#203 Erin Wade: The Mac and Cheese Empire

Summary

The Mac and Cheese Empire | Erin Wade The Knowledge Project with Shane Parrish | Farnam Street

Episode Release Date: September 17, 2024

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1. Erin Wade’s Personal Journey and Motivation

Erin Wade begins by sharing her personal struggles balancing a demanding career and family life. As a lawyer with significant responsibilities, she found herself overwhelmed and yearning for personal fulfillment. Her love for the ocean and desire to surf became a pivotal aspect of her life, providing her with meditative and joyful experiences. This introspection led her to evaluate her career path critically.

"I felt like I'm just consumed by other people's needs. So I was a bit desperate to find something for myself, something that could be just mine." ([03:22])

2. The Turning Point: Leaving Law to Pursue a Passion

Despite a successful career in law, Erin felt unfulfilled and disconnected from her passions. The catalyst for her career shift was an emotional moment when she realized the absence of quality Mac and Cheese restaurants in Oakland, her home city. This realization, coupled with her firing from her law job, propelled her to take a significant risk: opening a Mac and Cheese restaurant.

"When I got fired, I was like, this is my moment to try this bizarre idea of opening a Mac and cheese restaurant." ([07:31])

3. Building Homeroom: Early Challenges and Lessons Learned

Launching Homeroom, Erin faced numerous challenges, primarily due to her lack of restaurant industry experience. In the initial years, she grappled with creating a functional and enjoyable workplace. Her attempt to eliminate rigid structures led to confusion and chaos among her staff, highlighting the necessity of balancing freedom with clear guidelines.

"We had no dress code, no vacation policy. It was very much like, wear what you want. Take a vacation when you need to." ([12:56])

4. Management Philosophies: Open Book Management and Collective Success

Erin adopted innovative management practices to foster a collaborative and empowered workforce. Implementing open book management, she shared financials with her team, promoting financial literacy and encouraging staff to contribute to business improvements. This transparency not only boosted financial performance but also significantly increased employee satisfaction and retention.

"Open book management is really a game changer because business is really just like a sport." ([20:36])

Erin also introduced the Collective Success Model, a decision-making framework that evaluates the impact on customers, employees, and the company. This model ensures that decisions benefit all stakeholders, promoting a harmonious and productive work environment.

"We started making decisions by needing to maximize the largest degree of overlap for benefit to those three parties." ([28:42])

5. Hiring Practices and Values Alignment

Understanding the importance of cultural fit, Erin revamped her hiring process to prioritize values alignment alongside job performance. She implemented practical shifts and projects during the hiring process to assess candidates' compatibility and effectiveness in real job scenarios. Additionally, she established non-negotiable red flags, such as negativity towards former employers, ensuring a positive and cohesive team dynamic.

"Job interviewing is like dating in so many ways. If someone is shit talking all their exes, that's a really bad sign." ([41:18])

6. Addressing Sexual Harassment: The Color Code System

Erin tackled the prevalent issue of sexual harassment in the restaurant industry by developing the Color Code of Conduct. This system categorizes incidents based on severity—Yellow for bad vibes, Orange for ambiguous comments, and Red for explicit misconduct—and prescribes uniform responses. This approach empowered employees to report harassment without fear of judgment and ensured consistent handling of incidents.

"We developed a color-coded system that we call the Color Code of Conduct to handle these situations uniformly." ([44:39])

The system not only reduced harassment incidents but also fostered a safer and more respectful workplace environment.

"It dramatically reduced the red, the highest level of incidence." ([48:08])

7. Selling Homeroom and Continuing Impact

After a decade of successful operations, Erin decided to sell Homeroom to focus on broader impacts and personal projects, including writing a book. Although emotionally challenging, especially during the pandemic, selling the business allowed her to disseminate her innovative management practices on a global scale.

"My original vision was achieved, and I was itching to do new projects like writing this book to spread our ideas into the broader world." ([50:11])

8. The Importance of Titles and Identity in Company Culture

Erin emphasizes the significance of titles in shaping both external perceptions and internal identities. By adopting titles like CEO and Chef, she enhanced her professional credibility and empowered her team members to embrace their roles more fully. This practice not only improved self-perception but also strengthened organizational culture and pride among employees.

"Titles are incredibly important. They reflect how the world sees us, but more importantly, how we see ourselves." ([60:42])

9. Lessons Learned and Definition of Success

Throughout her journey, Erin highlights the importance of balancing autonomy with structure, the impact of transparency, and the value of creating meaningful work environments. She defines success not merely by financial metrics but by the quality of relationships and the positive impact on both employees and the community.

"Success for me is having meaningful relationships in my life, whether it's with work, with family, and creating ways for other people to do the same." ([64:43])

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Notable Insights and Takeaways:

• Balancing Freedom and Structure: Erin's initial attempt to eliminate all workplace rules led to chaos, underscoring the necessity of clear boundaries to harness employee creativity effectively.

• Empowerment Through Transparency: Open book management and the Collective Success Model demonstrate how transparency can lead to enhanced employee engagement and business performance.

• Innovative Solutions to Common Problems: The Color Code of Conduct serves as a scalable solution to handle harassment, highlighting the potential for small businesses to implement impactful systemic changes.

• Importance of Role Identification: Embracing professional titles can significantly influence personal identity and organizational reputation, fostering a more empowered and cohesive team.

• Redefining Success: Shifting the focus from purely financial success to fostering meaningful relationships and positive impacts creates a more fulfilling and sustainable business model.

Conclusion

Erin Wade's journey from a dissatisfied lawyer to the founder of a multimillion-dollar Mac and Cheese empire offers valuable lessons in leadership, management innovation, and personal fulfillment. Her approach to creating a transparent, empowered, and values-driven workplace serves as a blueprint for aspiring entrepreneurs seeking to build not just profitable businesses, but meaningful and impactful ones.

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This summary captures the essence of Erin Wade’s interview on "The Knowledge Project with Shane Parrish," highlighting her entrepreneurial journey, management philosophies, and the impactful systems she implemented to create a successful and positive work environment.

Transcript

[Erin Wade]

I had been coming home on a day that was just super depressing, and all I wanted to do is curl up in front of the television with just like a big bowl of Mac and cheese. But I realized that there was no place I could go to get really good Mac and cheese, which is sort of nuts. I pulled out the recipe that I had grown up making with my dad, made this delicious bowl of Mac and cheese, and I'm sitting on my couch and eating it when I sort of have this aha moment thinking, huh, there was no restaurant I could go to get this. This restaurant should exist. I think I should open it. And so when I got fired, I was like, this is my moment to try this bizarre idea of opening a Mac and cheese restaurant. If I fail, I'll just be back to what I was already doing, which is, you know, to sell my soul to make a lot of money. Working as a lawyer, I realized that my worst case scenario was basically the life I was already living.

[Shane Parrish]

Welcome to the Knowledge Project. I'm your host, Shane Parrish. In a world where knowledge is power, this podcast is your toolkit for mastering the best what other people have already figured out. If you're listening to this, it means you're not a supporting member. Members get early access to episodes. My personal reflections at the end of episodes, no ads, exclusive content, hand edited transcripts, and more. Check out the link in the show notes for more information. My guest today is Erin Wade who turned Mac and Cheese into a multi million dollar empire. We talk about the mistakes she made starting out as a first time founder with no experience in industry empowering employees, open book management, her unique and viral policy on harass, how titles can be effective, dealing with disciplinary problems at work, and how she focuses and reasons around a collective success model. You'll walk away from this episode with a different lens around running a business and a front row seat for what it's like to start and scale one. It's time to listen and learn. There are too many podcasts and not enough time. What if you could skip the noise and get just the insightful moments, even from shows you didn't know existed? That's what Overlap does. Overlap is an AI driven podcast app that uses large language models to curate the best moments from episodes. Imagine having a smart assistant who reads through every transcript, finds just the best parts and serves them up based on whatever topic you're interested in. I use overlap every day to research guests, explore and learn. Give it a try and start discovering the best moments from the best podcast. Go to joinoverlap.com that's joinoverlap.com want to.

