Grinding It Out (13 page)

Fred came to work in our office in January 1957, a year in which we opened twenty-five new McDonald's operations around the country. He was in on all of them. So were Jim Schindler, our stainless-steel magician from Leitner Equipment Company, and Syg Chakow, the salesman from Illinois Range. Both Jim and Syg worked as if they were on my payroll. They put in many hours of overtime making sure the equipment was right and seeing that it was installed properly. Sometimes they even helped clean up scrap lumber and sweep the parking lot to help a licensee meet his opening deadline. In Sarasota, Florida, they ran into a health department ruling that deemed it unsanitary to prepare milk shakes and hamburgers in the same room. In our units, of course, the shakes were made close by the griddles, and it would have been prohibitively expensive to redesign our structure. Syg Chakow came up with the idea of building a glass partition with an inside door so that the shakes and hamburgers could be prepared in separate rooms, yet served to customers through a single window. The health department was satisfied, and our operator was greatly relieved.

Harry, June, and I were talking about the Sarasota saga one midnight near the end of 1957. We were sitting in the recreation room of my home in Arlington Heights after one of our brain-wringing strategy conferences, and the subject was all the close shaves we'd had in getting units open. We were feeling kind of giddy with the accomplishment of having thirty-seven McDonald's hamburger restaurants in operation and the prospect of doing much better in the coming year. I told them there'd always been problems with openings, beginning with the McDonald brothers' first self-service store in 1948. Now San Bernardino is on the edge of the desert, remember, and you could probably put its average annual precipitation in a martini glass and still have room for an olive. But on the day the McDonald boys opened their new drive-in, it snowed three inches in San Bernardino! What few customers did make it through the traffic jams and into their parking lot sat in their cars and honked their horns angrily. Snow had covered the signs that advertised self service—no carhops.

An equally unusual thing happened in 1953 when the McDonalds were designing their “golden arches” building. They wanted to lay it out in the most efficient way possible, placing windows and equipment so that each crew member's job could be done with a minimum number of steps. Mac and Dick had a tennis court behind their house, and they got Art Bender and a couple of other operations people up there to draw out the whole floor plan with chalk, actual size, like a giant hopscotch. It must have looked funny as hell—those grown men pacing about and going through the motions of preparing hamburgers, french fries, and milk shakes. Anyhow, they got it all drawn, just so, and the architect was to come up the next day and copy the layout to scale for his plans. That night there was a terrific rainstorm in San Bernardino, and every chalk mark on that tennis court was washed away.

“What did they do, go through the whole damned procedure again?” Harry asked.

“Oh, sure,” I replied. “That's how they came up with the design Jim Schindler adapted for us.”

“Listen, Ray,” June cut in, “I think you ought to hire Jim. You're going to need him.”

June's suggestion made a lot of sense, and we did hire Jim Schindler, our second employee in the corporate office. I had to pay him $12,000 a year, which was more than Harry, June, or I were getting, but we badly needed his expertise. I don't think he would have come with us for that salary if I weren't Bohemian like him. He trusted me, and the association worked well. The suggestion that we hire him was a credit to June. But I was surprised by the directness of her statement. Usually June would drop hints here and there and try to transfer her enthusiasm to Harry and me by womanly wiles. This always amused me. June set great store by her “feminine intuition.” Some people actually thought she was psychic. But I didn't need a horoscope to tell me the value of her role in our office. She acted as a buffer between two pile-driving personalities, Harry Sonneborn's and mine, and most of the time she succeeded in keeping us from colliding head-on. Clashes were inevitable, though, because while Harry and I shared a belief in the capitalistic system and while we had the same faith in our enterprise and its future, our individual approaches were quite different.

Harry was the scholarly type. He analyzed situations on the basis of management theory and economic principles. I proceeded on the strength of my salesman's instinct and my subjective assessment of people. I have often been asked to explain the methods I use in choosing executives, because much of the success of my organization has been a result of the kind of people I have picked for key positions. My answers aren't very satisfying; they don't sound much different than the rules that students of business administration find in their basic textbooks. It's hard to come up with real answers because the weight of the judgment is not in the rule but in the application. As a result, I have sometimes been accused of being arbitrary. June Martino believed, for example, that I once fired a member of our staff because he didn't wear the right kind of hat and didn't keep his shoes shined. She was correct as far as it went, I
didn't
like those things about the man, but those weren't the reasons I fired him. I just knew that he wasn't right for us; he was prone to making mistakes, and the hat and the shoes were merely symptoms of his sloppy way of thinking.

