If you want to make the world a better place, sometimes you have to lead in your community, not just at work.
Bob Donegan has done that for decades. He is the President of Ivar’s, Inc., an iconic Seattle-area seafood restaurant chain.
From the shadows, Bob has shaped several massive public works projects, from the airport to the waterfront, where a multi-billion-dollar tunnel replaced Seattle’s Alaskan Way Viaduct.
In this episode, Bob explains why he’s so committed to civic leadership, how he helped more than 40 companies get off the ground or grow, why he agreed to serve on the Seattle Branch of the Federal Reserve, and Ivar’s secret to success that’s worked for 86 years.
If you aspire to be a leader at work and in your community, this conversation with Bob Donegan is the inspiration you’re looking for.
Resources from the episode:
- Connect with Ivar’s and learn more about their various locations here.
- Read more about the history of Ivar’s here.
- Looking for more interviews with Bob Donegan? Here’s a conversation he recently had with HistoryLink.
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Transcript
The following transcript is not certified. Although the transcription is largely accurate, in some cases it is incomplete or inaccurate due to inaudible passages or transcription errors. The information contained within this document is for general information purposes only.
Speakers: Bob Donegan and Mark Wright
BOB DONEGAN 00:00
Unfortunately, a lot of businesses are managed based on cost, not based on quality or service. And so, they seek ways to minimize cost rather than finding ways to do things more effectively, providing better quality products, better customer service. We have a series of goals that we think of at Iver’s. And one of them, the most important goal, is to keep our employees happy. It’s not customers first. It’s not patents or technology or chowder recipes first. It’s keep the employees happy because if the employees are happy, they create happy guests. And that’s what we want.
MARK WRIGHT 00:45
This is the BEATS WORKING show. We’re on a mission to redeem work – the word, the place, and the way. I’m your host, Mark Wright. Join us at winning the game of work. Welcome to BEATS WORKING. On the show this week, leading outside your company to make your community a better place. The Ivar’s Seafood Restaurant chain is a Seattle institution. It was founded in 1938 by entrepreneur Ivar Haglund, an irreverent and playful business leader whom Seattleites adored. The company has not only survived for 86 years, it has thrived. Today, Ivar’s has more than 60 locations from waterfronts to sports stadiums. Bob Donegan has helped lead the company since 2001. Ivar’s recipe for success is simple. Put your people first. You won’t believe how long some employees have been with the company, some for more than 50 years. Bob is a Yale management grad who honed his business skills by helping more than 40 companies get off the ground or grow, including the iconic Peet’s Coffee chain. For most of his career, Bob has done business, mostly with a handshake. Hard to believe in today’s litigious world. One of the biggest reasons I wanted Bob on the show is that he’s one of Seattle’s most prominent civic leaders hidden in the shadows, shaping major developments from the airport to the waterfront, where a massive multi-billion-dollar tunnel and park replaced the Alaskan Way Viaduct. Bob spent tens of thousands of hours evaluating and shaping the project that, in its original design could’ve killed divers. He’s also part of the Federal Reserve Seattle Branch Board of Directors in this period of economic uncertainty. What inspires me most about Bob is the motto he lives by, and that is, you don’t have the right to complain about things unless you’re willing to roll up your sleeves and do the hard work to make them better, and that he certainly has. Welcome to BEATS WORKING. On the show today, Ivar’s president, Bob Donegan. Bob, it’s so great to have you on the show. Welcome.
BOB DONEGAN 02:57
It’s always good to talk to you, Mark, especially on interesting topics like Seattle.
MARK WRIGHT 03:02
So, Bob, you and I have known each other for a little while. I’ve kind of known you as the person who runs Ivar’s, but also as someone who’s been super involved in civic development, civic projects in downtown Seattle for many, many years. And so, I guess I’d love to just start for people who aren’t familiar with Ivar’s or at least how many locations you all have, Bob, give us, give us an idea of the footprint of Ivar’s today.
BOB DONEGAN 03:27
So, when, um, I give the speech about Ivar’s, I always ask people, how many locations do you think we have? And the usual answer is two or thirteen. And today we’ve got about more than sixty locations operating from Marysville in the north, Issaquah on the east, and South Tacoma in the south. But that also includes locations in Husky Stadium, Lumen Field, T-Mobile, and Cheney Stadium in Tacoma. And because those food booths are so productive, uh, we think of them as stores. Each has a manager, a budget, a staff. So, they’re as productive as a freestanding restaurant is.
MARK WRIGHT 04:15
Wow. How did you guys get into stadiums, Bob?