[Erin Wade]

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[Shane Parrish]

You obsessed with right now?

[Erin Wade]

Oh my gosh, Surfing.

[Shane Parrish]

Where did that come from?

[Erin Wade]

I've always loved the ocean ever since I was a little kid after my son was born. He's currently about to turn 10. But it's my second child and at the time I was running my company so really busy, have like a hundred people reporting to me. I have two little kids and I'm just not really sleeping, you know, I just, I feel like I'm just consumed by other people's needs. So I was a bit desperate to find something for myself, something that could be just mine. And I realized that I had always loved the ocean. I'd always wanted to learn how to surf. I set up a surf lesson in this town that's like a half hour from where I live and got in the ocean. And honestly, I wasn't really very good at it, but I just felt so happy the whole time. And I made this promise to myself that I was going to make time for that once a week for a year and just sort of see what it did to my life. Honestly, it really changed my life. It was just this sort of magic time that was just for me, it was really meditative. And the following year I sort of challenged myself, like, okay, I'm gonna try this twice a week. The year after that I was like, I'm gonna do this three times a week. So like, I'm a full on obsessive surfer today. Yeah, it's just my favorite thing. It consumes my vacations, my free time. I, you know, just was, yeah, I love watching it.

[Shane Parrish]

Do you tend to go all into whatever you're doing? Like it sounds like you like tried it once, you liked it and then.

[Erin Wade]

You'Re like, boom, I'M in food, I'm in restaurants. So I think I'm really motivated by things that my body responds to really positively. That could be a delicious taste. That could be a beautiful, you know, space that you're sitting in. The ocean was really something that just engaged all my senses. And we're taught to do so much in our minds. And I'm a pretty, like, thoughtful person that can get lost there. So I tend to try to pay attention to my body and see, you know, what feels good. And I think we know on some primal level the things that feel right and the things that don't. And learning to follow the things that feel right has been pretty valuable for me.

[Shane Parrish]

What are the other ways that you shut off, like, that overthinking sort of side of your brain?

[Erin Wade]

Oh, God. I mean, I think that's probably why I'm obsessed with surfing. I don't have a lot of ways. I've definitely tried all the things that people tell you to do. Like, I've tried meditating many times. Yeah, I feel like I really am able to lose myself in things that encompass all my senses. Surfing, cooking, you know, is one of them. I think it's just such a creative practice.

[Shane Parrish]

Did cooking start when you were a kid?

[Erin Wade]

My family really loved food. Actually, me and both of my siblings, we all own restaurants or bars. Like, which is so funny because I think to, like, my parents deep disappointment. That's true. But it was. We're all so different. But the one thread that, like, really held my family together, my parents were very obsessed. They both actually were entrepreneurs and had their own businesses. But every single night, we would have dinner together as a family. And so I think cooking and food was a very, like, central part of my youth and certainly is something I still do with my kids today. So, yeah, I'd learned how to make things mostly from my dad, who actually would only cook, like, five things. One of those things was macaroni and cheese, so it ended up serving me very well later in life. I've always felt, like, a deep connection to food as a source of, you know, not just, like, nourishment from a physical perspective, but also from an emotional perspective as, like, a way to bring, like, diverse family members together or a community together. I think it's really just a much deeper thing than just physical nourishment.

[Shane Parrish]

If you close your eyes and imagine what it smelled like back in the kitchen, what smells come to mind?

[Erin Wade]

So my mom was actually physically disabled. She had polio as a kid, and so she couldn't really do much cooking. So my dad was really the big cook of the house. And like I said, he only made sort of five things, but one of them was chocolate chip cookies, which he made just all the damn time. Like, I feel like there was like always cookies or brownies in my house growing up. And so, yeah, I have a really deep nostalgia for sort of these, like American, you know, desserts. And the smell of them wafting through the house is definitely like the smell of my childhood.

[Shane Parrish]

You didn't start running a restaurant. You went to law school and then became a lawyer and you were fired from that job. What happened?

[Erin Wade]

Yeah, I had a very circuitous route to becoming a lawyer in the first place. That had actually taken a detour in food first. I had actually really tried. I wanted to be a chef and I learned how to cook when I was an undergrad and I worked in restaurants in New York. But honestly, it was a really dead end job. I was making minimum wage. I really could barely afford to pay my rent. I looked around me and I just didn't see a future in the industry. And so I did what I think plenty of smart people with a complete lack of direction choose to do, and I decided to go to law school. It seemed like a prudent choice on the surface, but it was really not something that I felt passionate about. So I was working as a corporate attorney. So I'm getting paid, you know, really an obscene amount of money. Like an amount that seemed crazy when I had been cooking in restaurants, like 10 times what I would have made in a year working in a beautiful high rise. You know, very respectable. Like, I looked good at cocktail parties, but I really hated going to work every day. So I was fired. And it was a real wake up call for me because I had always been just a super overachiever. And it was the first time that I was like. Well, I can't say the first time, but it was probably the biggest time where I was like, wow, I am not doing well at this. And it's not even because I couldn't do well. It's because I don't want to. I don't care enough to be good at this.

[Shane Parrish]

It's hard to excel at a job you hate.

[Erin Wade]

Oh, my God. I mean, it sounds so basic, but I think a lot of us don't pay attention to that. You know, we're taught to, you know, do the thing that's going to, you know, pay the bills or look good or that feels safe, but not necessarily, you know, to my earlier Point about, like, what makes you feel good in your body? We're not trained to be like, oh, like, what makes me feel, you know, real joy inside every day? Or at least that was not what I was trained to, you know, to pay attention to. So when I got fired, it was like I had this moment of, you know, asking myself, am I going to keep doing this? Because I could have easily been hired, you know, somewhere else doing the same thing. Like, am I going to choose to get back on this wheel or am I going to choose to do something else? A few months before that moment, I had been coming home on a day that was just super depressing. Like, I just had hated my workday. It's raining outside, and all I wanted to do is curl up in front of the television with just, like, a big bowl of Mac and cheese. But I realized that there was no place I could go to get really good Mac and cheese, which is sort of nuts. I mean, I live in Oakland, California. It's a major city. It seems like someplace that you should be able to, you know, get a good bowl of Mac and cheese, but there wasn't one. I pulled out the recipe that I had grown up making with my dad and went shopping and got the ingredients and made this delicious bowl of Mac and cheese. And I'm sitting on my couch and eating it when I sort of have this aha moment, thinking, huh, There was no restaurant I could go to get this. This restaurant should exist, and I think I should open it. I had been sitting on that idea and sort of thinking about it. And so when I got fired, I was like, you know, I think this is my moment. Like, I think this is the moment to try this bizarre idea of opening a Mac and cheese restaurant. And the truth is, if I fail, I'll just back to what I was already doing, which is, you know, have to sell my soul to make a lot of money. Working as a lawyer, I realized that my worst case scenario was basically the life I was already living. So. So what did I have to lose?

[Shane Parrish]

Which gave you some safety to sort of take a risk. The moment when you were fired, what was that moment? Like? Were you like, finally they caught me, I was slacking and I knew it. Or were you like, oh, God.

