Ron Shaich seemed headed for a career in politics and government when he got kicked out of a convenience store. A supporter of George McGovern’s 1972 presidential campaign and student at Clark University in Massachusetts drawn by its motto “challenge convention, change our world,” he and some pals had been escorted out of a convenience store across the street from the university’s entrance by a security guard suspicious of the three scruffy-looking youngsters lingering over the ice-cream freezer.
Lit by that moment of injustice, he told the others, “Why don’t we create our own non-profit convenience store, right here on campus, for the students?” He did, and was mesmerized by the creativity and challenge involved, moving into a life in business rather than politics, but still challenging convention and changing our world, most notably by pioneering the fast casual restaurant niche with Panera Bread. “I had stumbled on the thing that all successful entrepreneurs search for: An opportunity to create a better alternative,” he writes about that encounter with the security guard in Know What Matters.
Challenging convention means being a contrarian. He urges leaders to be cautious in good times and boldly advance in bad times. That comes naturally for him because he says he tries to live in the future – figuring out where people and businesses are headed, and preparing for that eventuality – while other leaders are fixated on today. “It’s wise to be cautious when everyone else is investing like crazy, and to make smart investments when everybody else is pulling cash out of the market,” he says, comparing that approach to financier Warren Buffett’s value investing method.
During the boom years of the first decade of this century Panera grew with restraint, trying to be realistic. When the recession of 2008 hit, others were over-leveraged and cut back, dramatically reducing staff hours and thereby making their restaurants less attractive, while he invested in improving the customer experience and snatched up new leases as their cost came down. He did the same in the pandemic, and again it paid off. “In my view, the worst time to grow is in a boom. The best time to grow is when everybody is retreating and costs are down,” he writes.
That attitude has meant twice having to fight off activist campaigns from suitors who wanted to gain higher immediate returns. He says the most game-changing insight of his career is that profits are not an end but a byproduct of your efforts to create things customers will want that distinguish you from competitors. “You can’t really ‘make’ profit,” he insists. That doesn’t mean profits aren’t important, he stresses, but if you focus your efforts on trying to make more money or raise the stock price you will lose sight of the means that create the end you seek.
The first effort to buy Panera came from Shamrock Holdings. When he met its chief executive officer the first time for dinner he was told, “I like you. You’re not all that bad. But we know more about your business than you do.” It was the arrogance of the vulture capitalists, telling the person who had conceived the company after two years of studying people in restaurants and then made it happen that an outsider, looking at the financials, knew better.
“Fighting activists isn’t easy, because they have one key advantage: They don’t care about the long term. It’s easy to boost quarterly profits and pop the stock. All you have to do is rip costs out of the P&L by cutting back on labour and R&D and innovation,” he writes.
He won both times, in part acting on some of the better suggestions from the outsider, but mostly by leveraging his credibility with other investors as well as his extra voting power through Class B shares he held. His 6-per-cent ownership gave him almost 20 per cent voting power, but he still regrets not insisting on more when the company had originally gone public, as the founders of Facebook and Google did. “To anyone who’s still an entrepreneur, my advice to you is to think about how much control you give up. If you can keep control, do it,” he writes. When he finally sold Panera in 2017, as he was contemplating retirement, it was to a privately held company, JAB Holding Company of Germany, that owned companies like Krispy Kreme, Peet’s Coffee and Keurig, and seemed to be patient, long-term thinkers.
He views the CEO as innovator-in-chief, always looking ahead and implementing the needed change. Success comes from what he calls “the doing of the doing.” Most companies don’t fully implement a lot of what they set out to do. He has been able to get done at least 80 per cent of what Panera executives told themselves would matter. And that comes from regular meetings deliberately focused on the latest transformation project. “What gets scheduled gets done. I’m not ashamed to say that I am a slave to my calendar. How you spend your time and how your people spend their time is one of the most impactful decisions a leader can make,” he says.
That doesn’t mean more meetings in general but sufficient focused, well-run meetings with regularity on the items that will change the world.
Cannonballs
- Time management and career development author Laura Vanderkam observes that with November we have entered “reflection season” and asks in her newsletter: As you picture yourself a year from now, what would you like to see?
- Since 2005, through four studies, consultant Josh Bersin has found less focus and support for leadership development. He believes CEOs and HR officials have been so worried about the pandemic, employee burnout and quiet quitting that they forgot to pay attention to developing leaders.
- Consultant Mark Schaefer asks colleagues in the marketing field to consider that social media marketing is directly contributing to social media addiction and the global mental health crisis: “Perhaps you are directly contributing to the mental health crisis …. I have no universal answer for this, but I needed to start a conversation about it. We can’t keep looking the other way.”
Harvey Schachter is a Kingston-based writer specializing in management issues. He, along with Sheelagh Whittaker, former CEO of both EDS Canada and Cancom, are the authors of When Harvey Didn’t Meet Sheelagh: Emails on Leadership.
Harvey Schachter