How to build a great culture with restaurateur Danny Meyer
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Hey everyone, it's Adam Grant. Welcome back to Rethinking, my podcast on the science of what makes us tick with the TED Audio Collective. I'm an organizational psychologist, and I'm taking you inside the minds of fascinating people to explore new thoughts and new ways of thinking. My guest today is Danny Meyer, founder of Shake Shack and the Union Square Hospitality Group. He joined me for a live conversation at the Wharton People Analytics Conference, where we dug into how to foster a healthy work environment.

Danny's an ideal person for that discussion. He's one of my role models for building a culture of generosity. I will tell you time and time again, while we can fake it, if our team is not feeling jazzed coming to work and feeling motivated by being surrounded by people with whom they have lots and lots of respect and trust, you will taste that. Your food will not taste as good. The hospitality will not be as good.

Danny's book, Setting the Table, is a must-read for anyone who cares about food, hospitality and service, or leadership. And this conversation will definitely give you a taste of what makes him a great boss.

Danny, welcome back to Wharton. Great to be here. Danny, I think that what a lot of people don't realize is you've not just been a pioneer in the way that you've made food. You've also transformed the way that a lot of people think about frontline work culture. And that's a big part of what we want to talk about today. So can you start just by telling us a little bit about your founding philosophy of how did you decide what you wanted your values to be as a restaurateur? I think my founding philosophy was born out of my own insecurity.

I was 27 when I opened Union Square Cafe and I had only been anyone's boss before that once in my life. I'd been a salesman. I was one of these people that was supposed to be a lawyer, took my LSAT, never applied to law school after that.

But the only other time I had ever been anyone's boss before that was working on a political campaign. A guy named John Anderson, who ran as the independent presidential candidate in 1980 against Reagan and Carter. Obviously he lost, as all independent candidates do. I had about 25 people reporting to me, and they were all volunteers. So I didn't have the opportunity to give anyone a raise, couldn't dock anyone their pay, couldn't give anyone a bonus.

100% of how I had to motivate people was with the higher purpose of why we were all doing this. Really foundational experience. I then opened Union Square Cafe at the age of 27. Half the people working for me were older than I was. And so when I talk about insecurity, I had this awful affliction that I think a lot of first-time leaders have, which is it was far more important for me to be liked than to command respect from people.

And without knowing it, I was unintentionally but intuitively adopting servant leadership. And I went to work every day for the purpose of making those guys feel successful and appropriating what I had learned from the political campaign, which was and give them a reason over and beyond their job to want to come to work. I love that. What was the reason?

The purpose was that we wanted to make people leave happier than however they felt when they came. Over time, we got a lot more intentional about stuff that had been just intuitive from the outset. I think one of the interesting things about your early days is culture building is easier for you now because you have a brand. They come to Union Square or Shake Shack with a set of expectations about what you stand for. Back then, nobody knew who you were. Nobody knew what you were about. How did you explain the culture you wanted to build to people?

Well, the fact is I didn't. I went to work every single day. For the first 10 years of my career, I had exactly one restaurant, Union Square Cafe. And my leadership philosophy was pretty weak. It was, if you see me doing it, that's what I expect you to do. If I wanted you to do something, I had the awful habit in those early days of saying, can I ask you a favor?

Excuse me, it's your job. What? Wait, who are you, the godfather? Far from it. Yeah, I would grab people by the cheeks and say, you see that napkin on the floor? I know you can pick it up, and so do you.

That's a good Godfather impression. I did not know. We've known each other for a decade. I had no idea you had that in you. Wait till you see how good I am with olive pits in my mouth. I can really do it well. But anyway, what happened was I finally opened a second restaurant, Gramercy Tavern, and

And I was literally like a Three Stooges routine, the one where you push in one drawer and the other one comes out and you push in that drawer. Whatever I got fixed at Union Square Cafe, it would be messed up at Gramercy Tavern. I was a whirling dervish. I would spend either all lunches at one restaurant fixing things and then all dinners at the other. Or I'd spend...

