Yum! to you … David Novak on Yum! Brands 10 years of global growth

Nation's Restaurant News,  Oct 15, 2007  

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David Novak, who as chairman, chief executive officer and president of the world's largest restaurant company, recognizes and credits everyone with whom he works for achievements Yum! Brands has made in its first 10 years.

"It's all about teamwork; that's how we've achieved our first 10 years of growth and how we'll achieve many more in the future," said Novak. "Our formula for success is centered on building people capability and we're actively building leaders at all levels in the organization. At Yum!, we're on a journey to greatness."

Novak was a former PepsiCo executive who was president of both KFC and Pizza Hut in 1997 when those brands, along with Taco Bell, were spun off. After the spin-off from PepsiCo, a new restaurant company was formed called Tricon Global Restaurants, which renamed itself Yum! Brands in 2002 with its acquisition of the Long John Silver's and A&W All-American Food brands.

As for the spin-off 10 years ago, Novak said, "There was very little synergy between packaged goods--Frito Lay and Pepsi--and the restaurants. The chance to create a company from scratch was a tremendous opportunity to get focused on things that really matter." He added that prior to spin-off, the restaurant brands were perceived as a drag on PepsiCo's earnings, they were autonomous, had poor operations, no organized development strategies or teams, a weak presence in Europe and a small business in China.

"We wanted to build a global company," Novak noted. He saw potential to accomplish that based on Yum!'s key market advantage of having a global portfolio of leading brands. Novak knew that in order for the new company to succeed, he and his executive team needed to focus on creating synergy among the brands, a strong global operating system, solid financial strategies, focused international growth and a fun, unique workplace culture all led and operated by people who love the restaurant business.

Novak and his team knew that creating the right culture for the new company was paramount. So, they decided to take the great parts of the PepsiCo culture--the desire to win, having very talented and smart people who were excellent leaders--and add to that the learnings they had developed individually about teamwork in the restaurants. If this were going to work, Novak told his team, it had to be based on the notion of people working together. That thinking led him and the others to form the eight How We Work Together (HWWT) principles and created a foundation for the company that is still strong today, 10 years later. The next step was development of the Founding Truths, what some executives call the company's Magna Carta. "We aligned behind it then and we still own it today," Novak said.

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Novak's focus in recent years has been geared around driving consistent year-over-year sales and profit growth and to aid in that, he developed five "Dynasty Drivers" to keep that goal fresh in everyone's mind. The Yum! Dynasty Drivers are: 1) Culture Where Everyone Makes A Difference;

2) Customer and Sales Mania;

3) Competitive Brand Differentiation;

4) Continuity in People and Process; and

5) Consistency in Beat Year Ago Results.

Using recognition to drive results is key to Novak's management style and Yum!'s corporate culture. Novak recognized that the number one reason why people leave a company is because they don't feel appreciated or valued - his vision was to create a company centered around people and to cascade a global recognition culture around the world throughout all levels of the organization.

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"Every leader around the world has their own recognition award, plus formal recognition," Novak said. Instead of giving someone a plaque, for instance, Novak gives out the Yum! Award which is an oversized set of walking teeth to employees who "Walk the Talk" of leadership.

That recognition culture led Yum! to "Customer Mania" and that, in 2004, led noted business author Ken Blanchard (co-author of the best-selling "One Minute Manager") to write "Customer Mania! It's Never Too Late To Build A Customer-Focused Company." In the book, Blanchard draws on examples from Yum! to explain how any company, large or small, can develop a unified, people-first, customer-oriented culture.

Novak is also passionate about developing leaders at all levels in the organization and has created and personally leads a Yum! leadership program called "Taking People With You." It's an intensive three-day workshop for Yum! executives and franchisees from around the world.

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Yum!'s culture goes beyond making people feel good. Looking at financial results, Yum! posted 15 percent reported earnings per share growth in the second quarter of 2007. Based on that, the company raised its full year commitment to 12 percent earnings per share growth. Novak is confident that 2007 will be the sixth straight year of delivering against the company's target of at least 10 percent annual growth.