· 7 min read · Features

Pizza Hut's HRD on turning the brand around

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Pizza Hut's HRD isn't afraid of a role with plenty of extra change and challenge on top

“I’ve always picked my roles less on the company and more on the challenge and what there is to do,” says Kathryn Austin, chief people and marketing officer at Pizza Hut Restaurants UK. And on joining what she affectionately terms “the Hut” in late 2010, the scale of the challenge was pretty obvious – the restaurant business hadn’t had a profitable year since 2006, and Pizza Hut UK posted pre-tax losses of £12.12 million in 2009.

“Yum [Pizza Hut’s then parent company, based in the US] was looking to reinvigorate the brand in the UK,” Austin recalls of the call she received about the job from an old contact while heading up an HR function at Lloyd’s Banking Group. “I had lots of fond memories of Pizza Hut from my childhood – it was one of those brands where I thought: ‘It could be so good if…’ I knew the challenge it had to remain relevant in a competitive marketplace, when the world of casual dining had dramatically changed. For me, it seemed like a good challenge.”

Austin joined the business as part of a fresh management team, including CEO Jens Hofma (who works monthly shifts front of house in branches), pulled together by Yum to turn the ailing brand around. Things became more complex when Yum decided to sell the Pizza Hut restaurant business to private equity firm Rutland in 2012, splitting out restaurant and delivery into two separate businesses. Yum continues to own the brand as well as the delivery business.

“It was a big decision but the right one for Yum to seek UK investors for a UK business,” reflects Austin, who along with the rest of the senior management team was kept on after the change in ownership. She adds that the delivery and the restaurant businesses “work in close partnership”, with the link to Yum proving useful for mobility: “Yum is a massive global business, which has benefits for talent management as it allows people to work internationally.”

Rutland’s ownership has also proved beneficial. The firm put £20 million into the business immediately on completing the purchase, and has reinvested tens of millions more in training and refurbishment. The chain has since reported nine quarters of consecutive growth. Now, to fund the next phase of investment, Pizza Hut is on the market for a new owner. Austin describes it as “about finding the next injection to help us through the next part of the cycle”.

“The beauty of private equity is if you can prove it, they will back it, so the onus is on you to prove it,” she adds. “HR often isn’t great at demonstrating that things can make a difference. [Private equity ownership] means you have an intelligent bunch of people outside the business asking you questions. It makes you more rigorous.”

What has made all the difference is a holistic focus on brand and people, led by Austin who has been responsible for marketing as well as HR since 2012. “As an HR person who isn’t a marketer by background it was great to take over one of the UK’s biggest brands,” she says. Having both functions report in to her has allowed her to leverage the strength each can bring to the other. A recent piece of work on how consumers feel about the brand has dovetailed perfectly into work on the employee value proposition (EVP), for example. “Our brand DNA is all about being relaxed, being yourself and having some fun, and that’s pretty much bang on our EVP as well,” says Austin. “Our consumer proposition and employee proposition are the same: ‘Taste Freedom’. We have a people manifesto and are applying all the marketing principles to people.”

When the teams were initially brought together marketing had a “pretty big budget”, as Pizza Hut had traditionally invested a lot in above the line marketing (such as TV adverts). “While we were getting the brand aligned we forced ourselves to go dark,” Austin explains. The money that would have been spent on national advertisement campaigns was instead funnelled into the “people elements of the brand”, such as uniform and training. “We virtually doubled our training budget,” Austin says. “You can get a lot out of transferring those budgets. You can shout as much as you like in the media, but if it’s not the experience when people walk through the door it won’t sustain.”

For Austin, in the service industry “where what you are selling is a vibe”, it makes perfect sense to bring HR and marketing closer together. “In our marketing team we’ve been cross-training everyone so they think not just from a creative perspective, but a commercial one too,” she says. “We’ve focused on making it good to be profitable. Sometimes people seem ashamed to be profitable, but the more successful you are the more you can invest back into the business.”

The “cross-fertilisation” of the two functions has been good for the HR team as it “gives a different perspective”, Austin believes. She gives the example of a soon-to-be-launched electronic troncs (tips pool) service for staff, to allow them to access gratuities made via card payments. “The way the HR team looked at launching troncs was different to how they would have done it a few years ago. They thought about it from a consumer and marketing perspective. Every time we do an HR project we consider it as a brand repositioning exercise – how do you engage people?”

