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8:00pm EDT July 26, 2007

Back in 1998, Greg Flynn was doing business in Washington state when he had the opportunity to buy a group of eight Applebee’s locations. While he didn’t know anything about running the restaurants, he thought Applebee’s had good long-term viability, so he made the purchase on blind faith that he could trust the guys who were already running the restaurants.

Nearly a decade later, that culture of trusting employees and not trying to control every decision himself fuels growth in his Applebee’s franchise group, Apple American Group LLC.

“You can’t be an effective leader in a large and diverse organization if you’re too controlling,” says Flynn, Apple American’s chairman and CEO. “You also can’t succeed if you punish people for taking risks that you encourage them to take.”

Flynn believes in having a flat organization that breeds the kind of culture where employees can make decisions and grow as leaders. He employs a state and federal approach to his organization, with corporate acting as the federal government and each region in his portfolio acting as a state.

“They operate with great autonomy, except they are subjected to federal standards — rules that apply throughout the whole portfolio,” Flynn says. “While we don’t tell them how they need to achieve these results in every instance, we do demand that they achieve the results we’re looking for.”

While many companies try to complicate visions, values and strategies, which leave employees utterly clueless about how to succeed, the key to Apple American’s success is maintaining that flat, simple organization to preserve the cultural values and propel growth. With 130 stores across eight states, Flynn has successfully done that, and group sales reached $375 million last year, a 114 percent increase since 2001.

“First and foremost, keep the entire business as simple as possible,” Flynn says. “From the long-term vision all the way down to the day-to-day execution, the simpler it is, the better you can communicate it, the better everyone in the organization will understand it, the more measurable it will be.”

Creating vision and values

Employees aren’t sure what they need to do if leaders don’t tell them what to strive toward and how to get there.

“Have a vision, which is where you want to be in the future, and a good plan for getting there,” Flynn says. “Have that clearly communicated so everyone’s pulling toward that vision in every action, every day.

“Our vision is very simple. It’s to be the premiere franchise group in the Applebee’s system. We have a dozen things we must execute well to do that, but it’s a simple vision. We don’t need to concern ourselves overly with global strategy in the restaurant industry or major marketing campaigns or menu development. We build and operate restaurants, and we just have to kill that.”

While it’s crucial to keep the vision simple, it also has to be something that you can measure, otherwise you won’t know how close you are to achieving it. For Flynn, he knows what other franchise groups look like compared to his because he can benchmark their performances against those of Apple American Group.

He also notes how crucial it is to stay focused and not get sidetracked with other ventures that can steer you away from achieving your vision. He sticks to Applebee’s and doesn’t get lost in other restaurant concepts, even if they seem to provide an alluring short-term gain. It’s more important to stay focused on the concept that has the best long-term gain for him and his people.

“By having a very narrow focus, it’s easier for me to communicate where we wish to be, and then lay out the plan for getting there and measuring our progress along the way,” Flynn says. “Define your vision as narrowly as possible because it will make it much clearer to your people and, ultimately, easier to get there if you really maintain a laser focus.”

Any organization can have an overall vision and put it up on the wall by the main doors in gold letters for everyone to read, but the employees also have to know how to act and what kinds of behaviors will help achieve that vision. For this reason, Flynn has a set of values, called the “Gold card,” for Apple American Group employees to know what the company values and expects.

“The central principle there is that we will feel comfortable seeing our actions and our motives for them published in the newspaper,” Flynn says. “I think about that one all the time. We will never do anything that I can’t look someone in the eye, who’s intimately affected by it, and justify it as an ethical, moral and rational action.”

Flynn adopted his values from one of the group’s predecessors, and while the values weren’t Apple American’s at first, Flynn has modified them to make sure they reflect the group.

“We’ve adopted it and changed and refined it over the years,” Flynn says. “It has a longer history than me and them and anyone at this point. ... As I understand more and more about what really matters in our business, we just make changes. It’s like the constitution — it evolves over the years through amendments.”

For example, Apple American’s vision looks at where it wants to be, how it will get there and the impact it has on three different groups: customers, employees and shareholders. Flynn saw how important community plays into his restaurants, so this year, he decided to add community as a fourth group in that list.

Values ensure that everyone is pulling in the same direction, but just like the vision, they have to be understandable and actionable.

“Keep it very simple when you can,” Flynn says. “Don’t say, ‘I demand excellent restaurants.’ Have clearly articulated expectations. Our whole system is not telling them how to get from A to B, but telling them we expect them to be at B, and they can take different routes to get there, but you have to tell them very clearly what B is. The overriding advice is trust your people.”

Employee empowerment

While headquarters are in Cleveland, Flynn works out of San Francisco, so he is conscientious that his structure requires him to trust people.

“Our system relies entirely on trust,” Flynn says. “We must be able to trust the individuals in our restaurants and in our markets to do the right thing because we’re not micromanaging them, and we’re not supervising them to an excessive degree.”

Trusting people means letting go and allowing your employees to do things.

“It takes a long time to earn people’s trust, so when we say we trust in you, and we believe in your potential, and we’re going to allow you to enjoy latitude in how you do things and develop yourself and your people, we actually do that,” Flynn says. “Ultimately, that’s the main way you get people on board with the system.”

Building trust requires realizing other people are capable of success.

“People, in general, are smart, hardworking, experienced, want to do the right thing and more capable than most companies give them credit for,” Flynn says. “The best way to develop people is to give them responsibility, and they will sort of develop themselves.”

Giving people responsibility increases trust between management and employees and increases buy-in of the vision and values, but you have to give people leeway in how they accomplish those responsibilities, too.

