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David Hoyt describes organizational health and identifies the two key requirements found in a successful business. They must be SMART, and they must be HEALTHY. A successful organization has minimal politics. David defines politics as the moment we begin to change our message based on who is in the room. He describes minimal confusion as topics where executives are not on the same page, due to confusion or lack of clarity. Confusion leads to bloody unwinnable battles. If we can minimize these, the outcome is High Morale, High Productivity, and Low Turnover.

The challenge as CFOs, is to wake up every day and figure out “how do I go to war against politics & confusion each day”? The moment we sense something is going on with productivity, we encourage leaders to revisit politics and confusion. 95% of companies focus on the left side of the equation since it is more quantifiable, but The Table Group has found that the best teams have a 50/50 relationship at the top focusing on being both Smart & Healthy.

When we talk about being healthy, there are four disciplines of organizational health that we need to live out consistently.

The first discipline is building a cohesive leadership team and making sure the team at the top is behaviorally aligned. Five attributes when you think of behavioral alignment include:

  • High Trust – Employees feel psychologically safe with each other. When we have high trust, this allows us to have healthy conflict.
  • Healthy Conflict – The conflict is about business issues only, not people, personality, politics, etc.
  • Commitment – When the team commits to a decision, they fully commit versus the opposite which we call “alligator army” decisions (when we leave a meeting and go different directions and/or half commit to what was just discussed). Great teams are fully committed to the agreed-upon decisions.
  • Peer to Peer Accountability – Each peer holds each other accountable versus only the CEO
  • Collective Results – Not just the results of my department and my division, but that of the entire organization

The second discipline is to create clarity. Six critical questions executives need to ask themselves are:

  • Purpose of Why We Exist
  • Core Values / Expectations of People in the Organization
  • What Do We Do / What Business Are We In?
  • How Will We Succeed?
  • What is Most Important Now?
  • Who does What?

INTRODUCING CHICK-FIL-A & BRENT RAGSDALE

The best teams reinforce and over-communicate clarity to the rest of the organization. One of the most highlighted organizations is Chick-fil-A. They have a tremendous amount of commitment to living out the four disciplines of organizational health. David introduces Brent Ragsdale, Senior Vice President and CFO of Chick-fil-A and asks how he came into the CFO role.

Brent started working for Chick-fil-A in high school as a cashier. He went through the first WinShape Program at Berry College where he went on to graduate and work for Arthur Young for two years. He spent the next 16 years in operations then former Chick-fil-A CFO, Buck McCabe, brought Brent over to groom him for the role.

EVOLUTION OF THE CFO ROLE

David goes on to ask Brent how the CFO role has evolved over the years.  Brent replies, in the last five years, we were heavy compliance and reporting. Now we’ve shifted to “How do we Become a Real Strategic Partner for the Organization”?  Work is no longer done in silos. We now work on the digital app, vertical integration of distribution capabilities, and even building a lemon juicing plant on the West Coast. All of these require a strong partnership with the Finance Team to make sure they are supporting each initiative from a strategic perspective.

David inquires what role senior executives play in career pathing. Brent admits his most important job is to make sure culture stays relevant and develop leadership. He spends 70% of his time focused on organizational health and ensuring it transcends down throughout the finance function and supply chain. Brent constantly thinks about how Chick-fil-A can create a great work environment and he believes it starts with the day an employee walks in the door. It typically takes one year to get a new hire up to speed and specifically ingraining them in the culture.

THE WAR ON TALENT

David brings up the war on talent and asks how Chick-fil-A safeguards the talent they have. Brent acknowledges the difficulty of finding the right people. Chick-fil-A recruits many students right out of college; therefore, they’ve had to make their organization appealing to what the current generation desires from a career standpoint. Chick-fil-A recently made numerous changes to attract new team members, first and foremost, by updating their workplace. The organization was originally not a fan of the open workplace but wanted to appeal to the up and coming generation. They learned employees tend to hide in offices; in turn, stifling collaboration and communication. Now even the Chick-fil-A executives use a hoteling concept versus individual offices and the workplace is open. Chick-fil-A offers a behind the scenes tour to demonstrate their massive shift in space. Brent was originally not on board with the “open” workplace, but he suggested taking file cabinets out of the hallway and convert tables to see if anyone would sit down. Sure enough, employees started coming together and working collaboratively.

