Olive Garden’s Recipe For Success

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Olive Garden keeps serving up good news for its investors.

This week, the restaurant chain posted yet another quarter of revenue and earnings growth that outpaced analyst forecasts.

It’s been a remarkable turnaround for Olive Garden, perhaps best illustrated by the stock performance of parent company Darden Restaurants.  In the past five years, Darden’s shares have outperformed the Dow Jones Restaurant & Bars Market Index by nearly 50 percentage points.

The best part of this story, though, lies in what sparked many of the improvements that have helped fuel Olive Garden’s resurgence.

It was back in October 2014 that activist investor Starboard Value ousted Darden’s entire Board of Directors and began to engineer the Olive Garden turnaround.  The newly installed Directors, hand-picked by Starboard, probably never imagined where their new role would take them…

Straight to the kitchen.

That’s right – the company’s new CEO, and everyone on the Board of Directors, spent a night working in an Olive Garden restaurant.  They spent time greeting guests, serving food, and yes, even preparing meals in the kitchen.

CEO Jeffrey Smith explained it like this, in a 2015 interview with Bloomberg News:  “It was an amazing experience because we felt, as board members, how are we going to make good decisions in the boardroom without really knowing what’s going on in the restaurants?”

He added that getting into the restaurants to see how things operated was “about making sure we’re giving [employees] the tools so that they can do the best job succeeding for us, for everyone.”

Kudos to Starboard for arranging this in-the-field exercise for its top leadership.

At most companies, there’s usually a huge chasm of perception between the corner office and the front-line. Executives have views about what’s going on in the trenches, while employees have views about what’s going on in the C-suite.

Both parties’ views about the other are rarely entirely accurate.

An immersion experience, like that engineered by Starboard, helps break down the walls between these two constituencies.

Executives get an unfiltered view of what it feels like to be a customer (or an employee who serves them).  Employees, in turn, get to educate their leaders about what really matters on the front-line.  And both parties get a chance to see one another not as stereotypes (a naive employee or a cold-hearted executive), but as real people.

The ideas that emerge from such exercises, and the trust that it cultivates, can be quite powerful.

Case in point — one of the new menu items that Olive Garden executives cite as a key driver behind the company’s success are its breadstick sandwiches, a creation born from the chain’s signature chewy breadsticks which accompany every meal.

Oh, and the idea for the new breadstick sandwiches, where did that come from?  An Olive Garden restaurant manager.

Just more proof that getting executives out of their offices and onto the front-line, listening to customers and staff, is a true recipe for success – in any business.

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