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Chain Leader ó Cover Society

Back to the Future
Joe Lee talks about lessons learned and whatís ahead.


Joe Lee
February 1998: chairman and CEO, Darden Restaurants

Today: chairman, retiring at year-end

Darden Restaurants Chairman Joe Lee graced Chain Leaderís cover when the Orlando, Fla.-based company had about $3.2 billion in revenues and just under 1,200 units. Today the casual-dining behemoth has more than $5 billion in sales and 1,350 units. Lee stepped down from the CEO position last December, turning the reins over to Clarence Otis, and will retire the chair at the end of the year.

Chain Leader asked Lee to look back at what heís learned and what he looks forward to.

What are some of the big changes in casual dining that youíve seen over the years?

The casual-dining segment has really grown since my entry into it a lot of years ago. I would like to say at the beginning, though, that when you talk about the changes, you have to talk first about the pioneers that made it happen. Whether thatís on the QSR side from Pete Harman and Colonel Sanders, who developed one of the first franchising systems ever invented in the country, or Ray Kroc, with McDonaldís, etc.

Then if you look back at the pioneers here, my mentor and the fellow who we named the company after, Bill Darden, was truly a pioneer in developing casual dining, that niche between fine dining, where you had to be dressed in a suit or fine clothes and the prices were very high, or you were going to just a family operation, where you couldnít have a full broad menu or the kind of selections that you had in fine dining. In the development of that niche in between, Bill Darden was one of the people who had the foresight to see it. Another was Norm Brinker out at Brinker. At that time he was inventing Steak and Ale. And so thereís some founders and pioneers that I just have to give credit to that helped pull this industry together.

Iíve had an opportunity to work with teams that did that in this industry, that invented the casual-dining sector, and then work with teams to grow it rapidly. The team at Darden by the way is not only Bill Darden but his brother Denham. He had a team put together that was Denham, himself and Charlie Woodsby. Charlie is still active in the business. When we sold to General Mills, he decided to go and do his own thing, and heís been running restaurants independently since that time and is still successful. His familyís in the business. Al Woods, who is now deceased, was part of that team. Wally Buckley was part of that team. Wally had been a manager restaurateur with Bill Darden, running one of the seafood restaurants that Bill had, which was up-market from Red Lobster. And Gus Gornto and myself were also on the team. I came in after the team had been formed and was on its way. And then Gus came in even later than that. But thatís the team that put together Red Lobster, which was one of the pioneers in casual dining.

What is it that made that team special?

Well, itís good camaraderie and enthusiasm, and various knowledge. Diversity has always been part of the value system at Darden. Right at the very beginningówhat Iím talking about now, since those were males and all were white, is diversity of background and experience. So it was a synergistic team that was put together. And I think that was important.

I really feel blessed, by the way, at having been involved in the business from the beginning until now. Thatís about 37 years since that time. Iíve seen it grow and seen great chains become established and grow like Outback, Applebeeís, etc. So itís really been fun to watch it happen and to be involved in making it happen.

I would say that one of the reasons it has is we have kept that notion of teamsmanship as one of our core values. So we have put teams together and kept that notion of diversity and expanded that notion to be what it is today, including gender and including race and nationality. We are a company that not only welcomes but searches out opportunities to have diverse people here. That then has led us into a lot of new things and has led us to do a better job in satisfying our customers, our employees, our suppliers, our investors.

How has the industry changed?

Itís still a growth industry. This is a fantastic industry as you know. Itís big. The total restaurant industry is about 4 percent to 5 percent of the gross national product. Thatís a $300 billion industry this year. Thatís big. The casual-dining sector is about $61 billion and growing. Four in 10 Americans work for the restaurant industry. And an amazing number, almost 30 percent of workers in America, got their first job in a restaurant. We are sort of a bridge between family and commerce and working outside the family. We let people have an opportunity to understand the disciplines of working away from home.

People are becoming more demanding. There have been changes. Thereís been technological change. We were a leader in that area. We actually formed a task force and invested in the development of quantum sales gear, which we now take for granted in our industry: electronic cash registers that communicate with each other and with the central office.

Consumers now are better educated. They are better traveled. They have been to more places around the world and around the country. So they are demanding more variety in types of items and experience. Taste demands have gone up. They want tastier food. They are looking at nutrition as they eat in restaurants more. Itís not the driving force yet. But itís on their mind now in a way it didnít used to be. Thereís just a continual change in the industry.

