The Boss Show

Workplace wisdom with heart and humor

March 6, 2017

Portrait of a Conscious Company

Jim & Steve chat with Bob Donegan, President of Ivar’s, a legendary Seattle seafood chain. Ivar’s has long done what the new “conscious capitalism” companies do ­– treat employees well, respect all stakeholders, value outcomes other than profit. … Plus, thinking of getting an MBA? Most corporate recruiters think it won’t prepare you for the business world.


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Voiceover: It’s a Northwest Lifestyle Weekend on KOMO News. Now, a show for anyone who is or has a boss, this is The Boss Show with Jim Hessler and Steve Motenko.
Steve Motenko: Today on The Boss Show, Bob Donegan, President of the storied Seattle restaurant chain Ivar’s offers us hope right here in the studio that running a successful, yet conscious business is not, in fact, an oxymoron. Welcome to The Boss Show, I’m Steve Motenko. I’m The Psychology Guy, I’m a Harvard educated leadership coach and personal development coach.
Jim Hessler: I’m Jim Hessler, I’m The Business Guy, they call me. I wrote a book along with Steve called Land On Your Feet, Not On Your Face. I’m the Founder of Path Forward Leadership Development which helps people learn to be good leaders in the business world.
Steve Motenko: Jim, before we get to the interview with Bob Donegan, who’s sitting here quietly in the studio … well, not quietly, his microphone is turned off.
Jim Hessler: He’s handcuffed, we have a …
Bob Donegan: [inaudible 00:00:57]
Steve Motenko: I came across an article that I just want to toss at you and see what you think. The title of the article was, “Is an MBA Worthless?” Some guy at the University of Texas did a study where he surveyed 500 business school leaders, 3,000 business school students and 10,000 corporate recruiters.
Jim Hessler: Wow.
Steve Motenko: It was a decent-sized study.
Jim Hessler: Yeah, no kidding.
Steve Motenko: The results showed a colossal disconnect between what business schools are selling and what corporate recruiters and by extension their companies are buying. An astounding 98% of corporate recruiters don’t think that MBA programs are making students career-ready.
Jim Hessler: Wow. Okay, so …
Steve Motenko: How do you respond to that, my friend?
Jim Hessler: Somebody else is saying it instead of me.
Steve Motenko: You only say it because you don’t even have a college degree, so you have to be … it’s that hostile envy thing [crosstalk 00:01:57]
Jim Hessler: I have to be careful. I have to be careful because people might think that I … it’s sour grapes or that I’m this … because I don’t have a college education. I went to college for two and a half years, I got good grades, but good glory, I was a music major. I never took a business course in my life. I found myself, throughout my career … this is going to sound really arrogant, but literally, running circles around people with MBA’s. I don’t have a high …
Here’s my biggest problem with MBA’s, is often people go get an MBA because their career has stalled, or they’re not making the kind of money they want to make, or they’re not elevating through the hierarchy at the speed they’d like to, so they say, “Oh, the problem is I don’t have an MBA.” Then they go get an MBA and they don’t realize that the success or lack of it that they’ve had up to that point in their career is not related to their education, but it’s related to the other aspects of their performance and behavior.
Steve Motenko: Yeah, a number of things. First of all, I want to contribute to the arrogance a little bit by saying I think you’re the smartest non-college graduate I know.
Jim Hessler: I appreciate that.
Steve Motenko: Having been Vice President of Fortune 150 company at age 36, you of all people, would know whether or not having an MBA hampered your career.
Jim Hessler: I kind of wish I had one, sometimes. Then other times, I think I’m lucky I don’t, because I think it’s probably resulted in me thinking a little bit further out of the box and out of the normal boundaries of business than a lot of people, because I haven’t been drinking that Kool-Aid and going to the big business school. There’s a lot of networking that goes along with that, that I think is valuable. I think you can meet people that you went to college with that can be supporters and network. I missed that. I wish I had that.
Steve Motenko: Yeah, that might be the most important result of an MBA, sure.