BOB DONEGAN 04:19
So, in 1997, the Mariners called us and asked us if we would come into Safeco Field. And I called Kevin Mather, who at the time was the CFO, back and said, we’re really honored that you would think of us, but we don’t know anything about stadium operations, so we’re going to decline. And he said, you guys would be the best stadium operator around. We look at your little fish bar on Pier 54, where on a summer afternoon, you’re serving hundreds of people an hour. And that’s what we need in the stadium. So, July 15th, 1999, when the Ferry Foghorn blew and the gates opened up, we had two food booths at Safeco Field, one behind first base on the main level, and one behind third base on the upper level. And I have a brother who is a professional stadium concession operator. And so, we had spent a lot of time with him finding out what works and what doesn’t work. And one of the things my brother, Tim taught me was the first time the point of sale cash register system in a stadium is turned on for all the food booths in the stadium is opening day and he said it never works. So, make sure you’re ready to have people who can take orders and do math in their heads, so that you can continue to sell product. So, three o’clock, Fury’s horn sounds, gates go up. There were two food booths in the stadium that were open. The two Ivar’s booths, because on the cash registers, we had our accounting staff. They could do math in their heads, and we didn’t need the cash register system to be able to operate. And at the end of that first season of the hundred food booths in the stadium, ours were number one and two in volume. And in the second season, they asked us if we would bring Kidd Valley into the stadium. So, there’s a Kidd Valley in the left field corner on the main level and a Kidd Valley behind first base on the upper level. And at the end of the second season, we were number one, two, three, and four in volume. When, uh, Seahawks built then Quest field and had a play at Husky Stadium. We began to sell chowder at Husky Stadium. Today of the 13 food booths at Husky Stadium, we operate the five busiest ones. Then Todd came to us and asked if we would come into then Quest field, which became CenturyLink, which is now Lumen. And one of the Mariner minor owners asked us if we would come into Cheney Stadium, which is how we got down into coma. So, 2023 was the busiest year we’ve had in stadiums. While attendance was up in sports facilities in Seattle, the primary reason we were so busy is unlike the master concessionaires in most of the stadiums, we don’t pay our people minimum wage. We’re starting them three, four or five an hour above minimum wage. And so, we always had people working in our booths. And if it’s the second inning and you need something quick to eat, you know, you can get something quickly at Ivar’s. You don’t have to stand in line a long time. And I expect 2024 will be equally busy because it feels like we’re finally through Corona. How’s that for a long answer about sports?
MARK WRIGHT 08:05
That’s amazing, Bob. And when did, when did you guys make that decision about the wage?
BOB DONEGAN 08:10
Oh, we’ve always paid in the top quartile of restaurants. And in addition to high wages, we also pay benefits. So, the benefits plan that we offer is as good as any other restaurant in town. And, even matches some of the technology companies and law firms, because we want people who can have a career with us, and we like older people with families. Because they are more stable employees and they, us old guys, we’ve made all the mistakes possible. So, we tend to be a little bit better employee. And then for every dollar that an employee puts into the 401k retirement plan, the company puts 50 cents on top of that. And so, for rational, thoughtful people with a long-term focus, Ivar’s is a good place to be. You’ll find a similar thing with Dick’s Drive-In or Pagliacci Pizza, or Tom Douglas restaurants. If they’re locally owned, and the owner-operator is in town, those are the restaurants that tend to treat their employees really well. So, we’re not unique.
MARK WRIGHT 09:24
How come more businesses don’t do that, Bob?
BOB DONEGAN 09:26
Unfortunately, a lot of businesses are managed based on cost, not based on quality or service. And so, they seek ways to minimize cost, rather than finding ways to do things more effectively, providing better quality products, better customer service. We have a series of goals that we think of at Ivar’s, and one of them, the most important goal, is to keep our employees happy. It’s not customers first, it’s not patents or technology or chowder recipes first. It’s keep the employees happy. Because if the employees are happy, they create happy guests. And that’s what we want.
MARK WRIGHT 10:10
Man, that is so cool. That is so cool. So, Bob, I’m in Mukilteo and my wife and I love to go down to the Ferry Landing and go to the Ivar’s down there for fish and chips or an ice cream cone. And what I’m always surprised at, and I, maybe I shouldn’t be surprised, but almost every single time I’m there, the person who takes my order actually has a smile on their face. And they, they look like they’re actually happy to be there. And it’s not like looking at their watch, like, when do I get off? I’ve always been impressed by that. And is that something you guys train or is it just expected as part of the culture?
BOB DONEGAN 10:43
So, we ask candidates a series of neutral questions, and we encourage the interviewing person on the resume, to make a hatch mark when they make a positive comment, and make a hatch mark on the other side of the paper when they make a negative comment. And if at the end of the interview, the number of positive comments to negative comments doesn’t outweigh them by four or five times, don’t hire them because if you’re negative, if you’re a pessimist, restaurants are not the place for you. Every 15 minutes, there’s a crisis, a tray gets dropped, an order is wrong. A baby cries, the toilet overflows, and pessimists run away from that. And an optimist runs over and says, oh, Mark, what can I do to help you here? You want me to go put another order in? So, we seek optimists, first of all. And then second of all, we have very low turnover among our staff. So, we have people who’ve been around many, many years. Every month, when I write a letter summarizing what happened that month to the bank, the ad agency, the insurance company, our key partners, my favorite part of the letter lists the five employees with the longest tenure. Number one is at 52 years. Number two is at 51 years, and number five is at 43 years. Who, who else do you know who’s been at a place for four decades?
MARK WRIGHT 12:22
I, I can’t name a single place.
BOB DONEGAN 12:25
And when you have people who are optimistic about things. And have been around a long time. They train that skill in new people. And if the new people pick it up, great. If they don’t, it’s probably not the right job for them. So, the people you’re referring to at Mukilteo, it used to be Billie. She was the longtime manager there. Huge smile, dark hair. Um, she was promoted to the district manager to manage the north stores. And her deputy, Tina, who is the manager there now, um, has been there for more than a decade. So, we asked the managers and assistant managers and all of our stores for their hundred best customers to know three things about the customers. What’s your name? What’s your regular order, and what’s something personal about you? And can you imagine going into a quick service Wendy’s, or McDonald’s, or Pizza Hut? And having someone say, oh, Mark, welcome back. Hey, weren’t you in Walla Walla last week? And the result is that we have a different level of customer service because we train that with people. And if you’re a regular, as you are. You know them and they know you, that’s really important to us.
