everywhere.
0:41:22 Do you have anything unique about your hiring process when you’re hiring people?
0:41:26 I can’t say that I was like naturally good at hiring people
0:41:32 is through a lot of like trial and error that I’ve learned to get better at, you know, at it.
0:41:39 The number one thing is really trying to have people actually do the position whatever it is.
0:41:42 It could if it’s a managerial position or a ground level position,
0:41:46 we will pay people to do like practice shifts or practice project
0:41:53 because talking is its own skill that has literally nothing to do with most people’s job performance.
0:41:57 And so I think we recognize that pretty early and the goal is to figure out
0:42:01 what is it like, you know, to actually work with you as as quickly as possible
0:42:04 and as inexpensively as possible.
0:42:07 Yeah, it’s sort of cheaper than going through that whole interview process
0:42:10 and then you go three months while you try to figure it out.
0:42:14 Man, if we just paid this person for two shifts, we could have figured this out a lot sooner.
0:42:20 And I think some are also like figuring out what are the things that are absolutely red flags
0:42:22 that you just won’t hire for.
0:42:27 Like for me, if someone is going to speak negatively about a former employer.
0:42:29 Honestly, I mean, I talk about this in the book.
0:42:33 I really think job interviewing is like so similar to dating in so many ways.
0:42:37 And just like if you show up to a date and someone is like a shit talking all their exes,
0:42:40 you know, all I’m thinking is like, when am I going to be one of these people
0:42:43 that they’re, you know, saying negative things about.
0:42:47 And so even though we all have employers or exes, we could say plenty of bad things about.
0:42:54 I think it’s just a really bad sign if someone is just saying that upfront and being vocal about it.
0:42:58 So that’s like something that is definitely a red flag I would would never hire for.
0:43:02 Something that we always try to be really clear about to you are we’re hiring for our values.
0:43:03 We’re also promoting based on our values.
0:43:05 We’re evaluating.
0:43:11 And so the point is like many jobs, they’re really only going to care about job performance.
0:43:16 And so we’re pretty clear that’s really only about 25% of what we’re evaluating on.
0:43:21 And so we’re also going to ask a lot about our values and how we think that you might be able to live them
0:43:28 and looking for examples of where someone has or hasn’t been able to do those things in former jobs.
0:43:33 The restaurant industry is known for a lot of sexual harassment happens.
0:43:36 You came up with a novel system to deal with that.
0:43:41 Can you walk us through when you recognized you needed to, to what the system is,
0:43:43 to the impact that it’s had outside of home room?
0:43:44 I would love to.
0:43:48 I think that’s actually something I’m really, really proud of that our team has done.
0:43:54 And I think honestly is a culmination of a lot of the systems and values that we’ve talked about here today.
0:43:57 What happened is a number of years ago,
0:44:04 I started getting this barrage of emails from female employees saying like emergency need to talk to you.
0:44:06 And I was terrified.
0:44:07 I was like, what’s happening?
0:44:14 But to my point, we had a lot of systems of that allowed people to be more open and more transparent
0:44:16 and not as hierarchical, right?
0:44:22 We held a meeting and it turned out that what they wanted to talk about is that one of them had been
0:44:28 sexually harassed in this really egregious way where a customer had stuck his hand up her shirt.
0:44:32 And like while she was serving the table, it was just crazy.
0:44:37 But it had sparked all the women to start sharing stories of like, oh, I have something like that.
0:44:38 I have something like that.
0:44:39 I have something like that.
0:44:42 I didn’t realize this was common until reading your book.
0:44:44 And I was like, oh my God, that’s insane.
0:44:47 It’s really common and not just in restaurants.
0:44:53 I mean, for lots of kinds of companies, but it’s particularly bad and like, you know, customer service.
0:44:58 I mean, it’s really like an epidemic and not just affecting, you know, women.
0:45:01 So yeah, they all started talking about it.
0:45:07 And I mean, I was pretty horrified because I thought, you know, here we are running this like utopian beautiful place to work.
0:45:14 And meanwhile, like people are having, you know, these like horrifying instance of sexual harassment that I didn’t even know about.
0:45:16 I mean, literally the first time hearing about it.
0:45:25 True to our values of collaboration, we decided to try to brainstorm like, how are we going to solve this?
0:45:30 Because interestingly, like I had actually kind of corporate law had practiced was labor and employment.
