Decisions, Decision – What Drives Yours?
In my last blog, I discussed how Schlumberger, a company that provides tools and services for oil and gas companies and operates in more than 85 countries, cut 25,000 jobs in 2015 – 20% of its workforce – and the CEO still received a total compensation package of $18.3 million – down slightly from his $18.5 million in 2014. In my book, Culture Trumps Everything, and in my presentations, I speak of this decision-making process as coming from Classic Capitalism – in this case, taking profit at the expense of employees.
In contrast, let’s consider Chipolte. In 2015, Chipotle (CMG) shares took a drastic hit after several health outbreaks infected and hospitalized customers. In August, before the outbreaks, Chipotle’s stock hit an all-time high of $758 a share. After people started getting sick, share prices plummeted. In early March 2016, they were just over $507 a share, up nearly 6% for the year. The health crisis caused Chipotle to temporarily close restaurants. It hurt sales and shook its public image as a fast-food chain that offers healthier meals.
Chipotle took in only $68 million in profit during the last three months of 2015 – a 44% drop from the year before. It was the worst quarterly profit Chipotle has had since 2012. And it was the first time sales have declined since the chain went public 10 years ago.
Rather than lay off thousands of employees, Chipolte closed all of its stores for a half day, spending more than $10 million in retraining all of its employees in food preparation techniques that exceed all industry standards.
The company also shaved the total 2015 compensation of both Steve Ells and Monty Moran by roughly half: Ells brought in $13.8 million and Moran $13.6 million. Their base salaries each increased by just over $100,000. This is a Social Capitalism response. This communicates to all the stakeholders, “we are all in this together.” It is the type of response that illustrates that the needs of all stakeholders should be considered in decision making, not just the needs/desires of the CEO or shareholders.
Chipotle has has launched new ads and promotions to entice customers back. The Centers for Disease Control (CDC) announced in February that it had finished its investigation into the E. coli outbreak. A cause was never determined.
We don’t know what the final outcome for Chipolte will be. But we do know that they have clearly acted in the interest of all of their stakeholders – a Social Capitalism decision-making strategy.
Keep cultivating your culture!