Introducing and Understanding the Situation
MOD Pizza. An organisation ranked number one in terms of growth which is on the way to take control of the US market and ready to disrupt the international market. A pizza restaurant that is not only about food but about improving the lives of individuals and communities through the special culture of giving back. Understanding how to best achieve that internationally is not easy.
The internal and external MOD environment is essential to achieve the purpose of this paper. A significant percentage of the information provided is known to the reader, however, the goal is to have an evidence-based analysis to improve the training and development of GMs who are responsible for holding the culture in the local stores.
MOD Pizza and The Nature of The Market
The pizza industry in the U.S. is a multi-billion dollar industry with earnings of $45 billion in 2017 (IBIS World, 2017). MOD operates in the fast-casual restaurant category where competition is rapidly rising. The Telsey Advisory Group predicts “2,000 restaurants could open over the next five years” in the US (Kell, 2014). Thus, MOD Pizza is expanding into international markets.
Using Ansoff’s framework, the fast-casual market can be considered a static-dynamic market since it is relatively new as a concept. It is static from the perspective that food is a necessity but also dynamic since restaurant trends change with no warnings. The market does not have frequent changes and especially the pizza industry has not had a major change over the last 40 years (MOD Pizza, 2017). The fast-casual market is very competitive, with antagonists not only being other pizza makers but all kinds of fast-casual restaurants (i.e Nando’s, Wagamama). Customers in this category are particularly demanding and the challenge is to achieve lifelong relationships.
Even though MOD Pizza opened its first store in 2008 with 17 employees, it has seen a tremendous growth over the last 9 years. In 2014, the company owned and operated 31 stores with 762 employees. In 2015, the company tripled its business with 200% unit growth which translates into a large expansion in new states with 61 new locations and an addition of 1300 new employees (MOD Pizza, 2016). MOD Pizza restaurants are now operating in over 200 locations (Robinson, 2017). Furthermore, the company’s headquarters are based in Bellevue, Washington and employs over 100 staff.
MOD Pizza as an organisation has a relatively bureaucratic structural form with strong elements of an M-form way when it comes to in-store operations. The M-form refers to an organisation which is composed of units that are autonomous and have their own resources, operating procedures and management structures. The M-form relies on strategic decisions taken at headquarters which is the case for MOD. Most stores have a general manager (GM) with an assistant general manager (AGM) and each store has 20 to 25 people on payroll. Above general managers are the district managers and above are the market managers. The hierarchy is obvious in the every-day operations of the company and even so in strategic decision-making.
The headquarters are divided in departments such as Finance/Admin; Operations and HR. Each department has its own sub-department for specific tasks. However, there is low requirement for HR directors to interfere with store managers since GMs have the autonomy to staff their stores.
Since MOD Pizza is not associating with trade unions in the US or the UK it has a sophisticated human relations approach. Employees are called MOD Squad members and one of the core values for new stores focuses on ‘Individuality with Responsibility’ where employees spend a day getting to know each other. There is also a clear career path for employees to rise in the ranks of the company. Examples of GMs who started as dish-washers are found throughout the stores. In relation to payroll, it is evident that MOD is very progressive. Employees are paid $10.50 p/hr in the US and£8.40 p/hr in the UK which is ahead of both country’s living wage.
The HR Director is both an adviser and change-maker. This is evident through the intervention of Heidi Durfee (HRD) who refused to introduce a screening tool that was suggested as a method of recruiting and selecting market and district managers for ‘culture-fitting’ reasons.
Finance and HRM
In contrast to the antagonists, MOD’s decision is to not go public for at least three more years. Thus, the organisation kept its culture safe from external pressures and is thinking in terms of the long term. The focus is towards pro-active HR and high investments in HR management. In relation to the cash-flow, revenues are rising while investments reached $75 million since 2008.
Political / Legal
– Impact on employment law after Brexit.
– Local regulations (particularly in London)
– Seattle City Council Example
– Local economy (neighbourhood, city, country)
– Concerns for the financial situation of MOD customers and employees.
– Labour costs
– Learn about the culture in the communities that MOD stores are based in.
– Sustain organisational culture to international MOD stores.
– Reputation of MOD.
– Not much concern about technological advancements in the food industry that could give competitive advantage.
– Competitors use smartphone apps for delivery purposes.
The external environment of each store influences GMs’ perception which influences internal decisions and behaviours of GMs as well as the employees. Buchanan and Huczynski (2017) describe that “our perception is selective, paying attention to some factors and filtering out others”. A PEST analysis indicates the importance of the external factors affecting the organisation..