0:45:33 So I had, I don’t know, worked on these kinds of cases and stuff.
0:45:36 And I knew what was out there and there just really weren’t great systems.
0:45:41 We tried to, you know, a few different things that didn’t work, landed on something that did.
0:45:47 And it was this color coded system that we call the color code of conduct.
0:45:52 The idea was that what we were struggling with wasn’t that no one was reporting this,
0:45:56 but that actually it was being handled really differently by different kinds of managers.
0:46:04 And particularly, we had a lot of male managers that basically were thinking that certain things that were being reported didn’t sound that threatening to them.
0:46:06 You know, all of our experiences are different.
0:46:10 And maybe if something like this had happened to you as a man, you wouldn’t feel threatened by it.
0:46:12 But as a woman, it feels quite scary.
0:46:16 So what occurred to us is that we needed to come up with a system because everyone really liked our management team.
0:46:19 It wasn’t like we have all these like, you know, insensitive men working for us.
0:46:21 These are like great guys that they love.
0:46:25 They really loved working with otherwise, but felt weren’t able to really understand what was happening.
0:46:31 The way the system worked is just that every situation just has a color that is connected to it.
0:46:35 For instance, a yellow refers to just a bad vibe.
0:46:41 So let’s say a server is on the floor, they can come up to a manager and say, hey, I have a yellow at table one.
0:46:42 And then it’s the server’s choice.
0:46:49 They can ask the manager to just take over the table or they can keep it and just alert the managers up to them.
0:46:55 An orange is sort of like the next level up, which would be you have a bad vibe, but then an ambiguous comment.
0:46:57 So maybe something like, I like your shirt.
0:47:00 If, you know, a little kid says that to you, you’re not going to feel threatened.
0:47:06 But if someone who you feel like has been sort of leering at you and checking you out and giving you this weird, you know, weird vibes,
0:47:09 it might actually feel like they’re starting to come on to you or it might feel threatening.
0:47:17 So in that case, the staff member just goes up to the manager and says, hey, I have an orange at table two and the manager is required to just take over the table.
0:47:21 And a red is sort of the next level up, which is sexually explicit comment.
0:47:24 So like you look sexy in that shirt or touching.
0:47:28 And in that case, the staff member has to come up and say, hey, I have a red at table three.
0:47:31 And in that case, the manager is required to kick them out.
0:47:35 What’s so cool about the system is we started using it and we developed it.
0:47:40 Just we were like, we just need a fast way to deal with this on the floor, make sure everyone gets treated the same.
0:47:43 We don’t have to explain what’s happening at all the tables.
0:47:46 Like there’s going to be no judgment calls about is this serious?
0:47:47 Is this not serious?
0:47:48 There’s just a way to handle it.
0:47:55 It actually like dramatically reduced the red, the sort of highest level incidents.
0:48:01 And the reason is like almost no one just walks into a restaurant and just sticks their hand up someone’s shirt.
0:48:04 They walk in, they start checking that person out.
0:48:07 They start making some low level comments and then they escalate.
0:48:11 And it just prevented low level incidents from escalating.
0:48:12 How do we nip it in the bud?
0:48:13 Totally.
0:48:18 Yeah, because it just changes the power dynamic at, you know, a really low level.
0:48:21 And it was great because like customers don’t know we’re using it.
0:48:26 They don’t know we think that person’s creepy, like they just know they just got a new server.
0:48:31 And staff member, you know, everyone’s going to have a different definition of what feels threatening or bad to them.
0:48:32 And they don’t have to justify it.
0:48:34 They can just get help.
0:48:39 I wrote about it and it got picked up by the Washington Post and it became this like viral article.
0:48:47 I testified about it in front of the United States EEOC in Washington and it became adopted as a best practice by them.
0:48:54 So it is now currently used in like restaurants and bars literally all over the world and, you know, started in our little restaurant.
0:48:54 That’s crazy.
0:48:56 It’s such a big impact too.
0:49:03 And it feels empowering for the employees I would imagine because they’re not trying to rationalize or justify.
0:49:05 They’re just like, you know what, I got a creepy vibe.
0:49:06 I don’t want to serve this table.
0:49:07 You do it.
0:49:14 The reason that I’m so proud of that system is that it really, it was developed because of all those other values and systems.