But as the industry changes, and this is really important, this is an industry where a lot of things stay the same. People have always wanted to have hot food hot, cold food cold. They want to have food taste appropriately. And they want to have an experience they can enjoy and wish to return to. So service is a very important part. Always has been, always will be.

So there are things that are changing and things that are staying the same. The magic is to do a great job in both.

Is the fact that people are changing and growing more demanding a recent phenomenon, or has that been going on since the í60s and í70s?

Itís always been evolving. Itís coming at a faster rate now. As the industry has gotten bigger and thereís more choices, and as people are more educated and more well traveled, I think the demands are escalating. There are studies and weíve had research that show that people are more demanding than they were five years ago. Theyíre expecting to be treated as a special customer today more than they were five or 10 years ago. So yes, their demand for variety, taste and excellent experience are accelerating.

When you look at the young people today in the industry, what do you wish you knew when you were starting out that you would tell them?

Let me turn it around just a little bit. I do have the privilege now of speaking to young groups. And I think hard about what Iím going to say. Iíve finally netted out that hereís something that people, when theyíre young, do not fully appreciate: how important it is to stand for something, to develop their own set of moral values and ethics and know them.

If you have a set of ethics and values like we do at Darden that starts with integrity, honesty and fairness, and then respect and caring for everyone that you serve, then youíre going to be very unhappy if youíre with a company that doesnít operate honestly. You might be getting ahead temporarily on a financial basis, going to one job or another. I can guarantee you, long term thatís not true. There are a lot of studies that show that ethical companies, companies that have values, are over time the ones that survive and grow and are strongest. But temporarily sometimes it looks the other way.

If you look at popular media, the media speaks about those situations that are grossly bad, and some people will look at whatís going on in the media and the news and in movies, etc., and get the notion that if youíre going to succeed in business, youíve got to be cutting corners, maybe being unethical. I found that not to be true. And so thatís one big finding that I wish I knew then as clearly as I know it now. Not that I went out and did those things, but I would have been a lot more comfortable. I ended up with Bill Darden and General Mills, two very highly ethical companies, so I guess maybe I just gravitated to where I wanted to be.

The students today really need to figure out who they are, what do they stand for. Then they need to get a job in a field they love. Thereís wonderful experiences and opportunities in the restaurant industry: the experience we think about with management and leadership of the enterprise, but in addition to that, thereís the need for technology, which is rapidly changing; thereís legal; thereís marketing; and thereís just the totality of an enterprise inside of a large restaurant company. Whether itís international procurement, national procurement, distribution, quality assurance, legal, real estate, design and construction, engineering, thereís so many job opportunities in an area that you love inside of the restaurant business.

Find something you love to do, and get a job there. The old Confucius Chinese saying comes into play: A man who loves his job never has to work a day in his life. Because it will be fun.

Those are two of the major things I would say to young people that they need to be aware of.

I guess the final one that I talk a lot about and believe a lot is never stop learning. Never stop teaching. Always learning and always teaching is important to both economic success and job satisfaction. Thereís nothing better than to be more valuable a year from now than you are now by learning things that make you understand your job or your industry or yourself better.

And thereís nothing more rewarding than having someone come up to you just out of the blue and say, ďI worked for you here, and you made a difference in my life, and Iíve learned and Iíve grown, and look where I am now, and I appreciate it.Ē You canít put a value on that kind of thing, and it happens all the time if youíre continually learning and continually teaching.

I was going to ask you what the attributes of a good leader are. Did you just answer that?

Perhaps I did. I answered them in the context of, if youíre a young person, how do you want to approach life. But itís truly also a great part of leadership. I think a leader has to set core values and live by them. We call that ďwalk the talkĒ now. But youíve got to really live what you say and what you stand for. John Quincy Adams had a quote that has meant a lot to me over time: ďIf your actions inspire others to dream more, learn more, do more and become more, youíre a leader.Ē Shortening that: Leaders have followers. Itís kind of a corny statement, but the facts are that leaders must have a north star that they point to, and then they must inspire others. They must attract and build good teams, and they must inspire those good teams to dream and to accomplish those dreams.

One of the things I would caution the young person on, is that a lot of what you read about leadership are the new theories around how to get something done, and theyíre pretty specific. But leadership is very broad. They read something in Harvard Business Review and say, ďOh, this is very important. It worked at blank, blank and blank companies, and now thatís what I need to do to be a good leader.Ē That is only one of many things.