In the 2017 Harvard Business Review for MOD Pizza (an update of the 2015) it is stated that what keeps Scott and Ally awake at night are “legislative and other governmental actions” affecting the labor market (Groysberg and Preble, 2017, p. 4). The founders mention the Seattle City Council’s “Secure Scheduling” law. This is an example of the importance on political issues that should be of concern on the expansion in the UK. Particular attention must be given to the changes that Brexit will bring to employment law.
The economic context of a neighbourhood, a city or a country is a key factor for all organisations, particularly for MOD which is seeking to expand into new international markets. Also, the economic situation of your customers and the community each store is based in is vital since your target market is as wide as it can be. MOD’s theme is to sell pizza and through that to make a difference in people’s lives by giving back to the communities they serve.
The huge emphasis given on culture starts from the very top and is transferred through Directors to Market, Region and Store Managers until it reaches store employees. The international shift towards the UK is a huge organizational risk in terms of culture sustainability and reputation.
Defining the Problem
The issues addressed are about the maintenance and transfer of the special MOD culture to international stores. This can be achieved with the training and development of GMs and staff. It is evident that MOD does not follow a formal process when it comes to hiring people. MOD is looking for people who can fit into the culture of the organisation. Examples of MOD hiring people with prison history or drug and alcohol problems are published in the media and it is something that not many organisations are comfortable doing.
The research literature surrounding traditional organizational training provides evidence both for and against. On the one hand, it acknowledges that training has been effective in providing staff knowledge (Detch, 2005). On the other hand, literature concludes that staff training is too insufficient when it comes to changing behaviours (Cullen, 2000). However, there are multiple methods for training and development such as self-development, action learning, e-learning, reflective learning and mentoring.
The fact that some people will fit into the culture from the first day and some people will need more time to do so is very likely. As an organisation do you exclude those that need more time and hire only the ‘special’ ones or can you develop HR policy and practices to encourage everyone to fit in? The purpose of this analysis is to develop those HR practices through learning and development of GMs that will transfer the ‘giving back’ culture to employees in the best feasible way.
Examples from other organisations
Pizza Hut (Pizza Hut, 2017)
In 1973, Pizza Hut opened its first UK store in London and as of 2017, there are over 700 stores. A part of the success is attributed to the Corporate Social Responsibility that Pizza Hut believes in. The company advocates various environmental programmes such as pizza boxes made from recycle cardboard as well as waste management processes and energy efficiency. Pizza Hut provides to employees not only on-board training but emotional and behavioural training as well as techniques to cope with stress and anxiety.
Additionally, employees learn about empathy and the ability to relate and be compassionate. Pizza Hut believes in supporting people that are connected to the business, the teams and the customers. The company is involved with the charity Children in Need and supports the Mental Health UK by funding events that are local to the stores.
Carlsberg (Buchanan and Hunzynski, 2017, p. 168)
In 2008, Carlsberg’s management at the Leeds brewery wanted to give additional training to 170 staff. The training included health and safety advice, updates on new technology and personal development sessions. The large-scale operation made Carlsberg to try something unusual. The company terminated production and shut the entire plant for one day to have all 170 staff and trainers attend which was an effective way to spend the training budget. The staff feedback concluded that the unprecedented move was successful and ‘learning day’ is now set to be repeated in other Carlsberg breweries as well.
The two examples are different with one another. The reason is that each one teaches a different lesson. The Pizza Hut example promotes the wellbeing of employees through special training that the organisation offers while the Carlsberg one promotes thinking out of the box even when it comes to training.
Generation and Evaluation of the Solution
The solution generated is simple and based on research literature as well as examples from other organisations. This is not to be interpreted as copying other organisations. Besides, giving back to the local communities and staff being proud of working for you is one of the most valuable achievements that an organisation can achieve. Before moving on, it is important to note that each country has its own culture and therefore no ‘international’ solution exists.
The Development department is responsible for ‘culture programming, special projects, leadership conferences, school of MOD and high potential program’. The Training department is responsible for ‘training, onboarding / orientation and culture/values’. MOD believes that GMs and AGMs are those who hold the culture. Indeed, in 2017 MOD increased the training costs for GMs and AGMs. “We do this because it’s motivating, it gives our people a chance for new challenges, and we’re able to put people into GM positions who get our culture and can serve as role models to the people they manage” (Scott Svenson, cited in Groysberg and Preble, 2017, p. 2).