Austin’s dual role is reflected in the structure of the management board, where other directors have responsibility for more than one function. “We all work cross-silo,” she explains. “If you’re going through change, having cast-iron silos makes it very difficult. Instead you need to pull together an agile working group and say ‘this is the problem we’re trying to solve, it impacts everything – IT, supply chain, operations, HR… How do we solve it?’ Through necessity we’ve had to do a lot fast, drawing on skills people didn’t know they had. That made us work closely together across teams.”

Rethinking the market spend during the process of brand alignment has meant the business by necessity became a lot more digitally savvy; communicating via direct emails and collecting vast amounts of customer data. And the process of doing so has led to an unexpected shift in strategy. “By looking at the marketing data we saw there were lots of segmented businesses within Pizza Hut, and that change could create even more division,” Austin explains. “From a marketing and communications perspective we went from a central one-size-fits-all model to a highly decentralised one. We shifted from one strategy for Pizza Hut UK to having a strategy for every single Pizza Hut.”

That has had a knock-on effect on the rest of the business, and the people aspect particularly. Austin elaborates: “It requires team capability in every Hut, so that they can work with area managers to recognise what will help them grow their business locally. We started to think about our whole organisation from that concept.”

This concept is in essence “cohorting” the business, in Austin’s words: “Every restaurant is going to get a refurbishment over time, but how do we progress them through? We can’t do them all at once and there might be things that aren’t suitable for some locations. We have a well-known brand and a massive business – when you have something of that scale every change can be a big risk. The default reaction is therefore to be risk-averse. We had to find a way to be bolder.”

The result is a three-stage leadership journey that all 272 restaurants are going through, with the end goal being “moving from that central ‘rule the world from HQ’ approach to ‘each Hut rules its own world, and creates its own reality’”. Stage one of the plan involves a focus on operational excellence and getting the basics right, as well as visiting other restaurants further down the path. Stage two is when the Hut itself is transformed; suitable locations will get a cocktail bar, which opens up evening trade. So far 137 Huts have been refurbished as part of the £60 million investment, with 70 more makeovers planned for this year.

But it’s stage three that is the “most exciting” from a people perspective, Austin feels. This is where the Hut’s team embark on a 21-week management training programme, broken into three areas: continuous improvement, famous for service, and commercial mindset.

Continuous improvement involves “ripping up the operations rulebook and creating a new platform”. The one-size-fits-all scorecard previously used is replaced by measurement sets defined by the individual teams, meaning “every Hut has a different measurement set of what success looks like”. Team members will be given accountability on rotation for different measures, which could range from table turn time to drinks sales to smiles. “The reality is team members are serving the guests, so they can spot issues better than me,” Austin reasons. Giving people accountability has a positive impact on engagement and motivation, she adds, with stage three Huts having a “really good take-up” of staff applying for management programmes.

‘Famous for service’, unsurprisingly, focuses on defining new service methods, while ‘commercial mindset’ teaches teams about the local drivers that could grow their business, resulting in a target of 6% sales growth – often exceeded, Austin says.

She is keen to emphasise that this is “not about quick fix”, and that the staged approach allows the methods to be refined as Pizza Hut goes. Given the scale of “fundamentally changing the way people think about the business and their role within it”, has there been resistance? “A manager can get wedded to their scorecard and fixated on set measures,” Austin admits. “You can get practices and behaviours that drive the wrong thing – they are driving for a number, not to get the right outcome. When you have to think about your own success measures, that’s accountability. For some managers it’s scary and we’ve had to give them support, but we haven’t seen much fallout.” To encourage sensible risk-taking in stage three, Huts bonuses are disconnected from the scorecards and managers are judged on their total contribution to the business.

Culturally, Austin is on a mission to make running a restaurant “really aspirational”. “You’re running a multi-million pound business and are responsible for the happiness of thousands of guests every day, and the lives of quite a few team members, many of whom may not have worked before and could be from very unstructured lives,” she says. Pizza Hut recently introduced the first hospitality business management degree, with the Chartered Management Institute. The business offers a range of traineeships and apprenticeships, in a bid to professionalise the hospitality industry. Austin says she “understands” the introduction of the forthcoming apprenticeship levy as a motivator for companies to invest in training.

The newly introduced National Living Wage will bump up Pizza Hut’s wage bill, but Austin welcomes it as “a good thing [to] even up the marketplace”. “The challenge for us is internal differentials,” she adds, pointing to the difference between front of house staff (who receive tips) and back of house (who don’t). As with most things, she takes a pragmatic approach: “We will need to get more productivity out of the business and keep people coming through the door.”

The stage three Strand branch is filling up as I leave the interview. With the new look, new menu and people-focused strategy, keeping customers coming is hopefully something Austin and the rest of the restaurants team will be able to deliver.