Lobue News: Sep 15, 2014

A Case Study of Fred Harvey and Performance Management

For those of you who have not heard of Fred Harvey, he was one of the most successful business men leading up to the turn-of-the century, the time when railroads were the lifeblood of a developing country.  Fred Harvey built a network of restaurants and hotels that capitalized on the growing network of rail throughout the country.  Starting from a single restaurant, he built a business that, upon his death in 1901, was worth over $200 million in today’s dollars, and The Fred Harvey Company was just getting started.  His family continued expanding its reach and value after Fred departed.
Whether you know of Fred Harvey or not, he has had an impact on our lives.  Mr. Harvey had a profound impact on the hospitality industry and on business in general.  Before there were restaurant chains, Fred Harvey built an impressive chain of restaurants.  The Fred Harvey Company provided weary travelers quality meals in places like Leavenworth, Dodge City, Albuquerque, and Las Vegas (the Las Vegas in New Mexico, not Nevada, which continues to employ Fred’s standards more than one hundred years later.)  The Fred Harvey fundamental standards were exacting and purposeful, and were focused on providing customers with the best dining experience at a time when dining and survival were nearly synonymous.  
Fred Harvey’s most impressive feat, however, was not what he built, but rather how he built it, especially given the environment .  Running a network of restaurants in the 1880’s presented a set of challenges that are almost hard to imagine today.  There were difficulties supplying high-quality food and cigars just on time to places far west, with little or no spoilage, shipped on trains with little but heat and smoke rushing through its cars.   Additionally, getting to each restaurant regularly to oversee the quality standards was difficult.   It took days to reach some locations, and when supplies had to be brought in from Europe, that took weeks or months.  With these and other operational challenges, one could imagine the difficulties of knowing how each location was performing and what customers were experiencing.  It is not surprising that most businesses at the time did not expand beyond a single location.  Additionally, information was not readily available as it is today, an understatement for sure.  With all the difficulties he and his management team encountered, however, they never lost sight of what the Fred Harvey standard was, indeed it was well documented and distributed, and they always measured performance against that standard. Fred always found a way to ensure top performance and he always managed with data. 
“At the beginning of each workday, Fred wanted to know everything that had happened at each of his eating houses the day before.  How many eggs and steaks had been eaten, how many pounds of butter and slices of bread, how many of each branch of cigars had been smoked?  ………  It was a level of interest and detail that most American businesses would not bother to consider for another century, with the help of computers.  …… Fred, in the 1880s, before most places had telephones or electricity, [used] a complex maze of telegraphed daily reports and letters.” 1
Accurate information is key to managing performance and, despite the environment and no immediate way to disseminate information, Fred always obtained needed information.  He knew how many patrons were served how many meals, and if any problems sprung up.  In the 1880’s there were real problems that sprung up, too, and some ended in gunfights.  It was the wild west.  Regardless of the circumstances and the environment, and difficulties that came with running a sprawling business in the 1880s, performance measures were always top priority.   Fred had standards and he had to know if they were being met in every location.  He endured a grueling travel schedule to ensure he saw for himself what was and wasn’t working.  The constant pursuit to measure and analyze to ensure a certain standard was the key to establishing a consistent customer experience and lasting financial success.
Performance Management 130+ Years Later
In the 130+ years since The Fred Harvey Company began, technological advancement has changed the landscape, yet the same desire, and challenges, for performance data remains.  In fact, the environment for data has become more complicated and the availability of massive amounts of data has resulted in a new endeavor to make sense of it all. 
Fred Harvey was among the early businessmen who had successfully devised a way to consistently deliver excellent service levels across an expansive business.  Let’s consider some lessons from Fred Harvey as a way of outlining the key aspect of measuring performance:

  • Define Standards;  make them clear and simple and make them an integral part of your business
  • Don’t get lost on the sea of data, focus on the information that provides the most value
  • Get everyone involved
  • Insist on action

The first step in designing a performance management program has nothing to do with gathering and disseminating data.  The first step is to develop the standards by which to measure and they must be clear and concise.  A complicated formula of standards will only cause a confused management process.  Establish clear standards, tied to your business strategy, that are understood by everyone in the organization.  Standards could define service levels, customer experience, employee behavior, or anything that defines success, and should be interpreted consistently everywhere in the organization.
The desire for meaningful business information today often results in more data, not more intelligence.  The value of information is how it can be converted to business intelligence.  More is not necessarily better.  Imagine that you only had a telegraph to use to gather your business data.  Wouldn’t it be focused on the most meaningful information to answer plainly whether or not your business is performing?  There would be no choice but to first determine what is important, then to ask for it in simple terms.  With so much data available today, a critical flaw is to first attempt to analyze the data in an attempt to make sense of it.   The first priority in data analytics should be to the key business standards.   
No one should be left out of the task of managing business performance.  Since everyone should have the same set of fundamental standards and a responsibility to ensure they are being met, this makes everyone a part of the management process.  Go to great lengths to ensure everyone has a purpose tied to meeting the business fundamentals.
Every performance indicator should have a specific purpose and should be actionable.   One way to test this is to review all business indicators to align it directly to a specific standard.  If it cannot be aligned, or if it is only secondary to measuring against the stated company standard, its purpose is questionable.  For every indicator, there should be triggers (not the old west kind, of course) that beg for correction. There is no sense in gathering information, compiling a set of indicators, and then not demanding action when the facts dictate a need for action.  No matter how far you are removed from the action, there is always a way to stay connected.
Finally, these key elements do not have not have to be complicated to be complete. 
Keeping up with the Times
For anyone who is having difficulties today getting good information, technology can help you.  Just as Fred Harvey used the telegraph, you too can find that edge if you are as persistent.  Available data today allows for a deep dive into numbers and information in general.  Big Data analytics is in its infancy and as already being deployed to make important business decisions.  There is no doubt that technology has and will expand our ability to assess business performance and make better business decisions, especially for those who have an appreciation for straight forward, clearly presented data that answers  critical questions.  
With so many forms of technology available to gather and disseminate information, it is clear that technology itself is not the answer to successful performance management.  As many managers could attest, there is no shortage of information coming from an endless supply of reports and presentations derived from data extraction or analytical tools, and yet many key questions remain unanswered.  The fact is that the fundamental standards of any business come from people, and business success comes from those people who are able to ensure the very purpose of the business is reflected in the performance management process.   

Carl LoBue, Jr.; President, LoBue Americas

References:
For a deeper look into Fred Harvey and The Fred Harvey Company, I suggest reading “Appetite for America: How Visionary Businessman Fred Harvey Built a Railroad Hospitality Empire that Civilized the Wild West.”  By Stephen Fried.   If you have an appreciation for a historical look at building a business empire or for the expansion of the West, it is interesting and informative.
1. “Appetite for America: How Visionary Businessman Fred Harvey Built a Railroad Hospitality Empire that Civilized the Wild West.”  By Stephen Fried; 2010