I've been wrong in my judgments about men, I suppose, but not very often. Bob Frost, one of our key executives on the West Coast, will remember the time he and I were checking out stores, and I got a very unfavorable impression of one of his young managers. As we drove away from the store I said to Bob, “I think you'd better fire that man.”

“Oh, Ray, come on!” he exclaimed. “Give the kid a break. He's young, he has a good attitude, and I think he will come along.”

“You could be right, Bob,” I said, “but I don't think so. He has no potential.”

Later in the day, as we were driving back to Los Angeles, that conversation was still bugging me. Finally I turned to Bob and yelled, “Listen goddammit, I want you to fire that man!”

One thing that makes Bob Frost a good executive is that he has the courage of his convictions. He also sticks up for his people. He's a retired Navy man, and he knows how to keep his head under fire. He simply pursed his lips and nodded solemnly and said, “If you are ordering me to do it, Ray, I will. But I would like to give him another six months and see how he works out.”

I agreed, reluctantly. What happened after that was the kind of personnel hocus-pocus that government is famous for but should never be permitted in business, least of all in McDonald's. The man hung on. He was on the verge of being fired several times in the following years, but he was transferred or got a new supervisor each time. He was a decent guy, so each new boss would struggle to reform him. Many years later he was fired. The assessment of the executive who finally swung the ax was that “this man has no potential.”

Bob Frost now admits he was wrong. I had the guy pegged accurately from the outset. But that's not the point. Our expenditure of time and effort on that fellow was wasted and, worst of all, he spent several years of his life in what turned out to be a blind alley. It would have been far better for his career if he'd been severed early and forced to find work more suited to his talents. It was an unfortunate episode for both parties, but it serves to show that an astute judgment can seem arbitrary to everyone but the man who makes it.

My executive style was prone to that sort of thing far more than Harry Sonneborn's. On the other hand, his cool, dispassionate manner didn't inspire much spirit and enthusiasm. I like to get people fired up, fill them with zeal for McDonald's, and watch the results in their work.

We were different, Harry and I, but for a long time we were able to splice our efforts so that the differences made us stronger. Fred Turner added another dimension to the combination. It became part of Fred's assignment in helping new operators to open their stores to deal with the local suppliers of meat, buns, and condiments, and this exposure, combined with his experience at the griddle, helped us make significant changes in the way things were supplied to us and how they were packaged.

Consider, for example, the hamburger bun. It requires a certain kind of mind to see beauty in a hamburger bun. Yet, is it any more unusual to find grace in the texture and softly curved silhouette of a bun than to reflect lovingly on the hackles of a favorite fishing fly? Or the arrangement of textures and colors in a butterfly's wing? Not if you are a McDonald's man. Not if you view the bun as an essential material in the art of serving a great many meals fast. Then this plump yeasty mass becomes an object worthy of sober study. Fred Turner gave the bun that sort of attention. We were buying our buns in the Midwest from Louis Kuchuris' Mary Ann Bakery. At first they were cluster buns, meaning that the buns were attached to each other in clusters of four to six, and they were only partially sliced. Fred pointed out that it would be much easier and faster for a griddle man if we had individual buns instead of clusters and if they were sliced all the way through. The baker could afford to do it our way because of the large quantities of buns we were ordering. Fred also worked with a cardboard box manufacturer on the design of a sturdy, reusable box for our buns. Handling these boxes instead of the customary packages of twelve reduced the baker's packaging cost, so he was able to give us a better price on the buns. It also reduced our shipping costs and streamlined our operations. With the old packages, it didn't take long for a busy griddle man to find himself buried in paper. Then there was the time spent opening packages, pulling buns from the cluster, and halving them. These fractions of seconds added up to wasted minutes. A well-run restaurant is like a winning baseball team, it makes the most of every crew member's talent and takes advantage of every split-second opportunity to speed up service. Once our bun box was in use, Fred kept coming up with little refinements on it. He found that buns would stay moister longer in the box if the lid came all the way down to the bottom instead of halfway. He also learned that the number of reuses we could get from a box was increased if he had an extra heavy coating of wax applied by the maker.

