Changing Culture at Pizza Hut and Yum! Brands, Inc.
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Organizational Dynamics, Vol. 32, No. 4, pp. 319–330, 2003 ISSN 0090-2616/$ – see frontmatter
ß 2003 Elsevier Inc. All rights reserved. doi:10.1016/j.orgdyn.2003.08.005
www.organizational-dynamics.com
Slice of Reality:
Changing Culture at Pizza
Hut and Yum! Brands, Inc.
BARRY MIKE JOHN W. SLOCUM JR.
T he concept of corporate culture has cap-
tured the imagination of executives for
years. For executives struggling to manage
how to influence it. If cultures are powerful
influencers of behaviors, they must be cre-
ated. One way to analyze shared assump-
organizational change, understanding their tions is by exploring top management’s
organization’s culture has become para- answers to the following questions:
mount before undertaking such a change. 1. How do people in this organization
They realize that significant strategic and accomplish their work?
structural realignment cannot occur if it is 2. Who succeeds in this organization?
not supported by the organization’s norms Who doesn’t?
and values. Organization cultures are created 3. How and when do people interact
by leaders and, therefore, one of the most with one another? Who participates?
important functions of a leader is the crea- 4. What kinds of work styles are valued
tion, management, and sometimes the in this organization?
destruction of a culture. 5. What is expected of leaders in this
An organization’s culture reflects the organization?
values, beliefs and attitudes of its members. 6. What aspects of performance are
These values and beliefs foster norms that discussed most in evaluations?
influence employees’ behaviors. Organiza- The purpose of this article is to share
tional cultures evolve imperceptibly over with you how senior leaders at Pizza Hut
years. Unlike mission and vision statements, in particular and at Yum! Brands, Inc. (Pizza
they are never written down, but are the soul Hut, Taco Bell and KFC) in general answered
of an organization. Cultures are collections of these questions and were able to create a new
unspoken rules and traditions and operate culture after the restaurants were spun off
24 hours a day. They determine the quality of from PepsiCo Inc. Culture change does not
organizational life. Cultures determine much occur in a vacuum. It is an integral part of the
of what happens within an organization. company’s fabric. To change a company’s
While managers are aware of their organiza- culture, rewards systems, leader behaviors,
tion’s culture(s), they are often unsure about and organizational designs must be created
Acknowledgments: This research was sponsored by a research grant from the OxyChem
Corporation. The primary focus of this article is Pizza Hut and how Pizza Hut both generated
and experienced the culture change at Yum! It is based, primarily, on the thoughts, reflections
and opinions of senior managers who experienced and helped communicate the changes
discussed in this article. The authors would like to acknowledge the constructive comments
made by Steve Arneson, Leon Avery, Chris Koski, Mike Rawlings and Don, and Leslie Ritter.
319to support the change, as the experience of The integration of these two companies,
Pizza Hut demonstrates. PepsiCo and Pizza Hut, resembled a failed
vinaigrette: a large amount of oil slowly
churning in one direction, overlaid by a thin
layer of vinegar, a whirlwind of speed moving
THE SPIN-OFF AND PIZZA HUT
in the opposite direction. The vinegar re-
Started in 1958 by the Carney brothers, Dan presents the high-potential PepsiCo general
and Frank, Pizza Hut played a major role in managers rapidly moving among the many
turning pizza from an Italian specialty into a divisions and corporate offices of PepsiCo.
mass-market, mainstream food. Pizza Hut Smart, ambitious, competitive and results-dri-
had developed a reputation for and commit- ven, they were attracted by PepsiCo’s ability
ment to product quality that was ‘‘built into to move them up fast and give them a breadth
the bones’’ of restaurant managers, and with of management experience in different Pep-
it, great pride in the brand. By the mid 1990s, siCo businesses. A rising star might spend two
Pizza Hut had become a powerful brand, years in field marketing at Pepsi Cola North
with some 8,000 U.S.-based restaurants, America, a year and a half in product market-
140,000 employees and over $5 billion dollars ing at Frito-Lay, an additional 18 months as a
in system-wide sales. One internal Pizza Hut product brand manager there, two years at
market researcher estimated that over 90 Pepsi Cola International, followed by a senior
percent of American pizza eaters had tried director position in marketing at Taco Bell, etc.