[Erin Wade]

At the moment I was fired, I was like, oh, God. I mean, I'm. I'm sort of embarrassed to say this because I really hated what I was doing, but, I mean, I think. I think I start crying. You know, I just. Yeah, I felt lost. I think that the deepest Part of that moment of failure wasn't so much losing the job. I think it was realizing that I was doing something that I didn't care about, that I wasn't good at it because I didn't care about, and that I was spending sort of precious years of my life doing something that I hated. Also, frankly, that I had had to rely on someone else to tell me that. I think that felt bad. Like, I knew it already for myself, and I didn't, at the time have the courage to act on it.

[Shane Parrish]

So you decide to start homeroom?

[Erin Wade]

Yeah, pretty much right away, I decided to start homeroom. And, you know, and it was not just because I had this love of food and cooking, but I honestly looked back at that earlier time that I had been cooking in restaurants and thought, you know, what would it be like to create the kind of place I wish I had been able to work where I could, you know, see a future for myself, where I would love coming to work every day? It was really sort of this personal odyssey to create the job that I had wanted to have, but also where other people would feel a similar, like, passion that I did. I don't know about you, but I had. I mean, I'd worked many jobs and not had that experience of being excited to wake up in the morning and go to work. And that feels like a sad way to live life. So I really, really wanted that for myself, but I also really wanted that for other people because it felt pretty empty if I created my dream job, but then other people felt like it was a slog.

[Shane Parrish]

So how did that work, though? Like, walk me through sort of the initial year of that. Like, how do you find people who are excited by Mac and cheese?

[Erin Wade]

Do you.

[Shane Parrish]

Do you hire differently? How does that look?

[Erin Wade]

Having an ideal of wanting to create an incredible workplace, an incredible restaurant, yet having never run one and also never worked in one that I'd want to emulate, meant that everything I learned was really through trial and error. And so it means that the first couple years, if I'm honest, were like a bit of a shit show.

[Shane Parrish]

Talk me through some of those lessons and mistakes that you made early on that you're like, oh, like, I had to figure this out because I didn't have the background. I'm coming from a law degree trying to run a restaurant, and while there's people in my family who do, I don't want to run it that way.

[Erin Wade]

I just kept thinking, like, okay, what are the values that I want to live here? And I would try to Take a stab at what I thought it meant to live those values at work. So, I mean, an example would be, I felt like a lot of jobs I had had don't give you a lot of autonomy. And it's something I had really dreamt of. I wanted to have a lot more trust in the system, and I wanted to be able to, you know, be myself at work. I thought, okay, let's do away with so many of the rules and structures that I had found so confining. We had no dress code, no vacation policy. It was very much like, wear what you want. Like, take a vacation when you need to. And these ideas, like, honestly, a lot of tech companies run that way, but a restaurant is not a tech company. Like, you actually can't have people gone just whenever they want all the time. It's a disaster. Like, you need people physically there every day to serve customers. And what was interesting is I was creating, you know, all this freedom, but it was actually like just moving from one dystopia, which is, you know, so many rules that people can't be themselves, to a very different dystopia, which is, like, no one knows what to do. There's so much freedom that it's actually constricting in its own way. You know, people didn't know, is it okay for me to wear this shirt? Is this going to offend somebody? Are these the kind of shoes that are acceptable? Am I taking too much vacation? Like, am I. Are people secretly resentful? Resentful? Like, it really created a lot of chaos and confusion. And, you know, I was not more beloved for it. People were actually looking to me for guidance. I sort of have had this, you know, after much trial and error breakthrough that actually, I think the right kind of freedom for people is. I think it's your job as a leader to create the structures and boundaries that within which people have freedom. For instance, you know, if it's something as silly as, like, terms of guidance for what people can wear, have some structure around. Like, here's what you need for safety. Here's what you need to not offend customers. You know, here's the basic rules, but within that, you know, assert your own independence. We didn't have uniforms and things like that for our people who are out on the floor, and they love being able to express themselves, but knowing, oh, if I wear this kind of thing, it's not going to offend people. My boss isn't going to, you know, be upset. And there's so much more freedom within the right kind of boundaries. I found time and time again that actually that was really my goal as a leader, was just what kind of boundary should we create? Something I'm really proud of is actually how we do customer service or like one of our sort of customer service roles. At many restaurants, there's scripts that would be like a highly constrained form of leadership where you give people no independence. The other would be to give them no guidance, which is something that I was doing at the beginning. And I actually had a really great team member. The idea he came up with was great. I started talking to him, figuring out, okay, how can we give better guidance on service? He told me he was like, hey, I'm always trying to be the best part of people's day. But I realized we serve thousands of people a day, so I can really do a great job with five tables a shift. Like, I just go crazy. I do anything it's going to take for those five tables to walk away. Being like, that was one of the best meals of my entire life. And he would do that to five tables a day. So that became sort of a service challenge that we gave to people. We're like, hey, our value is to be the best part of people's day. What that's going to mean and how you're going to create that experience for someone can be your own creative journey and a part of expressing yourself at work. Our expectation is you need to be able to do that for five tables a day. Or if you're working our takeout location for five customers a day, they should be able to come in and leave. Being like, this was the most magical experience of my life. And it's so cool because within that I've seen so much creativity. Anything from, you know, drawing art that they send home with people, to singing them a song, to, you know, comping their meal to, you know, doing some like, really over the top birthday celebration, spelling out a special message with, you know, condiments on their Mac and cheese. I mean, all sorts of funny stuff that I never could have come up with in a million years. That's really their own mark of individuality. There is a boundary and an expectation with which they are allowed to express that.

[Shane Parrish]

It's almost like intelligent autonomy.

[Erin Wade]

If you just give someone a blank piece of paper, everyone's going to create art that's totally different. If you give people a paint by number, everyone's going to create something that is exactly the same. And I think my goal is actually to be like a coloring book where it's like, here are the outlines of what I expect from you. But within that, you have complete creativity and freedom. So everyone's page of a coloring book is going to look different, but you're going to have the same structures. And I think that's actually really the key to creating great culture within an organization is like, am I handing someone a coloring book? Because I think that's what you should be doing.

[Shane Parrish]

It's interesting because when we're working for somebody else, we often feel, if I only had autonomy, if they only sort of gave me freedom, then I'd be happy, then I could excel. And. And then you end up with freedom. But there's almost like too much freedom in a workplace.

[Erin Wade]

You don't ever really feel like you have complete freedom. To my point about the vacation policy, if you tell people they can take however much they want, like, studies have shown they actually take less than at companies where there's just a set amount of weeks. And it's because people are actually afraid. Like, even though in theory they can take as much as they want, they're afraid that maybe they'll take too much. So I think in a workplace having some, like, guidelines and structures, the right ones, the coloring book is. Has the most freedom.

[Shane Parrish]

There's also an element of, like, paying attention. Right. It's like, if I have complete freedom, initially, that starts off as fun, but then you're like, look. Look at all these amazing things I'm doing and nobody's noticing.

[Erin Wade]

Totally.

[Shane Parrish]

What are some of the other lessons that you sort of like, trial and errored your way through?

[Erin Wade]

I knew that I wanted us to have a really collaborative work culture, which is, again, a really fabulous ideal, but can be harder to pull off. In reality. Something I ended up learning about, which I thought was really fabulous, was open book management, which is basically where you open up your financials to your team and you teach financial literacy, and then you engage people in improving those numbers, and then you share the results with the team. And that was really such a game changer because, you know, business is really just. Just like a sport. But the way that most companies are run is that, like, no one is really sharing with you how you're doing. It's such an odd way to run a team or a company when you think about it. But I think we're always afraid, like, oh, if people know too much, you know, maybe they'll just want more for themselves. But I think it's hard for them to be a part of something bigger than themselves, and I think that's much more important. Than the risk you take by sharing information.

[Shane Parrish]

At what point did you start this and what, what happened in the, like following sort of like 60 or 90 days.

