Ranjay Gulati: In the English-speaking world, it’s called the Golden Arches. In Spanish, Arcos Dorados. The golden arches are that familiar symbol of McDonald’s restaurants. It comes from the original design of McDonald’s drive-in restaurants, where two golden arches held up the roof. Today, it’s one of the world’s most recognized business logos. In Latin America and the Caribbean, Arcos Dorados is also the name of the world’s largest independent McDonald’s franchisee. Arcos Dorados was founded by my guest on this episode, Woods Staton.

I asked Woods an important question that has been at the heart of my research. Can companies operating in industries like fast food prioritize purpose? Woods Staton says that while Arcos Dorados must give a customer what they want, Arcos Dorados is on a path to towards purpose. It’s a path that guides the company’s journey towards environmental sustainability. The path proved critical as Woods led some 100,000 employees through the tremendous challenges of the COVID pandemic. The path inspires the company to lead by example, with the hope of influencing consumer habits and small business practices towards the betterment of Latin America. Woods says his company’s path to purpose is also a work in progress, and not something they necessarily publicize.

Woods Staton: We have a recipe for the future, which includes water harvesting, recycling, making sure that our buildings are built in an ecologically responsible way. People know what the mission of a company is, but I think they see it in the little things that we do on a daily basis. Be it, the people they interact with, their bosses, or be it when they see the recycling of paper and they see products that come out.

We’ve informed… Look, we have no more artificial flavors, no more artificial preservatives, so it’s a constant thing that you see, but you don’t have a speech about it. We don’t make a big deal out of it. We tell our shareholders, we tell governments what we’re doing, but I don’t think a lot of customers know that, in many cases, we’re doing a lot of water harvesting. Our employees do. I don’t think a lot of customers know that we’re doing with recycling or with taking old oil and turning it into biodiesel. I don’t think they know that. Maybe we should do a better job, but I think they need to know, but you also can’t go around saying what a great person you are. It’s not believable. I don’t think it is even correct.

Ranjay Gulati: Hello, and welcome to Deep Purpose, a podcast about courage and commitment in turbulent times. I’m Ranjay Gulati, a professor of business administration at the Harvard Business School. From a very young age, Woods Staton got a taste for operating businesses and leading others. His grandfather owned a massive Coca-Cola bottling operation based in Latin America. Woods got his first job there, working one summer at a Coke bottling plant.

Woods Staton: I was carrying these 50-kilo bags of sugar into this big tank and mixing what they call simple syrup, and then they would add the magical portion that would make Coca-Cola. And I worked there for many months, and I just realized how much the employees really appreciated my grandfather and my father. And so, I realized that there’s a link between what you do and the people that you work with.

And my hero has always been my grandfather. He was a very great entrepreneur. He started late in life as an entrepreneur. He was 50 when he started. And then, when I joined the company after college, my mother came to me and said, “Well, I’m very disappointed you’ve become a businessperson. I wanted you to stay doing psychology,” I was studying behavioral psychology. She sort of had this notion that business was not that great. I mean, you were sort of mediocre if you went into business, and she was very much into things like liberation and theology in Latin America. She taught philosophy, very much the Nietzsche and Gantt, and business was just another world. So, I think part of it has been in my life has been trying to disprove her, that you cannot do both things. You can do both things. You can be socially responsible and be a businessperson.

Ranjay Gulati: Woods Staton’s grandfather was a son of an Alabama sharecropper. In the 1920s, his grandfather got a job with a company that, in Wood’s words, was selling a little fizzy drink. Grandfather ended up in Colombia, the fizzy drink became a smash hit, and the family prospered.

Woods Staton: Well, he was one of the first people within the Coca-Cola system. And well, first of all, he was from a sharecropper family in Alabama. And he went to Georgia Tech, and he studied industrial engineering, and he graduated when he was, I think, 19. And he then went to study theology, and came to Brazil to work with the Methodist church and things, and his wife, my grandmother, got sick. They had to go back to the US, and that’s when he went to work for Coca-Cola, and he started in Canada. He ended up being the head of Coca-Cola in Europe, as it was starting. But these were all pioneering jobs. This was a little fizzy drink. This is in the twenties and thirties, that people didn’t really know. So, he was a pioneer in that sense, and then when he was 50, he got passed up for a promotion.