a Pizza Hut pizza. The bottom layer, the oil, represented the bulk
One of the key drivers of the success of of Pizza Hut’s operations, staffed by hard
Pizza Hut was PepsiCo. Along with KFC and working, dedicated, long-tenured restau-
Taco Bell, Pizza Hut was and had long been rant-focused operators who loved the Pizza
part of the PepsiCo Restaurant Division. Pep- Hut brand and the restaurant business. They
siCo had brought its national marketing were less likely to be at the top of their class in
muscle to the Pizza Hut brand, raising sales college and less likely in fact to have gradu-
and increasing brand visibility. But it had ated from college. Many had started as cooks,
also brought something that had a major or dishwashers or delivery drivers. Slowly, as
impact on Pizza Hut: the PepsiCo manage- they had mastered the complexity of running
ment system. Even before Jack Welch made retail operations and built their experience,
General Electric Co.’s personnel manage- they would move up the system. A select few
ment system the envy of American industry, even reached the top of operations, where
PepsiCo had a reputation for producing great they shared leadership positions with Pep-
general managers. Its personnel planning siCo general managers, some of whom had
system, shepherded by a set of organiza- non-operational functional backgrounds (in
tional psychology Ph.D. consigliore in each finance, say, or even marketing,) and who
of PepsiCo’s operating divisions, produced a were doing their ‘‘ops rotation.’’
stellar cast of professional managers. This This two-tiered system of PepsiCo ‘‘short
system, layered on an existent Pizza Hut termers’’ and Pizza Hut restaurant-dedi-
founding culture, was far from a natural fit cated ‘‘lifers’’ had a number of built-in ten-
for the quick-service restaurant industry. sions and misalignments, including:
PepsiCo was what Kerr and Slocum would Home office glorification: Business was
call a market culture with a performance- done in the restaurants, but ‘‘the power and
based reward system. PepsiCo’s very fast the glory,’’ as well as the field programs,
moving, individually focused, consumer- all originated in corporate headquarters,
packaged goods, entrepreneurial culture whether Pizza Hut’s in Dallas, Texas, Yum!’s
would prove not a great fit for the relatively in Louisville, Kentucky or PepsiCo’s in Pur-
mature, slow-moving, team-oriented, quick- chase, New York. Top management’s line of
service restaurant business. sight was focused away from the restaurants.
320 ORGANIZATIONAL DYNAMICS Short-term mentality: The ‘‘up or out’’ with consumers takes place through adver-
of the PepsiCo professional management sys- tising, or is mediated by supermarkets and
tem, a reward system linking short-term other retail and wholesale establishments.
results to individual rewards, created pres- Marketing was king, and at the time of the
sure to make one’s mark and make it quickly. spin-off, one of the kings of marketing, Roger
Anything that took too long to build or was Enrico, was the CEO.
built for long-term impact was a hard sell. Tricon Global Restaurants, Inc. was a
Lack of continuity: The need for quick restaurant company. Hundreds of thousands
success and the relatively rapid turnover in of low-pay, high turnover front-line employ-
headquarters management made for a ‘‘pro- ees interacted with millions of customers a
gram of the month’’ mentality. week in some 30,000 restaurants around the
Finance first headset: ‘‘Making plan’’ world. Quality control was not in the hands
seemed sacrosanct in PepsiCo’s results-dri- of process manufacturing gurus as at Pepsi
ven organization. This was often perceived Cola or Frito-Lay, but in those of part-time,
by the ‘‘restaurateurs,’’ and even by some often teenage employees making discrete
franchisees, to be at the cost of commitment decisions about quality with every product
to long-term restaurant essentials like pro- served. This posed an enormously different
duct and asset quality. challenge for top management at Yum!
Passive resistance in the field: The per- PepsiCo was a holding company. If gen-
ception of short-term focus combined eral managers made their financial numbers
with a ‘‘program of the month’’ mentality and grew their people, then headquarters
engendered, at its worst, a system of passive people left each general manager alone to
resistance in field operations—compliance run his or her business. Synergies across
without commitment. Field operators, espe- various lines of business were simply not a
cially franchisees, often felt secure in the high priority on PepsiCo’s strategic agenda.
knowledge that if they just delayed program In the restaurant division, this resulted in
implementation long enough, Pizza Hut man- three strong, independent consumer brands.
agement would turn over and the new group In effect, the three restaurant brands were
would charge out with the ‘‘next great idea.’’ really three separate companies, with inde-
A performance-based, consumer pack- pendent cultures, information technology
aged goods company like PepsiCo was not a (IT) systems, operations, field management
natural fit with the restaurant business. But practices, human resource systems, etc.
whether it was bad business fit, strategic or Yum!, saddled with a large debt by Pep-
culture misalignment, or simply lack of toler- siCo and in the relatively lower margin res-
ance for the restaurants business’ relatively taurant business, was in no position to
low margins and slow growth (despite its huge economically justify itself as a holding com-
cash flow), PepsiCo gave up on Pizza Hut and pany overseeing three independent restau-
its restaurants, spinning off its entire restau- rant businesses. It had to look for operating
rant division in 1997, under the name Tricon synergies, shared resources, etc. It had to be
Global Restaurants, Inc., now Yum! Brands. much more of an operating company.