0:49:26 And I think to me, it really illustrates like, I think we all have the ability and power to make tremendous difference truly like on a global scale if we want to.
0:49:35 And I think it’s just the power of getting groups of people together and creating the systems and structures that really allow them to get creative, to solve their own problems and to thrive.
0:49:42 And I think if every small business, you know, implemented some of the things that I read about my book, I’m excited to see like what, what could we accomplish?
0:49:44 What other things could we create change for?
0:49:52 I’m curious, as on the side, just because I like stats, but like what percentage of tables get like a yellow card?
0:49:53 It’s going to depend, right?
0:49:55 On the business, I’m sure.
0:50:06 But for us, this is not like, I’d say the system definitely gets used weekly, but not, not daily, you know, it’s pretty low.
0:50:11 I think when people hear about it, that’s their biggest fear is like, oh, what happens if someone just reports?
0:50:13 Every table is a yellow.
0:50:15 But I find people don’t, you know, don’t do that.
0:50:16 Yeah.
0:50:20 What went through your mind when you decided to sell HomeRoom?
0:50:22 At this point, you’re one of the most successful.
0:50:28 I mean, in terms of profitability, one of the most successful restaurants in the world on top of the world, right?
0:50:30 Like you’re making a lot of money.
0:50:33 Your employees, you’ve done well for the community.
0:50:35 You’ve done well for your employees.
0:50:39 You’ve created this system that’s now used all over the world for harassment.
0:50:41 You’ve had a huge impact.
0:50:42 Why sell?
0:50:45 Part of it was I had already been thinking to myself.
0:50:51 So I guess for one, I had received offers many, many, many times over the years to sell HomeRoom.
0:50:53 And I never even took a meeting with anyone.
0:50:54 Like I was just disinterested.
0:50:59 I had been a CEO running it for a decade at that point.
0:51:04 And I didn’t personally aspire to like turn it into a gigantic chain.
0:51:09 I wanted to create this beautiful place for people to work where we loved coming there, where it felt special,
0:51:11 where it was having an impact on the world.
0:51:15 And I think that original vision had been achieved.
0:51:20 And I was actually itching a little bit to be able to do like new projects.
0:51:22 Like I had wanted to write this book for a while.
0:51:30 I wanted to start getting our ideas into the broader world because my dream wasn’t just to keep growing HomeRoom into oblivion.
0:51:35 It was I liked having this sort of single restaurant.
0:51:42 So I think I had been already thinking, you know, what is this next chapter of my life going to look like?
0:51:48 Because this company already has leaders that can really run it every day and systems that I’m proud of that I really want to spread into the world.
0:51:53 That was sort of the broader vision and goal, grow the impact of all the great ideas that we’ve done.
0:51:59 But, you know, there was also really like personal parts of it that had nothing to do with all that.
0:52:02 You know, I just I was also getting divorced at the time.
0:52:09 The pandemic had hit and it was so unclear, you know, what the industry was going to look like in the long term.
0:52:16 Sort of like anything in life where just the like timing of a bunch of crucial pieces came together where I was like,
0:52:20 you know what, this is the right time to write a new chapter and stuff.
0:52:22 We don’t have a lot of stories like that, right?
0:52:25 Like when you think of a great movie or something, it’s about this singular thing.
0:52:30 Like, oh, I just wanted to open a great restaurant and they’re supposed to do that and like be happy forever.
0:52:33 But I think the truth is like dreams should evolve and change.
0:52:37 We don’t talk that much about like what happens when you actually like get to achieve your dream.
0:52:39 Do you just do that same thing forever?
0:52:42 You know, no, like it grows and it changes as it should.
0:52:44 I really think that that is what it was for me.
0:52:46 How long ago did you sell it?
0:52:47 Four years ago.
0:52:49 Did you go through any depression after?
0:52:50 Oh my God.
0:52:52 Yeah.
0:52:56 That was a dark moment in my life, honestly.
0:53:00 You know, for me, it felt like raising this child until they’re like 10 years old
0:53:06 and then giving it up for adoption to another family where I still get to like visit it, talk to them,
0:53:09 but I don’t get to be responsible for sort of what happens to them.
0:53:12 It’s really emotionally painful.
0:53:17 It was also a time when it was like, I think if the world had been normal
0:53:22 since I sold when it was, you know, during the pandemic, you know, I would have traveled a lot.
