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No kaizen here: Benihana of Tokyo case study

29 Jan

The heyday of the Benihana of Tokyo restaurant chain was the late 1970s and early 1980s. Back then, Benihana was glamorous, exotic and chi-chi. How do I know? I grew up in San Francisco, and precisely recall my experiences at the original location in that city, the chain’s fourth restaurant. The distinctive, finely crafted exterior. The tiled eaves. Its semi-cryptic Asian sign. Its heavy wooden front door. The dim, alluring interior. The private dining rooms with sliding Shoji screens. During its glory days, the era when this case study was written, Benihana was really something. I’ll never forget it.

You can still see a few telltale architectural details by searching for 740 Taylor Street on Google Maps Street View. The building was long ago converted into classrooms for the Academy of Art University, but it’s still distinctly Japonesque. The current Benihana in San Francisco was moved several miles to the West, to Japantown. I’ve never been to the newer version, but I’m fairly certain this newer outpost was not assembled by an imported crew of Japanese carpenters reassembling authentic materials from Japan.
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I have several memories of eating at Benihana in my late pre-adulthood, circa the early ‘80s. Some involved Japanese businessmen. My father worked in the computer industry, and commuted to a suburb called Santa Clara – it wasn’t even called Silicon Valley then – and occasionally we socialized as a family with his business contacts from Japan. Another memory involves a family celebration and my now long-dead grandmother. And the most specific memory was having dinner at Benihana with some guy whose name I can’t remember before his Saint Ignatius High School senior prom. We were served alcohol with dinner – score!

Here’s another thing I know about the restaurant industry in San Francisco in the late ‘70s: Don’t do it. During those Benihana halcyon days, my mother owned a public relations business in San Francisco. Several of her major clients were prominent restaurants of the day: the Graf Zeppelin in Ghirardelli Square, MacArthur Park. She also opened all the original Chuck E. Cheese Pizza Time Theaters, as Nolan Bushnell, the founder of Atari, was also her client. If there’s one mantra my mother drilled into my head, it’s that there’s no faster way to lose your shirt than to go into the restaurant business. Even back then, the margins were slender to none.

I can’t help but bring my childhood into this 30-plus-year-old case study. Geez, I even remember the Benihana of Tokyo print ads. Why am I including my recollections in a supply-chain analysis paper? Because this case study calls up my memories of what Benihana was once like, and its strengths – and also uncovers the weaknesses I can easily spot now from a supply-chain perspective. Any credible supply-chain consultant would visit his client, and if possible, experience the service for himself before completing a detailed analysis for the client. Knowing what I know about Benihana’s history, it would be unprofessional to exclude my observations.

Based on those observations, I can’t envision the restaurant as effective or efficient, at least based on what’s in the case study. I can’t evaluate the success, because all I see in the case study is the expense. Its operations obviously aren’t efficient. And since we don’t have complete financials, we can’t truly say it’s effective either. Since I know a little of the real company’s history – including what a showboater Rocky Aoki was – my analysis is colored, dyed bright red if you will, by my real-world knowledge.

We even get a little Rocky Aoki showmanship in the financials included with this case study. We don’t get profit figures – we get gross revenues. The Benihana budget for advertising is 8 to 10 percent of gross sales – way higher than the typical restaurant according to the operating statistics in Exhibit 1. And Benihana’s rents are quoted as 5 to 7 percent of sales, which is much higher than the standard 4 to 5 percent of fixed operating expenses.

In reading the case study, I identified four major supply-chain issues:

  • The chefs, staff and management imported from Japan
  • The restaurant construction and décor, also imported from Japan
  • The floor plans and table layout
  • The table turns

Chefs, staff and management imported from Japan

Rocky says in the case study “One of the things I learned in my analysis was that the number one problem of the restaurant industry in the United States is the availability and cost of labor.” Umm, something tells me that recruiting highly trained chefs in Japan, teaching them English for six months and then importing them to the U.S. is a lot more expensive and a lot less readily available than labor in this country.

