Who Made That Rule? Trust, Accountability, and the Cost of Not Asking Questions
Why even your most trusted employees need checks and balances, and why no restaurant should depend on one person.
By Jamie Galler | Restaurant Advisor
In his book Setting the Table, restaurateur Danny Meyer challenges conventional thinking with a simple question:
"Who ever wrote the rule?"
It's a question I've found myself asking throughout my career.
Why do we do things this way?
Who decided this was the best approach?
Is there a good reason for the procedure, or is it simply the way we've always done it?
In restaurants, longstanding habits can become so ingrained that nobody thinks to question them.
Sometimes those habits are harmless. Sometimes they're inefficient.
And occasionally, they can be extraordinarily expensive.
Let me share an experience that reinforced one of the most important lessons I've learned as a restaurant operator and advisor:
Trust your people. But verify your processes.
A Chef Everyone Trusted
Several years ago, I was working with a restaurant whose chef had the complete confidence of ownership.
He was experienced, knowledgeable and responsible for much of the kitchen's day-to-day operation.
Among his responsibilities was taking the restaurant's physical inventory.
In fact, he was the only person who did it.
Every inventory period, he counted the products, recorded the quantities and provided the numbers used to calculate the restaurant's food cost.
That's simply how things had always been done.
Ownership trusted him, so nobody thought much about it.
There was another consequence of this arrangement. Because nobody else knew how to conduct the inventory, the chef couldn't easily take time off when inventory was due.
The restaurant had become dependent on one person for a critical financial procedure.
As I began evaluating the operation, I suggested that we conduct the next inventory together.
It seemed like a reasonable request.
I wanted to understand the process, review the inventory and make sure the numbers were accurate.
But the chef resisted.
Quite strongly, in fact.
That caught my attention.
What We Discovered
Rather than continue arguing about conducting the inventory together, I decided to take an independent inventory when the chef wasn't working.
I completed the count the evening before his scheduled inventory.
That gave us two sets of numbers to compare.
The discrepancies were substantial.
We weren't talking about a few missing cans or a minor counting error.
There were significant differences between the inventory I had physically counted and the figures the chef was reporting.
Further investigation uncovered something more troubling.
The chef had been manipulating the inventory figures and taking product home.
When confronted with the evidence, he admitted what had been happening.
But there was another important piece to this story.
The chef's bonus was tied to the restaurant's food-cost performance.
Think about that for a moment.
The chef was financially rewarded for achieving a favorable food-cost percentage.
And he was also the only person responsible for producing one of the most important numbers used to calculate that percentage.
Nobody independently verified his work.
The restaurant had created a situation in which one employee could influence both the reported results and his own compensation.
The problem wasn't simply that an employee had been dishonest.
The business had a fundamental weakness in its financial controls, and nobody had questioned it.
1. Trust Is Not a Substitute for Verification
Restaurant owners often develop close relationships with their employees.
That's one of the things that makes this industry special.
We work long hours together. We navigate difficult situations. We depend on one another.
Over time, strong relationships and mutual trust develop.
And that's a good thing.
But trust and accountability are not opposites.
You can trust your chef and still independently verify inventory.
You can trust your manager and still reconcile cash deposits.
You can trust your purchasing employee and still review invoices, credits and vendor statements.
You can trust your bartender and still maintain proper cash-handling and inventory controls.
Verification isn't an accusation of dishonesty. It's a basic responsibility of management.
In fact, good controls protect honest employees as much as they protect the business.
When procedures are consistent, transparent and independently verified, employees are less likely to be unfairly blamed for discrepancies or mistakes.
The objective isn't to create an atmosphere of suspicion.
It's to create an environment where everyone understands the standards and where financial information can be relied upon.
2. Never Let Someone Be the Sole Judge of Their Own Performance
The bonus arrangement in this restaurant was especially problematic.
There's nothing wrong with incentivizing a chef to control food costs.
In fact, when properly designed, performance-based compensation can help align an employee's interests with those of the business.
But incentives must be supported by reliable measurements.
Consider how food cost is calculated:
Beginning Inventory + Purchases − Ending Inventory = Cost of Goods Sold
That cost is then divided by food sales to determine the food-cost percentage.
If ending inventory is overstated, the calculated cost of goods sold is understated.
The restaurant appears to have used less food than it actually did.
The reported food-cost percentage improves, even though the actual operating performance hasn't.
Now imagine that the person responsible for reporting ending inventory also receives a bonus when food cost meets a target.
You've created a conflict of interest.
And without independent verification, you've made it relatively easy for that conflict to go undetected.
The same principle applies throughout a restaurant.
If a manager receives a bonus based on labor cost, how are labor hours and payroll expenses verified?
If a salesperson is compensated based on revenue, how are discounts, refunds and cancellations handled?
If a purchasing manager is rewarded for reducing costs, who's verifying product specifications, quality and vendor credits?
The person whose compensation depends on a financial result should never have exclusive control over measuring or verifying that result.
This doesn't mean employees shouldn't participate in collecting or reporting information.