Monday through half of Wednesday at one and the other half of Wednesday through Friday at the other. And it finally dawned on me that the thing that we used to tell our kids when they were babies, use your words, is also a really effective thing in business and leadership. Until I started to use my words and say, this is what I expect you to do.

And I started taking a page out of our chef's playbook. Guess what a recipe is? It's using your words. If you follow these steps and do these things, you will get that result. I learned that when you do use your words and you use them from the very get-go, when you're hiring someone, you tell people, this is what success will look like.

When you do this kind of stuff, we're going to be really happy. When you don't do this stuff, we're not going to be really happy. But using our words and making things really crystal clear has been the journey. And I'd say only in this last two years have we, I think, gotten it even better than

which is moving from something we were really proud of for years, having family values. Those are our words, right? We came up with five family values. And by the way, those family values could have been anyone's family values. Excellence, hospitality, entrepreneurial spirit, integrity, right? And so two years ago, we finally did something way better using our words. And we said, number one, it's not a family.

Because I've gotten in a lot of trouble because whenever we would fire someone you don't fire your family members and it would be good for a lot of them though Well, yeah, I guess so that doesn't work so well if my sister didn't like it when I tried that on her So we change family values. It's not a family. And how do you hold someone really accountable to evaluate? We change that to effective behaviors and

and it is a business, these are the behaviors. We now have five expected behaviors and we do hold people accountable when we talk about those behaviors, when we hire you, when we review you.

Every single meeting that we have starts with those behaviors, and people know what they are. I love that you walked away from the family idea, because I think you're right. It sets unrealistic expectations. I think when people say we're creating a family here, what they really mean is we're a community, that we treat each other with respect. We have a sense of belonging. We try to make everyone feel welcome and included. But the family expectation is a little bit unreasonable. If you've ever worked in a restaurant before...

At its best, you know, you want it to kind of feel like a family, but the functional parts of the family, not the dysfunctional parts.

In fact, a lot of people in the restaurant business say that they spend more time with their restaurant family than with their actual family. But it's a business. It's called a restaurant business. It's not called a restaurant family. And it was confusing to a lot of people. Try it at your own risk. I've always loved that you had five values when you started out. Our own Drew Carton showed in a study that if you had more than five values, people had a hard time remembering them all, to your point. But also, they didn't always agree on what they meant.

It seemed like fewer than three was also too few to really be clear about what people stood for. I think a lot of organizations have a hard time narrowing it down to five.

Because there's a lot that you expect of people. How did you decide what the five core values were early on? We started off by going to our restaurants and having meetings and asking people, I can't tell you how long it takes to get every word right. Every word matters. Not just the words that are the expected behaviors, but the way we describe them. Because to your point, Adam, if there's the light of day between what you think I meant and what I meant,

How am I going to hold you accountable for that? I just can't. It goes through a lot of iterations and then we road test it constantly. Then they change. So for example, one of the expected behaviors is we play to win with a humble swagger. If you could know how much debate there was over those two words, humble swagger,

Could be an oxymoron if you're not careful. Well, it is. It is. It's like jumbo shrimp, right? I've called this confident humility for years. And the modifier of confidence isn't enough for a lot of people to think about that as a source of strength. It sounds weak. Humble swagger? That's strong. That's tough. I get that you're ambitious and you take pride in your work that way.

And I think for a lot of years, people actually heard the word hospitality. That's the name of our company, Union Square Hospitality Group. They took it almost the way that people used to hear a nonprofit, right? If you ran a nonprofit, there was a sense that you weren't really out to win because we're just a nonprofit. Well, nonprofits have to be

just as much on their game of accountability to have measurable results for the people who are contributing money as a for-profit. And so I learned the hard way that by talking about hospitality as much as we did, which is important, it's crucial, the way you care for people, the way you make people feel is not an excuse to not win. As a matter of fact, that's why we had to be assertive and affirmative that winning mattered to us.