The basic linear programming doesn’t work out favorably. Linear programming is a technique used to allocate limited resources among competing demands in an optimal way. Imported Japanese chefs are obviously a limited resource, especially since in the original way Rocky set up his business they had to return to Japan eventually. If the goal is to maximize profit, it’s easy to envision that a typical Benihana restaurant, which requires six to eight Japanese chefs, is going to be much less profitable than a restaurant which keeps its cooks in the kitchen and can probably just hire one imported chef from Japan who can then train the other staff needed.

The company’s VP of operations admits one of its biggest constraints is staff, especially since “each unit requires approximately 30 people who are all Oriental.” In addition to importing many members of the team, Benihana at the time was also offering the same “obligations” to staff as companies in Japan would, further decreasing effectiveness in the U.S. market.

The restaurant construction and décor

The most inefficient practice has got to be the construction and décor. At the time of the case study, the walls, ceilings, beams and other materials for the 16 restaurants were all gathered in Japan. Further compounding the expense, they were reassembled and constructed in the U.S. by Japanese craftsmen overseen by American unionized construction workers.

Now, going back to my childhood experiences, I have to admit that San Francisco’s Benihana was a standout, at least to a teenager, in a city known for its distinctive restaurants. But couldn’t Benihana just copy the décor from the first few restaurants – which were located in big cities like New York and Chicago, where the clientele is more sophisticated and harder to please – to all the succeeding restaurants? Did it all really have to be imported from Japan, with extremely expensive Japanese construction labor imported to go along with it? Couldn’t they just find a clever architect and a talented builder and copy it? The average customer would never know the difference. The company’s own data shows the average customer is NOT from Japan.

Much of the case study focuses on the company’s prospects for growth. At the time of the case study, the company could only open five units a year, because that’s as fast as the two crews of Japanese carpenters could work!

The floor plans and table layout

Rocky describes 22 percent of a Benihana operation as back of house, while the standard restaurant requires 30 percent. First of all, eight percent more front-of-the-house space is not radically different from the norm he cites. And when you require a lot more intensive staffing to serve that front-of-the-house crowd, I fail to see where there is any efficiency with that model.

He says he “eliminated the need for a conventional kitchen,” but according to the floorplan, well, he still has a regular kitchen with regular kitchen equipment, along with 14 mini-kitchens with stoves! Just in fuel consumption alone that will cost more, especially since the chef has to turn stoves on and off all night, versus running continuously in a regular kitchen.

Each table accommodates eight diners, with a chef-and-waitress team to serve every two tables. Most restaurants don’t have a chef, or a waitress, who serve only two tables at a time. That seems like an extremely high, extremely inefficient ratio. In a regular restaurant, one non-Japanese, non-imported chef, along with prep workers, might serve a whole restaurant, and a waitress might serve four to five tables simultaneously.

The table turns

What I remember most about Benihana was not the food, but the experience. And the type of occasions I ate there – special guests from out of town, family celebrations, proms – bore out that Benihana is experiential dining, not ordinary dining. I’m simply not buying that the average turnover at a table was an hour, as stated in the case study. First, due to the style of cooking, all the guests have to be seated together. So if you’re serving two parties of four at one table, you have to wait until all the guests have arrived until they can be seated. And people tend to talk more in this family-style arrangement, and drink more, and linger.

Second, when you are limited to tables of eight, you limit the number of turns you can perform in one night. Turns are an extremely important aspect of the restaurant business – I learned this from my mother. A turn is the number of times you can turn a table over in a night with new guests. The more table turns, the more revenue. Obviously, if you have table turns for alternating numbers – like two, or four, or six, or eight – over the course of an evening, all occurring at different times, you can generate a lot more revenue than if your operation is limited to groups of eight which can be seated only at limited time intervals. This could also be readily measured and evaluated with linear programming.

Seating guests in tables of eight also brings up an obvious customer service issue: What happens when one party of four has arrived, but the other has not? Now, the staff has to juggle to replace them quickly, so the table can be seated together and revenue can be generated. This is not a problem in ordinary restaurants, or even in family-style restaurants like Louis’ Basque Corner, simply because the food is not custom prepared at the table by the chef.

There’s also the related issue of job design for the chefs. In a regular restaurant, a chef keeps cooking until it’s time for a break. At Benihana, there is a lost opportunity in cooking time as a chef closes down and says goodnight to one table, and then has to move on to the next table.

