Outback Steakhouse Case Essay
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Outback has clearly defined strategic goals that give a clear sense of where the company is headed in the future. The company intends to drive its future growth though a four pronged strategy. First, they want to continue to expand in the U.S. with an additional 300-350 Outback concept restaurants. They also plan to develop a second system of franchise restaurants called Carabbas. After that, the founders may develop additional themed restaurants, and branch out into international franchising. To achieve these goals, several operational goals have been defined.
The owners will continue to focus on the development of Outback, because “there is still a lot of work left to do there.” Also, expanding Outback to greater levels will provide a strong foundation for the Carabbas venture. As Joe Coffer said, “I see [Outback] as the McDonald’s of the future, except a step up.” The operational strategy right now is to continue expanding Outback operations, and continuing to build their reputation as the premier mid-level steakhouse.
There are many standing plans outlined in the text, but two of note deal with the promotional strategy and staff training.
All job candidates for the restaurant staff are required to pass an aptitude test that assesses basic skills such as making change. Also, every candidate is interviewed by two people, and undergoes psychological profiling. With regards to promotion, Outback does local advertising on billboards and TV, but most of their promotion is done through community involvement. Actions speak louder than words, and the founders know that – their community involvement helps “build friends and an image of great food at a great price.” A single use plan was put into effect when the company needed additional venture capital to fund Outback’s early stages. They planned to offer a portion of the company for public sale. A project schedule was developed, outlining exactly what was needed for the plan to be a success.
They needed to raise at least 1.5 million to finance the purchase of equipment for the next year. They wanted to sell enough stock, priced at about 20% of the highest restaurant stock, to finance about 18 months of operation. Their well-defined project schedule paid off, and by 1994, sixty-eight million dollars were raised. 1. The Outback Steakhouse uses various types of controls that ensure high quality, efficiency, and customer satisfaction. One feedforward control has been the development of the Outback kitchen. Bob Basham designed the kitchen for peak efficiency, occupying 45% of the area of the restaurant. Bob decided that by overdesigning the kitchen and underdesigning the dining area, the restaurant is better able to operate during times of peak demand, while maintaining a high level of quality.
Controls are also used while the restaurant is in operation. The ratio of servers to customers at Outback is much lower than at the typical restaurant, and this is the key to Outback’s outstanding customer service. Outback employees typically only handle three tables at a time, so customers are served more quickly, and don’t feel rushed when ordering. Feedback controls are used when a new restaurant is opened and new employees are hired. The restaurant staff has four practice nights when charity events are held or the local media are entertained, before the restaurant is actually opened to the public. This gives the new employees some experience, but also provides a basis for discussion afterwards. By discussing the events of the practice nights, areas requiring improvement can be identified before the restaurant is open to the public. In a way, this is both a feedback and a feedforward control. External controls are not used extensively at Outback because of the relatively informal organizational structure.
Of course, company policy and procedures would be outlined during the orientation process, but there is not always a manager or supervisor watching you. The closest thing to external control outlined in the case would be Tim Gannon’s meeting and training sessions – upper management ensuring that the front-liners are behaving in a way that is consistent with the Outback philosophy. Internal controls are emphasized at Outback, through self-directed learning and personal growth. Trudy Cooper calls it the “learn-teach-learn approach.” As Chris Suiilvan explains, “Outback gives people a lot of opportunity to make some mistakes, learn, and go on.”
2. Both positional and personal power are utilized at Outback. The attention that Outback employees get during the hiring and training process would fall under legitimate power. The people that are training the new employees are experienced, knowledgeable workers – the new employees are clearly their subordinates. However, aptitude testing and one-on-one training would make them feel important. Such attention can be strenuous and intimidating, but in the long-run this attention would send the message that the company cares and wants you to excel. Referent power is one of the most beneficial types of power to have in an organization, but is also one of the most difficult to create.
At the ten meetings per year that Tim Gannon holds with staff members, referent power is utilized because Tim sounds like a cool guy. Employees work hard for him because he earns their respect and people want him to like them. Also, experience power would be present because of Tim’s extensive management knowledge and experience. People respect him because of the years he has invested in Outback. On the positional power side, reward power is used almost exclusively.
Outback has provided ownership opportunities at three levels: at the individual restaurant level, through joint venture and franchise opportunities, and though the employee stock option plan. The first two opportunities require an initial investment, but the return is excellent. The stock option plan, I think, is an excellent idea, because it benefits everyone, and rewards loyalty and hard work. You are rewarded in proportion to what you have contributed to the success of the venture.