One of the benefits of Steak n Shake’s dedication to building the proper infrastructure is a huge drop in employee turnover. And that is a key to what President and CEO Peter Dunn calls the Virtuous Cycle.
“It’s actually based on a concept taught at the Harvard Business School called the Service Value Profit Chain,” Dunn says. “We adapted it and tailored it for Steak n Shake. It’s based on a very simple premise: If you have capable and empowering leaders, they will create inspired and loyal associates, who will be able to create delighted and loyal guests.
“When your guests are delighted, they’ll come back more often, which will end up with rewarded shareholders. Rewarded shareholders will then, in fact, be very excited about empowering leaders to continue their work.”
Here is how it benefits a company.
“The theory is that every one of those things — less management turnover, less associate turnover, more delighted guests, improved margins — works its way in there,” Dunn says. “When you have delighted guests, it’s also easier to have improving margins. Every one of those things literally contributes directly to the bottom line, and they also re-enforce each other.
“Every year, you peel some of those potential profits off and put them back into leaders, associates, guests and margins. They each keep getting stronger each year, but you peel off enough to keep shareholders happy. You therefore have a perpetual motion machine.
“The way we present this is that we’re building on a foundation of heritage and strength that we know is successful. We re-enforce that with this Virtuous Cycle. When we do that well enough, we earn the right to open more restaurants to empower leaders.”