What does hold up

One area of Rocky’s stated efficiency holds up: the menu. Reducing the menu to three basic, easily cooked entrees certainly eliminates waste, and allows Benihana to negotiate better agreements with suppliers. The limited menu keeps inventory low and reduces costs of inventory management.

Conclusion

As a model of kaizen, as a model of continuous process improvement, Benihana fails. If the company was about kaizen, it would have realized early on that many of its processes were inefficient and wasteful. Benihana’s success was due to clever advertising and savvy promotion by Rocky Aoki, who was known for wacky stunts like having a hot tub in his Rolls-Royce and suing four of his seven children.[1] Rocky’s extensive quotes in the case study paint him as a visionary, not an operations or numbers guy. Yes, Rocky eliminated some food waste, but he created a lot of other waste in his operations and supply chain. It’s straightforward to deduce that the care and expense that went into the old San Francisco restaurant I recall fondly simply couldn’t be replicated past more than a handful of additional restaurants.

Benihana of Tokyo is in the entertainment business, not the restaurant business. That’s the lens through which Benihana should have been evaluated: it’s treated as a restaurant case study, not an entertainment case study. Some of the Benihana practices which make little sense in the restaurant business – high advertising costs; expensive, lavish “sets;” rarified, imported talent – make perfect business sense in the entertainment industry. We should be comparing it to those supply-chain norms, not the ones supplied.


[1] Read more about the interesting life of Rocky Aoki in a New York magazine profile, Rocky’s Family Horror Show

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Five readings to shape your management thinking

18 May

The spring semester, my first in the MBA program, is over — a rich time of learning. It was also rich in reading material, especially in Management and Organizational Science. I have an almost three-inch-high stack of paper to remember the class, with more than 368 pages of case studies, academic articles and news stories. (Not counting the textbook readings.)

When new (or familiar) management problems arise in my work life, I plan to seek out the wisdom of these readings, so I catalogued this treasure trove in a binder for future reference. I decided to create a Top Five most-useful/most-meaningful/most-interesting list while I was at it. You can find links to the original articles (sometimes for a fee) in the posts:

  1. Get Rid of the Performance Review! Samuel A. Culbert, a management professor at UCLA, is on a mission to revamp the performance review, with a book on the subject which came out in April.
  2. Case Study: Compensation and Performance Evaluation at Arrow Electronics. I especially loved the case studies. It was really hard to pick only one, but this one really got my ire up.
  3. Strategies of Effective New Product Team Leaders. If you need to build or rebuild a team, this article provides practical, concrete strategies.
  4. Evidence-Based Management. I titled my blog post My No. 1 Top Hit. It still stands. I’m now a huge Bob Sutton/Jeffrey Pfeffer fan.
  5. The Dean’s Disease: How the Darker Side of Power Manifests Itself in the Office of Dean. While this article may appear at first glance to narrowly focus on academia, it’s broadly applicable to any organization.

Five more readings which almost made my list:

  1. “To a United Pilot, The Friendly Skies Are a Point of Pride; Capt. Flanagan Goes to Bat For His Harried Passengers; Still, Some Online Skeptics.”
  2. Good to Great, or Just Good?
  3. “For Lt. Withers, Act of Mercy Has Unexpected Sequel: U.S. Officer Broke the Rules To Let His Men Take In Young Dachau Survivor.”
  4. The Men’s Warehouse: Success in a Declining Industry
  5. Treadway Tire Company: Job Dissatisfaction and High Turnover at the Lima Plant

The acrid aroma of burning rubber

26 Apr

I’m overwhelmed with a virtual stinky rubber smell just reading this Harvard Business brief case, Treadway Tire Company: Job Dissatisfaction and High Turnover at the Lima Plant. The phantom smell is symptomatic of the problems at the plant, which are multiple. Human Resources Director Ashley Wall needs to identify the root causes of line foreman turnover, and present a plan to resolve it. Stepping into Ashley’s rubber-soled work boots, here’s what I identified as the root causes:

  • Lack of training and preparation for new line foremen
  • Weak support from their superiors: general supervisors and area managers
  • Lack of firing authority/ability to impact union grievances
  • Burden of 12-hour shifts
  • Too many roles for line foreman/too many targets to meet
  • Apparent unresponsiveness of other managers – why is equipment not working at beginning of a shift?
  • Failure of supervisors/managers to act upon line foremen’s requests/suggestions
  • More effort expended on testing potential hires than training actual hires
  • High level of specialty knowledge required

Here’s a mini-breakdown of line foreman turnover by category:

  • Overall turnover = 46%. Almost half leave within one-year period.
  • External hires = a whopping 75% turnover! Half leave voluntarily, half involuntarily.
  • Internal hires = 40%. However, 62.5% of these leave Treadway involuntarily. Meaning that more than three-fifths of employees who were successful enough to get promoted get fired within a year? This points to major systemic problems, probably correlating to issues above.
  • Transfers = 50%. This could be really, really concerning. Half of the transfers from within Treadway leave? However, the sample size is small – only 2 – so this is one is least concerning of the three. However, it should be assessed again using more data.

So how should Ashley plan to address the issues and lower line-foreman turnover? She might want to explore the following in her plan:

  • A detailed budget analysis. The budget has been cut, leaving no money for training. But what is the cost of constantly hiring? Develop a variety of forecasts to show that hiring constantly to account for turnover rate costs more than training would. Forecast losses in productivity, increased time devoted to union matters, increased time for more FLT testing, etc. While only a hypothesis at this point, all this hiring has to cost more than training. Develop the data to prove it.
  • External or college hires are the MOST likely to fail. Turnover is 75 percent within one year. However, it’s important to continue to bring in college-educated potential managers. Propose a temporary moratorium on specifically recruiting external line foremen. Presumably, it costs more to recruit these people as well. Once internal problems are alleviated, the external program could begin again.
  • Focus training on general supervisors/area managers FIRST. These people seem to create the greatest impediments, are the least responsive, and have the most ingrained behavior. Make them share in all targets the line foremen have: We succeed or fail as team. Change needs to come from the top down. Focus on this group heavily first, then roll out …
  • Training for line foremen. Follow Ashley’s original training outline, and add modules in specialty knowledge. Continue sporadic specialty knowledge sessions throughout the year.
  • Review union grievance processes. See if there are ways line foreman can be involved in follow-up and firing decisions.
  • Consider shift adjustments. There were several references to 12-hour shifts causing illness as well as lateness. Twelve-hour shifts work great for some people – they like three days off – and not for others. Perhaps employees could have the option of whether to work 12-, 10- or 8-hour shifts. This keeps costs down and factory running 24/7, but also gives employees leeway. This type of scheduling option is commonly used in acute hospitals, which have roughly the same scheduling issues.
  • Consider giving hourly staff more say. Perhaps they can self-schedule, which would relieve line foreman. (This technique is also used in hospitals.) As Jürgen Dormann of ABB recommends, ask hourly employees for suggestions on scheduling, productivity, broken equipment and other issues. This could also lower the number of grievances over time and help foment better management/union relations.

By George, I’m impressed

21 Apr

It’s funny to consider my reactions to these cases. Recently, we read about Nordstrom, a high-end retailer with beautiful goods. After learning about its practices and how the company treats employees, I came to the conclusion that I wouldn’t want to work there. (Although I’m not in retail so it’s fairly unlikely.) And then we read about The Men’s Warehouse, an off-price men’s retailer, and I am thoroughly impressed. My only previous experience with the company is seeing the George Zimmer commercials, and being aware of the Reno store, but that’s it. And I came to the conclusion I would want to work there, that I would actually be excited to work there. (Although I’m not in retail so it’s fairly unlikely.)

What is so appealing about a men’s clothing retailer? Because it’s not about the clothing, it’s about the culture and the values, and embodying them as managers. George Zimmer has it absolutely correct: If you want your employees to treat customers well, you have to treat the employees well first. You have to value them.