0:53:25 I would have just totally distracted myself, but there was nothing, you know,
0:53:29 like the world was a bleak, dark place in general and I couldn’t travel.
0:53:30 I couldn’t distract myself.
0:53:35 So it was really this moment of like, oh my God, like who am I without my company, my work?
0:53:37 Have I made a mistake?
0:53:41 I think it was a really, yeah, a sad, hard time.
0:53:45 How do you keep the company culture now that you’ve sold it?
0:53:50 I mean, a lot of times when entrepreneurs who find or like start create this company,
0:53:54 they have this great culture, it’s very personality driven by the entrepreneur.
0:53:59 And then when they sell, they have the best intentions about that’s going to continue.
0:54:01 How do you think about what happens in the future?
0:54:05 Yeah, I mean, maybe this is like not a very inspirational answer,
0:54:07 but it’s a pragmatic and true one.
0:54:11 I mean, I think I guess what I’d advise anyone who’s thinking of selling a company is,
0:54:16 I think I wanted to have the belief like I currently sit on the board of the company that purchased home room.
0:54:19 I got to advise, you know, their other brands.
0:54:23 I get to like, I think I was excited to have potentially a bigger impact.
0:54:29 But I do think the truth is, you know, the person who’s really on the ground running something is really
0:54:35 the most deeply responsible for the culture and all the people who are working alongside them, right?
0:54:37 Like that’s what creates the culture of that organization.
0:54:41 I think I wanted to believe that I could have a bigger impact from a different seat.
0:54:45 And I do in some ways, but I think if you’re going to sell your company,
0:54:48 you have to feel pretty comfortable with knowing that that culture is going to change.
0:54:50 When I think about, again, my original goal with starting home room,
0:54:55 it was to create a job that I and many other people would love and that would create a positive impact.
0:54:58 And we did that.
0:55:03 And I think, you know, everyone who worked there during the decade I was running it,
0:55:05 you know, many of them are still there.
0:55:07 Some have gone off to do their other things.
0:55:09 I got to go and have the time to write a book about it.
0:55:11 We’re sitting here right now.
0:55:17 I think that it was never about like calcifying that culture in one organization for the rest of time.
0:55:21 It was, how do we make work that’s worth doing for more people?
0:55:26 And I think to that end, I’m very proud to have sold and been able to write the book
0:55:29 and be able to influence more people, I think.
0:55:35 Why do you think same store sales or, you know, restaurant location sales are down for most restaurant changes?
0:55:40 Most restaurant brands, whether small or large, I mean, they’re all suffering through this.
0:55:43 You’re not, what do you think is the cause of this?
0:55:49 This is honestly one of the hardest times that I’ve seen in the restaurant industry in all the years I’ve been in it.
0:55:54 I think we’re sort of in a moment of reckoning and change.
0:55:56 Costs have gone up.
0:56:01 I think people are rethinking the meaning of work and what’s worth their time.
0:56:05 And most restaurants, like I said, are not inspiring places to work.
0:56:08 And so I think a lot of people have said, I don’t need to do this with my life.
0:56:14 So restaurants, you know, nationally are having really hard time staffing, really hard time making money.
0:56:19 Like the face of cities have changed in the face of like, you know, a lot of work going remote.
0:56:23 So I think it’s just a moment of like reconfiguration and change.
0:56:25 And I think all industries go through it.
0:56:30 And I think it’s just being particularly heartfelt in the restaurant industry right now.
0:56:36 There’s a lot to be learned from the people who are like creative and trying new things and experimenting with new things.
0:56:41 I think like the hardest moments are usually what give rise to sort of like lasting positive change
0:56:45 because only the best ideas sort of make it in the long run.
0:56:49 You said in your book that you manage for impact, not intent.
0:56:56 This idea of impact and intent is, I guess to my earlier point about like the best lessons you learn in business
0:56:59 you can take to like all of your, you know, relationships in your life.
0:57:01 I think intent and impact is huge.
0:57:05 A lot of people think intent is what matters.
0:57:08 But we would teach that actually it’s impact.
0:57:14 An example would be let’s say that I see someone walking down the street
0:57:18 and they have, you know, like a big belly and I’m like, oh my God, congratulations.
0:57:19 Like, when are you do?
