David C. Novak's leadership philosophy pays off in big results for Yum! Brands.
As we headed to Louisville, Kentucky, for this interview with Yum! Brands Chairman and CEO David C. Novak, the company had just released its results for 2011, and they were stellar. The company posted its 10th consecutive year of double-digit EPS growth (14 percent), including 29 percent system sales growth in China, where Colonel Sanders's image is very popular. The company also opened 1,561 new stores around the globe, including China and other emerging markets such as India, Russia, and African nations. It is clear that the world has a taste for pizza, chicken, and Mexican-style food, and Yum's signature brands—KFC, Pizza Hut, and Taco Bell—are there to satisfy it at more than 37,000 restaurants.
Behind the company's financial success is a leadership success story featuring elements familiar to many learning professionals—leader as teacher, building on people's strengths, and self-discovery learning, to name just a few. Novak has created and taught a unique leadership training program at Yum! for the past 15 years and has just published a book about his approach titled Taking People With You: The Only Way to Make Big Things Happen. It's already become a New York Times bestseller. All of Novak's proceeds from the book go to the United Nations World Food Programme.
As one Yum! employee told us, "David really gets the value of developing people." We couldn't agree more.
Q In Taking People With You: The Only Way to Make Big Things Happen, you share a leadership philosophy and program you developed and spend significant time delivering. During the 15 years that you've led the program, what's the evidence that it's contributed to Yum! Brands's success in achieving its big goals?
A It starts with what we've defined as our core formula for success—building people capability. When you get the people capability right, you satisfy more customers and make more money. Many companies start out on the wrong end by thinking first about the money, but I've never seen success on a sustainable basis happen without developing people first—especially their leadership capability. You need good leadership to really build a sustainable business.
In our business, the restaurants are at the top of the pyramid because they're closest to the customer. Our restaurant general managers are our number one leaders because they build the teams that satisfy the customers.
As a global company, the thing we're most proud of is that we have great leaders now in all of our major businesses around the world. That's what's made us a true global power-house and the reason why we've delivered such strong and consistent results year after year.
Q Yum's three restaurant businesses—KFC, Pizza Hut, and Taco Bell—operate in 117 countries. How has your approach worked outside the United States?
A I think our culture is what makes our company tick around the world. One thing that distinguishes us is that we believe in recognition and we have fun with it. That's helped us attract and retain talented people.
While president of KFC, I recognized people by giving them rubber chickens. I gave people Cheeseheads when I was president of Pizza Hut. Now I give out teeth that walk to recognize someone for walking the talk of leadership. I write something personal on each award and include a little bit of cash with the gift. And I take their pictures, which hang in my office. [Hundreds of photographs line the walls and ceiling of Novak's office.]
Every leader in our company is expected to have their own leadership award to use for recognizing people who do things that will grow the business. At first, people said that would never work outside the U.S. But the fact is that people around the world have a deep need to be recognized; it's universal.
We found that people will leave a company for two reasons: They don't feel appreciated or they don't have a good relationship with their boss. That's why we have fun with recognition, and why we help our leaders become coaches who develop people rather than be bosses. Our definition of a leader is someone who does everything that a good coach does to take their people to victory.
Q You're known for your "leader-as-teacher" mindset. Why does that role merit the CEO's personal time and attention?
A My leadership program spans three days and I teach it around the world, so I devote a lot of time to teaching because it is so important.
Leaders need to teach with purpose, so the program helps to explain our strategies, what we're trying to achieve, what our challenges are, and to answer any questions people have. It drives home our cultural values and explains where we're going and why.
But I also help people with the single biggest thing they're working on that will have an impact on the business. I review those before the program and then together we go through a 14-step process on how to make big things happen based on what I've learned from experience and from other CEOs. People walk out with plans, and we follow up on them at 40 days and at six months. That's why I say that teaching those leaders is the best possible use of my time. It's also the most efficient.
Q Why did you wait 15 years to write Taking People With You?
A Many people urged me to write a leadership book based on the lessons I'd been teaching, but for me it was a heartfelt program and I wanted it to be personal.
I'm a real believer that the way you get enthusiasm, passion, and commitment for a company is to tell everybody everything you know because the more people know, the more they care. Sam Walton said that, and I love that statement. And that's why I wrote Taking People With You. By teaching, I've reached 4,000 leaders, and the book will reach 37,000 restaurant managers and allow me to reach many more people. We're using the training to drive operational excellence around the world.
Rob Lauber [vice president of Yum! University] and his team have developed an unbelievable set of materials for the rollout of the book: a toolkit, learning cards, discussion guides, and a manual. And it's all available in 11 languages and in the form of e-learning as well. We'll be able to make the book a business driver in every business unit and every restaurant we have.
All my proceeds from the sale of the book will go to the United Nations World Food Programme as part of our corporate social responsibility program. We've already raised a half million dollars from early sales of the book. I'm totally passionate about the subject of leadership and the whole notion of saving children who are hungry, so it's a perfect fit.