[Erin Wade]

You know, started using it a few years into the business. I think first I had to figure out some foundational things, you know, to my point, about like creating some really basic rules and structures. And I really wanted a way to engage people with growth, not just in the financial sense, but, but of all the things that we cared about, finding ways to measure it and improve on them. I studied up, took my team to take a lot of classes on how you do open book management, and we just started using it sort of roughly the way you do. It is like we would have a meeting every week where managers were required to attend, but they were open to all staff members. So any staff member would be paid to come and just sit there and eat snacks and, and learn about numbers. And what you have is, it's basically a P and L meeting, but different people within the company are watching those numbers. So instead of me as the CEO or a CFO running through those numbers, different people are responsible for tracking them. So we would watch things like our food costs, but we would also measure things that normally people only measure maybe once a year, like our employee happiness. We measured literally daily and weekly. And we'd report on those numbers too, and have people tracking them and talking about not just the number, but what's behind it. Why were those sales up this week? What did people notice? Why was our employee happiness or satisfaction low or high? What's going on? What could we change? And then we'd send out a little newsletter that would come out once a week being like, here's the suggestions we saw, here's the trends we're seeing, here's the ways we're going to improve, here's the things we're doing, here's the things we're actually also not going to act on. And what's amazing is that then everyone is engaged. They start knowing not just like, what are the numbers, but why are they getting better or worse. They see that the things that they suggest can become enacted. Staff members that aren't even attending that meeting, but are just, you know, filling out forms every day to sort of report back or seeing suggestions that they make be enacted. I mean, we saw not just, you know, huge financial gains. I mean, we were always in the sort of the top, you know, 1% of performance for the industry, but we saw that number go up and up and up and up every single year for the decade That I was a CEO, we also saw, you know, huge movements in staff happiness in restaurants in America. Anyway, the average tenure of an employee is 90 days. Our average tenure was two and a half years. The work we do is monotonous. We're making Mac and cheese every day. But when you get to be part of something that is bigger than yourself and, like, see changes that you suggest happening and see a place get better and better and better every week, every day, like, that's something that's really magical to be a part of.

[Shane Parrish]

I mean, this sounds great. I've never done it, but, like, I.

[Erin Wade]

You should.

[Shane Parrish]

Well, I mean, in a way, public companies all do it, right? They publish their financial statements, but they don't sort of work with their team to understand what that means and, like, how to control it. I'm so curious as to, like, okay, your, like, food costs are going up as a percentage of sales, Then what? Like, I tell you that and, like, how do you. How does that transfer into. Without me telling you what to do, how does that transfer into change in behavior that leads to increased profitability? And the reason that that's important is so that you can provide jobs so that you can keep going, so that you can do all these things. And people understand that as a system.

[Erin Wade]

Yeah, I mean, I think actually the thing with the food costs is so great. Like, if you think about the way even a public company is run, you're right. Certain numbers might be public or all staff members could know them. But there's a difference between that information coming from the top and maybe trickling down, maybe not, you know, like, I don't know how many, like, Chipotle employees are, like, you know, reviewing their financials on a weekly basis, you know, But I think something that is really magical about this way of operating is that it's much more flat. It's not hierarchical. And so, you know, everyone is involved. To your point about the food costs, that is actually an issue that we did have happen. We watch not just our food costs, but we line item our dairy costs. Because the biggest part of running a Mac and cheese restaurant, they were skyrocketing one year. And we could not figure out why our costs of, like, cheese and milk had not gone up substantially. We were just running through stuff really, really quickly. And so, you know, at most companies, you'd have someone sitting in an office looking at that. Like, I'm honestly not super sure how they would have gotten to the bottom of it, because they're not there on the ground, but because we're looking at it in the context of these meetings every week and having people who are on the ground and working seeing this stuff. You know, someone at the meeting suggested they were like, hey, I've been noticing, you know, we portion out the cheese in every single Mac and cheese, so each one gets exactly a quarter pound of cheese, which is a rather insane amount of cheese. And they were noticing that there had been some really, like, sloppy work on the part of folks who were coming in early in the morning to do this, that it didn't look like they were actually measuring it to the ounces they're supposed to be. They were just sort of throwing it in there. And so we went down and we started measuring out, like, we pulled some of these, you know, baggage of cheese out of a fridge and started measuring that or weighing them them, and sure enough, they are off by like, some pretty large amounts, honestly, sometimes less than they're supposed to be.

[Shane Parrish]

There's a lot of variability.

[Erin Wade]

Totally. But there shouldn't have been, like, we're paying people to sit there and, like, literally weigh out cheese portions so that everyone gets consistent food, but also so that our food costs remain stable. And they were just not really doing it. So that became something that we then started tracking, and we started, like, pulling baggies out randomly every week, you know, and measuring them. And sure enough, when you start measuring it, that number magically improves. We never had to, like, go talk to people and discipline, and then we were like, hey, these are not coming out the same, and we're going to start looking at it and, like, magically the problem solves itself. If we have each single Mac and cheese that we sell being over by even like a tenth of an ounce of cheese over the course of a year, we would have given away a ton of free cheese. Like, literally a ton. We've figured that out, solved that problem, saved ourselves all of that money. I don't know how that would have gotten solved in a bigger company. I think it would have been figured or not in a bigger company, but one which works more hierarchically. It would have been figured out, but it would have taken a lot of time. Time, a lot of effort. And I think what's more is all the people on the ground were able to feel empowered because they were like, oh, I just made a difference. Like, I caught this problem. I just saved us, you know, tens of thousands of dollars for the year. And I think that is really empowering.

[Shane Parrish]

And it feels good. It feels like you're part of something larger than yourself, too.

[Erin Wade]

Totally.

[Shane Parrish]

What Other problems have you solved sort of counterintuitively through radical transparency or open book management?

[Erin Wade]

I'd say sort of building on it, like how I was saying that, you know, we started out figuring like, how do we create sort of structures upon which people can be successful and then sort of build upon that, like open book management. I think when you start having a lot more transparency and a lot more collaboration, you also start to need honestly structures to sort of help you think about how to make good decisions. And so we started to use, I call it collective success, but it's basically just like a stakeholder analysis. And we would start measuring decisions that we were making through how is this going to benefit the customer or in the community, how is this going to benefit the employees and how is this going to benefit the company? Because we're measuring all these different things all the time. It's pretty easy for us to tell, you know, like biometrics, what are the effects going to be. And we started making decisions by needing to maximize the largest degree of overlap for benefit to those three parties. And I think that has been really, really helpful. Giving people data and the ability to improve it is really helpful. But also giving everyone a framework for how are we going to set, decide what we're going to maximize is so important.

[Shane Parrish]

Is there a particular decision that comes to mind when you think of that, that you're like, oh, this really helped me see or solve this problem in a different light. Looking through collective success model One of.

[Erin Wade]

The huge benefits of running a company that's very employee centric and really empowers its people is that you have all these empowered people. And one of the downsides is like, you have all these empowered people, you know, so you have a lot of folks who have a lot of opinions and are very vocal. One example is we used to have a language on our menus. We had a surface charge and they could leave an additional tip. And a number of servers came in and wanted to speak at one of the open book meetings because they wanted to propose a change to that language because they felt if there was different language on the menu, people would leave far bigger tips for them. Good suggestion. But the problem is this group of people, servers within most restaurants are actually the people already making the most amount of money. And so having this language is actually really helpful because we didn't have to say like, oh no, we don't want to, you know, no one had to be like, no, I don't want to do that. It didn't become a battle. We actually Just walked through the analysis. We were like, okay, if we're going to make this change, what is the impact on the employees? And they were like, well, it'll be great for servers because we'll make more money. And then we're like, okay, well, great. How about the folks in the kitchen who are not going to see a part of those tips? What do you think that's going to feel like to them? And they had to be like, oh, yeah, I guess maybe that won't feel great. We walked through and looked at the customer, okay, how's this going to feel for the customer who's now paying more money? And they're like, oh, I guess that's maybe not actually of a benefit to them. And then we're like, all right, well so for the company, you know, what's the impact there? And they were like, oh, well, I guess if the kitchen is disgruntled and the customers are paying more, maybe we won't ultimately make more money. If you run things traditionally and hierarchically, people bring suggestions that are perhaps self serving and your job as a manager is to be like, no, or maybe to explain why. And it creates like a pretty divisive dynamic where you're at odds with each other. But having people walk through this for themselves and understand, hey, okay, I might want this thing for myself, but I can see how this is not good for a system that's bigger than me, that I care about and decide for themselves that this is actually not the right choice.