A shift from three independent compa-
nies to one company with three independent
restaurant brands was required for financial
ALIGNING BUSINESS/
survival. Top management needed to meld
CULTURE
three independent company cultures into
Yum! management understood that they had one shared culture and one set of restau-
to create a radically different culture than the rant-focused values, built on a set of shared
one at PepsiCo if the new company was to functions (e.g., IT, benefits and compensa-
succeed. PepsiCo is primarily a consumer tion, legal). Succeeding at Pizza Hut could no
packaged goods company. Direct interaction longer be about making it to Purchase, New
321York to work for PepsiCo. It had to be about successful about the American Revolution
making the customer experience in Pizza Hut (vs. those of France, and Russia, for exam-
restaurants great. ple), focused on the concept of founding—
David Novak, newly named vice chair- both as a source of authority and as a state-
man at Yum! had already started creating a ment of the power and commitment that
restaurant-focused culture during his stint as comes from being a founder. The founding
president of KFC. Novak was fond of saying that was America’s Revolution was encoded
that he hated the term ‘‘culture’’ because it in two distinct documents: The Declaration
reminded him of germs. But his savvy under- of Independence and the Constitution. The
standing of how to build a restaurant- former served to articulate those values that
focused business culture was one of the rea- were distinct to America and the latter to
sons why he had been selected to run Yum! codify them into workable systems and pro-
With little time between his selection and cesses of government.
spin-off date, the new restaurant-focused Whether the leaders of Yum! had read
culture was going to have to be jump-started. Arendt is unknown, but they intuitively
Launch date: October 7, 1997. understood the elements that had made the
American experiment unique—and they
incorporated them into the values statement
and the launch of the new company. Rather
CREATING THE CULTURE OF
than start with yet another statement of cor-
YUM! BRANDS
porate values, they declared their differences
Changing and integrating the culture of three with the ‘‘mother country,’’ that is, PepsiCo,
companies with very strong founders, found- with a set of ‘‘Founding Truths.’’ The nine
ing traditions and underlying assumptions distinct statements in this one shared docu-
about what constitutes success would be an ment were Yum!’s ‘‘Declaration of Indepen-
enormous challenge, even after the homoge- dence.’’ They announced what Yum! would
nizing effects of PepsiCo culture were fac- stand for, while at the same time differentiat-
tored in. The actions that Yum! took to push ing the new company from its progenitor—
its culture toward a desired end-state align- the PepsiCo Restaurant Division. For exam-
ment with its business strategy and business ple, one statement reads, ‘‘The RGM (Restau-
model included: rant General Manager) is our #1 Leader . . .
1. Starting with a set of shared values to not senior management.’’ Another reads,
define a culture across the three brands; ‘‘Great Operations and Marketing Innova-
2. Founding the new company in a way tion Drive Sales . . . no finger-pointing.’’
that that embodied its new culture; These two statements suggest both the direc-
3. Using titles to signal intentions and tion Yum! wanted to take and the behaviors it
signify new cultural meanings; wanted to avoid. Taken together, the nine
4. Creating a coaching management statements clearly demarcate both the essen-
system to maximize restaurant performance; tials of a genuinely restaurant-focused com-
5. Developing a recognition culture to pany and the differences between what
reinforce cultural behaviors; employees could expect from Yum! and what
6. Realigning reward systems to vali- the restaurants and their operators had
date and ‘‘walk the talk’’ on the values; and resented in PepsiCo.