One of the things that's striking to me is you have anticipated so much of what we study as a community of people, analytics, scholars, and leaders. Sometimes I sit down with you and I feel like my purpose in my job is just to give you studies and words for things you already know and have been doing for decades. What do you not know? What are the things you would love to see people in this room investigate or study? I'd love to find a way to measure what we call hospitality quotient.

I don't understand why intelligence quotient is measurable, but hospitality quotient isn't. And I define hospitality quotient as the degree to which it makes someone feel better themselves when they make someone else feel even better.

And like IQ, it's not a judgment. We definitely do everything we can to hire people, irrespective of what kind of a great cook they are or how great they are at suggesting wines. We want people who have a high HQ because the motivation for their cooking should be that they made you feel better because of it, right? I don't know how to measure those things. I know how to ask questions in an interview that gets to it.

I know how to use my sense of people's body language, my sense of people. But I also can tell you that I think I have a very high HQ and I think I'm at a disadvantage because I don't have a way to measure it. I'm actually at a disadvantage when I interview a frontline worker because I shouldn't go into the interview caring how you feel to the degree that I do.

That is a disadvantage, and it actually makes it more likely that I'm not going to hire people with a high HQ because it mattered to me to make you feel better. I should be thinking about how are you going to make the rest of our employees feel once I hire you. I should be thinking about how are you going to make all of our guests, our customers feel. The way you described it today made me think of some work that Noah Eisencraft did with Hilary Elfenbein on what they called affective presence.

which is the question of, do you have a consistent set of habits around the emotions you elicit in others? So we all know some people who light others up and some people who would be seen as annoying. They work to measure that, and they found that independent of the emotions that I transmit, I consistently make other people feel certain things. But what you're adding here is that I care about my affective presence, right? And I enjoy lifting you up, and I feel bad if I've cut you down.

And that, I have never seen someone study that. Greg Popovich talked about it. He said he wanted to bring players under the spurs who enjoyed other people's success. 100% of the statistics in baseball are only about what happened on the field. And we know from baseball that half of any player's time is spent in the dugout, right? Well, the championship teams, you can actually watch what's happening in the dugout. I don't know how to measure it.

But what's happening in the dugout has everything to do with their HQ. Like, watch what happens when a player on this team strikes out, goes back into the dugout, gets a pat on the back. You'll get it next time. The other team, the guy just sits glumly on the bench afterwards and everyone kind of disassociates with him. So there's something to that, but why can't it be measured? Maybe we can get that done someday.

So I love your interview questions. I've borrowed most of them. Talk to me about the wake that people leave and how you assess that.

Well, the first thing is if they come into the interview wearing a disgusting cologne, that's going to leave a really bad wake. I actually have talked to people about that in the interview. I'm not necessarily just trying to be funny. We're in an industry where even if you don't care about restaurants that much, Adam, you're paying for how good the food tastes and how good the wine tastes. And if there's a waiter walking through the restaurant leaving this wake of cologne, it's

each time you take a sniff of your wine, they've ruined your meal. I do think that people need to understand that empathy, which is such a crucial emotional skill, which does make up a big part of having a high HQ, is often described as

the ability and willingness to try to walk in the other person's shoes. My favorite interview question that you've introduced me to is your question about the biggest misperception that other people have of you. Talk to me about what you're looking for when you ask that question. That is one of my favorites as well. And you cannot answer that question unless you're willing to share the real you. The only way to answer that question is to say, well, I'm really this.

But the dangest thing is that people actually see me as that. It gives me a chance to actually see the person and see how they see themselves. The other one that I love is tell me about something that happened in your life before the age of 12 that you think has had more of an impact on you today than anything else.

