CHAPTER 1

THE LAW OF THE LID

Leadership Ability Determines a Person's Level of Effectiveness

The law of the lid will help you understand the value of leadership.If you can get a handle on this law, you will see the incredible impact ofleadership on every aspect of life.

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In 1930, two young brothers named Dick and Maurice moved from New Hampshireto California in search of the American Dream. They had just gotten out of highschool, and they saw few opportunities back home. So they headed straight forHollywood where they eventually found jobs on a movie studio set.

After a while, their entrepreneurial spirit and interest in the entertainment industryprompted them to open a theater in Glendale, a town about five miles northeast ofHollywood. But despite all their efforts, the brothers just couldn't make the business profitable.In the four years they ran the theater, they weren't able to consistently generateenough money to pay the one hundred dollars a month rent that their landlord required.

The brothers' desire for success was strong, so they kept looking for better businessopportunities. In 1937, they finally struck on something that worked. They opened asmall drive-in restaurant in Pasadena, located just east of Glendale. People in SouthernCalifornia had become very dependent on their cars, and the culture was changing toaccommodate that, including its businesses.

The drive-in restaurant was a phenomenon that sprang up in the early thirties, andit was becoming very popular. Rather than being invited into a dining room to eat,customers would drive into a parking lot around a small restaurant, place their orderswith carhops, and receive their food on trays right in their cars. The food was servedon china plates complete with glassware and metal utensils. It was a timely idea in asociety that was becoming faster paced and increasingly mobile.

Dick and Maurice's tiny drive-in restaurant was a great success, and in 1940, theydecided to move the operation to San Bernardino, a working-class boomtown fiftymiles east of Los Angeles. They built a larger facility and expanded their menu fromhot dogs, fries, and shakes to include barbecued beef and pork sandwiches, hamburgers,and other items. Their business exploded. Annual sales reached $200,000, and thebrothers found themselves splitting $50,000 in profits every year—a sum that putthem in the town's financial elite.

In 1948, their intuition told them that times were changing, and they made modificationsto their restaurant business. They eliminated the carhops and started servingonly walk-up customers. And they also streamlined everything. They reduced theirmenu and focused on selling hamburgers. They eliminated plates, glassware, and metalutensils, switching to paper products instead. They reduced their costs and lowered theprices they charged customers. They also created what they called the Speedy ServiceSystem. Their kitchen became like an assembly line, where each employee focused onservice with speed. The brothers' goal was to fill each customer's order in thirty secondsor less. And they succeeded. By the mid-1950s, annual revenue hit $350,000, and bythen, Dick and Maurice split net profits of about $100,000 each year.

Who were these brothers? Back in those days, you could have found out by drivingto their small restaurant on the corner of Fourteenth and E Streets in San Bernardino.On the front of the small octagonal building hung a neon sign that said simplyMCDONALD'S HAMBURGERS. Dick and Maurice McDonald had hit the great Americanjackpot, and the rest, as they say, is history, right? Wrong. The McDonalds never wentany farther because their weak leadership put a lid on their ability to succeed.

It's true that the McDonald brothers were financially secure. Theirs was one of themost profitable restaurant enterprises in the country, and they felt that they had a hardtime spending all the money they...