Chapter 1 Yum! Meets the One Minute Manager
I HAVE THE GREATEST job in the world. I travel hither and yon, observing how organizations behave. I’m always looking for companies that are trying to build themselves the right way—by focusing on their customers and creating people-first, performance-based cultures.
Why is customer focus so important? Because whether you’re selling pizzas or professional services, your business is not about you. It’s about the people you serve. I say I’m always looking for companies that are trying to do it right because building a company the right way is a continuous journey. There is no final destination. When I find an organization on this journey, I am excited.
Four years ago I was asked to speak about customer service to an annual meeting of KFC (originally Kentucky Fried Chicken). At that conference I met David Novak, who at the time was president of Tricon—the parent company of KFC, Taco Bell, and Pizza Hut. During that meeting, David told me about the journey he and his folks were on to revitalize a lackluster balance sheet by becoming a customer-centric organization. David knew that his company, like most companies, had already been giving lip service to focusing on the customer. He believed that building a company the right way meant going beyond merely listening and responding to the customer; it meant putting together a can-do team that was obsessed to go the extra mile for the customer. David intended to create nothing short of a Customer Mania culture throughout all their restaurants worldwide.
Talk about an ambitious dream. In 1997 KFC, Taco Bell, and Pizza Hut had been spun off from PepsiCo to form Tricon. At that time, Tricon’s balance sheet was in trouble. The new company had inherited a $4.7 billion debt and its return on invested capital hovered at a feeble 8 to 9 percent. As if that weren’t a big enough challenge, in 2002 Tricon bought two additional quick service restaurant brands—Long John Silver’s and A&W All American Food Restaurants—and in the process became by far the largest restaurant company in the world, employing some 840,000 people at nearly 33,000 restaurants in more than 100 countries and territories. It was at this time the company changed its name to Yum! Brands. Given their financial situation and the sheer size of the enterprise, the task of creating massive cultural change was daunting, but that didn’t seem to faze David. I loved that attitude. It became clear he was not just interested in creating a Customer Mania culture worldwide, he was going to do it. I would grow to admire his commitment and determination.
I got to spend more time with David six months later, when he asked me to speak at an annual meeting of all the top managers from the company. This time we had a chance for some real give and take and it didn’t take long for us to realize we were soul mates. In David’s wanting to build a customer-focused company the right way, he was trying to implement everything I have been teaching and writing about for years. And he was doing it in one of the most difficult environments possible.
A Gigantic Do-Over
In golf if you hit a bad shot and say, “I’ll take a mulligan,” you get to hit again. David Novak uses a similar phrase to depict what his company is up to. He said, “When my daughter, Ashley, was younger and she and her friends made a mistake in their games, they would say, ‘I get a do-over.’ That’s what Yum! is—a gigantic do-over.”
The fact that this is a giant do-over makes the task of creating a customer-focused, people-first, performance-driven culture more difficult. It is much easier to implement the concepts I have been teaching over the years when you first start a company than to take an organization that has built a different culture and head it in a new direction. Starting over means winning over skeptics and gaining buy-in for a totally new way of operating.
Yum! is attempting to create a new culture from a group of decentralized companies that actually viewed each other as competitors. Disappointed by the lack of synergy and their overall performance, PepsiCo had come to the decision that it was time to shed even great brands.
While Novak was excited by the challenge, being spun off from PepsiCo made associates anxious. Although everyone knew their combined results were lower than expected, the folks from KFC, Taco Bell, and Pizza Hut still were proud to be a part of PepsiCo, which clearly had credibility and prestige as one of the world’s great companies. People in the new acquisitions—Long John Silver’s and A&W All American Restaurants—also had uncertain feelings.
Everyone was wondering, “Can they really ‘do over’ an enormous company made up of firmly entrenched brands?” What would the new company be like? Would benefits go away? Would the company be first class—or coach?
“We’ve got a real opportunity here,” David told me. “How many leaders and teams have the chance to take well-known brands—some that are celebrating their fiftieth anniversary—and start a new company? If we build it the right way, we can create the company of the century.”
A Common Sense Strategy
As they rebuild their company the right way into a customer-focused enterprise, David Novak and his people are trying to make common sense be common practice. Common sense says that if you consistently treat those who serve customers as if they’re the most important people in the company, they will treat customers as if they’re the most important people in the world. If a company’s people are treated as winners and see themselves as winners, customer satisfaction and profitability come naturally.
Making common sense common practice involves understanding people. In the case of Yum! that means understanding customers, suppliers, franchisees, team members, leaders, and yes, investors—everyone around the globe who is involved or impacted by the organization. With its emphasis on understanding people, one of the things Yum! stands for is:
You Understand Me
Recognition: A Universal Need
The phrase “You Understand Me” means you not only understand my unique needs but also universal needs, such as recognition, that apply across cultures all over the world. David sums it up:
What we’re talking about here is a universal truth. When you put people first, then surround them with processes and disciplines that recognize their efforts, performance will soar. This is becoming a global world. Putting people first doesn’t just work in the United States. It’s a basic human truth that exists regardless of what religion you are or where you happen to live. In the U.K., China, Malaysia, the Philippines, the Middle East, you name it—recognition drives performance everywhere.
In The One Minute Manager, Spencer Johnson (the guy who moved the cheese) and I said that the key to developing people and great organizations is to catch people doing things right and to accentuate the positive. David’s commitment to that principle is obvious. He is passionate when he explains that he wants to take recognition and celebration to new levels in building and sustaining exceptional performance around the world.