And it makes someone stop and think and it shows how vulnerable they want to be or not. And it doesn't have to be they lost their pet dog or their grandmother died. I'd

Got caught stealing a candy bar in in the five and ten if they even know what that is in the drugstore in the CVS How's that? Wow, I hear yeah, but yeah, wawa, but the point is is that whatever that story is You then get a chance to talk about how did it change who you are today and you're looking for vulnerability there I'm looking for honesty vulnerability willingness to grow

looking maybe for a little growth mindset, it also gives me a chance to show my vulnerability. And I think that I'm not going to go there if I already know from the get-go that this is not someone that we're going to hire. But if I start to feel like it is, we start to build trust. And I think that trust is the foundation of what a great

boss and subordinate relationship is going to be ultimately anyway. Well, this is one of the many reasons I've been such a fan of your leadership is right from the get-go, you're looking for hidden potential in candidates that other people might miss.

Once you hire somebody, you've also gone way above and beyond to make it clear that you care about them as human beings, that you want to see them succeed, that you're there to help them grow. Talk about how you do that. What happens in onboarding? What happens when you think about, let's say, somebody who's a server who has aspirations to become a restaurant manager and then maybe even a chef one day? What does that process look like? It's a lot of give and take. It's a

As you asked the question, I was thinking about an exchange I had just last night with a prospective employee. It actually led to one of my other favorite questions. My wife does not like this question. She always thinks I'm bringing business speak into our marriage. I said, no, I really care. That's why I'm asking this question. But this is somebody who we actually do hope to hire. And there was a kind of a glitch where this person was getting advice from someone that

maybe they couldn't sign up quite as quickly as possible. And it didn't make sense to me. But I said, I'm sure there's got to be a really good reason that you're getting that advice from somebody. And I just want you to help me understand what it is. And I said, I may or may not agree with it, but if you can help me understand, that would be really helpful. That's the question that

sometimes doesn't work as well in my marriage. Help me understand why you're so angry with me right now. And what's the reaction? You're beyond help. Yeah, the other one that doesn't work so well in my marriage, but it really works in work is, it'd be really nice if you had a charitable assumption about my motivations. I've crashed and burned on that one many times. I said, I

I'm going to express why I don't think you have a problem, why I think you can actually sign up immediately. But go take that to the person giving your advice. And here's the cool thing. When you come back, I'm going to accept whatever you come back with. I'm going to trust that. And it's going to work out. And the person wrote me a note last night saying, it's all good. I'm signing up.

But here's the cool thing. He then said, "Thank you for trusting me to go find out on my own." And so it gave me a chance to start our relationship right now. It wasn't a make or break thing if the person doesn't sign up till next week. But there were people on our team saying, "The person better sign up right now or we're not going to be able to hire." And I said, "That's not how it works." I just think that when you lead with trust, you get trust.

I think we first connected around the idea that we both want to hire and promote people who are givers, not takers. And for me, what that meant in your world is you've got to be customer focused. And you said, uh-uh, tell me more. You got to be customer focused, but the input to that is being employee focused. We came up with a recipe that we want 100% employees and 49% is going to be their technical skills. 51% is going to be their hospitality skills.

And then furthermore, what we then did was to tell everyone on the team, your job when you come to work is first and foremost to take great care of each other, to set an example of excellence with the 49% and set an example of hospitality with 51%. And you will be held accountable even before how you treat our customers, our paying customers, for how you treat each other. And the reason is that I firmly believe in accountability.

vicious cycles and virtuous cycles. I believe that one bad thing can keep leading to something even worse, and I believe that one good thing can keep leading to something even better. So we then held everyone on our team accountable for what we call the virtuous cycle of enlightened hospitality. And their job is to put their customer second, put their colleagues first.

put the community in which we do business third, put our suppliers fourth, and put our investors fifth. And I had to be crystal clear because I wasn't for the first couple of years. People thought this was a totem pole where, oh, I did what I was supposed to do. I took care of each other. And we didn't make any money because the investors are at the bottom of the totem pole.

And I realized I had not done an effective job of making it clear that this is not a totem pole. It is a prioritization of our stakeholders, but it's a virtuous cycle. If you break it anywhere, you break the whole thing. And the reason that we put investors fifth is not because we want to make less money. It's because we want to make more money. Because if one good thing keeps leading to something even better...

That has to be the output, but the input has to be our people. And by the way, why do I know this works?