7. Measuring the effectiveness and com- The statement of shared values, Yum!’s
mitment of senior managers to the values. ‘‘How We Work Together’’ principles,
doesn’t differentiate Yum! from its competi-
tors. Values statements rarely can serve this
Starting with Shared Values
role, and Yum!’s restaurant-focused, but
The political philosopher, Hannah Arendt, otherwise standard values certainly can’t:
trying to distinguish what was unique and customer focus, belief in people, recognition,
322 ORGANIZATIONAL DYNAMICScoaching and support, accountability, excel- represented the first time that area Pizza Hut,
lence, positive energy, teamwork—who KFC and Taco Bell managers had ever met
could be against these? Instead, as we’ll together in one place. There were managers
demonstrate, they served more to structure who ran restaurants of different brands,
processes and systems and stand as a code often adjacent to each other, who had never
for measurable behavior. In other words, met! The simple act of sharing personal bio-
they served the role of the U.S. Constitution. graphies and store histories created new con-
And, like the Constitution, while the details nections. After two hours of team-building
of the document weren’t easy to remember, activities, the message that we were now one
their impact was ubiquitous. company, not three, and that we were part of
a team together came across loud and clear.
The national event reinforced the local
The Founding
event rather than the other way around. The
The launch of a large, new public, U.S.-based invitation to and attendance primarily by
company, whether from spin-off, merger or restaurant managers told them they were
acquisition, usually follows a rather standard important. This was reinforced by the
process. You ring the opening bell of the New national event which stressed the primary
York Stock Exchange, throw a big launch role of the RGM and introduced the ‘‘Found-
event at corporate headquarters, presumably ing Truths,’’ and it was graphically embo-
beamed live to division headquarters and by died in the new Yum! stock certificate, which
videotape to international locations, blare the featured one real manager from Pizza Hut,
news across the corporation’s internal media Taco Bell and KFC on its front. The most
and push your best foot forward in the press. powerful part of each local event was saved
In this regard, the launch of Yum! followed for the end. Each locality had been supplied
the same format: Wall Street, a big event in with a large poster featuring the new com-
Louisville, Kentucky, featuring the new panies ‘‘Founding Truths.’’ The poster was
Yum! Management team and the restaurant put outside the event meeting room, along
brand presidents, moderated by then ‘‘Good with a set of magic markers. The managers
Morning, America’’ co-host Joan Lunden and were invited, on their way out, to sign their
beamed around the country. But if the launch names on the poster and to become a ‘‘foun-
was going to embody the culture, as enun- der,’’ but only if they agreed with the prin-
ciated in the ‘‘Founding Truths’’ and the ciples of the new company. They were told
‘‘How We Work Together Principles,’’ with that no top managers would be there to
its principles of putting restaurants and their watch, and that there would be no penalty
managers first, it was necessary to turn the for not signing. It was strictly voluntary.
usual launch format on its head. They were, in effect, invited to sign the com-
Yum! did this in three ways: by making pany’s ‘‘Declaration of Independence,’’ and
local activities the center of the action instead in doing so, make a public commitment to the
of the headquarters event; by centering activ- culture and the company. Over 80 percent of
ities on restaurant managers, and by signing the attending RGMs left their signatures.
up those managers as ‘‘founders.’’ The local ‘‘Founder’s Day’’ as it is now called, has
events were focused primarily on enlisting become a yearly event celebrating the culture
local restaurant general managers in the new of Yum!
company. Activities centered on team-build-
ing exercises for the managers designed by
Titles
Yum!’s organizational and leadership devel-
opment team. These were simple, but often Given the symbolic importance of titles,
powerful group activities. For example, the Yum! was smart enough to actively use
local event that one of the authors facilitated title changes to signal culture changes.
for some 200 participants in Miami, Florida, ‘‘Corporate Headquarters’’ was re-named
323the ‘‘Restaurant Support Center,’’ signifying managerial competencies was seen as a sign
that the restaurants were the central focus of of failure. The short-term focus of PepsiCo’s
the company. Presidents of the KFC, Taco management system had meant that fixing
Bell and Pizza Hut were, at least initially, things quickly was a strength. But short-term
re-named ‘‘chief concept officers,’’ signifying fixes became dysfunctional for building long-
that there was now only one company with term capabilities through coaching. Finally,
three concepts, not three companies. The the focus on individual instead of team per-
entire above-restaurant management team formance made it difficult to coach. Coaching
also had their titles changed from ‘‘man- ultimately has to be about the team and the
agers’’ to ‘‘coaches.’’ Area managers were person to be coached. It can’t be about the
now ‘‘area coaches,’’ operations directors personal success story of the coach.
