Yum Does a 360

By Douglas Shuit

Apr. 1, 2005

Eight years ago, pizza and fried chicken powerhouse Yum Brands Inc. broke off from Pepsico and its celebrated people management programs. In the wake of that split, many of the soft drink company’s executives joined the new business and made a fundamental management decision that is paying huge dividends for Yum and its shareholders. The former Pepsico executives scrapped the parent company’s hard-charging workforce management approach and build a people-friendly style all their own.

    Somewhat surprisingly, one of the tools the new company decided to use to forge its new “customer maniac” workforce identity was the 360-degree assessment tool, an old standby that had lost some of its luster. The campaign is designed to promote customer-oriented values like speed, cleanliness and hospitality among its employees while promoting intangibles like creativity and enthusiasm. The 360s, traditionally paper-based and unwieldy, hardly seemed like an assessment that could help drive a dramatic transformation of workplace values for the 850,000 workers involved in running Yum’s Pizza Hut, Taco Bell, KFC, A&W and Long John Silver’s franchises.

    It turns out that the 360s, after a Web-based technology makeover and a high-profile campaign that reached 8,000 Yum managers down to the store level, became a great tool for reinforcing the customer maniac values. They also fit nicely with the company’s international expansion, helping establish a common set of values that are as readily assimilated by employees in a Beijing KFC restaurant as they are in a Taco Bell in Los Angeles.

    “Being a customer maniac is a big part of being successful at Yum,” says Tim Galbraith, Yum’s vice president of people development and a longtime Pepsico executive. “We call that delivering our passion, which is to put a yum, or smile, on customers’ faces. We want to do that on every transaction.”

    The shift in the people management philosophy has helped Yum achieve a remarkable record of growth. With 33,000 restaurants dishing out fried chicken, deep-dish pizzas and other goodies to 22 million customers daily around the world, Yum is on a pace to open 1,000 restaurants a year, with a strong focus on international expansion. The company has found particularly fertile ground for growth in China, where its 350 restaurants make it the No. 1 restaurant chain.

    Yum earnings are contributing to record prices for its stock, with shares rising 32 percent in 2004, and generating enough income to eliminate more than half the $4.5 billion in long-term debt it inherited from Pepsico. Standard & Poor’s projects that earnings per share will jump from $2.36 in 2004 to $2.63 this year and will grow at an annual rate 10 percent a year over the next few years.

    At the time of the spinoff from Pepsico in 1997, leaders of the new company knew they had to get much more people-friendly to prosper as a stand-alone in the restaurant business. Pepsico’s focus is marketing and driving sales to big clients like supermarket chains. Yum’s customers care about getting their food hot and fresh, and with any luck, they’ll be served by an attentive counter person. A friendly separation from Pepsico’s hard-charging, show-me-the-numbers business style was inevitable.

    “Pepsico is a very strong, high-talent organization,” says Galbraith, who has a doctorate in industrial and organizational psychology. “What was missing were things more to do with values, the ability to deal well with people and be a great coach. So when the spinoff came, we swung all the way to the other side.”

    John Slocum, a professor of organizational behavior at Southern Methodist University’s Cox School of Business who has studied the two companies, says Yum made huge leap away from the Pepsico management style. The 360s and slogans like “walk the talk” went a long way in establishing an independent culture at the new company.

    “For Yum, the performance criteria are soft: teamwork, communication, leadership. You answer to a mentor or coach, not a boss,” he says. “Pepsi is hard-charging, results-oriented, do it now. They want you to bring your numbers to performance review sessions.”

    He credits the Yum executives with recognizing the differences and setting up a workforce philosophy much more in tune with operating restaurants.

    Under the system developed at Yum, managers officially became coaches. The goal was to turn people into the required customer maniacs.

    Yum turned to Kenexa, a firm that has translated human resources programs into 50 languages, to develop a new version of Yum’s outdated, paper-based 360 system. Just like the old 360, the new Web-based system pulls feedback on an individual’s job performance from a worker’s peers, managers, subordinates and customers.

    Paper-based 360s proved difficult to track in a timely way. They were prone to questions of reliability because the results were hand-tabulated. Without uniformity, 360s are highly suspect because they can vary from workplace to workplace and manager to manager. The paper-and-pencil process meant that the 360s could only be given to management-level executives to keep from getting too unwieldy.

“A lot of companies have historically viewed 360s as executive leadership or corporate management tools. Yum has taken it out to the field.”

    With Kenexa driving the process, 360s can be completed in a compressed three-week cycle. The new system is efficient enough to drop down from senior executives to store-level managers.

How it works
    The process begins with e-mails asking employees who are subjects of the 360s to submit a list of employees who could serve as raters, using a step-by-step process to come up with a list. Supervisors review each list. Once an acceptable list of a dozen or more co-workers is developed, questionnaires are sent out. They include plenty of room for written comment.

    The feedback is collected and put into a report. Then the employee sits down with a supervisor to go over the results. Galbraith says the feedback covers a spectrum of topics. The company wants to know how well its managers know their customers and how well they go about exceeding their customers’ expectations. Yum managers are also held accountable for driving business results by building and aligning teams. Yum managers and executives are also graded on their coaching ability.

    “In the area of building and aligning teams, we will ask, ‘What do you appreciate about this person and how can they be more effective?’ ” Galbraith says.

    To avoid traditional problems with these multi-rater surveys, the evaluations are not tied to compensation. Pay issues are a separate process and are spaced months apart from the 360-degree assessments.

    Given Yum’s global sweep and international expansion plans, Kenexa created a more uniform process and was able to provide language translations of the survey tied to each person’s local region.

    Yum also insists that employees at manager level or above undergo a 360 assessment every year. There is a cumulative effect, enabling the company to get a snapshot of its managers every year and giving it much more control over workforce strategy.

    “This solution helps us paint a picture of where we are as a company in terms of our capability and bench strength,” Galbraith says. “It helps us understand what capabilities we have, what we are missing and where we need to put organizational development efforts.

The right fit
    Jim Holincheck, research director for consulting firm Gartner, says he isn’t surprised by Yum’s success. Companies with global workforces and the kind of similar job and customer relationships found in a fast-food restaurant are a nice fit. “It works well if the activities and skills required to do the activities are similar,” he says.

    Companies made big investments in 360s during the 1990s. Then they fell out of favor because of the paperwork involved, he says. “Today it is a lot easier and less expensive to deploy technology to do the job.”

    Troy Kanter, president of Kenexa’s human capital management division, says Yum helps drive business results by taking the surveys down to the restaurant-manager level.

    “A lot of companies have historically viewed 360s as executive leadership or corporate management tools,” he says. “Yum has taken it out to the field. The feedback may be much richer because it is dealing with immediate customer issues.”

    Galbraith says Yum’s 360s are still evolving. The shift away from the Pepsico management style has begun to swing back to a sharper business focus.

    “We don’t want to create just a great place to work; we also want to be a growth company,” he says.

    One of the new ideas injected into the process has been boiled down to another slogan, the “beat year ago” mentality. “We expect our people to grow and develop each year,” Galbraith says.

    Yum CEO David Novak is a big supporter of the assessments–so much so that he decided to ask a wide swath of company people for feedback on a recent appraisal of the job he was doing. Galbraith says 120 employees responded to the assessment.

    “It ran 65 pages,” he says.

Workforce Management, April 2005, pp. 59-60Subscribe Now!

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