Leadership is somewhat situational. Leadership is leading people. People are different. So you have to speak to, talk with and motivate individuals. And so your talents in leadership should be broad enough so you can work with a variety of individuals and have different perspectives on life. Thatís one of the advantages of diversity, because when you bring in a team that can do that, the whole team learns from each other, and itís a continual-learning thing.

Can a person whoís put in a leadership role learn the leadership skills that come intrinsically in some people?

The answer is, yes they can. Thereís a combination of genetics and early-life experiences and the way that youíre brought up in life and the way youíre nurtured and the environment youíre in in your early life that come together and create a lot of the intrinsics of who you are and how you behave. But I know that all of us can improve our leadership abilities by reading the works of good leaders, studying leaders who have done it well. And we have leadership classes. We partner with colleges at Darden to help our people become better leaders.

What you really have to be careful of is taking someone that has a wide gap between their intrinsic leadership skills and the needs of the job. If the gap is too wide, they may have trouble filling it. The time required to get better in the leadership skills might be longer than the situation would allow. That can happen.

But everyone can develop better leadership skills and should. Thatís why always learning, always teaching is one of our core values at Darden.

Do you know our core values? The first one is integrity, honesty, fairness. The second is respect and caring. Third is diversity. And then we value teamwork; we value continuous learning, continuous teaching; we value excellence; and we value being of service.

I took one of our staff people when we formed Darden the last time, which is when we spun off from General Mills, and had them go look at companies that were 100 years old or older and determine if thereís any commonality. And a strong value system was common in every one of them that lasted 100 years or better. They didnít operate just situational to the leader of the day. They really had strong values through the organization that led back to the founders. That caused me to be stronger in my discussion about values.

Some people might call that old-fashioned.

Yeah, they might. It works.

There are a ton of leaders in the industry who have come out of the Darden systemÖ

Yes, we have had a lot of leaders at Darden. And Iím most proud of the many teams of leadership, some that have left and many that are still here. Weíve got competent leadership in this company today. And we have had competent leaders go on to other venues. And so Iím proud that a lot of these values that Iím talking about have spread into other enterprises as well as have been really entrenched and developed within Darden.

You just put one of those leaders in your CEO seat. What do you see in Clarence Otis that you look forward to watching?

With Clarence and Drew [Madsen, president], the situation here is, again, showing the diversity of experience and background coming together. All of the senior leaders on our executive committees are competent leaders. And they all bring something to the party in addition to just good leadership skills. In Clarenceís case, not only is he a good enterprise leader, but heís truly been focused on enterprise leadership most of his life since college. He has had a set of experiences in the legal arena and in the financial arena. And then came in here as treasurer, worked his way up to chief financial officer, and then over to Smokey Bones to roll out Smokey Bones, getting company-leadership skills and experience. Right there, thatís really a great set of experiences to a very bright and enterprising leader.

Then Drew, who has come up through the marketing field, through marketing at General Mills and a couple of other companies, and to company leadership, leading companies within other enterprises, and then coming here to be head of marketing at Olive Garden and then president of Olive Garden. He showed that he has very competent general-management skills and a focus on the experience and marketing. So you put the two together, and youíve got both enterprise and great leadership and diverse experiences that will give us a leg up on our competition. Drew has backed himself up with Dave Pickens, who is a strong operator, to the head of Olive Garden and who is on Drewís executive council as an operator. So we still have lots of operators in the mix as well as other functions.

What makes me happy in a nutshell is great people, the great value systems they have and a passion for winning.

What opportunities and challenges do they face in the next few years?

The industry will have its challenges as the world goes forward. So some of them will just be industry related. I hate to say commodity costs, because weíve been forward looking. We have a great purchasing department that looks ahead and does forward commitments and hedging. So weíve controlled our costs better than our competitors, in the main. And it shows through our P&L. So weíve got real good competencies there, but in the environment, those kind of things are always happening. So having people look ahead and be on top of trend changes and manage them very efficiently better than the competition is a key thing to do and keep doing.

Keeping the concepts fresh is a big challenge as we invent new concepts and keep the existing ones fresh and exciting. Thatís going on marvelously well at Olive Garden. Itís going on at Red Lobster as well. Kim Lopdrup has come to lead Red Lobster. Drew will have some opportunities there to continue to let Red Lobster evolve its brand to where it needs to be in brand management.