were ‘‘market coaches’’ and division vice Coaching supported the restaurant-
presidents became ‘‘head coaches.’’ It was focused culture in a number of ways. First,
one thing to state that coaching was a com- it required physical proximity. It’s best done
pany value—it was quite another to con- face-to-face. Coaching can’t be done very
struct an entire management system based effectively from another state. That meant
on coaching—to embed that value in the way above-restaurant management would have
the company worked. That was to be perhaps to start spending time in the restaurants.
the biggest culture change of all. Second, it required interpersonal and opera-
tional, as well as financial competence. To
coach a restaurant manager, you had to know
Coaching
the business at least as well as they did and
The idea that coaching could be something know how to share that knowledge, or you’d
that all associates in a company could have to be wasting their time. Shifting the basis of
improve their performance, right down to control to knowledge from command of
the front lines, and that every manager had resources and rewards would force ‘‘gen-
the capacity to coach may still appear radical, eral’’ managers to become ‘‘restaurant coa-
or at least improbable. Pizza Hut itself wasn’t ches.’’ Third, it required partnership. The
even sure it could be done when it started the coach can’t be successful and have the player
process. There were two incentives to create a fail. Market coaches, area coaches and res-
coaching culture in operations: first, business taurant managers were networking, mirror-
growth had stalled and the company needed ing the teamwork required in the restaurants.
a jump-start and second, the PepsiCo man-
agement system was incongruent with the
quick-service restaurant business. PepsiCo’s
COACHING MAY BE THE
focus on individual, instead of team success,
RIGHT WAY TO GO—BUT HOW
its short-term mentality and the intensely
DO YOU GET THERE?
financial results driven culture had its
strengths and its shortcomings. It was not The first 90 days: Before anything else had been
a culture that could lead to sustained team done, job titles were changed. All operations
performance in a restaurant. For example, vice presidents, directors and area managers
under PepsiCo, management had been by became ‘‘coaches.’’ That was the ‘‘changeable
exception. As Pizza Hut chief operating offi- moment’’ that signaled to employees that a
cer (COO) Aylwin Lewis put it before a new mode of operating was inevitable. There
national conference on coaching and mentor- was ‘‘boot camp’’ for the entire operations
ing, ‘‘If you’re a good performer, you get left team. The fastest way to ensure that all man-
alone; if you’re a poor performer, you get agers could master and understand the skills
an action plan.’’ In other words, getting the of the average employee was to bring them
kind of management attention embodied together, make them re-learn the basics of the
in effective coaching and training to build business of making pizza and then test them
324 ORGANIZATIONAL DYNAMICSso their competence was ‘‘certified.’’ While taught all market coaches, while the market
this was going on, the organizational devel- coaches bypassed all area coaches and per-
opment team was developing job maps and sonally taught all restaurant managers. This
outlining roles, responsibilities, outcomes, simple method had huge implications for
and behaviors for the role of coach. fostering a new culture at Yum!. First, it
With title, certification and job map, the meant that all the coaches had to learn the
coaching culture was launched. And barely coaching model well enough to teach it. Sec-
stayed afloat. The epiphany on what wasn’t ond, they had to demonstrate their commit-
working occurred to Aylwin Lewis during a ment to it in order to teach it well, and were
roundtable with area coaches in Columbus, held accountable for achieving results. It
Ohio. One of the area coaches looked at him would not have had the same impact if
and said, ‘‘You’ve changed our titles and the training department employees had
you’ve given us training and said, ‘Now, I led the classes. Third, it put the one level
want you to be in restaurants 80 percent of down coaches (the direct supervisors of the
the time.’ Okay, now what do you want us to students) on notice for accountability to their
do there? What do we do with all that time?’’ immediate subordinates. Fourth, operators
Without any existing precedents for were able to bring real-life examples into
building a new management system based the role-plays, increasing the relevance,
on coaching, it wasn’t immediately apparent impact, usefulness and credibility of the
that a model of coaching was needed. Coach- coaching material. In addition to training,
ing was a skill that had to be taught. People coaching logs were created in each restaurant
needed a model for how to coach. In PepsiCo, to document each coaching session, its les-
coaching wasn’t rewarded and therefore not sons and commitments. Audiotapes of coach-
practiced. A coaching culture model needed ing sessions were circulated to restaurant
to be developed at Yum! It had to be prac- managers to provide real-life demonstrations.
tical, simple and action-oriented—it had to fit Creating a coaching culture had begun.