He was the head of Latin America. He got passed over for promotion to be the Coca-Cola vice president worldwide. And he went back to Alabama to a farm. And one day, these people from Colombia came and asked him if he could help them with their bottling plants in Bogota, Medellín, and Cali, he said, yes, and I’d like to be a shareholder. So that’s how he started. So, he started from a very basic position as a shareholder in Colombia, and he grew it to be at the time, the world’s largest Coca-Cola bottling system in Mexico, Colombia, and Brazil. And he was a very simple person, didn’t take himself seriously, didn’t take his accomplishment seriously, and just did a lot for a lot of people and gave him a lot of careers. And I just liked the way he thought. He was simple and very intelligent and very hard working.

Yeah. So, I joined the company and my grandfather had four children, so there were four limbs to our family tree. And so, I go to work in Mexico and I started working there with a truck driver and learned the basics. I was there for a year. Maybe three or four months as a truck driver’s assistant carrying cases and learning not to talk about politics or football with the customers. I might get them angry. And then I went to Brazil, and I worked in Brazil, and was then promoted to vice president of marketing for our Colombian operation, and by then my grandfather had died, and my father had died, and it was turmoil in the family. The turmoil became jealousy that I had progressed so much in the company, and I was a little bit at fault, also, I was a little bit cocky and maybe even arrogant.

And so, we came to sort of acrimonious relationship and we left. I left the company. I went to see an ex-boss of mine and I had lunch with him. And he said, “Look Woods, why don’t you quit being an employee? Why don’t you try to do something yourself? You can probably do it, and you’d probably have fun doing it. And by the way, I know of a group of people who are trying to bring McDonald’s to Colombia, they’re looking for somebody to run it. Maybe you could do it. Why don’t you talk to them?”

So, my first job was try to get McDonald’s into Colombia. And I also, there, I failed miserably because the government did not allow us to remit funds, and they were killing judges, and they were killing presidential candidates. And the company said, “Well, we’re really not interested in Colombia this time.” It was one of the worst epochs of Colombia.

Ranjay Gulati: Like most successful entrepreneurs, Woods Staton didn’t let failure derail or discourage him. He persevered. Now he finds himself at a helm of a large enterprise with operations, spanning 20 countries and close to 100,000 employees. But as he built this organization, Woods combined what he learned from his grandfather with a moral sensibility from his mother, that businesses need to be successful, but at the same time need to be a force for good in society. That companies are not separate from society, and that they need to be deliberate about having a positive impact on the communities where they operate, an impact that goes beyond providing decent jobs and great products. Woods then tried to capture these goals by distilling them to a thing called purpose. I asked Woods Staton, how that purpose radiates out to his large and diverse workforce.

Woods Staton: We’re in 20 different countries. So, it’s very difficult to reach them all. We have values that we use as boundaries for the way we do business. We have to deal with three languages, basically Spanish, Portuguese, and French. But we try to make sure that people understand that it’s a meritocracy, that they can go anywhere they want. They can see their peers and their bosses and see that’s really true. We make sure that they understand that there’s no room for discrimination, that it’s an inclusive system. And they see it, because they have a lot of 50, 60% of the restaurant managers, or women. Their purpose is that they can grow, and they can grow in a system where they see that we take care of the things like packaging, our policies for recycling, for making sure that we have water harvesting from our air conditioning units. So, we talk about it, we let them all know about it constantly. And they are the front line of our business with customers, so it’s important that they know about it in case they’re asked by our customers.

Ranjay Gulati: So, it’s not some big speech you’re giving about, “We are a noble company trying to save the world.” It’s a whole bunch of things that you’re doing that they get to observe and see for themselves.