MARK WRIGHT 13:42
Oh, that’s fantastic. I’d love to know more about the history of Ivar’s. Ivar Haglund was such an iconic figure in Seattle as an entrepreneur and a business leader. Just a character as well, if you look back at some of the old black and white photographs of Ivar. For people who don’t know the history of how this restaurant chain was, was founded, Bob, tell us about Ivar Haglund and how he got the idea to start it.
BOB DONEGAN 14:05
So, if you were down here on the waterfront with me, looking across to West Seattle, that’s where Ivar was born March 21st, 1905. He was a single child of parents who were single children, so he had no brothers or sisters. And he graduated from the business school at the University of Washington in 1928 with the well-timed degree as a stockbroker. So, his family owned a bunch of residences and a hotel and commercial properties in West Seattle. And his people stopped paying their rent. Ivar knew he had to get a job. He had visited cousins of his on the coast in seaside Oregon, where his cousins were dipping marine life out of the bay, putting it in glass tanks, and charging people in nickel to see it. And Ivar said, I can do that in Seattle. So, September 2nd, 1938, on Pier 3, which is now Pier 54. Oh, and here’s a little digression, Mark. How come the number changed from 3 to 54?
MARK WRIGHT 15:15
Uh, that’s a good question. I have no idea.
BOB DONEGAN 15:17
During the Second World War, when the Navy came to town, it couldn’t find the piers because they weren’t numbered geographically. They were numbered in the order in which they were built. So, by the act of war, the U.S. Navy was given the right to renumber all the piers and all ports in the country. When did the Navy complete renumbering all the piers in the country? 1947, after the war, of course. So that’s how we went from Pier 3 to Pier 54. When Ivar opened the aquarium, he knew that there wasn’t a lot of food on the waterfront. So, in the southeast corner of Pier 3, he opened the little fish bar that’s still there today. And interestingly, he needed someone to teach him how to do fish and chips, and he had gone to West Seattle High School, and two of the guys he went to high school with were the brothers who started Spud Fish and Chips. So, Frank and Jack Alger taught Ivar how to do fish and chips. And he opened the fish bar. Um, by 1940, more people were coming to the fish bar than coming to the aquarium. So, he closed the aquarium, donated the marine life to Vancouver, and when you visit the Stanley Park Aquarium, that’s the descendants of Ivar’s marine life. Ivar ultimately had the four full-service restaurants, Acres of Clams on Pier 54, the Salmon House on Lake Union, The Captain’s Table at the north end of the waterfront. And then after his death, his successors opened the Mukilteo location that you know. It was Taylor’s Landing originally and bought it from the Taylor family. But he also had a dozen quick-service seafood bars. And Arthur Treacher, franchisee in Paramus, New Jersey, had seen that there was not quick-service seafood, much quick service seafood in Seattle. and opened Arthur Treacher’s, they did not do very well. And as he did his market research, he found that the best name in seafood and regional Seattle was Ivar’s name. So, he asked Ivar if he could use his name. Ivar licensed his name, but was soon disappointed with the quality of the product in the Arthur Treacher’s stores and repossessed the license. And that’s how I ever got into the quick service business. In January 1985, just before his 80th birthday, Ivar died. He had two wives, no children, and so half of his estate went back to the business school at the University of Washington, and the other half went to the School of Hotel and Restaurant Management over at Washington State. But there was a provision in his will that his five senior lieutenants could buy the company from the state, and so in May 1985, Jimmy, Frank, Mark, Scott, Jim, and Walt bought the company. And of those five guys, two are still my partners. The others have either died or retired. And today, as we’ve talked about, we’ve got more than 60 locations all around Puget Sound, not including the thousands of doors in restaurants and grocery stores and Costco stores west of the Mississippi where you can buy any of our soups and chowders.
MARK WRIGHT 18:56
Oh, that’s fantastic. Bob, what is it about Ivar, Ivar’s DNA, that’s still in the company today?
BOB DONEGAN 19:01
Well, a lot of the things that mattered to him a lot were learned by the people who’ve been around for 50 years and have carried on in the culture. So, when Ivar would visit one of his restaurants, he would not go to talk to the general manager or the chef. The first place he would go would be to the dish room, and he would ask the dishwashers. What food is coming back uneaten? And we still have that habit. When any of the management team go to a restaurant, we’re in the kitchens, we’re in the dining rooms, we’re in the parking lots, we’re talking with the people who are actually doing the work. And in 2005, when it was apparent that the Seahawks were going to go to the Super Bowl, Undercover Boss called us and said, hey, would you guys be interested? If the Seahawks make the Super Bowl, we’re on right after, we’d like to feature you. And we said, it’ll never work. All of our employees know who we are because we’re in our stores all the time. And they didn’t believe that until they started calling stores and asking, hey, who’s Jim? Who’s Mark? Who’s Bob? Because we’re there all the time. So that intimate contact with our employees and our customers, that’s one of the things that mattered a lot to Ivar, and it matters a lot to us.