the fast paced, high-turnover environment of
the restaurant business. A teachable three-
Recognition
step process, with an easy to learn acronym,
EAR, was developed: Top managers learned from Southwest Air-
lines Co. the power of recognition to motivate
employees, and to elicit positive discretionary
Exploring behavior among employees. Southwest Air-
Observe/ask/listen lines separates reward from recognition, cel-
Analyzing ebrating behaviors that reinforce the culture,
Facts? creating an elaborate, yet spontaneous pro-
Isolated or pattern? cess of positive behavioral feedback. Recog-
Root cause? nition is done by everyone, not just senior
managers. This means that all levels of super-
Responding visors can recognize behavior, empowering
Teach new skills and knowledge those supervisors, but also ensuring that the
Provide feedback recognition is timely, specific and meaningful
Offer support and gain commitment to the person who receives it.
There were three keys to building a suc-
cessful recognition program at Pizza Hut:
Operational leaders (not training personnel) 1. Starting at the top;
would be responsible for teaching all coach- 2. Ensuring it was continuous and on-
ing classes for those two levels down from going, and got built into communications;
them. For example, COO Aylwin Lewis and
bypassed head coaches and personally 3. Reinforcing it publicly.
325Starting at the top: David Novak, now To create a recognition culture, rather
chairman of Yum!, formerly president of than simply a recognition award, things
Pizza Hut (and of KFC) single-handedly couldn’t stop and start with Novak. He
brought recognition to Pizza Hut. He said encouraged his immediate reports to create
that he had learned the power of recognition their own recognition awards, and they soon
during his job as chief operating officer at one did. What followed was a slow process of
of the PepsiCo divisions. His deep-seated osmosis, reinforced by the positive impact of
belief in the power of recognition and his recognition. For example, the chief operating
commitment to it made all the difference. officer created a recognition award and gave
Novak’s first foray into recognition as pre- it out at all operations meetings. The positive
sident of a division occurred at KFC, where feedback and public recognition that accom-
he created the ‘‘floppy chicken’’ award. panied it built pride and goodwill amongst
The award itself embodied the distinction recipients and reinforced their positive beha-
between recognition and reward. It was vior. The obvious and widespread positive
one of those rubbery floppy chickens used feedback gave a reason for head coaches to
for pranks or jokes that would be as likely to create their own recognition awards for their
show up on Halloween as at any other time. meetings, and so on down the line right into
In other words, it wasn’t valuable in and of the restaurants.
itself—it wasn’t a watch, or a ring, fancy Like osmosis, the spread of recognition
clock, tie tack, brooch, earrings, etc. Three was uneven and sometimes slow. But within
things made it valuable as recognition. First, three years, recognition awards were regu-
it was numbered. So it wasn’t just a floppy larly appearing in restaurants, as managers
chicken. It was the #45 floppy chicken. Sec- used recognition to motivate front-line
ond, it was signed and had a personal mes- employees. And because the spread was
sage written on it. And third, a picture of the spontaneous—never dictated by ‘‘corpo-
recipient and Novak was taken, framed and rate’’—and completely voluntary, there was
sent to the recipient. A $100 gift certificate a sense of ownership for the behavior. Recog-
was also given, but Novak was clear to point nition built deep roots. Those roots had the
out that this was simply an add-on: ‘‘We time to grow because once the recognition
know you can’t eat the chicken.’’ tradition started, the continuous, ongoing
At Pizza Hut, Novak started the ‘‘Big commitment of senior leaders kept it alive,
Cheese’’ award—a rubber cheese hat (similar front and center. Every public meeting
to those worn by fans of the Green Bay included recognition awards on the agenda.
Packers football team.) This was also num- Over time, the continuity of recognition start-
bered, and personally inscribed. The recipi- ing generating a sense of anticipation and
ent had to wear it while being photographed ‘‘pull’’ for awards. Within three years, recog-
with the president. When Novak became vice nition had become so routine and omnipre-
chairman of Yum! at the spin-off, his succes- sent that it lost any tinge of self-awareness
sor as president of Pizza Hut, Mike Rawlings, and simply became ‘‘the way we do things
continued the tradition. During his five-year around here.’’
tenure, Rawlings handed out over 500 ‘‘Big
Cheese’’ awards. The frequent tears, positive
Rewards
emotions and heartfelt gratefulness of the
recipients were reinforcing for culture and The balanced scorecard was the primary
for the giver. One author personally experi- mechanism for allocating rewards and hand-
enced the impact of getting the award in ing out bonuses for restaurant managers.
front of 600 employees at an ‘‘All-Team’’ Two changes to the reward system helped
meeting. The power of the award is in the align it with the ‘‘Founding Truths’’ and
public recognition. The author’s $100 gift ‘‘How We Work Together Principles’’ on
certificate remains unspent. which the new culture was based.
