May The Force Be With You

How Au Bon Pain discovered a way to turn lackluster clock-punchers into a team of gung ho professionals

NOBODY EXPECTED MUCH FROM Gary Aronson, and he didn't surprise anyone. After dropping out of college before the second semester of his freshman year, he knocked around a while, eventually winding up as manager of a Kentucky Fried Chicken franchise. In 1983, he switched jobs again, this time moving to Au Bon Pain Co., a Boston-based fast-food chain specializing in fancy offees, croissants, and spotty customer service. That fact notwithstanding, Aronson viewed it as a different kind of company, or so he told himself, perhaps as a way of justifying his cut in pay from $410 to 280 a week. Different Au Bon Pain may have been, but three years later, Aronson was still making a meager $26,000 a year, with which he supported his wife and two children.

At 30, Aronson was frustrated, bored, and wondering why he persisted in the food-service business. Fast-food companies don't want managers, he thought; they want trained dogs who will go through their routines and keep their mouths shut. Aronson himself had a hard time keeping his shut. He was known in the company for being "difficult" and "opinionated" -- a whiner and a complainer. He didn't care. "My heart wasn't in it anymore," he recalls. "I had the feeling of being in a dead-end job. I thought if I was lucky, I might earn $3,000 more in five years." This was assuming, of course, that he didn't get fired, a distinct possibility. So he put in his 45 hours a week and tried to figure out what he was going to do next.

Today, Gary Aronson is still in the food-service business, and still with Au Bon Pain, but he no longer works 45 hours a week. Three mornings a week, you can find him in his store at 3:15, and on other days he's there from 6:00 a.m. until the store closes at 7:00 p.m. He works weekends, too, putting in a total of 65 to 80 hours each week, making sure that the food is fresh, the place is clean, and the customers are satisfied. His face looks weary these days, but he is not complaining. He's too busy thinking up ways to bring in more customers, sell more food, and make the whole operation run more smoothly. "This is the first time in my life I've been treated like a professional," he says.

It's also the first time he's been paid like a professional. If he continues at his present rate, he will make at least $80,000 this year. Suddenly he and his wife, Donna, also an employee, are the talk of the company. The betting is that they will be the first pair of Au Bon Pain shopkeepers to arrive at a managers' meeting in a chauffeur-driven limousine.

Companies have traditionally viewed compensation in a fairly narrow context -- as just one of the many levers available to influence the direction of a business. Of all the factors that affect a company's performance, compensation is seldom listed among the most important. If the company fails (or succeeds), the owners will usually blame (or credit) the product or the strategy, the financing or the timing. Seldom will they say that the crucial difference between success and failure is the way they structure the system for paying their employees.

And, in some cases, that may be true. After all, many companies succeed with a compensation system that's little different from their competitors', while those that fail usually have a multitude of other problems. And yet it is a fact that a company with an extraordinary record of performance almost always has an extraordinary compensation plan as well. In most cases, it has been installed by the founder, who had a vision of the kind of company he or she wanted, and an acute understanding of the kind of reward system that would inspire employees to create it. Then there are the handful of companies such as Au Bon Pain, which grope their way through a maze of obstacles before finally hitting on a compensation structure that makes most of the other problems go away.

The truth is that Ron Shaich (pronounced shake) had not given much thought to the issue before he became president of Au Bon Pain in 1982. He was only 28 years old at the time, with limited experience is business. As a student at Clark University, in Worcester, Mass., he had founded and managed a nonprofit compus convenience store in competition with a local Store 24. He had been so successful, and had had so much fun, that he decided to get his M.B.A., graduating from Harvard Business School in 1978. Thereafter, he worked briefly for a national chain of cookie stores, did some grass-roots political organizing, and dabbled in the world of campaign consulting. But his idealism soon led him back to business. "In politics, you build organizations and then tear them down," he says. Hoping to build something more permanent, he moved to Boston in 1981 and opened a cookie store on a busy downtown street.

The cookie store brought him into contact with Louis Kane, a 50-year-old Boston businessman who had acquired Au Bon Pain in 1978 from a French oven manufacturer. Shaich was interested in buying croissants to sell in his store, but Kane had other things on his mind. His company was in serious trouble, and he did not know how to save it. His expertise lay in real estate, not food service. Impressed with Shaich, Kane suggested a deal: the two would merge their companies, with Shaich becoming a partner, president, and chief of internal operations. Kane would focus on external issues, selecting expansion sites and arranging financing. Shaich agreed.

At the time, Au Bon Pain consisted of three bakery-cafes located on prime Boston real estate and staffed by its own French bakers. It was an expensive operation, and it was losing money at a rapid clip. Beyond that, the company lacked any sense of purpose or direction. Customers were treated carelessly, as if they were intruders, and employee turnover was high, even for a fast-food operation. The situation called for dramatic action. In short order, the new management team got rid of the instore bakers, eliminated the wholesale side of the business, and brought in Shaich's father, a New Jersey accountant, to design some financial controls. Then they turned to the stores themselves, replacing the old managers with new ones, whom they paid the going rate -- about $18,000 per year.

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