MARK WRIGHT 20:28
I’d love to go back and talk about your history in business, Bob, you’re a Yale grad from the business school, correct?
BOB DONEGAN 20:36
Well, we think of it as the management school, not the business school. Business, we’re in Seattle, Mark. Business is an evil thing here, as you know.
MARK WRIGHT 20:45
So, you’re on the East Coast, you’re working in the corporate world. It was American Can, wasn’t it? Wasn’t that the company?
BOB DONEGAN 20:51
It was. My undergraduate degree is from the first UW, the real UW in Madison. And I had a little painting company that got bigger and bigger, and we got up to a dozen employees. We needed to learn accounting systems and taxes and management systems. So, I went back to management school to learn how to do that. My wife was down the street in the economics department finishing her PhD. So instead of leaving, I took a job in Greenwich, Connecticut, in American Cans headquarters so that I could be close to her, and five years later when she finished, is when we moved to Seattle so she could teach in the business school at the University of Washington. For the next 10 years, I helped about 40 different companies, typically startups, get started, develop a business plan, raise money, set up accounting systems, file patents, hire boards of directors, whatever little companies didn’t have the time or ability to do, I helped them do. And in 1992, Zev Siegel and Gordon Bowker and Jerry Baldwin, the guys who started Starbucks, had bought Peet’s Coffee in the Bay Area five years earlier, and there was a non-compete between Howard Schultz and Starbucks in Seattle and Peet’s in Berkeley, where neither company would open in Washington or California to compete against the other. So, Zeven, Gordon, and Jerry said, let’s start another one. And I helped them start another one in the District of Columbia, Quartermain Coffee Roasters. It’s still there. We built the first coffee roasting plant in Maryland behind the White Flint Mall. Four stores, lots of retail, uh, wholesale customers available in lots of restaurants. Then we merged Quartermain into Peet’s in Berkeley, and I helped Peet’s grow beyond the Bay Area and get ready to go public. Meanwhile, Lisa had taken a sabbatical from her job at the university. We still had our house at Green Lake, even though we lived for a year in Bethesda, Maryland, and in the Bay Area, and we were looking to come back. And the ad agency that we used at Peet’s is the same ad agency that we used at Ivar’s, and I asked Terry Heckler, who needed help, and he introduced me to the Iver’s guys in February, 1997. And I started on a one-year project that’s now in year 26, 25.
MARK WRIGHT 23:30
So, it kind of worked out.
BOB DONEGAN 23:32
Yeah, or I’m not very effective at getting the job done.
MARK WRIGHT 23:37
So, Bob, I find it’s just really interesting that as you’re getting these little startups off the ground, I’m guessing you’re learning a ton at the same time about what these little companies need and what works and what doesn’t. What’s your best advice to people who are thinking about starting up a business or maybe they have a small business when it comes to growing and building and setting them up for success. Gosh 40 companies, you must know a ton about what really works and what doesn’t.
BOB DONEGAN 24:06
The most important thing is in the quiet before you’ve started to do a business plan. You’ve got to analyze the market. You’ve got to talk about what the opportunities are. You’ve got to be diligent about what costs and revenues will be, and you need to model that and play all the games on the computer or in your business plan. Because once you start, you won’t have the time to test things anymore. And it’s inexpensive to test it on paper or in the computer compared to testing it in the real world. So you have to have a really good business plan that does cash projections by month for the first three years or until the point you get to cash break even and then you have to have annual income statements balance sheets and cash flow for the next three four or five years however many years it takes to get to the steady state you want to be at, and the best way to validate what you’re doing is to be surrounded by a group of advisors who are bluntly honest with you and tell you where you’re all wet, what you should focus more on, where you’re making mistakes. So, I used to say when I was consulting, organizations that don’t manage for their futures are managed by their futures.
MARK WRIGHT 25:36
One of the companies you worked with was Sears. I’d love for you, Bob, to tell that story when you were with Sears, apparently the order went out to start to purchase other companies. And uh, if you could tell that story once again, I think that’s a fascinating story.
BOB DONEGAN 25:51
So, one of my bosses at American Can was recruited back to Sears by Michael Bosick, who was the chairman at the time and handed a 4 billion check and instructed to keep us the largest retailer in the world. Because there was a little company in Bentonville, Arkansas, that was coming up fast on the heels of Sears.
MARK WRIGHT 26:14
Walmart.
BOB DONEGAN 26:15
So, Al assembled a team, and we did an analysis of what Sears was good at, bad at, what its assets were. And you may remember that one of the things that Sears had was terrific retail locations, 800 of them around the country, think of Northgate. Think about the Starbucks headquarters in Soto. Think about South Center, Bellevue. They were just terrific locations, but retailing was changing. So, as we looked around for other opportunities to add to that. Sears portfolio, we identified a little company that had a handful of stores called Price Costco. We took that to the Sears board and the Sears board said, this is probably not going to work out. Well, I haven’t looked lately, but I think Costco’s revenues are above 300 billion a year. So, we went back to the drawing board. Another thing that Sears was really good at was hardware and garden and lawn tools, craftsmen, think of that stuff. So, we looked around the country, we found another retailer, handful of locations, with an orange logo, based in Atlanta. And so, the second proposal we took to the Sears board was acquiring Home Depot, and the Sears board said no. So, interestingly, another of the assets that Al managed for Sears was the Sears catalog. The Sears board made the choice to close the catalog business in the same month that Jeff Bezos started Amazon. Sears had hundreds of thousands of names from the Sears catalog, and purchase information, and order history, and family profiles, and relinquish that leadership in that market. So, it breaks my heart to know that Sears doesn’t exist in the way that I knew it. But markets change, and the Sears board didn’t keep up with those changes very effectively.