Like my former boss, Lynn Atcheson (who seems to come up again and again on my blog), Zimmer not only espouses servant leadership, but also models it. I was shocked at Zimmer’s 1996 salary as chairman for the company he founded: $420,000. While that’s high compared to a wardrobe consultant’s salary, it’s modest for a chairman, even when adjusted to 2010 dollars. Like Lynn, Zimmer knows how important it is for management to “walk the talk” (an expression I actually learned from her). When I worked for Washoe Med, bonuses were not typical, and only went to the senior management team. When Lynn received her bonus, she shared it with each of us. Because of course, as she recognized, she would not be receiving the bonus without our efforts. How many leaders do you know who would do that? Zimmer has the same idea. He essentially told his compensation committee he didn’t need more salary. (And after all, he does have $100 million in stock. But many leaders don’t let that stop them from asking for more.)

Compare Zimmer’s salary with the disgusting pay package that the venal chairman and CEO of Abercrombie  & Fitch received in 2008. He also happened to be named one of the five Highest Paid Worst Performers of 2008.

My husband is an academic, so he never wears suits. So it was interesting to ask him if he’d ever shopped at The Men’s Warehouse. He said “Yes, I bought my blue blazer there” – which he only wears to one or two academic conferences a year, one of only two formal jackets he owns. So I asked him what he thought of his service experience there, which occurred almost 10 years ago. I fully expected he wouldn’t remember, given it was so long ago. And he unhesitatingly and enthusiastically responded “Excellent!”

Best validation I can think of for the veracity of this case study.*

* 2010 update: The Men’s Warehouse continued to grow its revenues over the past five years. However, in FY2009, revenues were down by 4 percent – given the economy, no surprise whatsoever. It expects to have single-digit profits in Q1 2010. Many of the people mentioned in the 13-year-old case are still with the company, including George Zimmer and Charlie Bresler.

Robin the Rabbit

14 Apr

Assumptions without evidence are dangerous, as outlined in the HBR Case Study The Layoff . Robin Astrigo, CEO of his family’s namesake company, leaps to the assumption, based on ONE quarterly earnings call, that he needs to lay off employees. His leadership team, based on Robin’s dictate, jumps to the same conclusion that yes, layoffs are the only option, and fails to adequately, soundly and rationally assess alternatives. Strategy, and a long-term vision, are both sorely lacking.

Robin’s emotional reaction to the earnings call – described as “excruciating” – appears to be dictating his conclusions. He also seems to live in fear of disappointing his dead father, the company founder, while not factoring in that maybe business conditions are different than in Dad’s day. Perhaps the company wasn’t even publicly held then.

The case says that Astrigo profits dropped by double digits – serious, yes, but the company is still profitable and has plenty of cash. We’re talking about one quarter’s earnings here, and he’s holding a drastic senior leadership meeting at 4 p.m. that day? If the situation is really that dire, the company should be looking at a long-term strategy to dig out, over a period of many quarters or even years. Heck, if it’s that dire, Robin should have started that process BEFORE the call. Instead, he’s just chasing the next earnings call.

There’s another investor-relations possibility why the earnings call was brutal – Wall Street doesn’t like surprises. It’s possible, although not detailed in the case, that Robin has not been forthright with analysts all along about what the company is facing, or giving sound earnings guidance, and therefore is now taking the hit.

Perhaps Robin needs to learn to cultivate Wall Street a little better. As Laurence J. Stybel and Maryanne Peabody point out in their analysis of this case, he should focus on speaking to long-term shareholders, à la McDonald’s. Rather than focus on the quarterly call, which is almost always bound to bring out a naysayer or two, Robin should focus on telling the company’s story on his own terms. One way to do that is to develop a well-honed, well-tested thoughtful strategy first, and then share it with the market via an analyst day or other meeting. He should also try to get himself scheduled as a speaker at as many investor conferences as possible. That way, Robin gets to tell the story of what the company faces on his OWN terms, in less emotional, less combative settings, and also helps adjust Wall Street’s expectations over the next few quarters.

Robin actually seems quite directionless and spineless. He worries about “what the board would think,” and what Daddy would think from beyond the grave. He fails to ask his senior-management team to question his logic or develop other alternatives. His formation of teams of two is a bad idea: that allows a little too much coziness in private dining rooms and not enough questioning. When someone like Marzita Vasquez rightfully questions the company’s strategy, it wouldn’t have been so easy for Bob Slater to shoot her down in a group of three or more. What are the odds Marzita will bring this up again in the larger group setting? With the exception of Vasquez, and non-senior leadership member Sushil Bhatia, Robin’s leadership team comes across as self-interested and simplistic – certainly not servant leaders.