Another way Chick-fil-A maintains its top talent is by investing in development through Chick-fil-A University. Every employee is also given a development budget, starting at $2,000/per year, based on rank within the organization. There are three milestone sessions each year where employees sit down with their supervisor and lay out goals for the year. In June, everyone updates their plan for the end of the year. These sessions are mainly focused on if the employees are achieving their personal goals versus a traditional performance review.

SUCCESSION PLANNING

David asks Brent to describe Chick-fil-A’s succession planning. Former CFO, Buck McCabe, went to Brent in 2005 and thought he would be a good candidate to take the role. Buck was very intentional about exposing Brent to the technical and strategy side of the business. Brent did time in tax, corporate reporting, restaurant reporting and spent time in the family office developing the Cathy estate plan. Brent reveals Chick-fil-A uses Coca Cola’s concept of “Three Deep”.  Develop three people from a director level and up that could take your place should. Brent has already identified three team members that he currently mentors. In addition, the organization will send these potential candidates to continued education at Harvard, Wharton, etc. to prepare them for the role.

Based on the pre-event survey conducted by the CFO Forum, only 17% of organizations have a succession plan in place while 83% of organizations do not. Brent straightforwardly replies, “You never know what tomorrow holds, and from an organizational health perspective, it can be very disruptive to the business”. Chick-fil-A is highly focused on succession planning and intentional about career pathing. Promotions are based on achievements and increased responsibility versus tenure. Employees are promoted and incentivized based on restaurant performance. David notes with Chick-fil-A’s constant growth, naturally, a talent gap must arise. Brent discloses the desire is to promote from within, however, if Chick-fil-A is entering unchartered waters it makes sense to look externally. For example, their recent endeavors into International business and the distribution industry.

TIME MANAGEMENT = THE BIGGEST ROADBLOCK

Brent admits the chief roadblock is how busy the day-to-day business is. He receives a sales deposit report every day and Chick-fil-A has experienced double-digit growth for the last 5 years.  In turn, this can create a significant strain on the business. Brent references Stephen Covey’s time management matrix and the importance of spending time in quadrant 2 – What is Important but Not Urgent versus always being in quadrant 1 – Important and Urgent. He blocks protected development time in his calendar and encourages all employees to do the same. Brent shares that Truett never wanted to have a layoff and they have always understaffed the organization by desire. At Chick-fil-A, employees understand work is not over when you walk out the door, and that you must do your best and find time to focus on development.

David references a recent report claiming, it’s 30 times harder to become a Chick-fil-A franchisee than to get into Harvard. The operator deal has become so attractive and for $10,000 start-up cost, you can own a Chick-fil-A franchise. For measure, Chick-fil-A plans to open 127 restaurants in 2019 and had over 15,000 inquires. As for the hiring process, Chick-fil-A minimizes turnover by approaching it on the front end. A skills test is required, and only half of the candidates that apply for it pass. They will not consider a candidate who fails the skills test – making it a step harder than most organizations.

Chick-fil-A focuses on CHARACTER, CHEMISTRY, AND COMPETENCY “THE THREE CS”. After the skills test, candidates are often interviewed at lower levels to see how they interact from a chemistry standpoint. The competency part is taken care of with the test, and character is brought out through the interview process. David then inquires as to how Chick-fil-A continues to embed culture within the organization. Brent acknowledges it starts when they develop the employee’s training program. Chick-fil-A wants each employee to excel in their role first and foremost, then expand into other functions. They are intentional about activities the employee takes on and assign a mentor for their first year of employment.

FINANCE TEAM FUELING GROWTH

As the third-largest fast-casual restaurant in the US, David asks Brent how his finance team fuels this growth? Brent states five years ago, work and capital were solely spent on building restaurants. Now Chick-fil-A is also focused on IT, vertical integration, and back-of-restaurant operations. When Brent entered supply chain, he wanted to focus on moving things up the supply chain without sacrificing customer satisfaction. He is focused on process improvement; yet, did not want to sacrifice the hand squeezing of Chick-fil-A’s lemons. Now the organization is building a plant in California; taking one million man-hours out of the back of restaurants. Another process improvement includes Coca Cola using Chick-fil-A’s byproduct for their drinks, and now 85% of the EBITA is from product that they formerly threw away. When you start getting pressure from growth, you must innovate and establish new strategies. From a finance perspective, they must support the valuation of all partnerships and discover how to move it forward from a finance perspective.

