Saturday, July 04, 2009

David Novak: The Education of an Accidental CEO

David Novak, chairman and chief executive of Yum! Brands Inc, isn't your typical corporate chieftain. Any doubt about that should have vanished when he wore a yellow foam cheese head on the floor of the New York Stock Exchange in celebrating the company's initial public offering 12 years ago. These days, Mr. Novak, in his occasionally goofy but effective efforts to motivate associates, may opt for rubber chicken feet.

Mr. Novak views himself more as coach and cheerleader rather than as The Boss. He oversees one of the world's biggest restaurant companies, with some 36,000 outlets in over 110 countries and more than a million associates - Mr. Novak refers employees as associates. Four of its brands - KFC, Pizza Hut, Taco Bell and Long John Silver's - are the global leaders of the chicken, pizza, Mexican-styled food and quick-service seafood categories.

How Yum! Brands got to be so big, and successful - its stock has quintupled since going public - is laid out in "The Education of an Accidental CEO." The book guides readers through Mr. Novak remarkably steep and smooth career path. It focuses on the proper way to treat people and the rewards that can come for doing so intelligently and, if possible, service with a smile. Mr. Novak, with co-author John Boswell, makes clear that, to a large extent, Yum! Brands is a company to emulate.

The book's subtitle, "Lessons Learned From the the Trailer Park to the Corner Office," is sort of misleading. The words conjure up all sorts of negative stereotypes that Mr. Novak grew up poor and even, perhaps, in dissolute circumstances. Nothing can be further from that but neither did he live a charmed life. He spent much of his youth moving around the U.S. in a trailer, but the reason was that his father, who worked for the U.S. Coast and Geodetic Survey, was frequently reassigned to different parts of the country to gather data for maps. By his seventh grade, Mr. Novak had changed trailer parks thirty-two times and live in twenty-three states. His family was one of fifteen families on the survey team. He recalls whenever he moves, "it was like a circus caravan without the elephants."

However, Mr. Novak looks back on his nomadic upbringing as a major plus in his career and personal development. As a youth, he learned quickly how to adapt to new situations, interact with strangers and size them up. Going to a new school, meeting new people every few months wasn't always a snap for Mr. Novak. There was a lot of anxiety involved, but he learned how to walk through the anxiety and fear. Fears are "almost always about the future, even if it's the very near future, and I feared rejection as the new kid on the block," Mr Novak says. It has been his experience that "90 percent of the things we fear never happen and the other 10 percent don't happen the way we envision. But that doesn't make fear any less real." Fear will always be in human nature, but as Franklin Roosevelt says: "The only thing we have to fear is fear itself."

While he terms himself an accidental CEO, the reader can conclude that his ascent was anything but. Throughout his advancement - from advertising agency to PepsiCo Inc. division president to head of a listed corporation with sales in excess of $11 billion - his superiors saw in him effusive enthusiasm, passion, hardwork and an obvious talent to lead. He had a strategy from early on. Mr. Novak knew he was extremely competitive. He looks at everything relatively, be it business or climbing the corporate ladder. Regardless of what position he is in, he looks at his peers and decide if they're are better than him or not. Then, as he notes, "if you're as competitive like me, you work to become better than them. Once you are, then you look at your boss and think, 'Does he have something I don't have?' Then you work to become better than him, too. That's how my career always worked." That is a very shrewd strategy.

The sentence "Love what you do" goes a long way because it is the first rule of advancement, Mr. Novak writes. In his youth, Mr. Novak did a bunch of odd jobs, one of which is selling encyclopedias. The first time he went out, he sold two sets of encyclopedias, which was a very good start, and not to mention, good payday too. But he realized right away that he didn't feel good about the accomplishment. The problem was, he sold them to people who didn't need them. One was sold to a little old lady who didn't have any kids but was just delighted to have someone to talk to for a while. Mr. Novak thought that she bought the books to thank him for spending time with her. Within two days, he made $225, which was for him a lot of money. But on the third day, he quitted. He felt he was hustling people which was not the right thing to do. He knew he was good at selling but he notes, "I have to believe in what I sell."

There are many takeaways in "The Education of an Accidental CEO." It is chock-full of insights, axioms and wisdoms: "Love what you do," "You never know what you are capable of," "Keep a lid on your ego," "Stereotypes are poison," "It's never too early to find a mentor," "Play to your strength," to name a few.

Much of the worth of Mr. Novak as a CEO, as he notes, is doing "whatever it takes to get people fired up." One example is to motivate with praise. As Mr. Novak says, "You can never underestimate the power of telling someone he's doing a good job." As a leader, "the higher up the leader you are, the more important it is to give credit rather than receive it," he asserts. Celebrating the achievements of others is a huge part of Yum! Brands' culture. Mr. Novak often sends congratulatory handwritten notes to associates, signing them with a smiley face. Predictably, Yum! Brands is a company awash in employee awards - engraved silver pizza pans, rubber chickens and even $100 bills. "Thank you" is perhaps the most important thing a leader can say, Mr. Novak writes.