MARK WRIGHT 28:27
I’d love to go back to Jerry Baldwin and Gordon Bowker and Zev Siegel. Those guys were an iconic team that everything they touched was, was, you know, turned to gold. Talk a little bit about those three, if you would, Bob, and why the successes that they had with things like Red Hook and Starbucks and, uh, you know, what, what, what was it about those three entrepreneurs that caused such amazing success?
BOB DONEGAN 28:54
So, the way they came together is interesting and serendipitous the way startups often are. They lived in three little houses on West Bertona Street, which is below Perkins Lane in Magnolia. And there was one hot water heater for the three houses. So, the guys had to talk to each other about when someone was going to wash dishes or take a shower, and so they became friends. And when they got their first jobs, they decided they would splurge and buy coffee like the good Peet’s coffee Gordon and Jerry had tasted when they were in the Bay Area in college, University of San Francisco. So, one of them every frequent period would drive up to Vancouver, British Columbia, to buy coffee. And as Gordon describes it, on one of his trips back through the border, as he was passing Lake Samish, he said, I was blinded by the reflection off the lake. And like solid tarsus, I had an epiphany and said, why don’t we start our own? So, they went to Alfred Peet to buy coffee. Alfred agreed to sell them coffee up until the time they got to six stores, at which time he wanted them to build their own roasting plant up here. And when they opened the sixth store, which was University Village, is when they opened the store on East Marginal Way here in Seattle. Well, Gordon went on to start Red Hook, was involved in the Seattle Weekly, Sasquatch Publishing, Heckler Bowker Advertising. As you’ve identified, everything they touched wasn’t just a hit, it was a home run. And Zev left, Zev may be the most socially gifted person I’ve ever met, who can go into any situation and make friends. And Zev left and started a dozen other businesses on his own. Gordon became the chair and senior manager of Peet’s Coffee and shepherded it through his growth. And Gordon continues to cogitate things. Gordon says that his goal in life is to be bored. So, every afternoon he tries to take a walk, because when he’s bored is when he comes up with his ideas. And I’ve been lobbying him for 20 years to write the story about Gordon Bowker and the growth of Seattle and I’ve been unsuccessful in yet another and never.
MARK WRIGHT 31:32
Wow. What a great story, and it just reminds me, Bob, that Seattle really is the hub for so many Entrepreneurs and so many companies that really have broken the way led the way. You know Nordstrom from a little boot company supplying people going up to the gold rush in in Alaska, and you’ve got you, you know, Amazon, Microsoft, Boeing, all these companies that are such innovative companies. Do you have a theory as to why Seattle is such a hub for innovation?
BOB DONEGAN 32:06
Well, well, interestingly, when we lived in the Bay Area, I spent a lot of time looking at California history. And if you’ve spent any time in the Bay Area or Silicon Valley, you know that those are different people. They’re really different and they think about life differently and they behave differently. And my conclusion is, if you lived in the United States in the mid-1800s and weren’t succeeding in Ohio or New Jersey or Philadelphia and you heard about the gold rush in California, you abandoned everything and you fled to California to cash in on it. So, the risk profile of the people, the white people who initially settled California, was very, very high. They were tolerant of that. And if you look at the risk profile of Silicon Valley and the venture community and the law firms, that profile is still there. A similar thing happened in Seattle. And I believe the reason it happened here is this is where the railroads ended. If you couldn’t make it in the Midwest or East coast, and you got on a train, you couldn’t go any farther than Olympia or Seattle. And they got off the train and they started here. And again, they had a very high-risk profile. So, they were willing to do stuff and try stuff that people weren’t willing to do or try in other places.
MARK WRIGHT 33:32
You’ve helped in the planning and development of a number of significant public projects in Seattle. At the airport, at Coleman Dock, the viaduct replacement. At what point in your career, Bob, did you decide that you were going to make civic leadership part of who you were?
BOB DONEGAN 33:49
So, the management school I attended trained managers for the public, private, and non-profit sectors. And every class I took, whether it was accounting or marketing, talked about how to manage in each of those three sectors. The model for this school was Bill Donaldson, who grew up in Buffalo, New York, went to Manhattan, founded Donaldson, Lufkin & Jenrette, the first of the successful boutique investment banks. But then he also worked for Henry Kissinger in the State Department, became the chairman of the Securities and Exchange Commission. So, he danced back and forth between the public and private sector. And of course, as a consequence, he was involved in lots of non-profit stuff. So, after Lisa and I got finances stabilized and knew that we didn’t have to worry about jobs or income the way we did when we were a young couple starting out, I saw that there were lots of problems or opportunities that I had ideas about that I could help with but it’s very easy to criticize stuff and then not do anything about it. And I don’t think you have the right to be a complainer unless you’re willing to roll up your sleeves and try and help on things. So that’s how it initially came. My biggest involvement was, of course, the Tunnel, the Viaduct, and the new Waterfront Park. And that initially developed purely out of a self-interest. When the environmental impact statement on replacing the Viaduct was written. I was probably one of a handful of non-paid people who read the 600-page environmental impact statement, and one of the things that identified was the two preferred alternatives to replace the Viaduct would have Alaskan Way surface street closed for 116 or 117 months. Mark, do the math. That’s 10 years. So, I called Chuck Kirshner, the city mitigation manager, and said, hey Chuck, there’s 2,500 family wage jobs down here on these piers. What do we do for 10 years? And he looked at me and said, do you want to stay open? And that’s when I knew if we didn’t get involved, a major element of the city was going to be eviscerated. So, I began to look at the details of how the Viaduct was going to be replaced. The state department of transportation, after the Nisqually earthquake, looked at more than 70 alternatives to replace the Viaduct, and I made a spreadsheet that went through each of those 73 alternatives and identified how long will it take, how long is the disruption? Where does the traffic that was on the viaduct go during replacement? What’s the environmental impact? What does this mean for retail? And I came across this alternative called the Deep Bore Tunnel. Do you know where the machines that dug the English Channel were built?
