Ins and Outs

By Patricia Dailey, Editor-in-Chief -- Restaurants & Institutions, 10/15/2003

“Red-faced at Red Lobster” headed a recent editorial in the Chicago Tribune, the item attempting to parse, analyze and add commentary to the recent, well-publicized fallout from the chain’s summertime all-you-can-eat crab promotion. It earned the company “a new entry in the What Were They Thinking Hall of Fame,” according to the editorial and, by the Tribune’s telling, subsequently led to the abrupt departure of Edna Morris, president of the Orlando, Fla.-based unit of Darden Restaurants. Morris had held the top spot at Red Lobster since April 2002.

Red Lobster customers proved that insatiable appetites can impose serious damage on razor-thin restaurant margins—especially when pricey crustaceans are the objects of desire on which they feed—yet whether or not the seafood fiasco was the real impetus for Morris leaving the driver’s seat isn’t fully clear. In any case, the bottomless, twenty-buck crab bonanza is not the real story on which to focus.

Morris’ move is only one of several key restaurant-industry management shakeups announced in recent months. This has prompted a collection of industry wags, observers and commentators to look for common causes, the big sweeping themes, trends or business reasons that help to explain the corporate musical chairs that prompted so many senior-level executives to—in the carefully phrased parlance of press releases—“pursue other career opportunities.”

Ron Magruder, CEO, left Hops Grillhouse & Brewery; Cheryl Batchelder, president, exited KFC; President Michael Berry parted ways with The Cheesecake Factory; Michael Kaufman, CEO, no longer is with Metromedia Restaurant Group and Barbara Timm-Brock, COO, no longer calls Churchs Chicken her corporate home.

Speculation as to what really instigated the rash of purposefully vague news releases is burning up the wires. Naysayers take it all to mean that ongoing softness in the entire restaurant sector forced the decisions while others posit all sorts of explanations. Many have noted, too, that women are amply represented in this newly expanded list of free agents with walking papers. This has generated a rash of hand wringing over the real progress made toward gender diversity.

Analyzed through the all-pervasive quarterly-gains mentality under which publicly held companies exist, the executive-suite shuffles are not especially hard to explain. Plainly and simply, the upheavals relate decisively and directly to business performance and the death of the Gigantic Returns Genie that had so effectively conjured up strong profits for a brief, blissful spell.

When they’re on an upside climb, a couple quarters of big gains very effectively warm the hearts of Wall Street analysts. But those same ledger sheets can soon turn south in this numbers game, the performances too hard to sustain much less match or beat.

There are many factors beyond the control of CEOs that affect performance, but in a business climate of constant scrutiny, where monthly or even weekly measurements have given way to daily tabulations, management—whether male or female—no longer is given the latitude or luxury of riding out a bad spell.