People look at Darden and say, Darden is really the only company around that has two $2 billion-plus companies inside it. So how do you do that? How do you manage and provide the management resources and the infrastructure to enterprises that large that are growing? We have a lot of things that we do that need to be continually improved. Others look at us and say, we want to organize the way Darden is, or we want to get some of those skills. And we look at the situation as, weíve got a lot of those skills. We want to hone them, to advance them, to keep them.

But we also want more. We want to continue to learn because nothing in the world is static. If youíre not moving forward youíre probably moving backward. You canít stand still. Our challenges for Drew and Clarence will be to make sure that we continually improve our ability to be a multibusiness company, a multibranded company. There are operational-management opportunities. Thereís brand-management opportunities. Thereís synergy opportunities. Weíve got some synergies, but we have an opportunity to have some more between the companies. And portfolio management, which is different than brand management. Portfolio management is having companies operating in the right big sectors of the business. So we donít just put everything in the same sector that Red Lobster is in and Olive Garden is in. Take a look at Smokey Bones. Itís in a different sector of the business than Red Lobster or Olive Garden. And similarly with Bahama Breeze and Seasons 52.

Are you going to stay involved in Darden after your retirement next year?

Whatís the saying? You can take the kid off the farm?

I will always love this company and the people in it. One thing you havenít asked is what are you going to miss most. And Iím going to miss the daily contact with people. Weíve got great people. Darden has 148,000-plus employees now. We are the 30th largest private employer in the nation. We are a people business, and Iíll miss a lot of that people contact. Iíll have some. It isnít that Iím totally going away. But I also highly respect that the new CEO and the new president need to have space, and they donít need to have someone operating without benefit of todayís current information or tomorrowís projected information. And thatís what it would be if I tried to be too controlling or tried to have too much input going forward.

So what will you do with all your free time?

A lot of things that I put off. When you enjoy the business the way I do, sometimes you work a little excessively and maybe your family doesnít get as much time as they deserve. Iíve got grandkids now. I want to take advantage of the success Iíve had and take them on trips and tours. Primarily the history of the U.S. first. Go around and see Philadelphia and Boston, Washington and New York, Yosemite park. Just the history of this country. So traveling with my grandkids is one thing.

As a result of being deeply involved in the leadership of General Mills and then Darden, I certainly know and understand the financial community. I know a lot of the fund managers and all the fund companies. I think I will enjoy the art and science of investing. So I think Iíll be doing something in the financial arena to keep my mind occupied. Hopefully Iíll create some more wealth, most of which I will give to charity.

Which brings me to the final conclusion. I think if we sat down and talked about the future of the U.S. and what the world needs, weíd say the world needs educated kids. They need to stop dropping out of school. Weíd say we would want children not go into a life of crime and not go into a life of drugs and not to have teen pregnancies. The Boys & Girls Clubs is an organization that takes predominately at-risk kids, they become club members, they get adult supervision. Many of them otherwise would have gone home or to the streets with no parent there, and many of them may have no parent at night, staying with relatives or neighbors. And they take those kids and help them build self-confidence and help them get an education. The first thing every day after school that these kids do when they come in the Boys & Girls Clubs is called Power Hour, where an adult supervises them doing their homework. Then they find out what theyíre good at, what they love to do, and then they play in that arena, whether itís art or computers or football. So they begin to see themselves as heroes, as accomplishers instead of the opposite. And the statistics are just wonderful on how well the kids at the Boys & Girls Clubs do compared to not just the other at-risk kids but even kids in general. For example, the nationwide dropout rate, of kids entering high school versus those who graduate, is remarkably high. The actual graduation rate is somewhere in the mid 60s. In the Boys & Girls Clubs, the graduation rate is up in the high 80s. Thatís going to occupy a fair amount of my time and financial commitment.

Iíll remain active in the industry and with Darden on call. Iím not going to be working daily or weekly in either. But Iíll help out with the NRA and other industry associations on a project basis. Iíll work on a project basis with Darden if they should need me. So Iím not going to be totally apart from the industry. I donít think I could do that.

I started out saying this, and Iím going to end saying this: The industry has had a lot of pioneers. The industry currently has a lot of great leaders. And the industry has got phenomenal opportunity. Opportunity for people just to work in it part time and finance their education or to get temporary fund needs met. And itís got tremendous opportunity for careers. And I just hope that the vibrancy of the industry is even better understood in the future, and Iíll do my part in making that happen.


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