THE LAW OF THE LID A NEW OPPORTUNITY

The brothers’ desire for success was strong, so they kept looking for better business
Leadership Ability Determines a Person’s Level of opportunities. In 1937, they finally struck on something that worked. They opened a
Effectiveness small drive-in restaurant in Pasadena, located just east of Glendale. People in
Southern California had become very dependent on their cars, and the culture was
I often open my leadership conferences by explaining the Law of the Lid because it changing to accommodate that, including its businesses.
helps people understand the value of leadership. If you can get a handle on this law,
you will see the incredible impact of leadership on every aspect of life. So here it is: The drive-in restaurant was a phenomenon that sprang up in the early thirties, and
leadership ability is the lid that determines a person’s level of effectiveness. The it was becoming very popular. Rather than being invited into a dining room to eat,
lower an individual’s ability to lead, the lower the lid on his potential. The higher the customers would drive into a parking lot around a small restaurant, place their orders
individual’s ability to lead, the higher the lid on his potential. To give you an with carhops, and receive their food on trays right in their cars. The food was served
example, if your leadership rates an 8, then your effectiveness can never be greater on china plates complete with glassware and metal utensils. It was a timely idea in a
than a 7. If your leadership is only a 4, then your effectiveness will be no higher than society that was becoming faster paced and increasingly mobile.
a 3. Your leadership ability—for better or for worse—always determines your
effectiveness and the potential impact of your organization. Dick and Maurice’s tiny drive-in restaurant was a great success, and in 1940, they
decided to move the operation to San Bernardino, a working-class boomtown fifty
Let me tell you a story that illustrates the Law of the Lid. In 1930, two young miles east of Los Angeles. They built a larger facility and expanded their menu from
brothers named Dick and Maurice moved from New Hampshire to California in hot dogs, fries, and shakes to include barbecued beef and pork sandwiches,
search of the American Dream. They had just gotten out of high school, and they saw hamburgers, and other items. Their business exploded. Annual sales reached
few opportunities back home. So they headed straight for Hollywood where they $200,000, and the brothers found themselves splitting $50,000 in profits every year—
eventually found jobs on a movie studio set. a sum that put them in the town’s financial elite.

After a while, their entrepreneurial spirit and interest in the entertainment industry In 1948, their intuition told them that times were changing, and they made
prompted them to open a theater in Glendale, a town about five miles northeast of modifications to their restaurant business. They eliminated the carhops and started
Hollywood. But despite all their efforts, the brothers just couldn’t make the business serving only walk-up customers. And they also stream-lined everything. They
profitable. In the four years they ran the theater, they weren’t able to consistently reduced their menu and focused on selling ham-burgers. They eliminated plates,
generate enough money to pay the one hundred dollars a month rent that their glassware, and metal utensils, switching to paper and plastic products instead. They
landlord required. reduced their costs and lowered the prices they charged customers. They also created
what they called the Speedy Service System. Their kitchen became like an assembly
line, where each employee focused on service with speed. The brothers’ goal was to
fill each customer’s order in thirty seconds or less. And they succeeded. By the
mid1950s, annual revenue hit $350,000, and by then, Dick and Maurice split net THE BROTHERS PARTNER WITH A LEADER
profits of about $100,000 each year.
In 1954, the brothers hooked up with a man named Ray Kroc, who was a leader. Kroc
Who were these brothers? Back in those days, you could have found out by driving had been running a small company he founded, which sold machines for making milk
to their small restaurant on the corner of Fourteenth and E Streets in San Bernardino. shakes. He knew about McDonald’s. The restaurant was one of his best customers.
On the front of the small octagonal building hung a neon sign that said simply And as soon as he visited the store, he had a vision for its potential. In his mind he
McDonald’s Hamburgers. Dick and Maurice McDonald had hit the great American could see the restaurant going nationwide in hundreds of markets. He soon struck a
jackpot, and the rest, as they say, is history, right? Wrong. The McDonalds never deal with Dick and Maurice, and in 1955, he formed McDonald’s Systems, Inc. (later
went any further because their weak leadership put a lid on their ability to succeed. called the McDonald’s Corporation).

