Introduction:
Darden restaurants are the largest full service restaurant company in the world. Located in Orlando FL, they operate over 1,500 restaurants. They own many brands such as Olive Garden, Longhorn steakhouse, Bahama Breezes, Seasons 52, The Capital Grille, Yard House plus many more. They tend to all be located in high traffic areas, which encourages business. The restaurant industry is the fastest growing industry in America (Feeding America). Darden is committed to building and maintaining a customer-orientated environment. They provide work for nearly 150,000 employees; they focus on making their work environment vibrant and desirable. Darden values integrity, fairness, respect, diversity and teamwork. Recently in the news, all members of the board of directors of Darden were fired. They violated Darden’s values. The previous board of directors decided to sell Red Lobster and activist investors and shareholders were not pleased with the decision. So in a form of revolt the shareholders decided to fire the entire twelve members of Darden’s board and elect a new board based on activist’s investor’s insight.

Statement of Problem In the case of Darden, activist’s investors conglomerated with shareholders to create a proposal of how Darden could increase its revenue. When hedge funds purchase a substantial stake in a company they typically try to restructure the company because they see value. Darden has hidden value in its real estate. A research report issued by Starboard valued Darden’s real estate at over $4 million. Starboard is an activist investor, owning nearly 9% of Darden, which proposed spinning off Darden into three parent companies, one for the mature companies, one for the newer faster growing brands and finally a real estate investment trust (REIT). Activists wanted to monetize these real estate ventures. A continual goal of Darden has been to increase customer and shareholder value, something that attracts investors. But the board of directors at Darden decided to sell Red Lobster for 2.1 Billion, without shareholder consideration. So the problem is how will Darden manage and restructure their employees and gain shareholder trust to encourage growth within their brand?

Stages of Group Development
After shareholders fired the entire board of directors, Darden is starting from scratch. The purpose of group development is to engage in similar actions to benefit the underlying company or goal. There could be distortions if an individual does not keep the best interest of the team. The first stage of group development is forming, determining the purpose and structure of the group is important for generating responsibilities. This stage will take time for distinct roles to set in based upon each individual’s personality type. The next stage is storming, turbulence, disruption and frustration is at a high level. Individuals will begin to realize if they can interact efficiently with their group. People will begin to leave the group or job during this stage. Norming is the next stage which deals with shared values and goals. This is the stage that separates groups into teams. Collaboration is the way to achieve maximum performance. Lastly, performing is when the structure is in place and each member understands his or her duty and responsibility. This development stage is the beginning step for Darden’s new board. Yes, each person is designed a distinct role but everyone is new and will learn more about their position each day on the job. The sale of Red Lobster to was very important to the restaurant industry because it represented 8.5% of the domestic casual dining market (Morningstar). The group development of the previous board of directors broke down into adjourning, the termination of group activities. As time evolves there will be certain characteristics, which correlate to the overall structure of the group.

Leadership
Over the years, the correct leadership has propelled Darden to dominate the restaurant industry. With ever changing business models and the growth of competition in the industry, Darden needs to be revitalized. Operating problems are occurring due to a breakdown in the operating structure, which could provide profit-maximizing techniques. Building off of the group development stage an important characteristic in decision-making is creativity. Creativity can be used to capture opportunities and give one’s team a competitive advantage. There are many qualities, which could spur innovation. Obtaining a moderate to high level of risk and eliminating risks that will fail. Being open to new approaches and tolerating not having all of the facts before making an educated decision. The previous management team ruined Darden’s main brand, Olive Garden. In our opinion they had ideas with no creativity obtained through bad execution. Here is a prime idea of how Darden could improve their business profitability: breadsticks are the feature of going to Olive Garden. Everyone loves the UNLIMITED breadsticks. If a customer wants another breadstick, the employees will bring a basket of about six, when the customer would only eat one. Now, once the customer is done eating its meal, the server will throw the remaining breadsticks in the trash. If we were managing Darden, I would bring the customer less breadsticks and then they could continue to ask for more as they please. This will lead to higher profitability. The previous board of directors did not see this as a problem, but as analysts have outlined, Darden could save four to five million a year (Value Walk) by using this tactic.
The interim CEO, Gene Lee, plans to focus on ways to revitalize the Darden brand. Having a leader who is creative is crucial when dealing with increasing competition. A good leader separates its brand from competition. I believe focusing on creating a work environment that is positive will spur growth within Darden. Darden has been criticized and sewed in the past over having extremely low wages for employees. Clarence Otis (previous CEO) thought this would increase profit margins for investors but turns out it portrayed a negative perception of the company. Gene Lee will take a different approach compared to Clarence Otis; he will focus on employee – centered leadership. A key component to this strategy is that employees have room for growth, coming into a restaurant as a bus boy is not the desired role for many years, there needs to be incentives for growth for employees. In 2013, the turnover rate for employees in the restaurant industry is 62.5% (Restaurant.org). The main problem for the turnover is employees are not offered incentives and there is little roof for growth in the sector. This all boils down to the leader of the organization. Other ways Gene can gain employee satisfaction is listening to their ideas, reward employees for hard work and support career goals. Being the face of a company comes with a great deal of responsibility, you take the blame and credit for any situation within the company.
Darden is working off of a framework of revised path – goal leadership. This model will ensure stability within the group development stage. Typically, this model suggests that leaders are effective due to positive impacts on motivation, performance and satisfaction (TEXTBOOK). There are four different styles for which a leader can connect with employees. All of these vary based on each individual employees style as long as the situation at hand. The first style is a directive leader who lets employees know clearly what is expected of them (Chart A). The supportive leader treats all employees fairly and ethically. The participatory leader consults with employees within the organization and listens to their ideas to come up with a solution. The achievement-orientated leader sets reachable but challenging objectives. We believe that a good leader consists of all of these styles.

Chart A.

Stock Analysis
Darden Restaurants Inc. Ticker: DRI
There are many restaurants across the globe, so what makes Darden unique? In our opinion Darden has a highly diverse culture, through their menus and blend of different style restaurants. Viewing Darden on previous successes, they used to have a competitive advantage to drive up profits, but we see that diminishing due to increased competition and lack of food quality. We believe the previous board of directors sold off red lobster because it was inhibiting them from reaching their compensation benefits and also to pay back debts. Management forecasted that Red Lobster would have an adjusted earnings per share of about 11% but it came out to a loss of 10% while sales also came in lower than expected. Management then decided to hold the sale of red lobster because Red Lobster has been holding back on the pay they could be receiving. But selling Red Lobster at a huge discount was not tax efficient nor did not benefit the company in the long run. The stock price of Darden has been under pressure in the last six months (Chart B.) and until the new board of directors re affirms shareholder trust and organizational changes happen, the stock price will remain stagnant.
Chart B.

Bibliography: http://www.businessinsider.com/starboard-transforming-darden-restaurants-2014-9?op=1 http://www.valuewalk.com/2014/11/ben-strubel-potentially-purchasing-darden-restaurants-inc/

http://analysisreport.morningstar.com/stock/archive?t=DRI&region=USA&docId=661604

http://rocunited.org/wp-content/uploads/2012/09/ROC_DardenRep2012Proof.pdf

http://www.restaurant.org/News-Research/News/Economist-s-Notebook-Hospitality-employee-turnover