Happy Employees, Contented Customers.

• Author: Motley, L. Biff
• Position: Ruby Tuesday's strategy - Brief Article

One of the most successful restaurant chains in today's increasingly competitive marketplace for moderately priced family food is Ruby Tuesday. Its stock has taken off lately at a time when others' have hit a plateau. The reason is that customers are thrilled with the experience they have at Ruby Tuesday. The food is excellent. The prices are moderate. And the servers, managers, cooks and bartenders are fabulous. Like Southwest Airlines, this company has discovered the secret of success in a near-commodity business: people.

Ruby Tuesday's CEO is Sandy Beall, who is also the chain's chief strategist. Although he claims not to be a clever businessman, Beall has found success through his strategy of spending money on employees and training rather than flashy marketing. Rivals Outback Steakhouse and Chili's spend 4 percent to 6 percent of annual sales on advertising. Ruby Tuesday spends 1 percent or less. Rather than spend money on ads, Beall invests in employees. The company carefully selects entry-level employees and shows them an exciting career path with plenty of financial incentives. Ruby Tuesday promotes over 80 percent of its managers from the ranks of hourly workers. All managers must visit the company's WOW University, where they learn how to achieve the company goal of having customers say "Wow" at least three times a year.

Technology is no guarantee

This simple formula seems to have eluded many of today's gigantic financial services providers. This is surprising, since satisfactions surveys show again and again that the greatest "satisfiers" of customers of all types are employee-related attributes like professionalism, attention to problem solving, friendliness, etc. Certainly, customers appreciate modem technology like ATMs, the Internet, phone call centers and the like. But these tend to become ingrained quickly and can become "dissatisfiers" if operational performance levels are not maintained at nearly 100 percent.

As technology development-cycle times decline and automated products become ubiquitous, it is increasingly difficult to differentiate yourself through technology. Technology becomes as critical qualifier to play the game, but not a guarantee of...