Explaining the "why" is particularly important, Sarillo says, for young employees. "Today's teens are as strong and as good as any previous generation of workers, but you need to share the 'why' with them. The days of 'do what I tell you' are gone. You simply won't be successful."
That can present a challenge for managers accustomed to giving orders, as Sarillo discovered the hard way. In 2005, he and Adams set a goal of having five restaurants by the end of 2010. To achieve it, they realized they would need experienced general managers to run the restaurants they had. The three people they wound up hiring came out of established restaurant chains. On the surface, the managers embraced the company's purpose and values, as well as the systems that support them. Eventually, however, Sarillo decided he had to let all of them go. One tip-off was their inability to control costs.
As usual, the devil was in the details. Each Nick's Pizza & Pub has a just-in-time purchasing system, whereby food and beverage usage is tracked daily and orders are placed two or three times a week. A physical inventory is done once a week and then matched against the prior week's count, minus usage, plus purchases, to make sure the costs are under control. The goal is to keep beverage costs at about 22 percent of revenue and food costs at 20 percent.
But week after week, the costs ran too high, and physical inventory counts didn't jibe with usage and purchases. When Sarillo finally investigated the problem, he traced it to the managers' inability to let go of their old habits. "Their idea of leadership was telling people what to do," he says. "They had someone else put in the numbers, and when the numbers came out wrong, they didn't dig deeper to discover why. Because they didn't know the 'why,' they couldn't share it with the team members. When you know the 'why,' it's really easy to figure out what to do, but sharing that kind of information wasn't how they'd been trained to manage."
In the end, Sarillo turned over the responsibility for tracking costs at the Elgin restaurant to a 24-year-old woman named Jenny Petersen, who had begun working at Nick's when she was 16. She solved the problems in four weeks. She could do it, she says, because she cared about the 'why.' "I think it's a matter of personal drive and ambition," Petersen says. "You need the drive to ask questions and do the research. If our inventory numbers are off, there's got to be a reason. I like finding out what it is."
9. "Trust" without "track" is an invitation to trouble
In retrospect, Sarillo acknowledges that hiring those managers was one of his biggest mistakes in recent years. It became a big mistake, however, because he wasn't paying attention. For two years, he was totally focused on laying the groundwork for a new Nick's in Chicago, which was supposed to open in mid-2008. Only after that plan fell through did he turn his attention back to the existing restaurants. The company was in serious trouble, mainly because he had invested so much time, energy, and money -- about $300,000 -- in the Chicago project, but also because of slumping sales and out-of-control costs at Elgin and Crystal Lake.
From a distance, he attributed the problems to economic factors over which the company had no control. But as he looked more closely, he realized there was more to it. The cost-control issues were symptomatic of something deeper. The general managers weren't supporting the systems, and so the company's culture was beginning to change.
And yet Sarillo had to admit that the problems were ultimately his responsibility. Looking back, he says, "The big lesson is accountability. Results are results. You have to be real about how people are doing. I wasn't holding those managers accountable for their results and their behavior because I wasn't keeping close enough track of what they were doing."
10. Beware of growing before you -- and the company -- are ready
Sarillo didn't keep track in part because he was mesmerized by growth. He had decided to expand into Chicago, in the belief that a Nick's there would provide visibility the company could never get in Crystal Lake and Elgin.
He was eventually forced to cancel the Chicago project, however, when he lost his bank financing in mid-2008. The turn of events appeared at first to be a disaster for the company. It turned out, however, to be a blessing. "Because we were not able to do Chicago, we wound up doing something more important: fixing the culture in Elgin and Crystal Lake," says Sarillo. "If we'd opened in Chicago, I wouldn't have had so many financial problems, but I would have had much, much bigger cultural problems. By the time I found out about them, it might have been too late."
In the process, he learned an important lesson about the type of management he will need in the future. "I've decided there are two ways to get the right person to run one of our restaurants," he says. "One, you can get a new manager like Jenny Petersen, who hasn't already developed bad habits somewhere else. Or, two, you can get a manager with experience in the industry who's completely fed up with the corporate way of doing things and thinking, I really need a change." That's the story with Scott Jewitt, the operating partner at Crystal Lake.
So is Sarillo still committed to opening other Nick's Pizza & Pubs? "Oh, yes, I feel more inspired to grow than ever," he says. "People really do want to have a meaningful place to work, and that is one thing I know how to do well. So how could I not want to keep doing it for more and more people? I mean, what could be a more fulfilling life?"
Bo Burlingham is an Inc. editor-at-large.