326 ORGANIZATIONAL DYNAMICSFirst, people measurements were added financial officer of Yum! was let go, and his
to financial measurements and customer lack of cultural fit was cited as a reason, this
measurements, reinforcing the ‘‘putting peo- sent a powerful signal that the cultural values
ple first’’ credo. It might have taken three of the company were important.
years before all restaurant managers had been
trained as coaches, but the scorecard was
flexible enough to allow for measuring the
RESULTS
results of good coaching—such as reduced
turnover—within a year. Second, in a move The nature of Pizza Hut’s business makes it
unprecedented in the industry, restaurant very difficult to make causal links between
managers were given stock options as an the change in culture and changes in its
outright block grant, and stock options were business. For one thing, the main determinant
added to the list of performance incentives. of Pizza Hut sales is new product launches,
Legally limited initially in the number of somewhat orthogonal to culture as a sales
stock options it could award, Yum! chose to determinant. For another, as a result of the
award its restaurant managers these options spin-off, Yum! had been burdened with a
before their bosses, the area coaches, were huge debt and was in the process of selling
able to get theirs. This powerfully reinforced off its company-owned restaurants. This
the founding truth that the ‘‘RGM was #1,’’ undoubtedly impacted morale, potentially
and should act like an owner of the business. slowing the impact of culture change, and
The symbolic value and the boost to manage- it may have skewed the same-store sales
ment credibility was at least as important as averages of the remaining restaurants, obfus-
the value of the options themselves. cating the impact of culture.
These points notwithstanding, during
the first four years of its culture change, Pizza
Measurement
Hut experienced record highs in same-store
‘‘What gets measured, gets done,’’ is one of sales and a record low in restaurant manager
the oldest maxims of business. But when turnover. In the five years, from mid-1997
you’re trying to change a culture and using to mid-2002—when Pizza Hut was led by
values to do it, what do you measure about president Mike Rawlings, a time at the heart
the culture? Yum! answered this question in of the change in culture—same-store sales
two ways. First, it created the ‘‘Founder’s growth rose 19 percent, overall operating
Survey,’’ an annual company-wide survey profit doubled and margins improved to
that measured the company on its adherence record highs.
to the ‘‘How We Work Together Principles.’’ While these results may not have been
All employees, except restaurant managers, caused directly by the change in culture, they
were invited to participate, with participa- were certainly consonant with it. ‘‘Founder’s
tion rates in the mid-80 percentages. Results Survey’’ results show strong belief in com-
could be broken down by function and by pany leadership, commitment to and belief
levels, providing a picture on how different in the brand, and strong execution of the
parts of the company perceived the com- values at all levels. At the least, the changes
pany’s commitment to the culture. Managers in culture provided a strong foundation for
were then required to come up with action and enablement of high performance.
plans for those areas where results were less The management practices at PepsiCo
than satisfactory. and Yum! had a significant impact on the
Second, Yum! created values-focused, cultures created in each organization. In a
360-degree performance reviews, which were hologram, any fragment encapsulates the
eventually pushed to the restaurant manager essence of the whole. Interpretations of
level. Individuals were held accountable for a single management practice need to be
how they lived the values. When the chief consistent with the interpretation of other
327management practices. Top managers at been passed down through generations to
Yum! had the capacity to envision and enact preserve the status quo, and transitions (or
a culture that inspired intense loyalty, strong rites of passages) are practices that serve to
commitment, increased productivity, and indoctrinate new members into the culture
even greater profitability. To achieve consis- of the tribe. We summarize the differences in
tency at Yum! and differentiate Yum! from these four T’s between PepsiCo and Yum! in
PepsiCo, Yum!’s top managers developed Table 1.
practices that were consistent with its culture. Corporations have spent considerable
Cultural anthropologists for decades amounts of money in response to consultants’
have studied the behaviors of members of seductive promises of easy cultural change.
numerous tribes. While each tribe might wor- Some managers have sought to replicate the
ship different ‘‘gods,’’ the behaviors of tribe strong cultures of successful companies,
members can be described using four con- while others have tried to engineer commit-
cepts, all starting with the letter ‘‘T’’: Totems ment to a culture, in the hopes of increasing
are things that are worshipped or prized; loyalty, productivity, and/or profitability.