It means the business needs an independent check.
That's a fundamental principle of sound financial management.
3. No One Person Should Control an Entire Critical Process
There was another weakness in the restaurant's inventory procedure.
The chef was the only person who knew how to do it.
That created two problems.
First, it gave him virtually complete control over the process.
Second, it made the restaurant unnecessarily dependent on him.
Neither is healthy.
Ideally, critical financial responsibilities should be separated.
For example, the person ordering products shouldn't be the only person verifying deliveries, approving invoices and reconciling inventory.
In a small independent restaurant, completely separating these responsibilities may not be practical.
There simply aren't enough managers.
But that doesn't mean checks and balances are impossible.
An owner or general manager can periodically conduct an independent inventory.
A second employee can participate in the count.
Inventory adjustments can require management approval.
Large variances can be investigated.
Purchases can be reconciled against invoices and physical inventory.
And critical procedures can be documented so more than one person knows how to perform them.
These are relatively simple controls.
They don't require sophisticated technology or a large accounting department.
They require discipline and consistency.
The smaller the management team, the more important it becomes to establish practical checks and balances.
4. Your Restaurant Should Be Able to Run Without Any One Person
There's a leadership lesson here that extends beyond inventory and financial controls.
No restaurant should be so dependent on one employee that the operation cannot function properly without that person.
Not the chef.
Not the general manager.
Not the bookkeeper.
And ideally, not even the owner.
Think about the implications of having only one person who knows how to perform an essential responsibility.
What happens when that person gets sick?
Takes a vacation?
Leaves for another opportunity?
Or simply needs a few days off?
If the answer is that the business struggles, you've identified an operational weakness.
Strong employees are invaluable. Their knowledge, experience and judgment are assets worth developing and retaining.
But that knowledge should also help strengthen the organization.
Critical processes should be documented.
Other employees should be trained.
Responsibilities should be shared appropriately.
And management should be able to step in when necessary.
The objective isn't to make your best employees less important. It's to make the business less vulnerable.
A restaurant that can operate consistently when key people are absent is generally better positioned to grow, maintain standards and provide a healthier working environment.
5. Question the Practices Nobody Questions
What makes this story particularly interesting to me is how easily the problem could have continued.
Ownership trusted the chef.
The inventory was being completed.
Food-cost reports were being produced.
Bonuses were being calculated.
From the outside, the process appeared to be working.
Nobody had a reason to question it.
Except that nobody had ever independently verified the numbers.
And nobody had asked why the chef was the only person allowed to conduct inventory.
That's where Danny Meyer's question becomes so valuable.
Who made that rule?
Who decided that only the chef should count inventory?
Who decided the person earning the food-cost bonus should also control the inventory figures?
Who decided independent verification wasn't necessary?
The answer, in many restaurants, is that nobody consciously made those decisions.
The practices simply evolved.
And over time, they became accepted.
That's why I encourage operators to periodically challenge the way important things are done.
Not because every established practice is wrong.
And certainly not because every trusted employee is dishonest.
But because a process that has never been questioned may also be a process that has never been properly evaluated.
6. Build Controls Into the Business, Not Around Particular People
One final point.
After discovering a problem like this, it's tempting to focus entirely on the individual responsible.
And certainly, employees must be held accountable for their actions.
But if you stop there, you may miss the larger opportunity.
The more important management question is:
What allowed this to happen, and what should we change so it doesn't happen again?
Replacing a dishonest employee without correcting the underlying control weaknesses leaves the business exposed to the same problem in the future.
Instead, examine the process.
Who performs the task?
Who verifies the results?
Who approves adjustments?
Are responsibilities documented?
Is there a potential conflict of interest?
Can someone else perform the task if the primary employee is unavailable?
Are discrepancies routinely investigated?
Good management systems should work regardless of who occupies a particular position.
That's how you build a stronger business.
Not by assuming every employee will always do the right thing.
But by creating an environment where expectations are clear, responsibilities are appropriately divided and results are independently verified.
The Operator Challenge
This week, identify one important financial or operating procedure in your restaurant.
It might be inventory, cash deposits, payroll, purchasing, vendor credits, employee discounts or the calculation of management bonuses.
Then ask yourself five questions:
1. Who is responsible for this process?
2. Who independently verifies the information or results?
3. Does anyone involved have a financial incentive to influence the numbers?
4. Could someone else perform the responsibility if that employee were unavailable?
5. When was the last time we questioned whether this was the best way to do it?
If you don't have clear answers, you've identified an opportunity to strengthen your operation.
You don't need to assume something is wrong.
You simply need to make sure you would know if something were.
And if someone tells you, "That's the way we've always done it," perhaps the best response is a simple question:
"Who made that rule?"
Because good operators don't just trust their people.
They build systems that protect their people, their customers and their business.
Trust your people. Verify your processes. And never let familiarity replace accountability.
Jamie Galler
Restaurant Advisor | Former Multi-Unit Restaurant Operator
The Practical Creative
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