Jim Hessler: That fraternity of people that I went through school with. I also think that there’s ways in which it might have limited my thinking.
Steve Motenko: I’ve spent a lot of years wishing that I had gone for an MBA. When I graduated Harvard, I took the business school boards and scored a 744, which was … This is typical Harvard to remember that number, which was like the highest score in the business boards that the people around me had heard of. They said, “You have to go to business school.” I couldn’t see myself in business school. Then 15, 20 years later, I kept thinking, “I wish I had done that, I wish I had gotten an MBA, especially once I started my coaching career.”
Jim Hessler: Especially from Harvard.
Steve Motenko: Yeah, especially from Harvard. Yeah, who knows what doors would have opened.
Jim Hessler: ‘Cuz that’s a ticket in. That’s a ticket in.
Steve Motenko: Absolutely. Now I’m not so sure. This researcher says, seriously, I if I were in an MBA program, I should transfer to law school so I could start a class action suit against these schools for failing deliver what they promised. We have in studio with us today Bob Donegan, who is President of the iconic Seattle seafood chain called Ivar’s. In his first 15 years there he helped double sales. He’s a former Chairman of the Seattle Metropolitan Chamber of Commerce and currently the Chair of the Seattle Aquarium Board. Bob, thanks so much for joining us.
Bob Donegan: Thanks for having me on such a beautiful day.
Steve Motenko: I know. I’m sorry we have to be in studio, but at least we have windows here. We record, by the way, right here in the KOMO studios under the shadow of the Space Needle. It’s quite a lovely space. I do want to say, at the beginning here, Bob, that I actually made the mistake of inviting you to this interview before I found out that you’re a Yalie, so if you wouldn’t mind just leaving the studio…
Bob Donegan: We don’t usually mention that here on the West Coast where people don’t understand New England colleges, so thanks for bringing it up.
Steve Motenko: Yeah, you’re welcome. Seriously, I invited you because both, Jim and I believe … I met you when you did a presentation for the Seattle Conscious Capitalism Community a few months ago and I asked you if you’d be on a show. You were gracious enough to say yes. Jim and I both believe …
Jim Hessler: Can we remind the listeners just 30 seconds or 10 seconds on conscious capitalism?
Steve Motenko: Yeah. Conscious capitalism … You know what? Maybe I should turn that to you. What I want to say is we both believe that businesses should exist sourced in a set of values beyond simply the maximization of profit. I believe you believe that too. I’m wondering, does Ivar’s consider itself a conscious capitalism company? If so, what does that mean to you?
Bob Donegan: Those are big words, and we would not normally use big words to describe ourselves that way. The principles of conscious capitalism, many stakeholders manage for things other than profit, be actively involved in the community, treat your employees well. Those are all things that we’ve believed since Ivar ran the company.
Steve Motenko: Okay, I want to hit all of those. They’re great principles. I want to talk to you about how Ivar’s embodies those principles, so how you can actually get away with that stuff when most businesses are saying, “It’s too expensive to do all those things.” Before we get there, tell us a story or two about Ivar himself.
Jim Hessler: Yeah, because it sounds like this really came from the founder, to a large degree.
Bob Donegan: One of the interesting stories about Ivar is when he would visit restaurants, the first person he would go and see was the dishwasher.
Steve Motenko: I love it.
Bob Donegan: Because he wanted to know what was coming back uneaten on the plates. It’s a way for him to find out how the guests were behaving …
Steve Motenko: That’s brilliant.
Jim Hessler: Yeah, absolutely.
Bob Donegan: … and he would integrate upstream and talk to the chefs and the cooks about not putting so much broccoli on the plate, or whatever it was. He had that kind of managing by walking around attitude about life, and most of the people in the company who worked for him knew him and he knew them and their wives or their husbands and their kinds and their grandkids. Yeah, our history is well-tied to conscious capitalism long before it was referred to that.
Steve Motenko: That’s also really a Toyota lean principle, is we go out and we observe the work being done first hand. I know a lot of managers that are afraid of being micro managers and they don’t necessarily get as involved as they could or should in the actual mechanics of their business. It sounds like he was willing to roll up his sleeves and get right in there where the action was.