0:57:20 And they’re like, I’m not pregnant.
0:57:22 That is just so deeply embarrassing.
0:57:24 My intent might have been really positive.
0:57:28 I might be trying to like make them feel good about themselves, congratulate them on something.
0:57:30 But the impact is super negative, right?
0:57:32 Like, turns out they’re not pregnant.
0:57:33 They now feel like embarrassed.
0:57:35 It’s a totally awkward moment between us.
0:57:37 Should I like not apologize to that person?
0:57:41 Because I meant something really positive with, you know, my compliment.
0:57:43 No, like, of course I should.
0:57:46 Like, I either hurt them or we had this awkward moment.
0:57:51 We would teach that all throughout the organization because I think most people really want to do good.
0:57:54 But sometimes we have a really, you know, negative impact.
0:57:59 I had a manager, he would go around and compliment people on their clothing.
0:58:01 He’d be like, cool hat, love your shirt.
0:58:05 You know, like he was just like very sort of enthusiastic, like puppy dog energy.
0:58:08 I do think he had like really, really positive intent.
0:58:14 But I had a staff member who came to me one day and was like, hey, this person told me that I have a nice smile.
0:58:17 And that like creeped me out and made me feel uncomfortable.
0:58:18 That makes sense.
0:58:22 If a customer had said it, we would have that would have been like an orange at that table, you know?
0:58:28 But also like that’s a really common like, you know, come on to women is like, oh, like nice smile.
0:58:32 I believe that that, you know, manager had a really positive intent to try to make her feel good,
0:58:36 but had a really negative impact where she felt like he was being creepy and like borderline, you know,
0:58:39 using a line that someone else might use to hit on her.
0:58:46 So we had a restorative conversation about it and talked about it and talked about why the intent doesn’t matter,
0:58:47 but the impact does.
0:58:50 And so then we just started talking about like, how could you have a better impact on people’s work?
0:58:53 It was to honestly not talk about their appearance.
0:58:58 Like, they don’t, no one cares what your manager thinks about your shirt or your hat, your smile, right?
0:59:00 Like, they want to know what you think about their work.
0:59:02 Tell them like, you did an amazing job with that table.
0:59:09 It helped him manage for like, he had this really positive intent that he could channel into more positive impact for the team.
0:59:14 As I was listening to that and the smile thing is a pretty like innocuous comment.
0:59:22 Like, I was thinking, oh, you know, what have, what if he made 50 people feel really good and better and happier about being work?
0:59:30 And then one person who, who didn’t like, how do you think through that in terms of, because the impact is also like, oh, I like it.
0:59:40 When you, I feel happier when somebody recognizes that I put extra attention into my uniform today or I found this hat at the vintage shop.
0:59:48 And you know, I searched for hours and like, I want to get noticed and I want to get some sort of like validation over that.
0:59:51 To your point, I mean, managing for impact is hard.
0:59:52 You have to ask yourself that question.
0:59:55 If you have 50 people are most going to love it.
0:59:59 If you, you know, compliment their shirt or their hat, are they not going to care?
1:00:01 Some percentage are going to get affected.
1:00:02 And then what’s that threshold, right?
1:00:07 Is it 50/50 or is it like 80/20 or 90/10?
1:00:09 Like, how do I determine?
1:00:14 So then I would say that we should then have a conversation about this concept of collective success.
1:00:20 And when we think about like, how to create the most good for the most number of employees, is that the right angle?
1:00:29 And I would say probably not because even if 49 love it and one hates it, my guess is 50/50 will like it if you compliment their work.
1:00:30 Right, right.
1:00:36 And so I think we’ll just get a better impact taking that same energy and tweaking it, you know, whatever 25 degrees.
1:00:37 Yeah, definitely.
1:00:40 You are a strong advocate for titles.
1:00:41 And I want to get this quote right.
1:00:46 You say, “Titles reflect how the world sees us, but more importantly, how we see ourselves.”
1:00:50 Yeah, I do think titles are incredibly important.
1:00:53 I think like most things I’ve realized are important.
1:01:00 I realized how important it was by sort of messing it up the first time and then learning over time sort of why it matters.
1:01:04 I guess I can illustrate that best just with, you know, my own journey with it.
1:01:11 I’m an owner of a small restaurant in the grand scheme of things as well as we do, it’s, you know, still just a singular business.
