Culture As A Business Model: How We Turn Employee Satisfaction into Profits - Steve Palmer, The Indigo Road Hospitality Group

Josiah: Great organizational culture sometimes feels like something that everyone talks about, but few do well. And that's why I've become obsessed with going beyond the press releases and the marketing speak to figure out who really leads great cultures. And the name of our guest today, Steve Palmer, the founder and chief vision officer of the Indigo Road Hospitality Group, has come up again and again when I've asked people who actually has a great organizational culture. In this episode, you're going to hear how Steve thinks about culture, the practical things they do that have allowed them to thoughtfully expand from one restaurant to more than 30 thriving establishments throughout the country. Not only restaurants but a growing portfolio of independent hotels. If you want to lead a culture that stands out to your team and guests alike, this is an episode you won't want to miss. 

Josiah: You've talked about culture as a business model. And for me, that framing is very interesting. I wonder if you could unpack that a bit for our listeners. What does that mean in practice to have your culture as a business model?

Steve: Yeah, well, I think that maybe at the beginning of the tech boom, whatever the beginning of Facebook, Google, right? However many years it's time is maybe that was 10 years ago, but you would hear about, oh, they have a great culture. They have foosball tables and keg beer and employee break room and you know, and it was like they have beanbags you can do your work on and And it was really Danny Meyer who wrote, of course, the fantastic book Setting the Table in 2005. He gave a voice to so many of us that felt these things, but didn't know how to articulate. And I often say that culture for a lot of people is feel-good words. Maybe it's a corporate poster on the wall that the HR team… But when you see culture in action, it's dynamic. It's electric, and I could show you 35 P&Ls and our most profitable businesses are the ones where we have the best culture. And you have to have leaders to do that. You know, as you just said, the word culture gets thrown around a lot. And so, you know, we are very transparent. Every employee in the company has my cell phone number, every single one. I do culture talks around the company as the founder of the company. And I say to them, if you ever feel like you're not experiencing what I'm talking about, I want you to call me. Because look, we're not perfect. There are people that interview really well, you know, and then the first week on the job, you're like, wow, did you not hear what we talked about? You know, coming out of COVID with the shortage of employees, we went through some seasons where restaurants didn't have the leaders they deserved. We've had a hotel that didn't have the leader. So by no means do I think we're perfect, but we are relentless in our pursuit of culture. And when you do that, and you do it passionately and authentically with integrity, you will have a more profitable business. It just is.

Josiah: Well, you referenced looking across multiple businesses and seeing the ones with the best culture, you said, are the most profitable. I feel it's interesting to evaluate what is the best culture. I'm curious, are there metrics or other ways that you use to evaluate which ones have the best culture?

Steve: You know, honestly, honestly, that's a great question. Yes and no. Once a year we do an anonymous employee satisfaction survey. I've done this for 12 years and we allow all 2,500 employees to evaluate us. It is profound what you read when people can lower the fear of, I'm going to get in trouble if I say the wrong thing. And you asked him, honestly, do we live up to the values? Do you feel like we are who we say we are? So that's one way we do it. And I say this all the time. If you are a company that communicates your values, whatever your values may be, and you are not willing to be held accountable by the very people that you're telling these values to, then it's just corporate speak. It's not real. You have to be willing to say, we're going to be this. And then at some moment in time, how do you think we're doing? On the day-to-day, I've often said I can walk into the lobby of one of our hotels. I can walk into the host stand at our restaurant. I can tell you instantly if our culture is right or not. And it's just a feeling. You can look around the room. Are the employees smiling? Are they engaged? Do they look relaxed? Because if you walk in and they look tense, and I'm not talking about, I walked into a restaurant at eight o'clock and they were getting slammed. I mean, that's different, you know, look, everybody, we work, people, if you're in hospitality at some level, some might call it a sickness, you enjoy that tension and that pace. But If you walk in and there's an environment of fear, people are afraid they're going to get yelled at. Cooks in the kitchen are afraid that the chef is going to yell at them. You can feel that tension and it's not healthy. Conversely, I can walk in and immediately know we are where we're supposed to be. I think that the other way is our senior leadership team is constantly checking in on our people. How are you doing? What do you need? We have a support team that just roams the company across the southeast, dropping in, covering shifts, and making sure people are getting days off. So there's a lot of different ways. I don't know that You know, because even our employee satisfaction survey, right? It's not a, on a scale of one to 10, how well it's, it's open-ended because I want to hear people's thoughts. I don't want a multiple-choice kind of satisfaction survey. I want them to tell us how they're, how they're feeling.