What's the best way to make happy employees? They get raises and they get promotions. Does that happen when you're not making money? Uh-uh. So it is truly a virtuous cycle. And when you break it anyway, you do break the whole thing. There are organizational psychologists like Ben Schneider who would be just thrilled to see this, having for years studied the way that how you treat your employees spills over then to affect the customer experience.

And it's still remarkable, though, how many leaders fail to understand this. I look at Jeff Bezos, for example, just in the last few years, finally saying we were wrong when our mission was to be customer-focused and that we wanted to be Earth's most customer-centric company. We should have said we also want to be Earth's best employer. It doesn't cost any more money to do this. As a matter of fact, it makes it so much more gratifying to be at work. It really does.

First of all, I do need to mention that 90% of our employees don't really have a choice. They cannot work remotely. You can't do dishes on Zoom or decant a bottle of wine for a guest on Zoom or something like that. But the people in our home office, and there's probably 120 at Union Square Hospitality Group, do have a choice. I started doing something myself, which is that every Tuesday...

I would come into the office and I would just have an open hour at my desk with my door wide open, "Crawlers and Coffee" is what it was called. And you could come in and talk about anything you wanted to talk about. And it was a great opportunity not only to give people a reason to want to come to work, but they wanted to be heard. Gave me a chance to hear all kinds of stuff going on. Never an agenda. Sometimes we didn't even talk about business, but

you started to see that it became cool to want to come to work. We still don't have a rule, but teams, turns out, like to work with teams. Turns out that for the same reason that we don't want all of our meals delivered by DoorDash, we actually like going to restaurants still because people like being with people and they get sick of being pent up in their own apartment by themselves. So I think it's time for lighting round and also some additional audience questions. Are you ready?

Okay, first question. What is your go-to Shake Shack order? Double cheeseburger with a slice of raw onion and a pickle. I don't like raw onions, but when you get a double, the slice melts, and so it's cooked. That's really good. And I get a mini vanilla milkshake to go with it, because you dip the fries in a vanilla milkshake. Otherworldly. What's the menu item you've been dreaming about but never introduced?

At any restaurant? At any restaurant. I've tried so hard to have a barbecued bologna sandwich topped with coleslaw and barbecue sauce. I'm so glad that hasn't happened. Well, no, but think about it. Think about it for a minute. Bologna is basically a round hot dog. It fits on a hamburger bun way better than a hot dog does. It's perfect. A lot of people love hot dogs, but they don't want this.

What's your favorite conversation to have with an employee who wants to grow? Help me understand what your aspirations are and what we can do to get out of your way so you can achieve them. Get out of your way as opposed to support. That's fascinating. It's kind of like being a parent. I think we do a much better job of screwing up our kids than helping them be successful. I hope my kids don't hear that quote.

If you did a great job of hiring, and that's really where we put our focus, we really focus hard on the hiring, then it is our job to, if you hire great people, get out of their way and let them succeed. Yes, give them the tools, but don't do stupid things that make it harder to succeed. We create so much friction with meetings that didn't have to happen, not providing tools that there should be, not fixing things that should have been fixed.

I'm an idea minute kind of guy. Some of them are bad, like the

barbecue bologna. But I don't like when someone comes to a meeting telling you what's wrong with it. So I've really grown very, very fond of asking the question, what could possibly go right? What could possibly go right? What if this thing works? And I've learned that in my own business, it helps me to dream bigger dreams when I ask that question. But it also helps us plan for success because a lot of our failures are when

We got so caught up in the what could go wrong stuff that we failed to see, guys, what if this thing actually works? Will we be prepared for success? Frontline worker retention has been a huge challenge. What have you done since COVID started to help with that? Single biggest thing we did, and this was an idea that a lot of people on my team shot down. It's going to put us out of business. It's never going to work. And I stuck to my guns on it.