So Fred would go out to Milwaukee or Moline or Kalamazoo or wherever a new operation was starting, and he'd call on a baker there and tell him about McDonald's and the buns we would like him to make for us. Fred had the figures laid out cold, so the baker could see why our way was better and how it would save him money. He'd never heard of the kind of box we wanted, usually, so Fred would set up a meeting with the box manufacturer.

Supplying buns to McDonald's was the break of a lifetime for many of these men. Mary Ann Bakery, for example, was a small organization when it started dealing with us. Now it has a plant with a quarter-mile-long conveyor belt for cooling buns after they're baked. The firm uses more than a million pounds of flour a month to make buns for us. Mary Ann also has a trucking company that services McDonald's. Freund Baking, now a division of CFS Continental, is another company that grew with us. I had to twist Harold Freund's arm repeatedly to get him to build a bakery just to service our California stores. Freund now has the largest, most automated bun plant in the world. It produces eight thousand buns an hour for McDonald's. It also has a plant in St. Petersburg serving all of Florida, and another serving all of Hawaii.

Fred applied the same sort of thinking he'd used on buns to all the other supplies being purchased. It's important to make clear here that Fred wasn't buying these items on behalf of the corporation, and we weren't selling to the operators. We set the standards for quality and recommended methods for packaging, but the operators themselves did the purchasing from suppliers. Our stores were selling only nine items, and they were buying only thirty-five or forty items with which to make the nine. So although a McDonald's restaurant's purchasing power was no greater in total than that of any other restaurant in a given area, it was concentrated. A McDonald's bought more buns, more catsup, more mustard, and so forth, and this gave it a terrific position in the marketplace for those items. We enhanced that position by figuring out ways a supplier could lower his costs, which meant, of course, that he could afford to sell to a McDonald's for less. Bulk packaging was one way; another was making it possible for him to deliver more items per stop.

A side benefit of the purchasing system we were working out as we went along was that it gave us an automatic inventory check. An operator could balance off the number of buns used in a day against the number of patties used, and if they didn't come out even, something was wrong. He could keep a close check on waste, and he could spot pilferage almost immediately. If he was supposed to be getting ten patties of meat to a pound, he'd know something was wrong if he went through 110 pounds of meat in serving a number of buns that should have used only 100 pounds. Either his meat man was shorting him or someone was stealing it.

Whenever Fred came up with a better idea of handling a product, I'd see to it that our suppliers implemented it in all their operations. My years of experience in selling paper cups and Multimixers paid off here, because I knew exactly what hands held the strings I wanted to pull to get the job done. People have marveled at the fact that I didn't start McDonald's until I was fifty-two years old, and then I became a success overnight. But I was just like a lot of show business personalities who work away quietly at their craft for years, and then, suddenly, they get the right break and make it big. I was an overnight success all right, but thirty years is a long, long night.

I always felt comfortable working with Fred Turner, because he is a detail man like I am. There is a certain kind of mind that conceives new ideas as complete systems with all of their parts functioning. I don't think in that “grand design” pattern. I work from the part to the whole, and I don't move on to the large scale ideas until I have perfected the small details. To me this is a much more flexible approach. For example, when I was starting McDonald's, my original purpose was to sell more Multimixers. If I had fixed that in my mind as a master plan and worked unswervingly toward that end, my system would have been a far different and much smaller-scale creation. Once in a while I have great ideas strike me in the middle of the night—sweeping plans that I could see complete, or so it seemed. But, every time, these things turned out in the clear light of the following day to be more fanciful than functional. And the reason usually was that some small but essential detail had been overlooked in my grand design. So, at the risk of seeming simplistic, I emphasize the importance of details. You must perfect every fundamental of your business if you expect it to perform well.