1:01:20 As I started gaining more prominence for, you know, our ideas about what we’re doing in the workplace, our sexual harassment, you know, system,
1:01:25 I started doing a lot more interviewing and I would always get asked like, “Okay, what’s your title?”
1:01:31 I was actually in conversation with this reporter from the New York Times and she’s like, “Okay, so are you the chef?”
1:01:32 And I was like, “Oh, no, no, no, I’m not a chef.”
1:01:37 After we got off the phone, I was like, “God, why don’t I consider myself a chef?”
1:01:44 Like I literally, I made all the recipes, I’ve published a cookbook, I own this restaurant.
1:01:50 I mean, like if I’m not a chef, like who the heck is one, you know, that’s just a bizarre thing to say.
1:01:54 But I had this vision in my head that a chef is someone who’s like a really, really serious cook.
1:01:57 Like they spent all their days in the kitchen and that wasn’t me.
1:02:00 It was similarly with CEO.
1:02:05 I thought of CEOs as like you needed to be the head of like some gigantic company.
1:02:10 You needed to have like a full stack of people, you know, C-level titles beneath you.
1:02:12 I just decided to start experimenting.
1:02:16 I was like, you know, what is it going to sound like in that New York Times interview
1:02:18 if I’m not a chef or I’m not a CEO?
1:02:24 Like I think I’m not going to get taken as seriously for my food or for my business ideas.
1:02:29 And so I just decided to actually just embrace those titles and see what happens.
1:02:34 I started speaking at conferences for CEOs.
1:02:37 There was like groups that I could not join previously
1:02:41 because I did not consider myself a CEO that I now could be part of.
1:02:45 That created a lot of like, you know, mentorship opportunities for me.
1:02:46 But it just really expanded my network.
1:02:48 It expanded my reach.
1:02:52 It really affected how seriously people took me.
1:02:54 So I started encouraging everyone within the company.
1:02:57 We started really just like leveling up, you know, everyone’s titles.
1:03:03 And there’s so much pride associated with having like a title that is like more serious
1:03:05 and you start, you know, acting like that.
1:03:09 Like someone who cooks versus someone who’s a chef.
1:03:14 That is a very different level that you’re going to think about cooking and food.
1:03:17 Someone who is a leader and someone who is a CEO.
1:03:18 Same deal.
1:03:23 We talked a lot about the external impact in terms of like, oh, maybe the Times reporter takes me seriously.
1:03:25 Maybe somebody reading it is going to take it seriously.
1:03:27 I’m going to have a bigger impact outside.
1:03:29 But what about the impact inside?
1:03:35 So you just touched on it briefly, but how did it change you to like recognize yourself that way?
1:03:40 Just as it changes a cook, maybe to a chef and the pride that you take in your work.
1:03:45 If you’re like someone who like likes to ride bicycles versus you’re a cyclist
1:03:48 or like someone who like, you know, sort of dicks around in the ocean or a surfer.
1:03:53 You know, I do think that there is tremendous power in saying something about yourself
1:03:57 and saying, no, I am a surfer.
1:03:58 I am a CEO.
1:03:59 I am a chef.
1:04:02 I just found that I felt a lot more pride in myself.
1:04:06 You know, those identities meant something, not just to the external world.
1:04:09 But to me, I found them personally empowering.
1:04:13 Something that when I would get like a little lost, I could come back to
1:04:15 and think like, what does it mean to be this?
1:04:19 You know, I often say the most powerful story in the world is the one that we tell ourselves.
1:04:24 And if you tell yourself, I am a runner.
1:04:29 It makes it a lot easier to go for a run than if you think of yourself as a casual jogger.
1:04:30 A hundred percent.
1:04:34 If you are a runner, you’re going to create a training schedule for yourself.
1:04:37 You’re going to start like, you know, as part of your identity.
1:04:38 Totally.
1:04:42 And so if you don’t do it for a few weeks, it’s going to matter to you.
1:04:43 You know, you’re going to be in better shape.
1:04:45 You’re going to have more pride in what you do.
1:04:46 Your times are going to be better.
1:04:48 Like that’s a different thing.
1:04:49 What is success for you?
1:04:56 Success for me is I think just having meaningful relationships in my life,
1:05:03 whether it’s with work, with family and creating ways for other people to do the same.
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