Case Study - THE NO-NAME GRILL

It was 10:30 on a Monday morning during the first week of June. Don Kirby leaned back in this chair and pondered what he would do about Jesse Hawkins, his one-time good friend and employee. First, he asked himself, "Where did I go wrong?" Don then wondered what he should do with Hawkins' wife and son. "How could I have prevented the events that occurred? How can I keep them from happening again? How could I have been so nave and trusting? How could I have been so stupid?" The questions raced through his mind, and he was feeling quite ill.

To complicate the issue, Don notices that there has been a cycle of increasing costs over the last couple of years, reducing net profits. This perplexed Don because he had not seen any significant increases in per-unit prices (price variances), while usage variances had become increasingly unfavorable, especially regarding beverages. In addition, there seemed to be reduced cash available for current transactions due to increased cash disbursements.

BACKGROUND

The No-Name Grill, established by Don's family in the 1940s, opened its doors as a dinner club supplying various entertainment, including live bands, aspiring entertainers, and occasional banquet services.

Over time, the No-Name added a restaurant, sport-themed Bar, and grill to the original concept. Currently, the building contains three distinct sections: the restaurant area (known as the 'Restaurant'), a sports bar (known as the 'Bar'), and an entertainment venue (known as the 'Club').

The Restaurant is a full-service entity with a casual dining atmosphere akin to several national chain restaurants. The menu offers a traditional, broad-based American cuisine with hamburgers, sandwiches, steaks, fish, et cetera, and limited international items, including quesadillas and egg rolls. The area can seat up to 125 patrons, with the check for a party of two averaging around $75. During the week, the Restaurant serves an average of 50 patrons per night and approximately 90 on Friday and Saturday evenings.

The Bar contains several table games (pool, billiards, and foosball - each coin-operated), punching bags, and other games of skill (all playable at no charge), and a large selection of video and arcade games (also coin-operated). It also contained comfortable seating and large-screen televisions for watching sporting events. The menu was a limited version of the Restaurant, focused on mainly quickly prepared items and an assortment of appetizers. The section could efficiently service 150 patrons with a maximum capacity of 200 persons during special events. The area sees approximately 40 customers each night, expanding to 100 on the weekends. The average customer spends around $35 per visit, with most of the tab related to beverages.

The Club area was the original section of the establishment and provides a wide variety of night-time attractions, including live bands and disc jockeys. The site contains a removable stage and dance area to accommodate a vast venue of activities on special occasions.

The Club has a capacity of 200 patrons (expandable to 300 for special events). On an average weekday, the Club is not open for lunch and hosts around 35 individuals for dinner, and on a typical weekend night, 150 to 175 customers are served.

Don Kirby was the co-owner and general manager of No-Name. He was 57 years old and had been the owner and general manager for 23 years after working for and taking over the business from his father, who had passed away unexpectedly. Although Don never attended college, he learned the Grill's ropes from his father and through trial and error after his father's death. He was of average height with a stocky frame and prided himself on staying in good physical shape. Don was a friendly, affable man with a fairly easy-going personality, and he got along well with most people. In that order, he had a wife and three children (two boys and a girl). His children's ages ranged from 16 to 24. Don's oldest son (Billy) originally attended a local community college and put in 10 to 15 hours a week at the Grill during this time. He had no previous managerial or supervisory responsibilities and usually worked as a bouncer. When Billy turned 21 (three years ago), Billy quit school, and Don promoted him to Assistant Bar Manager.

Adding to the family tree, Don had a younger sister, Sarah (51 years old), who owns 25% of the establishment and is generally not involved in any Grill operations; however, due to her ownership, she received annual financial statements and quarterly dividend payments. She attended college at a prestigious private school in a mid-southern state. Afterward, she never married and became a successful attorney practicing corporate law in a large mid-western city.

Over the last decade, Don had tried to delegate more of the daily responsibilities of the Grill to his direct reports. In addition, he had promised his wife to spend more time at home with their family. Nevertheless, in the first years of his marriage and when his children were young, Don spent long days at the Grill, working until midnight and sometimes through the early morning hours. As Don put it, "I worked too many hours when I worked nights at the Grill. Now, those days are behind me. Over the last ten years, I have made it a point to complete most of my work during daylight hours." Nevertheless, he still dropped by the Grill now and then in the evenings "to keep his eyes on the things and help out when necessary."

Don has reached the point of thinking about retirement and has quietly started looking into a plan for succession. He wonders if he should focus on an internal candidate (promoting either Bruce, one of Bruce's direct reports, Billy, or another employee) or look outside for a seasoned hospitality manager. Don was not keen on hiring from the outside since he believed a seasoned manager would be costly.

MANAGEMENT AND SCHEDULING

Though Don had never formally developed an organizational chart, Exhibit 1 depicts the basic organizational structure of the employees at the Grill. In addition, Don had never developed written job descriptions, formal policies and procedures besides a proprietary drink recipe book for his bartenders. New employees were assigned to a specific area (Restaurant, Bar, or Club) but could be temporarily reassigned (with Bruce's or Jesse Hawkin's approval) to another location if needed. He felt the Grill was small enough that he and his staff could collectively get things done without unnecessary formalization. He believed that whatever work needed to be done with a good team got done by whoever might be there then. Employees wishing to move to another department permanently had to undergo a vetting process, with final approval being granted by Bruce Samson.