But to reinforce how powerful the 51% hospitality skills are, we started giving everyone on our team a 51% discount to dine at any of our places anytime. And I will tell you that it has been the most potent retention tool ever. And a lot of people who work in our industry say,

cannot necessarily afford to eat a lot of the kind of restaurants and our guests are bringing in all these expectations but our own staff hasn't had the experience themselves so by giving this 51% discount it allows our staff members to actually understand the experience they're providing how does it feel to be on the receiving end but here's the even best part of it is that

They end up telling us what we need to do to get better, which is so much better than me telling them what they need to do to get better. So you're saying to everyone in this room who has a retention challenge, it's just two steps to solve it. Number one, start a food business. And then number two, discount for employees. Okay, check. I would think 51% off anyone's business would be a helpful thing. Only if your employees like your products or services. You mentioned earlier treating each other well is a key expectation.

How do you measure that? Trust surveys, we do pulse surveys. You know, we have guest sentiment, we have employee sentiment. And we know on a pretty ongoing basis how we're doing in both. And at the end of the day, I kind of feel like there's three things. If they're all headed in the right direction, I'm sleeping really well at night. Does it feel better to work here today than it did last time we asked? Does it feel better to dine here today? And are we making more money?

How do you navigate subcultures across different locations? You want to allow for variation, obviously, but you want some consistency, too. How do you walk that tightrope? We champion it. So as long as the really core things, like what I call enlightened hospitality and excelling at the expected behaviors. And I do believe that the businesses that outbehave the competition are the ones that prevail most.

We have a lot of different restaurants. And I love the fact that each one has its own, we call house pride. And we actually create opportunities for them to compete with each other. Sometimes on the playing field at staff picnics, we do annually an awards ceremony.

where we reinforce the behaviors that we want, but all the restaurants kind of sit with themselves, and they're rooting for their own team. And it's pretty cool watching that. There's obviously a behavioral scientist in the room who wants to know, do you run experiments between your different locations? No. Sorry. Next year. Okay. I'd like to know what kind I might run. One other thing we did once, which was great. After a particularly tough winter, and this was a few years ago,

The economy wasn't doing great. I had a cold one day and I went to one of our restaurants and I said, "I just need a really good bowl of chicken soup."

And that chef made me an amazing bowl. It was the chef of Tabla. It was great. Chili, peppers, ginger, all the stuff made me feel better. And I said, you know what? What this town could use right now is a good bowl of chicken soup. And I challenged every one of our chefs to do an experiment. So maybe I did do this, where each chef could put his or her thumbprint on chicken soup.

They all came up with their own recipe and we promoted this thing. We gave all the recipes out and we said to our guests, for every bowl of chicken soup we sell for this month, we're going to give $3 to City Harvest to fight hunger. You get to feel better. We get to promote what is different about each one of our restaurants. That was a pretty cool thing. Well, Danny, you talk a lot about enlightened hospitality. I have to say what I admire you most for is enlightened leadership.

And I know you would be the first to say, I don't want to be cloned, but I think the world could use a few more Danny Meyers. And I think, you know, it's just... He lost all of his credibility with that last statement right there. Completely disagree. There's a great expression in Italian, bastico zi, enough already.

Well, if I can just embarrass you for a second, I will say in all the time we've known each other, I've never seen you say no to any request, ever. And although I worry about your well-being, I greatly appreciate the way that you're willing to serve and share your wisdom. And I know we've all benefited from that today. So thank you. Rethinking is hosted by me, Adam Grant. This show is part of the TED Audio Collective. And this episode was produced and mixed by Cosmic Standard.

Our producers are Hannah Kingsley-Ma and Asia Simpson. Our editor is Alejandra Salazar. Our fact checker is Paul Durbin. Original music by Hansdale Sue and Allison Leighton Brown. Our team includes Eliza Smith, Jacob Winnick, Samaya Adams, Michelle Quint, Banban Chang, Julia Dickerson, and Whitney Pennington-Rogers. Like we all know his IQ can dance circles around mine. Doesn't make him a better person than me. I don't know how he got it. There are other things that make me a better person than you. Ha ha ha!

I'm just kidding. I'm trying to do humble swagger. Work on the humble part. I'm sure I could have been a contender.

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