Bob Donegan: We still do that. Every Seahawk game, I work. I’m in one of our booths. There is nothing like identifying a good manager to be at the beer line and have the beer run out and see how that person reacts to 300 angry Seahawk fans who want their two Bud Lights. You get a really good sense of who’s good and who’s bad and how you can help people improve.
Jim Hessler: Give us just one example of what you’ve learned. Another example what you’ve learned by walking around. We’ve got about 20 seconds.
Bob Donegan: Anything we try, we’re going to screw up. A new idea comes up, we try something new, it’s going to be a mistake. We’ve built into our processes the expectation that we’re going to have to fix things. Because this is year ’71, we know of … we hang around long enough, we’ll fix everything and we’ll be just fine.
Steve Motenko: How do you help people deal effectively with failure? How do you keep them from being so afraid of failure that they’re afraid to take risks and that’s afraid to create, innovate?
Bob Donegan: It’s okay to make mistakes. We encourage that. We just don’t want people to make the same mistake twice. As an example, on 9/11, when my predecessor died and my partner’s asked me to take over, I managed the guy who ran our 30 seafood bars. David had been doing it for 25 years, and every manager and assistant manager that he hired had to be run through then president. I suggested to Dave, “You’ve interviewed more people than I’ll ever know, I’m glad to talk to anybody you want, but you go ahead and interview people without me.” A year later, he told me he thought I was setting him up to fail.
Steve Motenko: Oh, interesting.
Bob Donegan: That he would make a bad hire and the consequence would be we would fire him. That was exactly not the case. He was the expert. We know in hiring that a quarter of the time we’re going to make bad choices. That’s okay, learn from it, just don’t do it again.
Steve Motenko: What’s interesting about that to me is by your predecessor, having the requirement that he would vet all the assistant managers, there was an implied lack of trust there for this guys and then when you extended that trust to him, he had trouble trusting that. He wasn’t used to being dealt with that level of trust.
Bob Donegan: It took a while for him to recognize that, but once he did, then he was off to the races and he tried all kinds of new things. Digital menu boards, new menu items, different hours, drive throughs, things that we, in the past, hadn’t tried before. He was successful because of it. That’s the most successful of our five operating groups, is our seafood bars. Consistent, reliable, growing, strongest staff. They do a really good job.
Jim Hessler: And darn good food, too.
Steve Motenko: There’s a lot in here I want to explore. One is, you said, about a quarter of the time you’re going to fail in your hires. Do you have a sense for whether that’s similar or better than the industry average?
Bob Donegan: I think we’re better. We know that in restaurants, every three minutes there’s going to be a crisis. When the crisis hits, you want to be surrounded by optimists. One of the things we teach our hiring managers is to ask potential employees a series of questions to try to determine their optimism quotient. We want to hire optimists.
Jim Hessler: Interesting.
Steve Motenko: Is that the primary criteria for hiring? Optimism?
Bob Donegan: It is one. We want people who are great customer service advocates and really good with people, because we can teach them anything they need to know, as long as they stay with us long enough.
Steve Motenko: I just think that’s so fascinating to be hiring for optimism. I heard you say this at the Conscious Capitalism event. You also said really focused on customer service. How do you determine? How do you assess that in a hiring interview?
Bob Donegan: We ask questions to determine if they’re optimistic when a crisis comes up, or if they’re pessimistic. Let’s play a little game. Steve, tell me about your last job.
Steve Motenko: My last job was teaching music in an elementary school. That was 18 years ago, before I became a coach [crosstalk 00:12:54]
Bob Donegan: How did you like it?
Steve Motenko: I liked it. This is not a job interview, so I can be more honest and I can say I liked it a lot sometimes, and it was really frustrating other times. There was a real balance there.
Bob Donegan: We keep track of the number of positive comments you make about your last job. I really liked it, I learned a lot.
Steve Motenko: It sucked.
Bob Donegan: They trained me. Or it sucked. In the little interview that we just did, you were one and one. One positive comment, one negative comment. Unless that ratio is four or five to one, we won’t hire you.