[Shane Parrish]

I think that was really magical reasoning out loud too. Goes a long way, right? Which is like, instead of saying yes or no, it's like, let's walk through this problem and reason about it totally.

[Erin Wade]

And I think, you know, sometimes when I tell people about these various management practices, they'll be like, oh, that sounds really time consuming. And I'm like, well, that conversation I just described took maybe five or 10 minutes. And yes, that's more time consuming than saying, no, I'm just going to not do it. But you know what would have happened if like I hadn't, if we hadn't had that conversation is they would have spent months complaining, like hurting morale, being like, this is wrong.

[Shane Parrish]

It's really interesting because when you think about it just from the time consumption, it's like, well, the visible time consumption, five or ten minutes. If I said no, it's like zero. But the invisible time consumption is huge and hard to measure. And so we don't tend to think about that.

[Erin Wade]

And I think we don't tend to Think about a lot of things that we maybe don't measure. And how much does having that conversation contribute to someone's sense of satisfaction, which contributes to their longevity? And how much money do we spend on things like turnover? Like, all those things add up to make a huge difference over time.

[Shane Parrish]

What would you say to a small business owner right now who's listening to this, thinking about, oh, what would it mean for me to open my books? And, you know, I'm scared to do that, and I don't know what the next step is.

[Erin Wade]

You could start really small. You know, you don't necessarily have to start by opening up everything all at once. Maybe you just pick something that you really want people to work on. I would say pick a number that you care about improving that is dynamic and is that employees can make a difference on. Start measuring it, and then set a benchmark, you know, like, that you'd like to reach and share the success. I mean, that is part of it is, if you're going to do this, if you think that improving that number could make a difference to the tune of, I don't know, $10,000 that year, share $1,000 of that with the folks who helped make it happen. You'll still be $9,000 richer. So you do have to teach it, involve people, but also, you know, share in the success.

[Shane Parrish]

Was there a moment with homeroom when you wanted to give up? Or, you know, when you're sitting on your kitchen floor at home after the end of a long day and you're crying and you're just like, I can't do this.

[Erin Wade]

I think that's the beauty of, like, having been quite unhappy in my work before doing homeroom is. I think I knew what the alternative looked like. My worst days at homeroom were still better than my best days as a lawyer. I think it helped give me perspective that, like, everything is hard, you know, and what kind of hard do you want? And I'll pick meaningful hard any day over meaningless hard. Most things in life worth doing are hard. You know, I know you have kids as well. Like, that's hard. It is really hard to be a parent. Studies on human happiness, like, show that people who choose not to have children are, on average, happier because they can just, like, do whatever they want all the time. You know, for me, my kids are also one of the most meaningful parts of my life. So I think things that are hard often accompany things that are meaningful. And if something's hard and meaningless, like, that's the worst thing. And I think for Many people, unfortunately, work falls into that category.

[Shane Parrish]

I think the kids thing is interesting because I've seen a lot of people go through this cycle of, I don't want kids, and they're really happy, and then they hit late 40s, early 50s, and then all of a sudden, it's like, I kind of wish I had kids.

[Erin Wade]

Yeah.

[Shane Parrish]

Because there's an element in the tail end of life what you really want to be doing. And maybe we don't articulate this, or maybe not everybody wants to do this. And I'm not projecting, but it's like, I really want to have dinner with my kids, and I want to have dinner with the grandkids, and I want to watch them play. And, I mean, I look at how much joy my kids bring to my parents, and I think, wow, like, I want that.

[Erin Wade]

We all have an innate drive to have some kind of impact that's bigger than ourselves. And for some people, that comes through children, and for some people, that comes through how we spend our days. You know, maybe at work, I prefer to do both. You know, I love my kids and I love my work, and I want everywhere that I'm living in my life to be about, you know, creating meaning with more people.

[Shane Parrish]

Did your law background ever help you in business? Aside from, like, reading contracts and stuff? But, like, was there an element of, like, oh, I approach this different because I have a legal background.

[Erin Wade]

I'll give you one way that my legal background helped and one way that it hurt. And I guess we'll start with the hurt one, because I had to overcome it first. Think something we're thinking about, whatever your job is, is, you know, what is the worldview of this profession? The legal worldview is, at least in America, it's an adversarial system. Two people take very extreme positions. You're, in fact, duty bound to take only that side, and they duke it out, and someone wins at the end. So there's no gray. There's no meeting the middle. It's very destructive. Honestly, you're literally fighting. I found that quite demoralizing to do over time. It's certainly not a good way to run a company. I think that's something I love about business, is that it's, like, literally and figuratively creative. Like, you make something, but you also. To make something, you can't be fighting with people. You have to. To be generative, you have to create something with them. Moving from this destructive mindset to this creative mindset was a big shift. So I think in that way, my legal background Gave me something to overcome. But a way that it really helped me was I was really struggling to understand how to do punishment for like, lack of a better word. Every company or organization has the issue of people misbehaving. I've been the person misbehaving at various jobs. I mean, that's, you know, why I got fired from being a lawyer. I just wasn't really doing my stuff. I have empathy for both sides. I feel like I hadn't really seen a system that worked very well. Like places I had worked, if you weren't doing well, you'd get a write up or some kind of punishment. Maybe you'd be, you know, like, doc shift sent home, you won't get a raise. Like there wasn't something that felt like it was going to meaningfully change behavior except with punishment, which just didn't feel effective to me, to be honest. So I actually did draw on my legal background for that. I had had some exposure to a system called restorative justice, which is not about punishing something. It's about trying fix a wrong or make it right. And it's a really interesting system. And so we started trying to use that in our discipline at homeroom. It was incredibly transformative and really effective.

[Shane Parrish]

Can you give me an example? Like, so it makes it tangible for me.

[Erin Wade]

Something really common in restaurants, in fact, probably many workplaces, people showing up late. If you work at a desk job, maybe it doesn't matter so much if you work in a restaurant, if someone's late again, you need people to actually physically be present. There's just less people to help customers to cook food. It makes the experience for the guests worse. And you know, we have like 100 people. So it's a lot of people who could be running late at any given time. Traditionally, if someone was running late, you probably write them up. If they do it a few times, maybe they lose their job. Right? I had found it was not effective at all. With a restorative discipline approach. What you do is you sit down for a conversation. You basically are like, hey, you know what happened? Someone says I was late. And then you talk about who is affected. Well, turns out, you know, you sort of walk them through, like who was affected. It's the, you know, servers that have to cover more tables. It's the cooks that have to cook more stuff. It's the customer that has, you know, worse service. It is the manager that is now wasting their time having this conversation with you. It affects lots of people in a lot of ways. And then you Ask them the question, well, what are you going to do to make it right? And I think that's, like, the most interesting part of it because it's not about punishment. It's literally, oh, shoot. I think for many people is the first time they're realizing that they've actually caused harm versus that they're, like, in trouble. And we'd have people come up with all sorts of creative stuff. Honestly, they could go over the top, like, things that once they'd realized that they had, like, wronged their fellow staff members, they would try to, like, pick up their side work or cover a future shift. They'd go apologize. They'd bring customers like, you know, little, like, gifts to say, sorry, it took so much longer to get to your table today. It generated all these creative things. And back to that point about empowerment, that person now feels like, oh, okay, I made a mistake, but I can make that thing better. That is so much more of a fun place to work to be a part of. When you see people actually making things better for each other rather than just getting in trouble and then, you know, maybe doing it again, maybe not.