Kroc immediately bought the rights to a franchise so that he could use it as a

THE STORY BEHIND THE STORY model and prototype. He would use it to sell other franchises. Then he began to
assemble a team and build an organization to make McDonald’s a nationwide entity.
It’s true that the McDonald brothers were financially secure. Theirs was one of the He recruited and hired the sharpest people he could find, and as his team grew in size
most profitable restaurant enterprises in the country, and they felt that they had a hard and ability, his people developed additional recruits with leadership skill.
time spending all the money they made. Their genius was in customer service and
kitchen organization. That talent led to the creation of a new system of food and In the early years, Kroc sacrificed a lot. Though he was in his midfifties, he
beverage service. In fact, their talent was so widely known in food service circles that worked long hours just as he had when he first got started in business thirty years
people started writing them and visiting from all over the country to learn more about earlier. He eliminated many frills at home, including his country club membership,
their methods. At one point, they received as many as three hundred calls and letters which he later said added ten strokes to his golf game. During his first eight years
every month. with McDonald’s, he took no salary. Not only that, but he personally borrowed
money from the bank and against his life insurance to help cover the salaries of a few
That led them to the idea of marketing the McDonald’s concept. The idea of key leaders he wanted on the team. His sacrifice and his leadership paid off. In 1961,
franchising restaurants wasn’t new. It had been around for several decades. To the for the sum of $2.7 million, Kroc bought the exclusive rights to McDonald’s from the
McDonald brothers, it looked like a way to make money without having to open brothers, and he proceeded to turn it into an American institution and global entity.
another restaurant themselves. In 1952, they got started, but their effort was a dismal The “lid” in the life and leadership of Ray Kroc was obviously much higher than that
failure. The reason was simple. They lacked the leadership necessary to make a larger of his predecessors.
enterprise effective. Dick and Maurice were good single-restaurant owners. They
understood how to run a business, make their systems efficient, cut costs, and increase In the years that Dick and Maurice McDonald had attempted to franchise their
profits. They were efficient managers. But they were not leaders. Their thinking food service system, they managed to sell the concept to just fifteen buyers, only ten
patterns clamped a lid down on what they could do and become. At the height of their of whom actually opened restaurants. And even in that size enterprise, their limited
success, Dick and Maurice found themselves smack-dab against the Law of the Lid. leadership and vision were hindrances. For example, when their first franchisee, Neil
Fox of Phoenix, told the brothers that he wanted to call his restaurant McDonald’s, SUCCESS WITHOUT LEADERSHIP
Dick’s response was, “What . . . for? McDonald’s means nothing in Phoenix.”

In contrast, the leadership lid in Ray Kroc’s life was sky high. Between 1955 and
1959, Kroc succeeded in opening 100 restaurants. Four years after that, there were
500 McDonald’s. Today the company has opened more than 31,000 restaurants in 119
1
countries. Leadership ability—or more specifically the lack of leadership ability—
was the lid on the McDonald brothers’ effectiveness.

SUCCESS WITHOUT LEADERSHIP

I believe that success is within the reach of just about everyone. But I also believe that
personal success without leadership ability brings only limited effectiveness. Without
leadership ability, a person’s impact is only a fraction of what it could be with good
leadership. The higher you want to climb, the more you need leadership. The greater
the impact you want to make, the greater your influence needs to be. Whatever you
will accomplish is restricted by your ability to lead others. To increase your level of effectiveness, you have a couple of choices. You could
work very hard to increase your dedication to success and excellence—to work
The higher you want to climb, the more you need leadership. The greater the impact you want to
toward becoming a 10. It’s possible that you could make it to that level, though the
make, the greater your influence needs to be.
Law of Diminishing Returns says that the effort it would take to increase those last
two points might take more energy than it did to achieve the first eight. If you really
Let me give you a picture of what I mean. Let’s say that when it comes to success, killed yourself, you might increase your success by that 25 percent.
you’re an 8 (on a scale from 1 to 10). That’s pretty good. I think it would be safe to
say that the McDonald brothers were in that range. But let’s also say that leadership But you have another option. You can work hard to increase your level of
isn’t even on your radar. You don’t care about it, and you make no effort to develop leadership. Let’s say that your natural leadership ability is a 4 —slightly below
as a leader. You’re functioning as a 1. Your level of effectiveness would look like average. Just by using whatever God-given talent you have, you already increase your
this: effectiveness by 300 percent. But let’s say you become a real student of leadership
and you maximize your potential. You take it all the way up to a 7. Visually, the
results would look like this:
SUCCESS WITH LEADERSHIP organization is limited. That’s why in times of trouble, organizations naturally look
for new leadership. When the country is experiencing hard times, it elects a new
president. When a company is losing money, it hires a new CEO. When a church is
floundering, it searches for a new senior pastor. When a sports team keeps losing, it
looks for a new head coach.

