K U D SO.C . TA n nERvO Lu M E 14 n u M B E R 1

Texas RoadhouseTHE BEnEfITS Of BRAnDInG RECOGnITIOn

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RE COG nIT IOn SnAPSHOT

A nalysis conducted by the Compensation Roundtable reveals

that reward and recognition programs can have more than twice as much positive impact on employee performance and retention as annual bonuses.

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W alk into any Texas Roadhouse restaurant and you will see, smell, and hear the very tangible

culture of this remarkable company. In a word, it’s fun. “If your employees are having fun then, they are going to have fun with the guests,” says restaurant founder Kent Taylor. “The biggest compliment I get when I talk to people coming out of our stores is not that they had great food or great service, but that they had fun.” Make no mistake, this party has purpose. “Culture by design, not default,” is the Texas Roadhouse leadership team’s mantra. The rapidly growing, $1.2 billion (including franchise sales), 335-unit restaurant chain is proud of its rowdy reputation and the culture it encourages among employees and guests. // continued inside

2x$ Couple that with the fact that most employees’ desire for job recognition has increased by 15 percent across the past several months and appreciation becomes a major motivator for employees and employers.

G . J . H a r T, C H I E F E X E C U T I V E O F F I C E r ,

T E Xa S r Oa D H O U S E

SOuRCE: InCREASInG THE ROLE Of REWARD AnD RECOGnITIOn In InCEnTIvE PLAnS, COMPEnSATIOn ROunDTABLE, 2009.

“For the life of me I don’t understand, if you have people as your biggest asset and you claim they are your biggest asset…then how can you not invest in them and expect a return?”

— G .J . HART, CEO, TExAS ROADHOuSE

“Culture for us really is one of our biggest assets,” says Dave Dodson, communications director. “We talk all the time about really making sure that we are protecting our culture, that we’re investing in our culture, that people understand our culture, that new people we are bringing into our company learn the culture.” In fact, the company boldly claims the status of “legendary;” using the words “Legendary Food. Legendary Service.” as both mission statement and sincere commitment to employees, customers, and culture. “You can’t have Legendary Food and Legendary Service without Legendary People having Legendary Fun,” says Mark Sampson, senior director of Legendary People for Texas Roadhouse.

THE CASE fOR CuLTuRE

What does “culture” mean to Texas Roadhouse or any organization trying to find, instill, and promote a sense of identity and belonging among its employees? “Organizational culture is possibly the most critical factor determining an organization’s capacity, effectiveness, and longevity,” says Linda Devis, expert in building high performance cultures and organizational development. “[Culture] also contributes significantly to the organization’s brand image and brand promise.” The company has been called to defend its efforts to maintain and promote company culture in recent months. Texas Roadhouse CEO, G.J. Hart, appeared on CNBC to answer tough questions about why the company has continued to invest in recognition events and celebrations with shareholders and current economic conditions to consider. “We’re all about our people and our culture,” Hart told the CNBC interviewer. “We live by a philosophy in our company that if we take care of our people, they’ll take care of our guests. And that’s exactly why events like these are important in times like this. We’ve got to give a little to get a lot...and, in fact, I’m not sure we’re doing enough.” Hart pointed to recent company earnings, growth, and the fact that 70 percent of the restaurant’s guests are repeat customers as evidence of the success of Texas Roadhouse’s attention to cultivating culture. The interview has become a rallying cry for the restaurant’s leaders, operators, and employees. “The interview was pretty incredible. It’s an honor to be a part of a company that’s so committed to taking care of its people–especially now,” says service manager Wendy Ennis, Clarksville, IN. “At a time when most companies are saying, ‘Don’t love your people very much, don’t do anything extra, just tighten the belt as much as you can,’ it’s almost as if our leadership does just the opposite. The message we get is, ‘Take care of your people especially right now. Love your guests especially right now. Take care of your community especially right now.’ And you know what? The guests tell us they can feel it too and they love it.” For Hart the secret to Texas Roadhouse’s success is no secret at all. “It’s like if you make an investment in your 401 K, you’re saving money for the future and you expect to return on that investment and you have to put up money to do it,” explains Hart. “For the life of me I don’t understand, if you have people as your biggest asset and you claim they are your biggest asset, and in our case it’s such a people intense business, then how can you not invest in them and expect a return?”