MARK WRIGHT 37:11
Uh, Japan?
BOB DONEGAN 37:13
Kent.
MARK WRIGHT 37:14
Kent?
BOB DONEGAN 37:15
Robbins Tunnel Boring equipment built the machines that dug the English Channel Tunnel.
MARK WRIGHT 37:20
Oh my gosh.
BOB DONEGAN 37:21
At the start of the tunnel process here, the big Bertha of the Bertha Tunnel, there were more than 800 tunnels in and around Puget Sound. Seattle is one of the world headquarters for tunneling knowledge, and so I called Dick Robbins, whose father started Robbins Tunnel Boring, we had lunch at the pier, and I asked him, when you met with WSDOT to talk about would a deep bore tunnel work here, Dick said WSDOT never called. I asked him who the world’s foremost expert on deep bore tunnels was. He said, you’re not going to like this answer either. The head of the World Tunneling Consortium is a guy named Harvey Parker. He lives in Bellevue. Harvey comes down to the pier, we have lunch. So, Harvey, what did you tell WSDOT when they were investigating the deep bore option? He said WSDOT never called. So that’s when I knew we needed to get involved. And the result was the Tunnel Plus Transit Coalition that ultimately was 197 different people and organizations including hay farmers in eastern Washington and the grape growers and the apple people in eastern Washington who were part of the 2 million truck trips a year into and out of the port and they couldn’t put up with 10 years worth of construction disruption. All the suburban communities were involved. Well, here’s a little test for you. When the state closed the Viaduct for its annual maintenance review, where did the traffic that was on the viaduct go to? 405. It wasn’t First Avenue. It wasn’t I5. People change their commuting patterns, so you have to think about an integrated transportation system and having these 197 different groups, organized labor, the bicycle clubs, the neighborhoods, the walking organizations, all make their input into the process, resulted in a much better solution than the one that was developed by the state, the city, the county which was focused only on minimizing capital cost. The budget for the project was about three and a half billion dollars at the start. We did a survey using WSDOT’s projections that if the Viaduct was taken down, the 110, 000 vehicles a day would go someplace else, and Interstate 5 would go to what it called, quote, Peak Capacity Condition, close quote, for 14 hours a day. And Peak Capacity Condition means traffic moving fewer than 10 miles an hour. Mark, even when you came in to do the morning news at four in the morning, you’d be going 10 miles an hour. So, we surveyed 600 businesses, arts organizations, sports teams, and said, if I5 is at Peak Capacity Condition for 14 hours a day, what happens to your employees and your businesses? And the economic loss annually from that was $3.3 billion. So, in one year and a few months, we would have exceeded the capital costs. So, a major change that the tunnel plus transit coalition made was changing the discussion from minimizing capital costs to minimizing total costs. So, it started as a self-interest and it became a bigger community thing. And the result is that we produced something that was a better, will be a better outcome than what the state, the city and the county were producing on their own. And you can see it whenever you come down to the waterfront. That 20.6-acre park would not have been possible if we had rebuilt the Viaduct or we had built a couplet, which was one way South bound on Alaska way. And one way North bound on Western Avenue. So, we’re re, we have redefined the city’s front porch because of the huge involvement of the community that was involved in this process. Was that long winded enough for you?
MARK WRIGHT 41:39
Well, I just can’t imagine, Bob, the number of hours that you put in, uh, doing the math, crunching the numbers, finding the documents, reading the documents. That is just, that’s, that’s, that’s mind boggling. Um.
BOB DONEGAN 41:50
Well, remember the New Yorker writer from Toronto? Whose name I won’t remember until we’re done with this. Who says after you’ve spent 10,000 hours on something, you’re really an expert. Well, it was in the fourth year of this process that I passed 10,000 hours of volunteer work. Working on this and that’s in addition to my day job.
MARK WRIGHT 42:11
Well, I think a lot of us have you to thank and many others who rolled up their sleeves, Bob, because every time I go down to the waterfront, I’m, I’m just stunned at the beauty and the quiet and just how the face of our community for decades, centuries to come is going to be different. That old viaduct was just so dirty and dark and loud and, and this new waterfront is just a dream.