Jürgen Dormann, not surprisingly, got it exactly right in the Case Commentary. Dormann, a real-life chairman and CEO, faced a similar situation at ABB – actually, a much direr situation than Astrigo. Dormann focused on consolidating leadership at the board level, shaking up the executive committee, opening up communication and asking for advice from experts – the employees of the company. Best of all, Dormann espouses servant leadership – Robin must model humility. Instead, he’s running like the proverbial scared rabbit.

Real leaders ask questions

12 Apr

Whoa! What a surprise. There they are in today’s reading — what I call The Lynn Review Questions:

  • How are you doing?
  • What are you learning?
  • What are your goals?
  • How can I help you?

My former boss, Lynn S. Atcheson, met with each of her staff several times a year to review the answers to these questions. It was intended as a status report on our progress toward the annual performance review. I valued these questions and the dialogue they opened up so much that I later used them with my own direct reports. I’ve even kept the list on my Palm for almost 10 years!

However, I was missing was the underlying infrastructure that goes along with the questions, as detailed in Stephen R. Covey’s article New Wine, Old Bottles. I always knew Lynn was a student of leadership, and she made it clear she did not originate the questions, but I never knew the source.

Lynn’s use of the questions went along with how our performance agreements were structured: We were the “experts” in our individual specialty areas. Lynn provided guidelines, and then it was up to each one of us to decide how the work was to be done. When we ran into tough decisions, we knew she was available to help.

I’m presuming this December 1994 Executive Excellence article is an excerpt from one of Covey’s books – perhaps Principle-Centered Leadership or Servant Leadership: A Journey into the Nature of Legitimate Power and Greatness. While this article outlines the general principles of servant leadership, a more detailed exploration would be helpful. For example, one of Covey’s three steps to transformation is “Build a new relationship.” To do that, you have to have trust. But this article doesn’t explain how to build relationship of trust – although I realize there’s no magic formula – or, more challengingly, how to resuscitate relationships where trust has been broken. Perhaps it’s covered in his books.

Covey recommends setting up performance agreements and becoming a source of help, à la Lynn. This is difficult for most managers to pull off – Lynn is a rarity. In my experience, most managers struggle with the day-to-day interactions more, and tend to fall into old judging patterns without even realizing it. Me included.

A related Wall Street Journal article, Good Leadership Requires Executives to Put Themselves Last, also skimps on the details. The point of the article: Corporations shouldn’t assume that strong governance principles are enough. The actions of leaders matter more. Michael Leven’s story is compelling, but I wish the article were longer with more exploration of practices and principles for leaders – although perhaps The Dean’s Disease could suffice. With a shorter article, sadly most of the target audience will fail to recognize themselves and the need for change.

Embodiments of leadership

7 Apr

A common business bromide is “Management is doing what’s right. Leadership is doing the right thing.” Its embodiment is a 2003 Wall Street Journal article, “For Lt. Withers, Act of Mercy Has Unexpected Sequel: U.S. Officer Broke the Rules To Let His Men Take In Young Dachau Survivor.” For Lt. John Withers, doing what’s right as a manager — the safe route — would have been to turn in Martin “Peewee” Weigen, né Mieczyslaw Wajgenszperg. Withers chose to do the right thing, help him, despite the risk it presented to his own future.

Withers and his men demonstrated compassion for Peewee and another Holocaust refugee, Salomon. As Withers puts it, “I think I identified with them very strongly and instantaneously,” referring to his own background as a black American in the South.

Bryan Gruley’s article demonstrates something beyond the beauty of the compassion itself: the economic impact of compassion. Withers’ compassion led to Wiegen’s emigration to the U.S., where he ran businesses and raised children who then went on to run businesses themselves. Generosity and compassion for others make us a better nation morally, socially and economically.

Col. Joe Dowdy, like Lt. Withers, also embodies leadership in practice, not just principle. Unfortunately for Dowdy, things were not so fortituous for him. As detailed in another Wall Street Journal article, How a Marine Lost His Command in Race to Baghdad, Dowdy is a consummate servant-leader who put his men before the mission, and paid dearly for it.