Woods Staton: We do recycle of paper, right? And 50 percent of our paper is recycled from the kitchen back. Another 50 percent is from the customer area. When you look at recycling programs in Latin America, actually, if you look at any big city or any small city in Latin America, they don’t have good recycling systems. Why? Because people don’t segregate what is recyclable from what is organic. And what happens is, that I think that we have a space here where if people see that they can do it in a McDonald’s, then they’re going to go to their homes and say, “Well, why aren’t we doing it at home? Why can they do it? And we’re not doing that recycling at home.” And we can act also, sort of as an example for children, adolescents, to take back to their home. So we don’t have big speech. We just basically do these little things. Small changes mean great things if you keep doing. And that’s what we espouse.

Ranjay Gulati: Arcos Dorados is big. It operates more than 2000 restaurants and has annual revenues of more than $2.5 billion. When a big company has a clear and deep purpose, it focuses strategy making, it fosters relationships with customers, it engages with external stakeholders, and it inspires employees. And as it is with many companies, Woods Staton says the mission at Arcos Dorados is evolving. It requires company leadership to make tough choices and difficult trade-offs. And as owners of a franchise, Arcos Dorados has to work within the guidelines of the larger McDonald’s corporation.

Woods Staton: To be very honest with you, we’re still working on what our deep purpose is from point of view of having it laid out. But I would say that it’s about nourishment, right? It’s about nourishing ourselves and giving good nourishment, good food to our customers, and also nourishing the societies or communities that we work with. The founder of McDonald’s, when he started, he said, “Look, we would like to give back something to the communities that give us our business. We want to give back something to them.” So I think it’s a little bit of that. It’s being part of the communities.

Ranjay Gulati: When you say giving back to the community, what does that mean to you? Is it environment? Is it jobs? Is it good food? How do you think about that?

Woods Staton: Well, it’s all of above actually. I mean, I think that we have about 95,000 employees in Latin America. 40% of our top executives started off as crew people. They started off at the very bottom. They came as young kids, got a part-time job, and because of that job, they were able to continue their education, and most of them now have MBAs. Not from HBS, but they have MBAs from very good, reputable universities in Latin America. So that’s one way we do, and I think that in doing so, what we’ve done is establish a meritocracy. Meritocracies are great. They also have their flaws, but I mean, I think they’re the best way for society to develop, and I think we do that.

Ranjay Gulati: So I see, but also, one is jobs. I get the idea that you create this really, in that part of the world, amazing economic opportunities for employees to come and work for you. But you’ve also talked about the recipe for the future, that you want to really focus on single use. You’ve been pushing on single use plastic, saying we’re not going to do that. You’re recycling cooking oil. You want to conserve water. You’re going after your supply chain. That’s part of your story as well. And why is that?

Woods Staton: Well, because I think first of all, it’s the right thing to do. We live in these communities and we should provide good jobs. We live in these communities, we should provide good food. And we’ve been doing a lot of work as far as reducing or eliminating artificial colors, artificial flavors, reducing the amount of sodium, the amount of fat in our food, and also making sure that the providence of it is as ecologically beneficial as it can be. So for instance, we’ve cut away meat, zero tolerance for meat that comes from deforested areas, and it’s monitored by a third party. And that’s a big step forward, especially in Brazil, but I think it’s, we have the opportunity to do it, and it’s good for society, and it’s good for us. Customers, I think appreciate that you’re a part of the solution. So it’s a two-way street.

Ranjay Gulati: It’s a two-way street with a lot of different intersections. Deep purpose implies balancing the interest of various stakeholders, including shareholders, customers, employees, community, and the rest of the planet. Woods Staton says his restaurant chain looks for products and practices that emit less carbon into the atmosphere, but there are limits to how far out front a company can get of its diverse stakeholders. This is what I call the messy, but essential pursuit of purpose.

Woods Staton: You have to give customers what they want. You can’t get away from that. I mean, we’ve tried it with a plant-based hamburgers. People don’t like it. I mean, be it us or the competition. Now, do you have to have it on your menu? Yes. You have to have it on your menu because it signals what you want to do, even though you don’t sell much of it.

What we can do is try to sell more carbon zero beef. We can do a lot with our packaging still. There’s a lot of runway there. With the building materials that we use, we can have a lot of heat solar panels on our buildings, in our parking lots. There’s a lot we can still do to make us more environmentally friendly. But for the point of view of food, it’s a long, hard way of looking at it. Yeah.