The relationship between leadership and effectiveness is perhaps most evident in

sports where results are immediate and obvious. Within professional sports
organizations, the talent on the team is rarely the issue. Just about every team has
highly talented players. Leadership is the issue. It starts with a team’s owner and
continues with the coaches and some key players. When talented teams don’t win,
examine the leadership.
Personal and organizational effectiveness is proportionate to the strength of leadership.

Wherever you look, you can find smart, talented, successful people who are able to
go only so far because of the limitations of their leadership. For example, when Apple
got started in the late 1970s, Steve Wozniak was the brains behind the Apple
computer. His leadership lid was low, but that was not the case for his partner, Steve
Jobs. His lid was so high that he built a world-class organization and gave it a nine-
By raising your leadership ability—without increasing your success dedication at digit value. That’s the impact of the Law of the Lid.
all—you can increase your original effectiveness by 600 per-cent. Leadership has a
multiplying effect. I’ve seen its impact again and again in all kinds of businesses and In the 1980s, I met Don Stephenson, the chairman of Global Hospitality
nonprofit organizations. And that’s why I’ve taught leadership for more than thirty Resources, Inc., of San Diego, California, an international hospitality advisory and
years. consulting firm. Over lunch, I asked him about his organization. Today he primarily
does consulting, but back then his company took over the management of hotels and
resorts that weren’t doing well financially. His company oversaw many excellent
TO CHANGE THE DIRECTION OF THE ORGANIZATION, CHANGE THE facilities, such as La Costa in Southern California.
LEADER
Don said that whenever his people went into an organization to take it over, they
Leadership ability is always the lid on personal and organizational effectiveness. If a always started by doing two things. First, they trained all the staff to improve their
person’s leadership is strong, the organization’s lid is high. But if it’s not, then the level of service to the customers, and second, they fired the leader. When he told me
that, I was surprised.
 “You always fire him?” I asked. “Every time?” 2. Assess your leadership ability. Complete the leadership evaluation in
Appendix A at the back of this book to get an idea of your basic leadership ability.
“That’s right. Every time,” he said.
3. Ask others to rate your leadership. Talk to your boss, your spouse, two
“Don’t you talk to the person first—to check him out to see if he’s a good leader?”
colleagues (at your level), and three people you lead about your leadership ability.
I said.
Ask each of them to rate you on a scale of 1 (low) to 10 (high) in each of the
following areas:
“No,” he answered. “If he’d been a good leader, the organization wouldn’t be in
the mess it’s in.”
People skills
And I thought to myself, Of course. It’s the Law of the Lid. To reach the highest
Planning and strategic thinking
level of effectiveness, you have to raise the lid—one way or another.
Vision
The good news is that getting rid of the leader isn’t the only way. Just as I teach in
conferences that there is a lid, I also teach that you can raise it—but that’s the subject
Results
of another law of leadership.
Average the scores, and compare them to your own assessment. Based on these
assessments, is your leadership skill better or worse than you expected? If there is a
gap between your assessment and that of others, what do you think is the cause? How
willing are you to grow in the area of leadership?
Applying
THE LAW OF THE LID
To Your Life
1. List some of your major goals. (Try to focus on significant objectives—things
that will require a year or longer of your time. List at least five but no more than ten
items.) Now identify which ones will require the participation or cooperation of other
people. For these activities, your Leadership ability will greatly impact your
effectiveness.