[Shane Parrish]

Do you have that conversation when they show up for work late, or do you have it sort of like the next day?

[Erin Wade]

It's going to depend on someone's workplace. For us, often it would be at the end of the shift because at the point they show up, we really just want them.

[Shane Parrish]

You need them on the floor.

[Erin Wade]

For some people, sometimes it takes a little while to get them to be in sort of a calm space to have that conversation. We found it was really effective because when most people reflect on the impact to other people that they hopefully care about, they tend to create change. And when they don't, then it's also, frankly, an easier conversation to say, hey, you're not caring about the welfare of your fellow staff member or the customer or the company. And that's our culture, and we're sorry, but you can't be a part of it.

[Shane Parrish]

Is there another example that comes to mind where this has been, like, really practical and meaningful at changing behavior?

[Erin Wade]

I can say, certainly, like, on a personal level, it's even, like, changed the way I am with, like, friends or family. And I think people would say that a lot. Like, this is a technique that they would bring not just into problems that we had within the company, but that they'd bring home. Because, I mean, think about how many times, like, we fight with friends or partners over how big of a deal was this thing. But when you take it out of Right and wrong and she be punished or how do you make it? But when it's just like, oh, shoot, how do we do this better? How do I help? Right or wrong, it builds closeness and intimacy and accountability. And I think that's something you can bring everywhere.

[Shane Parrish]

Do you have anything unique about your hiring process when you're hiring people?

[Erin Wade]

I can't say way that I was like, naturally good at hiring people is through a lot of, like, trial and error that I've learned to get better at, you know, at it. The number one thing is really trying to have people actually do the position, whatever it is. It could. If it's a managerial position or a ground level position, we will pay people to do like practice shifts or practice project because talking is its own skill that has literally nothing to do with most people's job performance. And so I think we recognize that pretty early. And the goal is to figure out what is it like, you know, to actually work with you as quickly as possible and as inexpensively as possible.

[Shane Parrish]

Yeah, it's sort of cheaper than going through that whole interview process. And then you go three months while you try to figure it out. You're like, man, if we just paid this person for two shifts, we could have figured this out a lot sooner.

[Erin Wade]

And I think some are also, like, figuring out what are the things that are absolutely red flags that you just won't hire for. Like, for me, if someone is going to speak negatively about a former employer, honestly, I mean, I talk about this in the book. I really think job interviewing is like, so similar to dating in so many ways. And just like, if you show up to a date and someone is like, shit talking all their exes, you know, all I'm thinking is like, when am I going to be one of these people that they're, you know, saying negative things about? And so even though we all have employers or exes we could say plenty of bad things about, I think it's just a really bad sign if someone is just saying that upfront and being vocal about it. So that's like something that definitely a red flag. I would never hire for. Something that we always try to be really clear about too. We're hiring for our values. We're also promoting based on our values we're evaluating. And so the point is, many jobs, they're really only going to care about job performance. And so we're pretty clear that's really only about 25% of what we're evaluating on. And so we're also going to ask a lot about Our values and how we think that you might be able to live them, and looking for examples of where someone has or hasn't been able to do those things in former jobs.

[Shane Parrish]

The restaurant industry is known for a lot of sexual harassment happens. You came up with a novel system to deal with that. Can you walk us through when you recognize you needed to what the system is to the impact that it's had? Outstand outside of homeroom?

[Erin Wade]

I would love to. I think that's actually something I'm really, really proud of that our team has done. And I think, honestly, as a culmination of a lot of the systems and values that we've talked about here today, what happened is a number of years ago, I started getting this barrage of emails from female employees saying, like, emergency, need to talk to you. And I was terrified. I was like, what's happening? But to my point, we had a lot of systems of that allowed people to be more open and more transparent and not as hierarchical. Right. We held a meeting, and it turned out that what they wanted to talk about is that one of them had been sexually harassed in this really egregious way where a customer had stuck his hand up her shirt and, like, while she was serving the table. It was just crazy. But it had sparked all the women to start sharing stories of, like, oh, I have something like that. I have something like that. I have something like that.

[Shane Parrish]

I didn't realize this was common until reading your book. And I was like, oh, my God, that's insane.

[Erin Wade]

It's really common. And not just in restaurants. I mean, for lots of kinds of companies. But it's particularly bad in, like, you know, customer service. I mean, it's really like an epidemic and not just affecting, you know, women. So, yeah, they all started talking about it. And I mean, I was pretty horrified because I thought, you know, here we are running this, like, utopian, beautiful place to work. And meanwhile, like, people are having, you know, these, like, horrifying incidents of sexual harassment that I didn't even know about. I mean, literally, this is the first time hearing about it. True to our values of collaboration, we decided to try to brainstorm, like, how are we going to solve this? Because interestingly, like, I had actually, the kind of corporate law I had practiced was labor and employment. So I had, I don't know, worked on these kinds of cases and stuff, and I knew what was out there, and there just really weren't great systems. We tried, you know, a few different things that didn't work, landed on something that did, and it was this color coded system that we call the color code of conduct. The idea was that what we were struggling with wasn't that no one was reporting this, but that actually it was being handled really differently by different kinds of managers. And particularly we had a lot of male managers that basically were thinking that certain things that were being reported didn't sound that threatening to them. You know, all of our experiences are different and maybe if something like this had happened to you as a man, you wouldn't feel threatened by it, but as a woman it feels quite scary. So what occurred to us is that we needed to come up with a system because everyone really liked our management team. It wasn't like we have all these like, you know, insensitive men working for us. These are like great guys that they love. They really loved working with otherwise, but felt weren't able to really understand what was happening. The way the system worked is just that every situation just has a color that is connected to it. For instance, a yellow refers to just a bad vibe. So let's say a server is on the floor, they can come up to manager and say, hey, I have a yellow at table one. And then it's the server's choice. They can ask the manager to just take over the table, or they can keep it and just alert the manager. It's up to them. An orange is sort of like the next level up, which would be you have a bad vibe, but then an ambiguous comment. So maybe something like, I like your shirt. If you know, a little kid says that to you, you're not going to feel threatened. But if someone who you feel like has been sort of leering at you and checking you out and giving you this weird, you know, weird vibes, it might actually feel like they're starting to come onto you or it might feel threatening. So in that case the staff member just goes up to the manager and says, hey, I have an orange at table two. And the manager is required to just take over the table. And a red is sort of the next level up, which is sexually explicit comment. So like you look sexy in that shirt or touching. And in that case the staff member has to come up and say, hey, I have a red at table three. And in that case the manager is required to kick them out. What's so cool about the system is we started using it and we developed it just, we were like, we just need a fast way to deal with this on the floor. Make sure everyone gets treated the same. We don't have to explain what's Happening at all the tables. Like there's going to be no judgment calls about is this serious, is this not serious? There's just a way to handle it. It actually like dramatically reduced the red, the sort of highest level incidence. And the reason is like almost no one just walks into a restaurant and just sticks their hand up someone's shirt. They walk in, they start checking that person, person out, they start making some low level comments and then they escalate. And it just prevented low level incidents from escalating.

[Shane Parrish]

How do we nip it in the bud?

