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Business Excellence Institute sharing Pal's secrets for success

Sharon Hayes • Aug 14, 2009 at 12:00 AM

KINGSPORT — It’s the only restaurant in the country to receive the prestigious Malcolm Baldrige National Quality Award and the first two-time winner of the Tennessee Excellence Award. Its operating practices have been studied by businesses from around the world.

Now Pal’s Sudden Service wants to get the word out locally — it can help businesses and organizations achieve performance excellence right here in the region.

The Kingsport-based food chain established its Business Excellence Institute (BEI) in 2000 to share its best practices for success with other organizations. Since then, business owners and managers have traveled to Kingsport from across the globe to learn and incorporate Pal’s methods into their organizations.

But not many businesses in the region have taken advantage of the BEI. Indeed, some may not even know it exists.

“While Pal’s is famous, I’m not sure people know we’re here at all,” said BEI President David McClaskey. “That’s part of our challenge — how do we get the word out so that we can help accomplish this mission of helping everybody have what I call ‘the Pal’s difference.’ ”

Pal’s was established in 1956 by Fred “Pal” Barger Jr., whose parents operated the popular Skoby’s restaurant on Konnarock Road. The first Pal’s Sudden Service was located on Revere Street in downtown Kingsport. Then Barger bought an ice cream shop on Lynn Garden Drive and converted it into a Pal’s.

Barger initially started selling 12-cent mini-hamburgers at the new location. Then he held a Friday and Saturday special: hamburgers for a nickel apiece.

“On Friday we sold 8,500 and on Saturday we sold 12,000. But nobody waited — we never had more than two or three people in line,” Barger said.

Even back then, Barger had a plan for implementing fast and efficient customer service. He had the hamburgers prepared at Skoby’s restaurant, then transported them to Pal’s.

“We put a dozen in a bag, and if somebody wanted just 10, we took two out,” Barger said.

The concept of “sudden service” proved successful. But Barger and his eventual right-hand man Thom Crosby, now the company’s chief executive officer, were always on the lookout for ways to improve the business. The company started practicing the criteria set forth in the Malcolm Baldrige process — considered the best standards for businesses and organizations in the country.

In the late 1990s, other companies and organizations started noticing the changes at Pal’s and began asking questions.

Crosby decided to hold a “benchmarking session” with businesses interested in Pal’s operations. He contacted the Kingsport Chamber of Commerce, which sent word out to its membership base.

“Well, we had 60 seats for the session, and we filled it up the first day. We had to cut it off — the seats were all gone,” Crosby said.

Pal’s began holding those benchmarking sessions once a quarter.

Then in 1999, Crosby got a request to speak to the local chapter of the American Society for Quality. That’s where he met David McClaskey, a quality expert for Eastman Chemical Co.

Before long, Crosby and McClaskey realized they shared a similar vision: To see this region become a world center for performance excellence.

“We said, ‘Why don’t we join forces? Maybe we can reach more people,’ ” Crosby said.

McClaskey retired from Eastman after 34 years of service, and he and Crosby founded the Pal’s Business Excellence Institute in 2000 to share Pal’s operational ideas with other organizations.

McClaskey said that Pal’s processes are designed on two principles: to delight the customer and to achieve operational excellence.

“Pal’s has a standard,” McClaskey said. “They’re going to train 100 percent of their people to do the job 100 percent right, 100 percent of the time.”

The key to achieving that goal is training. While many companies give new employees a few hours of training, hourly employees at Pal’s undergo 120 hours of training before they work in one of the company’s restaurants.

“If you don’t get it right from day one, people aren’t going to come back,” said Barger.

McClaskey said he hates to see an employee labeled as a “trainee.” “Trainee means they’re going to screw up, and we’re giving them the excuse in advance so you’ll know why you just got screwed-up service,” McClaskey said.

To see first-hand what employees go through to achieve excellence in service, McClaskey decided to train and work at the Pal’s Church Hill location for six weeks earlier this year. The experience, he said, was an eye opener.

“I told the owner operator — ‘I’m afraid I’m going to muck it up.’ He said, ‘Dave, don’t worry about it. Our training processes never allow you to make a mistake that can reach the customer.’ ”

Knowing that decreased McClaskey’s anxiety from the outset. Plus, he said, he and the other employees were never given more than they could handle. And employees were shown respect and given the opportunity to take responsibility. They also could use their skills and talents to produce results.

The system has paid off. Same store sales and market share have grown for the past 24 years, and service speeds are four times faster than competitors.

Order accuracy is at least 10 times better than the closest competitor, and employee turnover is half that of the industry average.

“Pal’s is probably one of the best-managed companies in the country,” McClaskey said. “It’s wonderful to see that people in the industry and outside the industry can hear about Pal’s and say, ‘We looked all over the country and we’re going to come to Kingsport, Tennessee, because we can’t find anywhere else to see such an example.’ ”

In 2001, Pal’s Sudden Service won the Malcolm Baldrige Award, becoming the first restaurant in the country to achieve the nation’s highest quality honor. The award was created by Congress and is personally presented by the president of the United States.

That same year, the company won the Tennessee Excellence Award. It won that recognition again in 2006.

Eastman Chemical Co. — where McClaskey had worked as a quality expert — also won the Baldrige Award in 2001.

“As a quality expert, I was looking for the world’s best practices. Who would have thought I’d find it right here in Kingsport?” McClaskey said.

Today, Pal’s BEI offers various courses and consulting based on the management and leadership systems at Pal’s. Courses include a tour of a Pal’s restaurant to show participants first-hand how processes and procedures are implemented.

And the lessons that can be learned aren’t just for businesses. More than 50 nonprofit organizations and government agencies have also benefited from the training. All types of organizations have worked with BEI, including food service, hospitality, manufacturing, healthcare, hospitals, school systems, law firms, charities and churches.

“It’s geared to help any organization,” Crosby said.

B. Clay Rolston, marketing director for the BEI, said many businesses and organizations that attend will come back time and again.

“The biggest challenge for us is to get them in the door. Once they’re in the door, the product sells itself,” Rolston said.

Ken Schiller, with Rudy’s BBQ restaurant in Texas, brings his entire management staff every year to BEI. In a BEI promotional video, Schiller said the trip is worth the money.

“When we initially came to Pal’s we realized that it could completely change the way we operate our business and take it to a whole new level,” Schiller said.

Since first coming to Kingsport five years ago, Schiller’s business has grown in sales an average of 12 to 14 percent per year.

“And part of that was in a down economy,” Schiller said.

“Coming to Pal’s allowed us to know where the bar can be set. It gave us a benchmark that we otherwise wouldn’t have even known was possible,” he said.

In September, Pal’s BEI will offer two of its most popular classes. “Achieving World Class Results” will be held Sept. 14 and 15. The course teaches participants how the various management systems of Pal’s are integrated to produce effective results. Participants will learn about world-class customer satisfaction, process management, human resource systems, and leadership practices that create a culture for success. The class includes a behind-the-scenes tour of Pal’s, and is ideal for executives and managers of all levels as well as human resource and quality control professionals.

The second course, set for Sept. 16 and 17, is titled “The LEAN, Mean, Profit Machine.” This class will show participants how Pal’s uses LEAN techniques to improve service while reducing cost for little or no capital money. Participants will learn LEAN principles, see them applied, and come away with an action plan to rapidly increase efficiency, reduce cost, and improve customer service.

For more information, pricing, and registration for either course, contact Rolston at [email protected] or call (423) 276-4901, or visit www.palsbei.com.

The BEI training facility is located on Konnarock Road, behind the former Skoby’s restaurant.

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