Business

Yum CEO David Novak on rubber chickens, China and Taco Bell

David Novak calls himself a “pretty informal guy.” He used to hand out employee recognition awards in the form of rubber chickens. He loves to teach. He’s also the multimillionaire chief executive of Yum Brands Inc., the fast food company with the most stores in the world.

This week, Novak, 59, swung through Los Angeles and briefly talked about leadership lessons, international expansion for brands such as KFC and Pizza Hut and why he thinks struggling Taco Bell will “go down in history” this year. 

Novak’s new book dropped in January, its bright red back cover plastered with praise from the likes of Alan Mulally (chief executive of Ford Motor Co.), Jeffrey Immelt (chief executive of General Electric) and Jamie Dimon (chief executive of JPMorgan Chase). Warren Buffet was on the front.

Titled “Taking People With You: The Only Way to Make Big Things Happen,” it’s a manual on motivation and management style. Proceeds are being donated to the United Nations World Food Programme.

Some of the book’s tips have been worked into Yum training guides that have been translated into 11 languages and distributed across the company in what Novak calls “the most ambitious learning and training effort ever done.” (Note that he often makes grand proclamations that he usually doesn’t bother to hedge.)

Part of his mantra: staying down to earth.

“Nobody’s going to follow you unless you’re the real deal,” he says, urging managers to be “extraordinarily authentic.”

For Novak – whose $29.7 million in compensation last year led Forbes to rank him 23rd among high-earning CEOs – that means using goofy tactics to recognize employee work.

Bosses at Yum companies now give away sets of fake teeth, sauce packets and cheese-shaped hats to top staff members. And Novak’s office at Yum’s Louisville headquarters has no corporate art – unless you count the photos of him posing with employees that blanket the walls and even part of the ceiling.

That includes Yum’s growing international base. While comfortably ensconsed in a chair at the Marriott hotel in L.A. Live, Novak said he now spends half of the year traveling to sites such as India, Dubai, Thailand and Europe.

“You have to make the rounds,” he said. “We have more places to go now. Satellite video technology has helped a lot.”

In the U.S., chains such as KFC have struggled. Yum is selling off more company-owned stores to franchisees – a model that Novak claims to “love” because of its high returns.

Taco Bell had an especially “challenging time last year,” with sliding sales, a salmonella outbreak and a controversy over the content of its beef filling. (Novak, though, says the newly launched Doritos Locos Tacos is the “number one breakthrough in the industry this year, one of its greatest innovations” with a Cool Ranch version coming soon.)

The chain, he says, is “on its way to having an outstanding future.”

But Yum is growing madly in markets such as China, where the company has experimented with concepts such as Chinese food-focused East Dawning restaurants and the recently purchased hot pot chain Little Sheep.

There are now 37,000 KFC, Pizza Hut and Taco Bell restaurants in more than 120 countries.

This fall, Yum split India into a separate division; the company is planning more than a hundred new KFC stores in Africa as well as major pushes in markets such as Indonesia, Vietnam and Russia. Roughly 60% of its profit now comes from outside the U.S.

Training the global teams is a straightforward and uniform process, Novak said. After all, “we don’t have different operational cultures around the world at Yum.”

But local managers are tasked with providing what Novak calls “sales layers” – basically expansions on the original recipe chicken or pan pizza on core menus. In China, that means soybean milk and congee and KFC as well as options such as afternoon tea time and desserts.

“We’re leveraging our assets throughout, much like McDonald’s has done,” Novak said.

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