[Erin Wade]

Totally. Yeah. Because it just changes the power dynamic at, you know, a really low level. And it was great because like customers don't know we're using it. They don't know we think that person's creepy. You know, like they just know they just got a new server and staff member. You know, everyone's going to have a different definition of what feels threatening or bad to them. And they don't have to justify, they can just get help. I wrote about it and it got picked up by the Washington Post and it became this like viral article. I testified about it in front of the United States EEOC in Washington and it became adopted as a best practice by them. So it is now currently used in like restaurants and bars literally all over the world. And you know, started in our little restaurant.

[Shane Parrish]

That's crazy. It's such a big impact too. And it feels empowering for the employees, I would imagine because they're not trying to rationalize or justify. They're just like, you know what? I got a creepy vibe. I don't want to serve this table. You do it.

[Erin Wade]

The reason that I'm so proud of that system is that it really, it was developed because of all those other values and systems. And I think to me it really illustrates, like, I think we all have the ability and power to make tremendous difference, truly like on a global scale if we want to. And I think it's just the power of getting groups of people together and creating the systems and structures that really allow them to get creative, to solve their own problems and to thrive. And I think if every small business, you know, implemented some of the things that I read about my book, I'm excited to see, like what, what could we accomplish? What other things could we create change for?

[Shane Parrish]

I'm curious as an aside, just because I like stats, but like what percentage of tables get like a yellow card?

[Erin Wade]

It's going to depend right on the business, I'm sure. But for us, this is not like I'd Say the system definitely gets used weekly, but not daily. You know, it's pretty low. I think when people hear about it, that's their biggest fear is like, oh, what happens if someone just reports every table is a yellow? But I find people don't do that.

[Shane Parrish]

Right.

[Erin Wade]

Don't do that.

[Shane Parrish]

Yeah. What went through your mind when you decided to sell Homeroom? At this point, you're one of the most successful. I mean, in terms of profitability, one of the most successful restaurants in the world. World on top of the world. Right. Like, you're making a lot of money. Your employees, you've done well for the community, you've done well for your employees. You've created this system that's now used all over the world for harassment. You've had a huge impact. Why sell?

[Erin Wade]

Part of it was, I had already been thinking to myself, so I guess for one, I had received offers many, many, many times over the years to sell homeroom, and I never even took a meeting with anyone. Like, I was just disinterested. I had been CEO running a decade at that point, and I didn't personally aspire to, like, turn it into a gigantic chain. I wanted to create this beautiful place for people to work where we loved coming there, where it felt special, where it was having an impact on the world. And I think that original vision had. Had been achieved. And I was actually itching a little bit to be able to do, like, new, new projects. Like, I had wanted to write this book for a while. I wanted to start getting our ideas into the broad, broader world, because my dream wasn't just to keep growing Homeroom into oblivion. It was. I liked having this sort of single restaurant. So I think I had been already thinking, you know, what is this next chapter of my life going to look like? Because this company already has leaders that can really run it every day and systems that I'm proud of that I really want to spread into the world. That was sort of the broader vision and goal, grow the impact of all the great ideas that we've done. But, you know, there was also real, like, personal parts of it that had nothing to do with all that. You know, I just. I was also getting divorced at the time the pandemic had hit, and it was so unclear, you know, what the industry was going to look like in the long term. Sort of like anything in life where just the, like, timing of a bunch of crucial pieces came together where I was like, you know what? This is the right time to write a new chapter. And it's tough. We don't have a lot of stories like that. Right. Like, when you think of a great movie or something, it's about this singular thing, like, oh, I just wanted to open a great restaurant. And then you're supposed to do that and, like, be happy forever. But I think the truth is, like, dreams should evolve and change. We don't talk that much about, like, what happens when you actually, like, get to achieve your dream. Do you just do that same thing forever? You know? No, like, it. It grows and it changes as it should. I really think that that is what it was for me.

[Shane Parrish]

How long ago did you sell it?

[Erin Wade]

Four years ago.

[Shane Parrish]

Did you go through any depression after?

[Erin Wade]

Oh, my God. Yeah, I. That was a dark moment in my life, honestly. You know, for me, it felt like raising this child until they're like 10 years old and then giving it up for adoption to another family where I still get to, like, visit it, talk to them, but I don't get to be responsible for sort of what happens to them. It's really emotionally painful. It was also a time when it was like, I think if the world had been normal since I sold, when it was, you know, during the pandemic. Pandemic, you know, I would have traveled a lot. I would have just totally distracted myself, but there was nothing, you know, like, the world was a bleak, dark place in general, and I couldn't travel, I couldn't distract myself. So it was really this moment of like, oh, my God, like, who am I without my company, my work? Have I made a mistake? I think it was really. Yeah, a sad, hard time.

[Shane Parrish]

How do you keep the company culture now that you've sold it? I mean, a lot of times when entrepreneurs, is he find or like, start create this company, they have this great culture. It's very personality driven by the entrepreneur. And then when they sell, they have the best intentions about that's going to continue. How do you think about what happens in the future?

[Erin Wade]

Yeah, I mean, maybe this is like, not a very inspirational answer, but it's a pragmatic and true one. I mean, I think. I guess what I'd advise anyone who's thinking of selling a company is I think I wanted to have the belief, like, I currently sit on the board of the company that purchased Homeroom. I got to advance, advise, you know, their other brands. I get to like. I think I was excited to have potentially a bigger impact. But I do think the truth is, you know, the person who's really on the ground running something is really the most deeply responsible for the Culture and all the people who are working alongside them. Right. Like, that's what creates the culture of that organization. I think I wanted to believe that I could have a bigger impact from a different seat, and I do in some ways. But I think if you're going to sell your company, you have to feel pretty comfortable with knowing that that culture is going to change. When I think, again, my original goal was starting homeroom. It was to create a job that I and many other people would love, and that would create a positive impact. And we did that. And I think, you know, everyone who worked there during the decade I was running it, you know, many of them are still there. Some have gone off to do their other things. I got to go and have the time to write a book about it. We're sitting here right now. I think that it was never about, like, calcifying that culture in one organization for the rest of time. It was, how do we make work that's worth doing for more people? And I think to that end, I'm very proud to have sold and been able to write the book and be able to influence more people, I think.

[Shane Parrish]

Why do you think same store sales or, you know, restaurant location sales are down for most restaurant changes. Most restaurant brands, whether small or large, I mean, they're all suffering through this. You're not. What do you think is the cause of this?

[Erin Wade]

This is honestly one of the hardest times that I've seen in the restaurant industry in all the years as I've been in it. I think we're sort of in a moment of reckoning and change. Costs have gone up. I think people are rethinking the meaning of work and what's worth their time. And most restaurants, like I said, are not inspiring places to work. And so I think a lot of people have said, I don't need to do this with my life. So restaurants nationally are having really hard time staffing, really hard time making money. The face of cities have changed in the face of, you know, a lot of work going remote. So I think it's just a moment of, like, reconfiguration and change, and I think all industries go through it. And I think it's just being particularly heartfelt in the restaurant industry right now. There's a lot to be learned from the people who are, like, creative and trying new things and experimenting with new things. I think, like, the hardest moments are usually what give rise to sort of, like, lasting, positive change, because only the best ideas sort of make it in the long run.

[Shane Parrish]

You said in your book that you manage for impact, not intent.