At the same time, he also sets the bar high. If you want to get noticed and promoted, he says, it isn't enough to do just what is required. You must do more. As for where you do it, that is insignificant. "If you are happy with and challenged by your work," Mr. Novak writes, "you will be happy doing it on the moon." Yum! Brands, by the way, is headquartered in Louisville, Kentucky - think Berkshire Hathaway which is located far from the epicenter of the financial world.

While having self-confidence is commendable, listening is a vital check on it, in Mr. Novak's view. He constantly remains himself that, despite of his "infectious enthusiasm," he needs to be "ever vigilant to remain open to other people's points of view." Otherwise, he notes, "I could enthusiastically lead everyone right over the cliff."

He had done nearly that at times. In the early 1990s, Mr Novak while in PepsiCo's beverage operations, zealously pushed the idea of a clear soda - called Crystal Pepsi - that ended to be what Time magazine called one of the worst product ideas of the 20th century. Mr. Novak blames himself for not paying attention to in-house skeptics. As a marketing executive at Pizza Hut when it was still part of PepsiCo, in the late 1980s, he was certain that a sunglasses promotion tie-in with a "Back to the Future" movie sequel would be a "slam-dunk." He should have checked first with his young daughter then, who pronounced the glasses "dorky." It took months to unload nine million pairs of shades, Mr Novak sheepishly recalls.

Among his successes was the transformation of Diet Mountain Dew from a shunned stepchild soda into a winning brand extension. Later, he presided over a turnaround at KFC - an accomplishment that "pretty much made my career," he says. The KFC success positioned Mr. Novak as the logical person to co-lead the restaurant group that Pepsi intended to spin off.

One reason for KFC's turnaround can be attributed to Mr. Novak's willingness to cooperate with and listen to franchisees, many of whom had their nest eggs on the line. Franchisees act "like entrepreneurs," Mr. Novak writes, "because that's what they are, and we'd have to be crazy not to listen to them." Their advice was to concentrate on product quality, new menu items, and better personnel training. Working together, Yum! and the franchisees, developed an action plan. One result was the crispy chicken strips, a franchisee's creation which became the most successful new product since the Colonel's original recipe, Mr. Novak says.

As talented an individual as Mr. Novak might be, he did not invent any new breakthrough technology or product that causes his ascension. "The truth of the matter is, there is no reason to try to reinvent the wheel," he says, "most good ideas are already out there, and to learn about them, all you have to do is ask the right people." The right people is not only restricted to people who are still alive. Sir Isaac Newton, once said: "If I have seen further, it is by standing on the shoulders on giants." It is to be noted that neither Sam Walton nor Thomas Murphy, former CEOs of Wal-Mart and ABC/Cap Cities (both extraordinary successes), respectively, invented nothing new. They simply copied what others have done smartly and improve on them. To put it plainly, from Chapter 16 of Mr. Novak's book, is to "steal from the best" in order to accelerate learning. Upon the spin-off of Yum! from PepsiCo, Mr. Novak was determined to learn the best practices from some of the top companies. In 1999, he visited some of these companies, when these companies were at the top of their game. Mr. Novak learns from: 1) Wal-Mart - "The more you know, the more you care;" 2) Home Depot - "I'm an owner" for which many of their front-line people have a skin in the game; 3) Target - "Differentiate yourself;" 4) UPS - "Make what matters a science;" 5) General Electric - "Relentless drumbeat for performance."

And probably, besides learning on the best practice of operating business, the best practice in dealing with Wall Street is equally as important for a public company. To this end, he consulted Warren Buffett. One of the questions Mr. Novak wanted to know was how to handle Wall Street. Mr. Buffett gave an answer that was both brilliant and simple, he says: "Don't romance Wall Street. You don't want investors who are only concerned about the quarter, or who are working on their exit strategy from day one. You want shareholders to own you forever." However, in order to get the right shareholders takes time, as Mr. Buffett notes. To achieve that end, Mr. Buffett advises, "it happens by communicating well, by being up-front about your company - its successes and its failures - and what your strategies are to keep it on track," and "talk to your owners." Mr. Novak still makes it a point to see Mr. Buffett every year and he brings along a couple of Yum!'s high performers partly as a reward for them and for them to learn.

The book deserves to be read in its entirety for its humorous yet earnest take on getting ahead using compassion, common sense and showmanship rather than bravado. In Mr. Novak, Warren Buffett says: "If CEOs were selected like NFL quarterbacks, David Novak would be a first-round draft pick. I would certainly like to have him running a Berkshire company. After you read this book, you will know why." I guess you can't get any better endorsement than that.

1 comment:

Penny Stocks said...

Ceo's are very overrated they remind me of the guru's on tele infomationals.