QUESTIONS FROM THE AUDIENCE

  1. On efficiency…Chick-fil-A has experimented with taking drinks off the counter. In their opinion, these stations are unsanitary; however, the main reason they serve drinks is because of the guest engagement. Chick-fil-A’s success is in part by offering a different level of service. Their business model filters through local ownership, thinking about operators/franchisees from a support perspective, and creating a meaningful brand. They want to be known as “the brand that cares”.
  2. On compensation…Chick-fil-A had to reset compensation due to how high it had escalated, but they remain market leaders with new compensation principles.
  3. On vacation policies…Chick-fil-A recently converted to a PTO system. They do not police PTO, as Chick-fil-A encourages their employees to “do what you need to do to keep a good work-life balance”. They expect people to get their work done and base reviews on their outcomes. With this environment and structure, Brent admits the opposite effect occurs, and the company now encourages people to take time off.
  4. On succession planning…. If your organization does not have the ability to go “Three Deep”, make sure you have at least one leader in mind that can step into your role at any time. Ideally, it is someone internally but have a backup plan. It is crucial to constantly develop leaders and be intentional about what you are doing.
  5. On a rotational talent aspect…Chick-fil-A has a portal where jobs are posted internally first in which employees can apply. These are not automatically awarded, but discussions with supervisors and teams can help with the hiring decision. Chick-fil-A encourages career pathing and needs well cross-rained folks that can think about the organization. Talent belongs to the organization, not any individual team.
  6. On change management…Sometimes employees do not want to share talent and / or responsibilities. The business is moving too fast for this to occur and when they start to see someone straying from the culture, they will have a serious discussion. Chick-fil-A values transparency, so much so, they brought in Brené Brown, a research professor at the University of Houston where she holds the Huffington Foundation – Brené Brown Endowed Chair at The Graduate College of Social Work, for a year and a half to lead the team on how to become more transparent.
  7. On Developing the “Three Deep” Philosophy – You do not want to signal too early, as to keep leading each potential candidate down the path. Eventually, there will be an acknowledgment and a few hurt feelings. However, each of these potential candidates will maintain a high role within the company.
  8. On S. Truett Cathy…most precious times Brent spent was working in the family office working on his estate plans. He was very concerned about his wealth going to his children and wrote a book about it – “Wealth, is it Worth it?”. Brent’s favorite memory was watching Truett write checks each to individuals or organizations in need.
  9. On Brent’s Favorite Menu Item…The Original Chicken Sandwich with Chick-fil-A Sauce!

 

ABOUT THE SPEAKERS

Brent Ragsdale, CFO, Chick-fil-A – Brent Ragsdale is senior vice president and chief financial officer of Chick-fil-A, Inc. and is a member of the company’s Executive Committee. He oversees the Cathy family office, enterprise social responsibility, financial services, information technology and supply chain. Brent began his career at Chick-fil-A during high school as a team member and was later afforded the opportunity to become a member of the first WinShape® class at Berry College, a scholarship program founded by S. Truett Cathy. Upon graduation, he worked for accounting firm Arthur Young (now Ernst and Young) for two years. He then joined Chick-fil-A as a business intern, during which he served as the Operator of a Chick-fil-A restaurant in South Florida. He later moved back to Atlanta, working with the company as a business consultant before transitioning to the financial services department, where he has held multiple leadership positions. Brent serves on the Berry College board of visitors and on the board of directors of Fellowship of Christian Athletes Atlanta. He also serves on the finance team and as an elder at Southside Church in Peachtree City. He holds a Master of Business Administration from Mercer University and is both a certified public accountant and a graduate of Harvard Business School’s advanced management program.

David Hoyt, Principal Consultant, The Table Group – David Hoyt lives locally and brings over 20 years of experience in leading people and organizations.  He is driven to see organizations create healthy cultures and teams where individuals can thrive.  Prior to partnering with The Table Group, David had the privilege of serving as an executive leader with John Maxwell for 19 years. As part of Maxwell’s inner circle, he ran a significant portion of John’s business interests and most recently served as President of The John Maxwell Company. David works with CEOs and executive teams to help them master the disciplines of Organizational Health in order to consistently and effectively apply the concepts captured in all of Patrick Lencioni’s books.

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