taboos are practices used to control or punish Unfortunately, culture is rooted in the
deviant behaviors or those not sanctioned by countless details of an organization’s life.
the tribe; traditions are practices that have How decisions are made, how careers are
TABLE 1 YUM! VERSUS PEPSICO: COMPARISON OF CULTURAL ARCHETYPESa
TOTEMS TABOOS TRADITIONS TRANSITIONS
Yum! Brands Focus of attention: Results without Recognition Pizza ‘‘certification’’
values ‘‘Quick hits’’ and other ‘‘boot
camps’’ for
making products
Restaurants Coaching Becoming a
Team players Restaurant General ‘‘founder’’
Manager is #1
Operations/marketing Values driven
partnership
Focus on people Specialization
Effective operations
Division
interdependence
Retail mentality
PepsiCo Financial results Values without People career Quarterly financial
results planning results review
Individual stars Lack of upward Cross-functional Move up or out
mobility rotations to build
general managers
Marketing is king Long-term projects Strong brand mentality
without short-term
results
Making a plan Not making a plan
Division independence
Wholesale/distribution
mentality
a
This table is not meant to be a definitive anthropological statement. Rather, it represents perceptions of the
differences between Yum! and PepsiCo corporate cultures. Note as well, that Yum! ‘‘traditions’’ tend to be
founding behaviors and values created at its spin-off and continuously reinforced in systems, processes and
leadership communications over its existence.
328 ORGANIZATIONAL DYNAMICSmanaged, how rewards are allocated—each these three C’s leads to poor customer service,
small incident serves to convey some aspect which ultimately affects store profitability.
of the organization’s culture. The founders of Second, people need appreciation. Big
Yum! did not want to create a culture that cheeses and other tokens of appreciation for
perpetuated their own values and sense of talented high performers are an integral part
immortality and stayed away from quick of maintaining a strong culture.
fixes. What is the soul of Yum!? First, forget
the numbers. Internal competition ends up
making people less committed, creative, and
caring. In the restaurant business, the lack of
329SELECTED BIBLIOGRAPHY
For selected works on corporate culture and McAllaster, ‘‘Want Innovation? Then Use
its impact on organizational performance, see Cultural Artifacts that Support It,’’ Organiza-
Harrison Trice and Janice Beyer, The Cultures tional Dynamics, 2002, 31, 74–84; Jeff Kerr and
of Work Organizations (Prentice-Hall, 1993); John Slocum, ‘‘Managing Corporate Cultures
Joanne Martin, Cultures in Organizations through Reward Systems,’’ Academy of Man-
(Oxford University Press, 1992); Edgar Schein, agement Executive, 1987, 1, 99–108; and Jennifer
Organizational Culture and Leadership, 2nd ed. Chatman and Karen Jehn, ‘‘Assessing the
(Jossey-Bass, 1992); Jackie Freiberg and Kevin Relationship Between Industry Characteris-
Freiberg, NUTS! Southwest Airlines’ Crazy tics and Organizational Culture: How Differ-
Recipe for Business and Personal Success (New ent Can They Be?’’ Academy of Management
York: Bard, 1966); James Higgins and Craig Journal, 1994, 37, 522–553.
Barry Mike is vice-president, internal communications, for the invest-
ment management firm T. Rowe Price. He previously spent seven years
as director, internal communications at Pizza Hut. During his tenure
there, he helped communicate his way through three presidents, one
spin-off, one major restructuring, a downsizing, and a major culture shift.
He has also worked closely during his career with the chairmen of Digital
Equipment Corporation and Bell Atlantic. Mike’s educational back-
ground includes two master’s degrees as well as completion of his course
work for a Ph.D. in Sociology from the University of Pennsylvania.
In May 2001, he received his M.B.A. with honors from the Executive
M.B.A. program at the Cox School of Business at Southern Methodist
University (SMU).
John W. Slocum Jr. holds the O. Paul Corley professorship in manage-
ment at the Cox School of Business, Southern Methodist University. He
serves as the co-director for SMU’s Corporate Director’s Institute and is
chairperson for the management and organizations department at the
Cox School. He is the author of more than 24 books, over 130 articles, and
has worked as a consultant in the human resources area for many
Fortune 500 companies, including Lockheed Martin, IBM, and Aramark,
among others. Currently, he is co-editor of the Journal of World Business,
Journal of Leadership and Organizational Studies and associate editor of
Organizational Dynamics.
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