Don has two direct reports; Bruce Samson was the operations manager and ran the show, especially during nightly operations when Don was away. In addition to running the Grill's overall operations, Bruce also performed most of the personnel functions associated with the Grill. For example, Bruce was also responsible for placing workers into specific servers, bartenders, and security/bouncers. All other workers were hired part-time, including the floor supervisor. Jesse Hawkins (Club Manager) occasionally filled in when Don and Bruce were absent.

The other direct report was Cathy Werner (Don's first cousin, the daughter of his mother's sister), who handled all the administrative functions, including the following:

• Accounting for all cash receipts, which included preparation of daily deposits, reconciliation of sales to deposits, and reconciliation of the monthly bank statement,
• Processing disbursements for all purchases, to facilitate this, Cathy was given a company credit card with a $10,000 spending limit,
• Performance of all payroll functions, including check distribution,
• Maintaining inventory levels, including cycle counts, and ordering all supplies, including food and beverages,
• Preparation of monthly sales and use tax and payroll tax returns,
• General Ledger maintenance, including preparing and posting all monthly adjusting journal entries. All General Ledger information is submitted to a CPA firm for income tax preparation at the end of the fiscal year.

Cathys personality was sporadic; at times, she was very kind and a pleasure to be around, and during other times, she was not very approachable and frequently criticized employees for irrelevant things such as the way they wore their hair or the type of car they drove, et cetera. As a result, the staff referred to her as Miss Congeniality during these times. On occasion, Don also called her by that name. In addition, rumors circulated that Cathys sudden mood changes were unnatural. As a result, one could never tell what mood Cathy was in at any given time, which put many employees on edge.

Don typically began work at 9:00 a.m., Cathy arrived at 7:30 a.m., and Bruce usually did not arrive until 2 or 3 p.m. Although some overlap did exist, only one of the three managers was present at the Grill. Moreover, because the Grill was open seven days a week and Don and Bruce had different days off while Cathy worked a Monday through Friday schedule from 7:30 a.m. until 4:30 p.m., Don believed it was not practical to become involved in the daily operations of the Grill unless Bruce was unavailable. However, all three shared many responsibilities, and Bruce did not seem to mind. From his perspective, there was never a shortage of things for him to do, and he welcomed any help from Don and Cathy.

Employee turnover was somewhat high, generally around 50 percent, because many employees quit when a full-time job became available elsewhere or left due to graduation from the local college. In addition, business at the Grill was quite variable. For example, in the first week of May, the Grill only needed four kitchen staff, fifteen servers, five bartenders, five bus persons, and six security /bouncers daily. However, on the last week of September, the 'Harvest Days" festival (the annual celebration of the Harvest industry), the Grill needed over eight kitchen staff, thirty waitresses, ten bartenders, ten bus persons, and twelve bouncers for the Harvest Days crowd. During times like these, Bruce turned to primarily temporary help and used some Grill patrons who wanted to work occasionally, along with a few of the Harvest Days steering committee.

HIRING AND TRAINING

Potential applicants filled out a general application form. This form was placed in a pile to be screened when employees were needed to fill vacated positions. Most potential employees stated the job they wanted to fill, such as kitchen help, server, bartender, or security/bouncer. Don and Bruce only allowed men to serve as bouncers because of the nature of the job. Before an employee could become a bartender, they had to start as a bus person and then move to work as a server or as a kitchen helper. The Grill trained bartenders in-house because standards and practices were inconsistent across the bar business. Specifically, bartenders were trained to make the expensive, specialized drinks only available at the No-Name that required unique ingredients that were very difficult to acquire. Therefore, Don kept the alcohol in a separate closet with limited access. Potential promotion to a bartender was generally based on an employee's work performance.

Employment applications were screened on a first-come, first-served basis. For example, when a position for a bouncer became available, Bruce examined all of the employment applications on file and screened them down to a shorter list of those he considered potentially qualified to fill the position. After compiling the list of potential employees, he began setting up interviews with the applicants. Scheduling was problematic because most applicants had already accepted positions with other employers rather than wait for the part-time jobs offered at the Grill. So Bruce set up interview times with those still interested in employment with the Grill. Bruce and Don occasionally deviate from their standard hiring procedure and hire someone without considering other applicants. They had even been known to ask someone they had just met to apply. "Sometimes, when somebody good comes along, you have to grab them while you can," Don had stated on more than one occasion.

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REQUIREMENTS

1. , please describe the five most pressing issues requiring attention and how you would address each. Examples of items can include (but are not limited to)
   1. Does the lack of written job descriptions and policies create issues with the Grill? What types of guidelines should be documented? Would job descriptions for individuals or specific jobs improve any issue?
   2. Are there any control issues with Cathys job responsibilities?
   3. Should the No-Name Grill look at hiring more full-time employees?
   4. Does the installation of cameras create any legal issues?
   5. Should someone be hired to handle payroll and the books instead of a random employee having to fill in and do it?
   6. Can legal actions (criminal or civil) be taken against the employees for stealing and fraudulent checks?
   7. What are the dynamics of Dons hiring decision?

1. assume Don approached you about becoming the General Manager. If you were aware of everything in the narrative above, would you accept the position and describe the basis of your decision?

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