Q Tell us more about the culture at Yum! Having a unified culture for 1.4 million employees working in 117 countries for three different restaurant brands must be a huge challenge.
A We decided early on that in becoming a global company we wanted to have unity of behaviors about how we work together. We call these our "how we win together" principles. There are three core behaviors we want to carry forward: belief in all people, customer mania, and recognition. Then we wanted more urgency and more growth orientation in our behaviors, so we added going for breakthrough results, take-the-hill teamwork, and building know-how. The best restaurant manager makes his or her restaurant a training center. They show people how to make customers happy. We've found that the reason why our behaviors work is that they are relevant to the business and they drive success.
We foster diversity of style but we want unity of behaviors everywhere in terms of how we work together. You might be in Germany or China or Brazil and you've got to figure out how to make our brands relevant in those countries, but the behaviors you exhibit have to be the same as they are everywhere else.
Q You urge people to be "know-how junkies." How does the company take advantage of social technology to support knowledge sharing?
A One thing I learned from people in my leadership program is that they want more ways to share best practices, take know-how to the next level, and make sure it's relevant. We're using technology to do that and at the same time making a big company small and connected. We developed iChing, our internal social network, for sharing best practices to drive the business wherever you are around the globe. For example, if you're working on sandwiches you can go to iChing and find the latest sandwich recipes or the results of the most recent sandwich tests from different markets.
Q Do you blog?
A I have an internal blog where I share stories and photographs of our people, our business, and our recognition culture while traveling to our restaurants around the world. It's another way to make a big company small.
Q Learning professionals are always interested in what CEOs expect of the learning function and how the CEO evaluates the effectiveness of the learning function. What would you tell them?
A What is most important in my mind is that the learning function improves the company's people capability. For us, leadership development is absolutely essential, so we have a real strategy around it. We need the right tools and the right processes to bring people along, [and to] educate them about our culture and what we really stand for.
We have a model that is geared toward building people capability. Every year we do our people planning review process. If we don't walk away with a sense that we're building better leaders, then we're not really performing.
One of the things I love most about our company is the way the learning function helps people gain self-awareness and improve. What I love is that we focus first on what we appreciate. We help people build awareness of their real strengths and then we help them figure out how they can take them to the next level. We're asking them to take what they have and make it better, rather than trying to be something that they're not.
I believe that self-discovery is key. I think a great learning function helps people discover how to be better. In the end, the answer to your question is we expect our people capability to improve and our results to be better.
Q And how do you know that's happening?
A Sometimes there's stuff you really can't quantify. A lot of this is common sense. The problem with common sense is it's not that common. You've got to invest in the soft stuff that drives hard results. And you have to look at your organization and ask, "Are you winning?"
Q Other CEOs have told us that they also evaluate learning based on the way the organization is performing over time. But what happens to the learning function if the organization starts to struggle?
A Our commitment to leadership development is huge. For example, we invested a lot of money in the learning materials for the rollout of the Taking People With You training, but my view is that it was a very worthwhile investment and we will get a lot out of it.
Learning would be the last thing that I would cut. In fact I think that's one thing we've never cut. We know we've got to take it to the next level.
Q Even in tough times?
A We continued to invest in learning during the financial crisis in 2008. That was the year we trained everybody in achieving breakthrough results, and I continued to teach my leadership program.
I think it's more important to do this kind of training and development in the tough times than in the good times because the tough times are when you show what really matters.
Q One great example in your book is about Magic Johnson deciding to make other players better instead of trying to score all the points himself.
A That's the job of the leader. It's not something you delegate. In the end, what you're really doing when you take people with you is going from me to we. It sure is a lot easier to be a leader if you unleash the power of people and you don't think you're the only one who can do things. I call that 1+1=3. That's what leadership is all about and that's what Magic Johnson did.
I'm really proud that I'm not the only teacher in the company. Sam Su, head of our China business, teaches a program for general managers called Building the Yum Dynasty, where he talks about doing that in emerging markets. Scott Bergren, the CEO of Pizza Hut, does a program called Jump the Gap, where high-potential people learn how to make more quantum leaps in their careers. Greg Creed, the CEO of Taco Bell, has taught the program on achieving breakthrough results to 1,500 Taco Bell restaurant managers.
We really believe that leader as teacher is the way to go. One way you get promoted around here is to be a people grower. If you don't have a list of people that you have grown, people that you've taken to the next level and who have been inspired by you in some way, I don't think you're going to move up very high in our company.
Q How do you account for your passion for learning?
A The only thing I can tell you is that I like to win and that means learning from other people. I always say—and I said it in the book—that's the best way to raise your IQ. I've realized that when I talk to somebody from another industry or seek knowledge from other people, you come up with ideas you wouldn't have had otherwise. I want to win but I want to help other people win, too. In the end it's all about winning.