[Erin Wade]

This idea of impact and intent is, I guess, to my earlier point, about, like, the best lessons you learn in business. You can take to, like, all of your, you know, relationships in your life. I think intent and impact is huge. A lot of people think intent is what matters, but we would teach that actually it's impact. An example would be, let's say that I see someone walking down the street, and they have, you know, like, a big belly. And I'm like, oh, my God, congratulations. Like, when are you due? And they're like, I'm not pregnant. That's. That is just so deeply embarrassing. My intent might have been really positive. I might be trying to, like, make them feel good about themselves, congratulate them on something, but the impact is super negative, right? Like, turns out they're not pregnant. They now feel, like, embarrassed. It's a totally awkward moment between us. Should I, like, not apologize to that person because I meant something really positive with, you know, my compliment? No, like, of course I should. Like, I either hurt them or we had this awkward moment. We would teach that all throughout the organization because I think most people really want to do good, but sometimes we have a really, you know, negative impact. I had a manager. He would go around and compliment people on their clothing. He'd be like, cool hat. Love your shirt. You know, like, he was just this, like, very sort of enthusiastic, like, puppy dog energy. I do think he had, like, really, really positive intent. But I had a staff member who came to me one day and was like, hey, this person told me that I have a nice smile. And that, like, creeped me out and made me feel uncomfortable. That makes sense. If a customer had said it, we would have. That would have been, like, an orange at that table. You know, also, like, that's a really common, like, you know, come on to women is like, oh, like, nice smile. I believe that that, you know, manager had a really positive intent to try to make her feel good, but had a really negative impact where she felt like he was being creepy and, like, borderline, you know, using a line that someone else might use to hit on her. So we had a restorative conversation about it and talked about it and talked about why the intent doesn't matter, but the impact does. And so then we just started talking about, like, how could you have a better impact on people's work? It was to honestly not talk about their appearance. Like, they don't. No one cares what your manager thinks about your shirt or your hat or your smile, right? Like, they want to know what you think about their work. Tell them, like, you did an amazing job with that table. It helped him manage for, like, he had this really positive intent that he could channel into more positive impact for the team.

[Shane Parrish]

As I was listening to that, and the smile thing is a pretty, like, innocuous comment, right? Like, I was thinking, oh, know, what if. What if he made 50 people feel really good and better and happier about being work? And then one person who didn't, like, how do you think through that in terms of. Because the impact is also like, oh, I like it when you. I feel happier when somebody recognizes that I put extra attention into my uniform today. Or I found this hat at the vintage shop and I searched for hours and, like, I want to get noticed and I want to get some sort of, like, validation over that.

[Erin Wade]

To your point, I mean, managing for impact is hard. You have to ask yourself that question. If you have 50 people are most going to love it if you, you know, compliment their shirt or their hat, are they not going to care? Some percentage are going to get affected.

[Shane Parrish]

And then what's that threshold? Right. Is it 50, 50, or is it like 80, 20 or 90, 10? Like, how do I determine?

[Erin Wade]

So then I would say that we should then have a conversation about this concept of collective success. And when we think about, like, how to create the most good for the most number of employees, is that the right angle? And I would say probably not. Because even if 49 love it and one hates it, my guess is 50 out of 50 will like it if you compliment their work.

[Shane Parrish]

Right.

[Erin Wade]

And so I think we'll just get a better impact taking that same energy and tweaking it, you know, whatever. 25 degrees.

[Shane Parrish]

Yeah, definitely. You are a strong advocate for titles. And I want to get this quote right. You say titles reflect how the world sees us, but more important importantly, how we see ourselves.

[Erin Wade]

Yeah, I do think titles are incredibly important. I think, like, most things I've realized are important. I realized how important it was by sort of messing it up the first time and then learning over time sort of why it matters. I guess I can illustrate it best just with, you know, my own journey with it. I'm an owner of a small restaurant in the grand scheme of things as well as we do, it's, you know, still just a singular business. As I started gaining more prominence for, you know, our ideas about what doing in the workplace, our sexual harassment, you know, system, I started doing a lot more interviewing. And I would always get asked, like, okay, what's your Title. I was actually in conversation with this reporter from the New York Times, and she's like, okay, so are you the chef? And I was like, oh, no, no, no, I'm not. I'm not a chef. After we got off the phone, I was like, God, why don't I consider myself a chef? Like, I literally, I made all the recipes. I've published a cookbook. I own this restaurant. I mean, like, if I'm not a chef, like, who the heck is one? You know, that's just a bizarre thing to say. But I had this vision in my head that a chef is someone who's like a really, really serious cook. Like, they spend all their days in the kitchen. And that wasn't me. It was similarly with CEO. I thought of CEOs as like, you needed to be the head of like, some gigantic company. You needed to have, like a full stack of people, you know, C level titles beneath you. I just decided to start experimenting. I was like, you know, what is it going to sound like in that New York Times interview if I'm not a chef or I'm not a CEO, Like, I think I'm not going to get taken as seriously for my food or for my business ideas. And so I just decided to actually just embrace those titles and see what happens. I started speaking at conferences for CEOs. There was like, groups that I could not join previously because I did not consider myself a CEO that I now could be part of. That created a lot of like, you know, mentorship opportunities for me. But it just really expanded my network, it expanded my reach. It really affected how seriously people took me. So I started encouraging everyone within the company. We started really just like, leveling up, you know, everyone's titles. And there's so much pride associated with having like a title that is, like, more serious. And you start, you know, acting like that, like someone who cooks versus someone who's chef. That is a very different level that you're going to think about cooking and food. Someone who is a leader and someone who is a CEO. Same deal.

[Shane Parrish]

We talked a lot about the external impact in terms of like, oh, maybe the Times reporter takes me serious. Maybe somebody reading it is going to take it seriously. I'm going to have a bigger impact outside, but what about the impact inside? So you just touched on it briefly. But how did it change you to like, recognize yourself that way? Just as it changes a cook maybe to a sh. Chef. And the pride that you take in.

[Erin Wade]

Your work, if you're like someone who, like, likes to ride Bicycles versus you're a cyclist or like someone who, like, you know, sort of dicks around in the ocean or a surfer, you know, I do think that there is tremendous power in saying something about yourself and saying, no, I am a surfer. I am a CEO, I am a chef. I just found that I felt a lot more pride in myself. You know, those identity identities meant something not just to the external world, but to me. I found them personally empowering. Something that, like, when I would get like a little lost, I could come back to and think, like, what does it mean to be this?

[Shane Parrish]

You know, I often say the most powerful story in the world is the one that we tell ourselves. And if you tell yourself, I am a runner, it makes it a lot easier to go for a run than if you think of yourself as a casual jogger.

[Erin Wade]

A hundred percent. If you are a runner, you're going to create a training schedule for yourself. You're going to start like, you know.

[Shane Parrish]

It'S part of your identity totally.

[Erin Wade]

And so if you don't do it for a few weeks, it's going to matter to you. You know, you're going to be in better shape. You're going to have more pride in what you do. Your times are going to be better. Like, that's a different thing.

[Shane Parrish]

What is success for you?

[Erin Wade]

Success for me is, I think, just having meaningful relationships in my life, whether it's with work, with family, family, and creating ways for other people to do the same.

[Shane Parrish]

Thanks for listening and learning with us. For a complete list of episodes, show notes, transcripts and more, go to FS Blog, Podcast or just Google the Knowledge Project. Recently I started to record my reflections and thoughts about the interview. After the interview, I sit down, highlight the key moments that stood out for me, and I also talk about other connections to episodes and sort of what's got me pondering that I maybe haven't quite figured out. This is available to supporting members of the Knowledge Project. You can go to FS Blog membership, check out the show notes for a link and you can sign up today and my reflections will just be available in your private podcast feed. You'll also skip all the ads at the front of the episode. The Frenum Street Blog is also where you can learn more about my new book, Clear Turning Ordinary Moments into Extraordinary Results. It's a transformative guide that hands you the tools to master your fate, sharpen your decision making, and set yourself up for unparalleled success. Learn more at FS until next time.