Ranjay Gulati: Well, let me ask you a related question to that. Public health experts say fast food is a key contributor to poor health for people across the developed world. Can you be a purpose filled company while also providing foods, now you might say, it gives you pleasure. It’s bringing you joy. And if you eat it in moderation and not every day, you’ll be fine. How do you reconcile kind of the product itself and its implications, both for the customer and for the environment, within the efforts you’re trying to make?

Woods Staton: There’s all kinds of fast foods, and it’s been stigmatized since the ‘70s. In our case, we serve good food. I mean, we’ve had this issue of having junk food, all since that I can ever remember, but we do is we serve good food fast. And what we serve are things that you can buy in the supermarket, and mothers buying the supermarket. We have made assure that in the process that we’ve reduced sodium, and fat, and all the things you’ve mentioned.

But I think today, people also understand that moms good home cooking probably has a lot more calories and a lot more fat and a lot more... It’s probably not as good for you, although it’s moms cooking, than we do. So we’re also in many countries where we’re saying to customers, if you’re below the age of 12, you cannot eat this food because too many calories. So customers say, “Well, why do you do that?” Well, because it’s got too many calories and we’ve been asked to put that labeling on our product, and that’s the way it is. So I think quick service food has had a bad rap. It still has a bad rap, but I think we are serving people what they want.

Ranjay Gulati: In addition to having a coherent sense of purpose, successful business leaders must have courage. They must be able to face fear and take action. When the COVID pandemic hit, Arcos Dorados was able to keep most of its McDonald’s drive-through windows open, but it had to close virtually all of its dining rooms, Woods Staton says the wellbeing of employees and their communities was a first concern.

Woods Staton: Sometimes, we could keep drive-throughs open. It varied from country to country – a lot of confusion, but within all that confusion, there was one thing that was certain, which was that our sales had gone to hell, and profits had come down. We really couldn’t foretell the future, and the first thing we did is we took out as much credit as we could with our banks. We actually took it so that we didn’t have it taken away from us later on, in case somebody else needed it. So we indebted the company big time, so we could go through the process. Those first six weeks were pretty terrible, but I knew that we would make it once we got to that cash flow stabilization.

We communicated once a week with everybody in the company, and we talked about where we were and my speech to everybody was, “Look, we are in a boat, crossing the stream and we have to continue to cross the stream, but we’re going to get there. And so don’t, don’t panic. We’re in this together, and we’re going to make it.” Then we went through a rollercoaster of countries opening, closing, going back on their policies, but by then we knew we were okay. That we’re going to make it, and we just have to wait until things normalize.

Ranjay Gulati: But there were so many other things you had to do. I mean, you had inventory, supply chain, you’ve placed orders, there’s perishable foods, and you have no sales, and you’re saying to me that you are making payroll, you’re not firing anybody. You’re not laying anybody off, and no customers are coming in. How did you at that moment prioritize, okay, how are we going to do this? Look, and at that time, there was no clear idea of when things will open up again.

Woods Staton: We had a duty to these people working for us. We had a moral obligation. They put their trust in us, so we have to take care of them. We worked with a Walmart, and we worked with Mercado Libre, and we placed some of our employees with them. They were doing delivery. They needed people, so we said, “Look, why don’t you go work for them temporarily? And then when things get back together, you can come back and work for us,” but that was a minority. We started working with governments to help them give us breaks, tax breaks, and help make payroll. And with as far as supply chain, we had great suppliers, Coca-Cola and others, and they were patient with us. They were also going through their own problems. And they also knew that once we came out of it, we would be okay.

And I don’t think any of us thought that we would not come out of it. So there was just a notion that we would make it, that we were just going to get to the other side of the river and make it. I think one of the things that really has surprised me is how customers appreciated what we were doing for our employees. Obviously, we didn’t do it to get their kudos, but not firing anybody was a big deal, and it was very well appreciated by our customers. And that surprised me, and I think a lot of our success today is derived from these things that we did during COVID to try to get and help everybody get through the crisis. I think we’re getting a lot of very good grades from our customers for it.