Steve Motenko: Damn it, I’m not going to get the job at Ivar’s! Well, I’ve learned my lesson, at least.
Bob Donegan: When someone drops the tray of dishes, which happens all the time, pessimists complain and whine and look to blame and optimists ask, “Oh, what can I do? I’ve got to find something here. What can I do to make this better?” The first orientation of customer service is you have to have a good attitude. As Jim said, if you see it, you know it in an instant.
Jim Hessler: Yeah, I do, during the break … I love eating out. My wife and I are foodies and we eat out a lot. You can just tell the second you walk in the front door, I really believe it’s that evident whether the employees there want to be there, whether they enjoy serving you. It makes a big difference in your experience as a consumer.
Bob Donegan: With our stores, we ask our managers to know three things about their 100 best customer. First, their name, second something about personal about them and third, their regular order. When they come into our stores, offer our customers will not go to the counter and order, they’ll just go and sit down, and Carrie, the manager in the Kent store, will come over and greet them and bring them their food five minutes later and talk with them. This is in a quick service location. If you have a customer service orientation, it’s obvious in an instant.
Jim Hessler: That manager enjoys doing that, I would imagine. They don’t see it as a burden, something, it’s just something they take pride in and pleasure …
Bob Donegan: This is year 42 for Carrie doing this.
Jim Hessler: Wow.
Steve Motenko: Which brings up a question, what’s your turnover like compared to … with all these enlightened practices of both hiring and of hiring people who have a customer service orientation? How does your turnover compare to the industry average, do you know?
Bob Donegan: Industry averages are between 250% and 400% a year turnover in restaurants. Sabrie who manages our human resources just completed the calculation for last year. We were at a 103% turnover, so that’s 40% of the industry [crosstalk 00:15:27] and that includes the 250 people who work for us in stadiums every summer, who at the end of the Mariner’s season get laid off, so that 25%. Our turnover is very favorable.
Steve Motenko: There’s another piece of that – you pay people better than the industry average, as I understand it. Is it still true that you pay full benefits to everybody?
Bob Donegan: Correct. If you work more than 28 hours a week, you’re eligible for benefits not only for you, but for your spouse and your kids. We pay 80% of your policy and we ask you to pay 20%. Steve, you and your family of four would cost us $2,200 a month for that insurance and you pay a couple of hundred bucks for that and you get full insurance.
Steve Motenko: Yeah, well, but you’re not going to hire me, you’ve made that clear, because I’m not optimistic enough.
Bob Donegan: We’ll put you through the training program and we’ll work it out.
Steve Motenko: Okay, fair enough. I’m looking forward to it. Again, most businesses that are more short-sighted will say, “Well, we can’t afford to pay people at the top of the range. We can’t afford to give full benefits to everybody, because the business model won’t work.” You say what?
Bob Donegan: We know from our continuous market research that the typical person who visits us visits us every 10 days with 1.2 people with him or her and last week spent $12.89. We don’t know how long they stay with us, we’ve only been doing this research for 20 years, but we assume 25 years. If you add and multiply all that stuff out, the lifetime value for a customer is almost $30,000. To not pay an employee enough to provide good customer service is both wrong and it’s financially short-sighted. For us, it works. I don’t know how it works for other businesses, because I don’t understand their operations.
Steve Motenko: I think you said during the break that that the first obligation is to making employees happy and then customers get happy, as a result of focusing on that. I know Ivar’s considers sustainability a core value. It was, for example, one of the first companies in Seattle to compost food waste, all the restaurant’s food waste. What else do you engage? What other practices do you engage in to embody your commitment to sustainability?
Bob Donegan: The big one that people always ask about is sustainable sourcing of seafood and vegetables. During the summer, we get most of our vegetables from an organic farmer over on the other side of the mountains. [inaudible 00:18:05] drives over a couple of days a week, Monday and Thursday and drops stuff off, all fresh, all local. Seafood is an easy one for us. You may know that there’s one state in the nation whose constitution requires that its fisheries be maintained sustainable.