BOB DONEGAN 42:36
And Mark, you may remember that one of your favorite things about the Viaduct was the view, but you could only see that view when you were driving on the Viaduct. Well, in a few months, when the city opens the Overlook Walk, which connects the Pike Place Market with the roof of the Aquarium’s new Ocean Pavilion, you will be four feet higher than the height of the Viaduct, and you can stand up there as long as you want. And look down to Rainier, over to West Seattle, across Elliott Bay, out to the Olympics. And as you know, having come down here often, it’s always 70 degrees and sunny on the Seattle waterfront, including today.
MARK WRIGHT 43:15
I love it. I love it. Um, let’s talk about the Federal Reserve, Bob, how you got involved with the Federal Reserve. And until I saw you on a panel, I really had no idea. I thought the Federal Reserve was some bankers in an ivory tower far away who would huddle and try to figure out what they would do with interest rates. But what I learned when I heard you speak on a panel, it’s, it’s really a network of people from a lot of different disciplines, all who are connected with the idea that the Fed has actual good data to rely on when it decides what to do with interest rates. How did you get connected with the Fed and what, what’s your exact role?
BOB DONEGAN 43:53
So, we never know where the recommendation came from to propose us to help with the Fed, but they called seven years ago and asked if I would help. And I gave the same response to the Federal Reserve that I gave to the Mariners. We’re really honored by this offer, but I’m working many hours a week I really don’t have time to do this. But the Fed people are really smart, and the chair of the San Francisco board at the time, Jack Pellow, was the president of Koch for the West Coast. Ivers is a Koch house, and Jack called me and said, Bob, you really need to do this. And I’m going to send you the list of the other directors. And you know some of them, call them up and find them out, find out about what the role is like. So, the president of Edison Electric Power, the electric utility in Los Angeles, the treasurer of Microsoft, the CFO of Square, the senior vice president of operations for United Parcel. I called Jack back a week later and said, Jack, Ivar’s has less revenue in a year than any of these organizations have income in an hour. This is way above our punching weight. And he said, Bob, the Fed has hundreds of economists. We have every piece of information and data that you’d ever want to see. But what we want are the stories of what’s happening on the streets. And you keep track of what’s happening in the fishing industry in Alaska. And you’re watching what’s happening with union employees on the Seattle Waterfront. And you’re paying attention to what students are facing at the University of Washington. Those are the kind of stories that we need to have. So, each of the 12 districts in the Federal Reserve has a bank, and then each of the regional banks has neighborhood banks. Seattle has one, Portland has one, Salt Lake has one, Los Angeles has one in the 12th district. And each of those area banks has a board of directors as well. Every month we’re given two or three questions. And we’re asked to answer for our company or organization, for our industry, and our geography. And our goal is to get anecdotes to the decision makers. So, when the Federal Open Market Committee meets next week to talk about interest rates, they have very specific examples of how people are doing with jobs and inflation and rent and working conditions. So, I think of us as a data vacuuming organization for the Fed to be out there gathering information so that they make their decisions with more robust information than just econometric data.
MARK WRIGHT 47:01
So, Bob, you mentioned when we spoke a few weeks ago that a lot of the people that you do business with in terms of suppliers for Ivar’s, it’s done on a handshake basis, and you don’t get into long, complicated contracts. And you made mention of that before when you were, you know, a consultant, you, you had a lot of handshake agreements with people, and you said, hey, look, if we, we make you money, and you think my time is worthwhile, you can pay me, and, and it worked out. I’d love to know where that came from. It just seems so, so counter to how litigious our, our society is today.
BOB DONEGAN 47:35
So, at Ivar’s, integrity matters a lot to us. Many of our vendor, landlord, partner relationships are 40, 50, 60 years old. So, next Friday, I will fly to the Boston Seafood Show, and Ray, who’s our Director of Purchasing, in his 43rd year, he’s on the top five list. And I will shake hands with vendors to buy more than two million pounds of seafood. Cod and salmon and clams and oysters. And the people that we’re buying from are people who are across the harbor from us here in Seattle that we’ve known for a long time. And you always have an argument, and if you get through that first argument, you have the basis for a long-term relationship. If you don’t get through the first argument, you’re probably not going to have a long-term relationship. Some people need to have a contract. And if they do, we’ll work with them, and we’re one of the only places I know that reads every word of every contract that we do. And I send it to my partner who’s an attorney, and I send it to our insurance company. Because if we put our name to a contract, we’re gonna do everything we can to live up to every letter and subclause in the agreement. But our preferred way of doing business is to shake hands with someone, look them in the eyes, because we know there’s gonna be problems. And when problems come up, half the time, the contract hasn’t anticipated that. So, you gotta call and ask for help or ask for forgiveness. And long-term relationships allow that to happen. Contracts make it more difficult.
MARK WRIGHT 49:24
Bob, what was COVID like to navigate as a business owner? It was so unprecedented for all of society, but how, how did you guys navigate COVID?