Foremost among the things that impressed us were David’s energy and passion about the company and the business he is in. Just walking into David’s office is an experience. Most executives have their company’s motto “lamed and framed” on the wall—in this case the motto would be, “We recognize people.” But David’s entire wall space declares the value of recognition. It’s completely covered with pictures of people he’s honored around the world. David pointed to pictures he’d put on the ceiling when he ran out of wall space.
“The loss-prevention guys are letting me keep those up there as long as they’re bolted in so they don’t fall and hit someone on the head,” he said with a smile.
All that evidence of recognition is not there just for show; it’s for him. He told us, “I’ve got the greatest CEO office in the world.” He is like a kid in a candy store—so glad to be there.
The more I found out about Yum!, the more excited I got about the possibility of documenting their journey. As I said earlier, I’m always looking for good examples of people attempting to practice what I preach, but I had never seen a group of top managers who were interested in “doing the whole thing”—implementing a complete corporate do-over.
When I shared my excitement about their journey being a case study that could help other people and organizations, David and his people got excited, too. Given the size and complexity of the potential assignment, I knew I’d need some help. I asked two of my colleagues, Fred Finch and Jim Ballard, if they would join me on this project. I have known both of them for over thirty years. Fred is a founding associate of The Blanchard Companies and an excellent consultant. Jim is a fine writer and trainer who has worked with me on a number of books, including coauthoring Whale Done!: The Power of Positive Relationships.
After Fred, Jim, and I met with David in his office in Louisville, we agreed that he and his people might just pull off rebuilding their company the right way and creating a Customer Mania culture worldwide. But our enthusiasm about the project increased leaps and bounds when David’s team said, “Okay, have at it. As long as you don’t write a book that’s a whitewash.” They told us to go anywhere in the company and talk to anybody. “But make sure that anything you write reflects accurately what you find—the good, the bad, and the ugly.” That even gave us permission to raise tough questions. This drove us on even more, since we didn’t want to be involved in writing a book that amounted to a lot of hoopla. That point was reinforced when David insisted that he didn’t want the book to be about him either. Given the egos of CEOs we’ve run into, that was really impressive.
Knowing that the behavior of top management is always mirrored right down the organization, we began by interviewing senior management people at Yum! corporate, as well as at each of the brands. Focusing on vision, values, and leadership, we got a feeling for what the company believed in, their aspirations, and the direction they were going in their journey. Then we talked to franchise owners, leaders down the line, restaurant managers, and team members, both in the United States and abroad. As the project grew, so did our confidence in the company’s commitment to its people.
Organization of This Book
Over the years I have found that leaders in great organizations, large or small, know how to build a customer-focused company the right way. They do that by leading at a higher level and focusing people’s attention on more than making money. They understand the power of a people-first, performance-driven culture and intuitively practice the four key steps to building a company the right way:
Step One:Set your sights on the right target and vision. Step Two:Treat your customers right. Step Three:Treat your people right. Step Four:Have the right kind of leadership.
Let me make it clear that when I talk about leaders, in many cases I’m not simply referring to top management. Leadership is an influence process and leaders can be anyone with the opportunity to affect others, for better or worse. A great organization has leaders at all levels.
This book is organized into three parts. The first part contains this introductory chapter and gives a brief history of Yum! Brands. Part II—the main body of the book—zeroes in on the four steps to building a customer-focused company the right way. It consists of four chapters, each representing one of the key steps. The first part of each chapter is labeled Blanchard’s Dream and contains my thinking about what it takes to do that step in an ideal way. The second part of each chapter is labeled Yum!’s Reality. This section releases the voices of people throughout Yum!—their leaders, coaches, and associates—and tells their story. It describes how they are using that step to rebuild the right way and accomplish their dream of establishing Customer Mania worldwide. At the end of each chapter is a Scorecard. This is my sense of how well Yum! is doing in each key area compared to the ideal I described in my Dream sections. Part III, Next Steps, explores the challenges they face to keep the momentum going and what they’re doing to meet those challenges. The final chapter, “It’s Your Choice,” will help you make your own decision: Will you go through the “Yum! door” or the “dumb door”?
for Desirable Change
Yum! Brands is not the only company we could have chosen to exemplify how to build a customer-focused company, but it is surely the most exciting. Yum! has the most positive, dynamic culture we’ve ever seen. It is the largest restaurant company in the world, yet the company is dedicated to acting small. Its journey provides a blueprint for desirable change that can be used by all types and sizes of organizations wanting to be more profitable and have more fun achieving their business goals.
The moral of this story is that it’s never too late to build a customer-focused company the right way. While Yum! would be the first to admit it has lots of work to do and has just begun the journey, its leadership is well on its way to taking entrenched brands with checkered pasts and creating a single, exciting culture that’s already producing measurable results. As Dave Deno, the company’s CFO, likes to say, “All the numbers that should be going up are going up and all the numbers that should be going down are going down.” Since its spin-off in 1997 from PepsiCo, Yum! has more than tripled its earnings per share, doubled its return on investment capital and has taken its market capitalization from $3.7 billion to $10 billion. The $4.7 billion of debt Yum! was saddled with is now just $2.1 billion and today the company has an investment-grade quality balance sheet.
We hope you enjoy taking this journey with us. We’re sure that regardless of how large or small your company is—whether it’s conservative or cutting edge, old or new, whether it involves top level executives or front counter folks—you can build it right by focusing on your customers, too.