Lessons From a Blue-Collar Millionaire

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Take the process of opening and closing the kitchen. In a typical restaurant, a supervisor is responsible for both, has a long checklist of things to be done, and tells everyone what to do. At Nick's, by contrast, the whole kitchen crew is responsible. To help people keep track of what needs to happen, there is a laminated "ops card" for each task involved. Each ops card is red at the top and green at the bottom and has its own slot in a converted timecard holder. In the morning, when staff members come in, the ops cards are in the slots with the red end showing. Whenever a task is completed, someone turns over the corresponding ops card so the green end is showing. By closing time, all the cards are showing green. It's then the manager's job to make sure they are all red again before people arrive the next morning.

The system is an important mechanism for creating a trust-and-track culture and for breaking the habits of command and control. "Managers trained in command and control think it's their responsibility to tell people what to do," Sarillo says. "They like having that power. It gives them their sense of self-worth. But when you manage that way, people see it, and they start waiting for you to tell them what to do. You wind up with too much on your plate, and things fall through the cracks. It's not efficient or effective. We want all the team members to feel responsible for the company's success."

Some people would no doubt find such a regime unbearable, but Nick's employees appear to thrive under it, especially the high school students. "Parents tell me, 'I don't know what you did to my kid, but whatever it is, keep doing it,' " says Sarillo.

What Sarillo has done, on one level, is simply to treat high school students -- and everyone else -- like intelligent, responsible, and, above all, trustworthy human beings. "All of our systems are geared toward creating a culture of trust," says Sarillo. "A lot of people would say trust is intangible. We've made it tangible by putting these systems in. They allow you to see whether the trust is there and whether the way people behave is promoting or undermining trust."

5. Coach in the moment, not after the fact

To be sure, just about every company has systems of one sort or another. A common one is the annual performance review, which almost all management experts would say is essential for giving employees the feedback they need. But Sarillo doesn't believe in performance reviews. Rather, managers and employees are trained to coach in the moment, providing feedback immediately.

There are actually three forms of feedback at Nick's. The first is called a feedback loop and applies mainly to new employees. At the end of a shift, a trainer will ask, "What is one thing you did well, and -- if you could replay the tape -- what is one thing you would do to enhance your performance?" It's a two-way conversation, hence a loop.

The second form is called performance feedback and, again, usually comes at the end of a shift. After observing someone's performance, the manager or trainer will mention one thing the person did well and one thing he or she should try to improve.

The third form is direct feedback and happens in the moment. Suppose, for example, that Sarillo observes a host with her head down as a guest walks by. "With a smile on my face and in a nice way, I'd say, 'Eyes up, Rhonda. Remember, five steps with every guest.' " He is referring to another mechanism: Smile and greet a customer whenever you come within five steps of one.

As for deciding when to provide feedback, managers are taught that everything is an interview. "We do a lot of role playing in our job interviews," Sarillo says. "When you observe a behavior, the question is, Would you have hired that behavior? If yes, you can recognize it. If no, you can coach it. But either way, you should do it in the moment."

6. A consultant can be more helpful than you think

Sarillo says he first got the urge to expand to new locations in 2002, but he wasn't confident in his ability to do it without outside help. So he brought in an accountant and then a couple of consultants. "They all talked about control, control, control," Sarillo says. "I felt like I was on Mars. What I was doing was obviously working, but I didn't know anyone else who ran a business this way. I mean, I'm an ordinary guy. If I can do it, anybody can." Then he met a consultant named Rudy Miick. "He asked all the right questions," says Sarillo.

He decided to hire Miick, who didn't come cheap. Sarillo estimates that, in 2003 and 2004, he spent $200,000 preparing to expand, 80 percent of which went to pay for Miick's services. That's a lot of money for a business doing just over $3 million a year in sales. But Miick played a key role in helping the restaurants streamline their management systems, which helped reduce employee turnover from 185 percent to 20 percent. Given a cost of $1,500 to recruit, interview, and train a new employee, the drop in turnover alone saved almost $250,000 a year.

7. Turn negatives into positives by making talk safe

Sarillo uses a system called safe space, which allows employees and managers to have difficult conversations by following certain well-defined rules. One rule, for example, is that statements must be based on data, not feelings or speculation. Another rule is to identify "the moose in the room" -- that is, something many people are aware of but no one is talking about -- the goal being to nip gossip and rumors in the bud. Adams, for one, feels that safe space is "the most important way we create trust in the organization."

One team member recently used safe space to question Sarillo about a sarcastic remark he had made. Sarillo had intended it to be good-natured joshing, but it came across as pointed criticism. "I said, 'Holy cow! I didn't realize it,' and I apologized," Sarillo says. "It reminded me that sarcasm can be lethal when you're the boss. I have my share of imperfections, and I love it when team members call me out on them. It's not a threat if you have a culture based on trust. In fact, it proves that the trust is there."

8. "Why" is more important than "what" or "how"

Sarillo likes to say he doesn't tell people what to do. Instead, he prefers to explain the situation and let them choose. Of course, giving people choices rather than orders requires trusting them to do the right thing. But it works the other way as well: They have to trust you enough to believe your explanation of the situation. That means making sure they understand why they are being asked to do whatever it is you want them to do.

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Bo Burlingham

Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants: Companies That Choose to Be Great Instead of Big. The book was a finalist for the Financial Times/Goldman Sachs Business Book of the Year Award in 2006. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business and A Stake in the Outcome.

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