Ranjay Gulati: What do you say to people who, there are observers who say, “Business’s job is to stay in business, don’t get involved in social issues and any other issues.” You see that with Disney and the backlash against Disney and other companies saying it’s one thing to help your employees, but now people are asking companies, what’s your position on voting rights? What’s your position on abortion? What’s your position on other sensitive issues? How do you demarcate for yourself? Here’s what we want to do.

Woods Staton: Yeah. I mean, if you take, for instance, packaging, we have eliminated a lot of plastic packaging from our suite of products. I think what happened there is that, we did it because also, we had cost savings. For instance, we took care of a whole bunch of straws and lids, and we got rid of them, because it was just a lot of plastic that we were putting in. I think it was a thousand tons a year in our system. Huge. And you had photographs of turtles with straws in your nasal passages. So we said, Look, let’s get rid of it. We’ll just use it for drive through. And we will not even offer it to customers.” Well, lo and behold, the customers didn’t really care. They didn’t notice that was lacking, so we were able to reduce costs in the process.

So there’s a moral obligation, but our obligation is to shareholders to make money, but if we can make money, and at the same time, do these things, then why not? And then to your question of against abortion or other things, that’s not in our wheelhouse. That’s an issue that a hamburger flipper has no right to question. He might have their own thoughts, but that’s it.

Ranjay Gulati: So what’s next for Arcos Dorados? What’s next? What’s your vision for the future now for this organization?

Woods Staton: I think we will continue drawing. I think we have a bigger and bigger role in this space of restaurants and in the environment and ESG. I think the work we’re doing in ESG is the work of leaders in Latin America, and I think that’s important. A lot of the world’s resources are in Latin America, be it Cerrado or the Amazon Basin, all the way to Peru, Mexico. So this is part of the world which is important, and I think it’s important that companies that have our footprint, do a good part. And I’d like to see this company continue to be a leader in the ESG, but not just the environmental part. I think we have a very big issue with being leaders in the social, the S of the ESG. And that is with being good employers, being a meritocracy, continuing to have these values.

And I think, look, a very simple thing is that when an employee comes to work for us, they pay taxes. It’s something silly, but the fact that they taxes brings them into society, and being in society, then you start being more involved with politics and how things are going, and you don’t start accepting, keep solutions and populous decisions. I think that’s an important thing.

Ranjay Gulati: So what’s next for Woods Staton, though? What’s your next chapter going to be once you’ve decided that you’ve done your time with Arcos Dorados? Where are you headed?

Woods Staton: No, I’d like to be involved with looking how academia can help bring together the different parties, politicians, social leaders, businesses, and basically business people are probably the best problem solvers out there. And I think that problem solving skill and that analytical skill can be used in a lot of the issues that we have in the world. And I’d like, on the one hand for our image to change, we’re not bad people. We’re good people and we have a lot to add. But I also think that once business leaders can be in those circles, they can show and they can add a lot of value to politicians, especially looking at long term. I don’t think politicians anymore look at the long term solution. I think they look at short term solutions to get elected again. I mean, if you will, they’re suffering the same thing we do on a quarterly basis. They do it on a four-year basis. And I think all the solutions require a lot more time.

Ranjay Gulati: Do you think if your mother was here, she’d have changed her mind about businesses and business people and how they operate? Do you think you’ve done a convincing enough job?

Woods Staton: Yeah, I think maybe, yeah. Maybe I think, yeah, I think she’d be, she’d have hope.

Ranjay Gulati: Woods Staton is the founder and executive chairman of Arcos Dorados, the largest McDonald’s restaurant chain in the world with nearly 100,000 employees and more than 2000 restaurants in Latin America and the Caribbean. Arcos Dorados is based in Montevideo, Uruguay.

You’ve been listening to Deep Purpose, a podcast about courage and commitment in turbulent times. You can go to my website for more of my conversations with leaders in the business world, navigating the 21st century business environment. You can also find out about my book, titled Deep Purpose. That’s deeppurpose.net. This podcast is produced by Steven Smith with help from Lauren Modelski, Melissa Duncan, Craig McDonald, and John Barth. The theme music is by Gary Meister. I’m Ranjay Gulati.