Josiah: I love it. You referenced earlier this notion of internal hospitality. I wonder if you could speak a little bit more about that. Are these some of the themes that you've been talking about or do you describe internal hospitality as something else?

Steve: I think it's partially that. I mean, look, we go to great lengths. It's fundamental in its idea, and again, I will put my hat off to Danny Meyer, who really started this revolution, but it's the simplest idea in the world. If an employee, if everything else is equal, goes to two restaurants, and at one restaurant, the employee loves their job, and at the other restaurant, they don't. But let's say that everything else was the same. The food came out hot, prepared right, blah, blah, blah. you are going to naturally have a better time with the employee who loves their job. Just naturally. And I'm not just talking about hospitality, any industry in the world. If you encounter an employee who is passionate about their job, you will have a better time. So it is our job to create that environment. It is our job to come to work with empathy, kindness, leadership, direction, and accountability. It's our job to listen. I always say listening to someone is one of the highest forms of respect that you can show them. We have a home loan buying program where we will give the employee their down payment on their house. They have three years to pay us back. We make no money. The money is interest-free. We have free mental health. We will reimburse for culinary or hospitality education. There's so many ways that we have family meal every day, no matter what. Everyone in the hotel, I was at family meal at the Flatiron two days ago. Housekeeping was there. The front desk was there. Everybody gets a warm, hot meal from us every single day. So it's all of these things that we do in a single day to try and communicate to our employees, we care about you.

Josiah: That's interesting because the family meal concept, is that something you feel is kind of typical in the restaurant world? And in my talking to a lot of people, maybe a little less typical in the hotel world. Is this an example of something that you found was helpful in the restaurant world and you're bringing to hotels now?

Steve: Yeah, I think so. I think it's also, you know, in a hotel, you've got multiple departments, right? You've got housekeeping, you've got sales and marketing, you've got maintenance, you've got the front desk. What's more connected than sitting down and breaking bread with somebody? You know, it gives everybody a moment to come and and eat and, be a part of the same team. I mean, a great hospitality doesn't happen in a silo. You know, you don't have a great arrival experience at the hotel, but then you have a dirty room because the housekeeping team didn't do their job, or then you've got poor food and beverage. So. It's all got to be cohesive and family meal, it's just a small way, but I think it's a powerful way to communicate that.

Josiah: I appreciate you listing that because I was taking notes as you're talking. I believe that to get different results, you need to have different inputs. You have to be doing something differently, right? You can't act as everyone else does. So you talk about creating this positive culture. And I'm just kind of thinking about all the things that you mentioned. Everything from everyone has your cell phone number. You're actively encouraging people to let you know if folks are not living up or cultures, environments are not living up to the vision, kind of the goal that you have there. open-ended questions on these satisfaction surveys. So it's not just a rating, you're getting more detail. You talk about the roaming support team. That's really interesting and different. Free mental health, education, family meal every day, home loan program. It seems like, across many different dimensions, you're doing things differently. It's not just, hey, we just talk a talk here. You have practical specifics to make the culture better.

Steve: That's right. You have to walk the walk. You have to be engaged and we're not perfect. Listen, we have bad days just like everybody else. And we miss the mark, at times. And what I always try to model and live by example and ask of our leaders is, Hey, when you are less than that, when you make a mistake, when you get it wrong, be quick to apologize and be quick to be vulnerable. Be quick to say, Hey, I got that wrong and I'm sorry. you know, leading that way, which to me is intuitive, like nobody had to tell me that, because people can smell a leader who is not is inauthentic, or who acts like they know everything, nobody knows everything, right. And I'm the first person, you know, especially at the senior team, when I get asked a question to say, I don't know, I tell my team all the time. And I sometimes I get different reactions, I remind them all, hey, I've never done this before. I've never taken one restaurant to 35 and five hotels, so I'm still learning. And so I think modeling that kind of leadership to your teams, it opens up people to feel like they can be real, they can be vulnerable, they can be authentic. And when people are relaxed in that space, they're not worried that the corporate boss is breathing down their neck and they're going to get in trouble. people naturally do a better job.