TRAInInG fOR fIT

For many organizations growth threatens culture; requiring more processes, systems and rules to keep things moving smoothly. Texas Roadhouse focuses heavily on training to ensure the restaurant’s culture of fun grows, thrives, and continues to stick. “We train both management and employees across the board, not just about the specs and the procedures and how to cut a legendary steak and how to make legendary

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fun

green beans, but also about the culture of what this company is all about inside the four walls,” says Lisa Dwelly, director of employee development. “Our guests visit Texas Roadhouse because it is such a fun exciting environment, so we train our management and our staff how to really show that on a daily basis.” How do you train fun? Texas Roadhouse founder, Kent Taylor believes it all begins with recognition. “Before I started this restaurant, I worked for others,” explains Taylor. “I did a lot of contests for employees and other crazy things in the store that I got in trouble for. Many times we had to hide stuff so that the people at the corporate office didn’t know I was doing fun things in the stores that cost money. So I said one day, if I get to open my own restaurant, I’m going to recognize and celebrate people the way I want to and not worry about somebody looking over my shoulder telling me I can’t do it.” Today, Taylor realizes that while fun is the focus, formalizing recognition and putting a framework around how to celebrate helps maintain a focus on the brand and keeps the business strategy intact. “You have to formalize the recognition when you get to the size we are because you can’t go into every store and try to get people to get it,” says Taylor. “I can remember having an area manager and come to me and say, ‘I found a way to save money at the openings.’ He said, ‘We need to cut out all these crazy contests and things we do to recognize people.’ And so I kept him in training an extra six weeks because he didn’t get it.”

CREATInG A fRAMEWORK fOR fun

Formalizing recognition—standardizing the many contests, promotions and recognition occurring in hundreds of locations across the country, required a plan. “Our promotions centered on different parts of the business—meat cutters, bar tenders, line dancers,” says Dodson. “The recognition was good, but there wasn’t much that tied it together. We were looking to create a movement among all our employees and that required a more cohesive approach.” Dodson and his team partnered with O.C. Tanner to create “Living Legends,” a branded approach to recognition at Texas Roadhouse that allowed the restaurant to communicate tools, training, goals and messaging in one well-understood format while offering milestone and performance recognition with more meaning. “Through our partnership with O.C. Tanner and the creation of our Living Legends recognition platform, we have developed a tool box of materials that our operators can reach out and use to help and aid their efforts that they already have in place in their stores,” says Dodson. “To us, it serves as a trigger for recognition. Whether it’s an employee service milestone or an employee performance achievement, our stores have something that they can reach out and use to support all the great things they do in the store.” Dodson and his team of trainers rely on O.C. Tanner’s Carrot Culture team to keep them up to date on the latest best practices and information when it comes to recognition. “We’ve been involved in developing recognition in our company for many years, but it doesn’t mean we’re experts,” says Dodson. “Carrot Culture training really helps us to take our internal training to the next level. The training always focuses on the best, most recent information including new studies and best practices. And it’s at that point you know the results organizations are generating through smart recognition programs are not just ideas. That’s exciting.”

RESuLTS THAT MATTER

Paying attention to culture. Recognizing achievement. Celebrating like family. It’s an approach that has earned Texas Roadhouse greater levels of employee satisfaction and an impressive 30 percent reduction in turnover in its locations that use recognition most. Other company metrics also speak to the success of Texas Roadhouse’s approach to cultivating culture. In 2009:• Diluted earnings per share increased 29% • YTD stock is up 58.63% from 12/30/2008

to 12/29/2009• Five company restaurants opened and one

franchise restaurant was acquired• Restaurant margins increased 237 basis

points to 17.4% “Why create a culture, when you can create a movement?” says Dodson. “We want to create a movement that our employees and our customers can really engage in. Being smart about showing our appreciation in as many ways, for as many results as we can think of, will help create that movement.” “We’ve also seen amazing reductions in negative employee phone calls,” says Dodson. “Alongside measurements like how much the program is being used, those types of culture shifts tell us we’re doing something right.” And while every company is different, Dodson believes every company has to create a unique culture for themselves and anyone can create a culture that their people can embrace and believe in.

“Recognition really is a simple choice,” says Dodson. “We have seen that over 16 years of our business at Texas Roadhouse. Taking care of your people makes a difference. It drives results. It creates success.” CEO Hart says recognition is an investment in your people that pays rich dividends. “As a leader, you must serve your people. And in our case we really try to live that and I think it’s paid dividends,” says Hart. “When you get tested on those commitments is when people really pay attention, and they have very long memories when it comes to whether or not we deliver. I’ll invest in our people until the day I die and that’s hopefully why we’ll continue to be successful.”

KEnT TAyLOR, fOunDER

MARK SAMPSOn, SEnIOR D IRECTOR Of

LEGEnDARy PEOPLE

Texas Roadhouse employees love their work so much they wear it on their sleeves—literally. In 2005 the company introduced a bold “I Love My Job” t-shirt campaign. They did not mandate the shirts, but instead simply made them available for employee purchase. To date more than 200,000 shirts have been sold.

AWARD SPOTL IGHT

ku•dos

1. honor; glory; acclaim.

2. a statement of praise or

approval; accolade; compliment.

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In this issue…Texas Roadhouse: Branding Recognition

Double Your Money: Appreciation’s ROI

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