“If you don’t give them any latitude — here’s exactly how you have to do everything — then there’s no innovation,” Flynn says. “But if you say, ‘All I care is you end up in B,’ it really encourages creative thinking, and we get tremendous creativity from our people as they seek out new and creative ways to get from A to B. People are smart, and they have great ideas all the time, but the certain structure of those companies doesn’t allow for those to percolate up.”

Flynn also emphasizes that leaders have to actually do these things and not just say them or talk about them in meetings.

“You live it,” Flynn says. “You say to people, ‘I believe in pushing authority down the line and empowering you and giving you the resources to do it yourself, and I don’t really want to hear about it unless there’s a big problem or opportunity,’ and then you actually do that.

“There’s no better way to develop a person than to just give them responsibility and figure it out for themselves. You know, they’ll stub their toe a few times, but the benefit they’ll get is someone who has really learned how to do it and didn’t just follow instruction.”

And while employees work to improve themselves and drive the company to succeed, they need reassurance that they’re on track. Flynn has a profit-sharing program for his managers, where each gets a percentage of his or her divisional earnings, with no strings attached.

“Keep it simple, without adjustments,” Flynn says. “I’m delighted to pay them that way because it’s all the results of growth.”

He says it’s also important to give the managers equity ownership in the business. He gave them a five-year plan in 2001, and when they recapitalized in 2004, they were exactly on target for meeting those numbers and got rewarded in cash.

“They’re side by side in their ownership with me,” Flynn says, “So it’s good for me; it’s good for them.”

While Flynn has formal recognition programs through conferences, awards dinners and monthly staff rankings, he says informal recognition is more important, especially at the lower levels.

“Recognition is mostly a day-to-day thing,” he says. “The culture of your organization — is it appreciative? Can we — and do we — say, ‘thank you,’ often and out loud to each other?”

Getting buy-in

To maintain his state and federal model for the organization, he has to have an inclusive decision-making style.

“A critical component of being a flat organization is having a very inclusive decision-making process, which can be inefficient at times, but when you reach a decision, you’ve typically gotten a better decision because of all the input you’ve gotten from the people in charge of carrying it out,” Flynn says. “Because you’ve gotten better buy-in, you do roll out decisions more effectively.”

People feel like they had a say in the decision and that it wasn’t just mandated down from the powers that be.

“They need to feel like their opinion was sought and listened to and considered, and even if it was ultimately overridden, they were treated with respect,” he says. “They have to trust that the leader has lots of different opinions he’s considering, and a vision of his own, and trust that your decision is going to be right at the end of the day, but if you don’t listen to someone, it’s almost impossible to get them on board with that decision that’s contrary to what they already believe.”

While not everyone may agree with a decision, people will at least respect the decision if they were included in making it.

“Typically, it happens very well because they will have been part of the process, understand the logic behind the decision, and they’ll respect it in the process,” Flynn says. “Even if they disagree with it, they will have been heard.”

While Flynn encourages and facilitates discussion and conversation when making a decision, he also notes that, when necessary, the leader has to be prepared to wrap things up and move on.

“Rarely does it happen where I need to just shut down the debate and make a decision that we haven’t arrived at collectively as a group,” Flynn says. “But it does happen. In our state and federal model, there is a president.”

When decisions are made, you can’t overlook how crucial communicating those decisions are, but it’s equally important to explain the process and reasons behind decisions.

“It shows respect for them as people,” Flynn says. “They’re not just automatons doing what they’re told to do. That’s antithetical to our culture. More importantly, if they understand why we’re doing what we’re doing, what impact it has, they’ll do it better, and they may come up with better ways to do things if they understand where they’re trying to go.

“If this is about getting from A to B, most of our ideas of coming up with a better way to get from A to B comes from the field, but they have to know what B is to suggest a better way.”

When communicating those processes, reasons and decisions, you also need to be brutally honest with your people, otherwise employees see right through it and wonder what’s being hidden or what they’re not being told.

“Say exactly what you think all the time and don’t hold back, and people respect that,” Flynn says. “I’d like to think we don’t sugarcoat anything in our business, and as a result, we are much more effective, and our people have much more actionable information, and therefore, are more successful.”

While Flynn and his management team are happy to make decisions and communicate those to the rest of the group, they are also keenly aware that some decisions are best left to people below them. With such a wide geographic spread, he knows he’s not equipped to make a decision about a restaurant in Pennsylvania by sitting in his office in California.

“They are identifying problems and opportunities themselves and acting on them in real time, with much greater sensitivity to the actual local context of the issue, as opposed to me, centrally sitting there with much less information and much less understanding of the context of a given issue, trying to decide,” Flynn says.

He even works to develop his employees’ decision and problem-solving skills by asking them tough questions to make them think differently as new situations arise.

“I’m always saying, ‘What problems do you have, and what opportunities have you had, and what are you doing about them?’” Flynn says. “I expect both sides of that question answered, so it’s not, ‘We have a problem; what are we going to do about it?’ It’s, ‘We have a problem, and here’s what I’ve already done about it.’”

Flynn’s commitment to keeping his business simple has cooked up one successful and growing organization. In 2005, Apple American Group was ranked fourth on Nation’s Restaurant News’ “Top 100 Growth Companies” list, finishing one spot ahead of Starbucks Corp. But Flynn attributes Apple American’s growth to the culture he’s created and maintained.

“It’s fuel for growth,” Flynn says. “Growth is fuel for people development. The two are complementary. We attract and retain better people because we’re growing; because of the opportunities for upward mobility within Apple American that we can afford.

“Likewise, our people are driving growth. We have better people. They stay with us longer, and they enable us to open more restaurants and open them better, and when we acquire new markets, we have wonderful procedures for integrating the new people, so it’s really a synergistic and complementary dynamic.”

HOW TO REACH: Apple American Group LLC, www.appleamerican.com