BOB DONEGAN 49:34
So, I’ll tell you three stories. Before Corona, we had about a thousand employees in all of our locations. In June of 2020, at the worst of Corona, we had 375 employees. So, we had laid off 600 people that we had worked with for a long time. So that’s story number one. Story number two, when the governor made the choice to close restaurants for indoor dining in September 2020, we knew that Acres of Clams on Pier 54 and the Salmon House, with 60,000 students and staff steps away, could not survive the winter. So, we convened the staff of each of those restaurants. In the banquet room, and said, we’re going to either fail or we’re going to survive, but we have to put you into hibernation for the winter, and we don’t want to lose you. And if you’re, we’re making $2,000 a week before Corona, and you can get $500 a week on unemployment. We will give you another $1,000 a week to take you up to 75 percent of the wages you were earning before. And we won’t give you that as income, we will give you that as a loan. That way, you don’t have to declare it against unemployment compensation. And if you come back to work for us, we will forgive the loans. And then second, everybody in the company was given free healthcare during our closure period and our Corona period. Because we didn’t want our employees or their spouses or their families to be without health care. And the result was, May 17th, 2021, when the Salmon House reopened, of the 52 people who were there the day we closed, 47 are back on the staff. We treated them well, they are loyal, and they came back. Third story, Before the state’s hospitality convention in November, they asked me to do an industry update for what happened, what was the hospitality industry like before Corona, at the worst of Corona, and last week, and then what’s going to happen the next three years. So, I gathered a whole bunch of data from the Department of Labor, and Commerce, and National Restaurant Association, and Washington State University. Every source of data I could think of. Before Corona, there were 347,700 employees working in hospitality in Washington State, the largest single industry employer in the state. At the worst of Corona, we had 189,000 people working in hospitality. The week before the conference, we had 351,000 people working in hospitality. If those numbers are too big, Before Corona, we had 16,192 restaurant licenses in Washington State. In June of 2020, we had 14,000. Last month, we have 17,000. So, we have more restaurants today than we had before Corona started. So, it appears we have gotten through it. There are fundamental changes in the industry. Supply chain made it much more expensive. Inflation made products much more expensive. Many older employees chose to retire rather than deal with Corona. And so, the industry has worked through all of that stuff, and it feels optimistic right now. Although talking with many other restaurant people in the last two months with the lousy weather to start the year, it hasn’t been a good start, and we’re hoping for a really busy summer with cruises and tourists. And gorgeous weather and snowpack in the mountains to feed our water supplies, but our moods are good right now.
MARK WRIGHT 53:45
Just about ready to wrap up Bob, but I wanted to ask you, you know our mission on this podcast is to redeem work and that is to showcase people and companies who are operating in a way that not only makes money but also honors human beings at the same time. And it’s really clear that you and your team at Ivar’s are really consciously doing that. I’d love for you to give some advice for maybe a business leader listening, some encouragement, like here’s, here’s a better way to do it because not many businesses pay more than the minimum wage if they don’t have to. And I just think on so many levels, Ivar’s and you are doing it right. So, I just love some final thoughts as we wrap things up.
BOB DONEGAN 54:27
So, there’s conventional wisdom. Especially around hospitality, which is to minimize costs. When I arrived at Ivar’s in 97, I asked what our turnover rate was. Turnover in restaurants nationwide is between 250 percent and 400 percent a year. So that means for our 1,000 employees, we would hire 4,000 people a year. I asked Cheryl, our Director of Human Resources at the time, what does it cost us to hire, get licenses? Uniforms and train a new employee. And in 1998, it was $2,040 an employee. We were doing that five times a year. That’s an additional 10,000. The conventional wisdom is minimize your costs by paying your employees as little as you can. But the wisdom that we have is if you cut your turnover, you can save 10,000, 20,000 dollars a year. By not having to hire and train people. And if you keep employees around longer, they know the tricks, they know the deals, they know the secrets of customer service. And so, your revenues go up, your costs go down, and your customer complaints go down. So, a piece of advice to other people is don’t always trust the underlying assumptions. About what the best thing is to do, think about it in a different way. It’s the reason that Amazon was successful. It’s the reason that Tesla was successful. They thought about things in a different way, and since Ivar’s has thought about things in a different way, September 2nd will be our 86th anniversary in business. It’s apparently worked for us.
MARK WRIGHT 56:13
I love it. Well, Bob, one last question, and that is, what are you most proud of in your life, in your career? You’ve done so many different things over the years.
BOB DONEGAN 56:23
You know, Mark, I haven’t spent a lot of time thinking about that.
MARK WRIGHT 56:27
There’s a lot, a lot to think about. I mean, all the different civic projects, all the business projects. Is it just the way you show up in the world?
BOB DONEGAN 56:36
I’m so focused on whatever the next meeting is or the next problem or opportunity we’re working on that I haven’t taken the time to reflect on things. And I don’t know how to answer that. I guess I’m really pleased with how well our daughters and now our grandkids are turning out. The first success is success at home. I can’t answer that, Mark.
MARK WRIGHT 57:00
Yeah. Well, I’ll check back.
BOB DONEGAN 57:03
Yeah, good. And now, when I garden or run, I have a topic to think about, which is, what should I be most pleased about?
MARK WRIGHT 57:11
Ah, that’s great. Well, Bob Donegan, it’s been such a treat spending time with you, and just so, uh, grateful for the work that you’ve poured into our community over the decades. And, and, uh, thank you for that, and keep up the great work, my friend.
BOB DONEGAN 57:25
Thanks, Mark. It’s always good to talk to you, and I look forward to seeing you soon.
MARK WRIGHT 57:30
I’m Mark Wright. Thanks for listening to BEATS WORKING, part of the WORKP2P family. New episodes drop every Monday. And if you’ve enjoyed the conversation, subscribe, rate, and review this podcast. Special thanks to show producer and web editor Tamar Medford. In the coming weeks, you’ll hear from our Contributors Corner and Sidekick Sessions. Join us next week for another episode of BEATS WORKING, where we are winning the game of work.