Steve Motenko: Oh, oh, can I guess?
Bob Donegan: Guess.
Steve Motenko: Maine.
Bob Donegan: Alaska.
Jim Hessler: Is that right?
Bob Donegan: Uh-huh (affirmative).
Jim Hessler: Oh, interesting.
Bob Donegan: The fishery catches today are similar to what they were in the ’50s before Alaska became a state, so that makes it …
Jim Hessler: That’s really good to know.
Bob Donegan: … really easy for us to source. Our fishing boat, the Northern Leader, Alaska Leader is out in the Bering Sea today, catching cod in the A season, which opened three weeks ago. All of that stuff, all those cod will be there years from now because of that.
Steve Motenko: Do you literally own that boat?
Bob Donegan: We do not.
Steve Motenko: You’re contracted with them to [crosstalk 00:18:54]
Bob Donegan: It’s a joint venture between Native Claims Settlement company and the Pribilofs and a group of Seattle guys. They provide three quarters of a million pounds of northern Pacific cod that’s in the fish and chips that you’ll have for dinner tonight.
Jim Hessler: Wow.
Steve Motenko: Do you have a sense for how many customers know or care about the fact that you’re committed to sustainably harvested seafood?
Bob Donegan: In Seattle, everybody assumes it, it’s why we don’t talk about it. Outside the region, it’s less important.
Steve Motenko: You don’t use it as a marketing message?
Bob Donegan: We do not. People expect it from us. We’re strong members of the community. We’re out there all the time. They’re in our stores. If they want to see things, any of our managers or staff can talk about it, but no, we don’t trumpet it.
Steve Motenko: What’s the hardest thing, in your mind, about running a “conscious” business?
Bob Donegan: It’s not difficult for us, because it’s such an important part of our culture. We think about things not only for profitability, for also for their effect on employees and the effect on suppliers and the effect on our customers and the effect on the community. It’s been that way from the beginning, so it’s not difficult for us at all.
Steve Motenko: Do you get members of the board or senior executives who say, “Well, you know, if we just cut this corner on “conscious” business practices, if we just reduce this cost, nobody’s going to care that much.” How do you deal with the slippery slope of that?
Bob Donegan: Jim, and Frank and Mark and I who own the company sit 30 feet apart from each other. The board meets half a dozen times every day.
Jim Hessler: Interesting.
Bob Donegan: We make all of our decisions together. Decisions to reduce costs or eliminate things never come into our thinking.
Steve Motenko: Wow. Can you imagine a successful business person stating that sentence?
Jim Hessler: Yeah, and just a 10 second advertisement. If you are new to Seattle, if you haven’t grown up here, you have to idea of how important Ivar Haglund was to this community, and I’m not surprised to hear that some of his legacy is playing out in this conversation. He was a great guy.
Steve Motenko: We’ve only got a little time left. What’s worth mentioning that we haven’t mentioned? You said the quirkiness. What did you mean?
Bob Donegan: One of the key elements of Ivar’s success and the reason we like to work there is it’s a fun and quirky place to be. The most recent example of was about 10 years, when the recession had hit, and we knew that the community would be down and people would be unemployed and needed to have some fun. That’s when we discovered that in 1953, Ivar was a member of the State Transportation Commission that had learned that the ferries operated better underwater than on top. That’s when he buried the underwater billboards, which we discovered that year. Of course, it was big news and everybody enjoyed that.
Jim Hessler: That was fun, that was a good [pun 00:21:56].
Steve Motenko: What a great pleasure it has been to have you on, Bob. Thanks so much for coming to the studio and playing with us.
Bob Donegan: It’s great to be here, thanks for having me.
Jim Hessler: The Boss Show’s produced by Path Forward Leadership, and our sound engineer is Kevin Dodrill.
Steve Motenko: If you missed any of the show, you can get it in its entirety online at thebossshow.com, which is also where you can go to subscribe to the podcast.
Jim Hessler: Thanks for listening.
Steve Motenko: And don’t forget, rule number six.
Jim Hessler: Rule number six.
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