Learning from a Restaurant Business Studied by Harvard Students

Two years ago we wrote here about Pal’s Business Excellence Institute (Pal’s BEI) to highlight the role of the Kingsport, Tennessee-based small business as a training offshoot of the Baldrige Award-winning restaurant chain Pal’s Sudden Service.  Launched 17 years ago by Pal’s Sudden Service CEO Thom Crosby and David McClaskey, Pal’s BEI is a “systematic mechanism to convey the essence of performance excellence for leaders of all types of businesses,” said McClaskey, who continues to serve as president of Pal’s BEI today. The mission of Pal’s BEI is to “inspire, enable, and support leaders to create extraordinary organizations through operational excellence.”

“Pal’s Sudden Service has 400 percent more repeat business than well-known global competitors and a rate of employee turnover that is half the average for the restaurant industry,” McClaskey also said recently. “This level of performance was obtained and sustained by using the Baldrige Criteria for Performance Excellence [part of the Baldrige Excellence Framework]. We wanted to have a way for other organizations to learn about Pal’s Sudden Service’s world-class performance in a way that enabled them to readily apply their learning to their organizations.”

Following are questions and answers from my recent interview of McClaskey and David Jones, vice president of Pal’s BEI.
 

1. In 2015, you said you were providing training for more than 700 customers from around the world at your Tennessee facility annually and reaching thousands more through roles as conference speakers and workshop leaders. At that time, you also stated that about half of your trainees were from restaurants and the other half represented wide-ranging sectors and sizes of organizations. Is that still the case?

McClaskey: Today the client base is about 60 percent from restaurants, with 40 percent from every other kind of organization, from schools and health care organizations to doctors’ practices. In addition, Pal’s Sudden Service has grown to operate 29 stores in Tennessee as well as southwestern Virginia. It amazes people that Pal’s would have an institute that mainly trains leaders outside of Pal’s Sudden Service on the business’s world-class performance-excellence practices—and that 40 percent of all whom we train are outside the restaurant industry.

It shows how universal the principles incorporated within the Baldrige framework are. Ninety percent of Pal’s BEI training class participants rate our training “5” (top box) on a scale of 1 to 5 in post-training evaluations, with the rest giving ratings of “4.” … Although we are getting a 4.9 average satisfaction score (out of a maximum of 5.0), we are striving to have everybody give us the top-box rating. That’s what the Baldrige continuous-improvement process instills in us: … We are never going to stop trying to get 100 percent satisfaction for every class.

2. Two years ago, you also said that since 2012, 100 percent of those that attended your training had used in their own organizations one or more practices they learned in your classes within four weeks.   

McClaskey: That’s still true today.

Jones: The most frequently implemented takeaway from our classes is Pal’s new-employee orientation process. What we hear from folks is that it creates a much more positive workplace culture, and they see the result within 30 days.

3. Your organization received the top-level award for excellence from the Tennessee Center for Performance Excellence (TNCPE) in 2015, an achievement based on an evaluation against the Baldrige Criteria for Performance Excellence. Would you please describe how your organization has benefited both from using the Baldrige framework and participating in the TNCPE assessment process?

McClaskey: There have been 24 winners in 24 years for TNCPE’s top-level award. We were by far the smallest company to have won it, with only three team members. The next-smallest company had 51 employees. That shows that a business of any size can benefit from using the Baldrige framework. 

There are two major benefits of using the Baldrige framework and assessment process:

The first is that whole idea of the mission, vision, and values. … It helps us stay laser-focused on what’s most important for us: creating classes and consulting that result in attendees using what they learned to create value for their own customers.

The second major benefit is having a process for continually and systematically improving the organization. We are always using Plan, Do, Check, Act (PDCA) process improvement methodology to check that everything we do is meeting the objectives 100 percent of the time.

If there’s any gap, we close the gap using the PDCA process. This process provides a relentless engine. … to keep providing huge value in running the business every day.
 

4. Pal’s Sudden Service and Pal’s BEI have together been the subject of a case study for Harvard Business School, and innovations of the restaurant business have garnered the attention of national media (e.g., see this video clip of an interview with CEO Crosby last September). Please share more information about that.

McClaskey: In early 2016, three Harvard University professors spent a day and half at Pal’s Sudden Service, touring multiple stores, talking to senior leaders and employees at every level, and attending part of our “Achieving World-Class Results” (AWCR) class, which is open to the public and taught twice per month at Pal’s BEI. The visit was arranged around days the AWCR class was being taught. It helped to give them an integrated picture of Pal’s Sudden Service’s world-class systems.

The professors then wrote a case study on Pal’s, and last August the Harvard School of Business began using it in its curriculum. What sparked the professors’ interest was reading about Pal’s Sudden Service on the Harvard Business Review blog.

Jones: That blog [https://hbr.org/2016/01/how-one-fast-food-chain-keeps-its-turnover-rates-absurdly-low/] was the most-read Harvard University blog ever for the online site.

5. What other key points would you like to share?

Jones: Our training is very relatable because the business of Pal’s Sudden Service is hamburgers and hotdogs. … By seeing role-model practices at work in a business they can understand, they can more easily apply what they learn in their organizations. We aren’t teaching theory; our classes always include tours for participants to observe best practices firsthand and have conversations with the leaders of the restaurant business.

McClaskey: We don’t teach anything that Pal’s Sudden Service doesn’t practice. This is not a theory class but, rather, a proven practice class. Clients get to see an organization that is highly rated in all seven categories of the Baldrige Criteria. That really turns them on and engages them in the process. They get a really good, holistic picture of what Baldrige is. It is such a beautiful thing to see all seven Baldrige categories integrated and firing at the same time.

A lot of people are trying to figure out how to inspire and engage their organization’s leaders to use the Baldrige framework. Our training is a mechanism for getting leaders to pursue use of the Baldrige framework because they see the huge business impact.

Jones: Baldrige is still very much in use by Pal’s Sudden Service. Thom Crosby uses the Baldrige framework every year to conduct an assessment to keep the organization performing at world-class levels.