The concepts that are already in place for MOD are successful in the US, but the recommendations in this paper are about improving them and contextually fitting them in international locations. The solution proposed is about introducing a new framework into the training and development for GMs based on ‘servant leadership – serving culture’. This philosophy is based on serving others before serving yourself. Below is a direct quote that perfectly describes why the proposed solution leaves the organisation in a better place;
“When the majority of members of an entity are aligned in terms of what behaviors are appropriate in the collective environment, the behavioral norms that make up the serving culture provide a roadmap that individuals use in order to evaluate how best to respond to different situations that they encounter at work.
When multiple people in the work unit are engaged in serving behaviors, the culture is perceived by participants as one defined by putting the needs of others first, behaving with integrity, and developing conceptual skills associated with thoroughly understanding the tasks and overall business (Liden et al., 2008). Thus, although the focus of servant leadership is on meeting the needs of individual followers, it also provides substantial benefits to the collective through the culture cultivated by servant leaders. Specifically, serving cultures are characterized by a focus on understanding the needs of others and helping others, both within and outside of the unit” (Liden et al., 2014, p. 1437).
The theory of serving leadership was first developed by Greenleaf in 1970. One of the dimensions of this theory is creating value for the community. This philosophy reinforces the social learning theory which argues that human beings can learn by observing and imitating others (Bandura, 1977). The term of serving leadership refers to “servant leaders (store GMs) guide followers (store staff) to emulate the leader’s behavior by prioritizing the needs of others (customers, coworkers, community) above their own” (Liden, Wayne, Zhao, & Henderson, 2008 cited in Liden et al. 2014, p. 1434).
HR policy and practice recommendation
The recommendation made is an addition to MOD’s values, training schedule as well as to the qualities of All Star Trainers. The solution recommended was generated through the thorough research on MOD and relevant literature. The recommendation can be considered a missing puzzle in the organisation’s values as well as the training and development department.
MOD’s Servant Leadership – Serving Culture
At MOD, we believe in serving others before serving ourselves. Thus, we teach our GMs how to be servant leaders and how to create a serving culture in our stores. We care about our communities as much as we care about our stores. We want our people to work in a culture where selfishness is prohibited. We want our store leaders to be role models in and out of the store and inspire MOD Squad members and customers to be the best version of themselves.
Reducing the limitations
One limitation of the proposed solution is that due to increased responsibilities, GMs are not able to be constantly present or visible to their staff. However, when a serving culture is achieved, the desired behaviours are maintained by the staff and their interactions. Thus, when GMs adopt a servant leadership approach it creates a self-maintained cycle for the employees where servant culture’s norms are encouraged and expected within the store even when the manager is absent. Therefore, new employees are not just encouraged to adapt to impress the manager but also from their need to behave like the rest of the staff to fit in. Another limitation is to identify specific behaviours of servant leadership that will create a serving culture which is a matter of discussion between the headquarters and GMs in the training courses.
Implementation and Conclusion
MOD does not have to spend millions to implement the proposed solution. That is because the proposed solution is not a heavy complex operation but rather an addition that fits and enhances the MOD culture. Due to wording restrictions, the existing culture training procedures are not mentioned in the paper. This solution is not achieved through top-down direction. This is achieved through top-down communication and bottom-up implementation.
Business and Time Plan
There are 4 MOD stores in the UK with an average of 20 employees on payroll. The GMs go through a four-week training course which includes learning of MOD’s cultural elements. Additionally, there is a three-day cultural seminar for all employees. The plan is to embed the servant leadership – serving culture philosophy into the training sessions for GMs and staff. The course can be evaluated through in-course and post-course interviews and questionnaires. Further details must be discussed with board of directors.
Implementation and Conclusion
The training will take place in the UK. As soon as the first GMs and staff finish the new course, the Board can measure its success through store performance, customer and employee satisfaction. The measurement should be made after at least one month of testing the new concept with evaluations such as observation by a Director. The roles of GMs and staff do not significantly change in detail but in approach. However, the GM must be a role model for the staff and visibly use servant leadership. It is the GM’s responsibility to create the empathetic serving culture within the store as well as motivate and encourage their employees to care. When serving culture is achieved, the GM can see if the employees carry that culture even in his/her absence. Since MOD’s plan is for international presence, the creation of international store leaders is imperative. In the US, it is more convenient for an Executive or Director to visit a store and feel the culture. However, in international settings you cannot have that kind of expenditure often. Thus, it is imperative for GMs to be trained to adopt servant leadership behaviours.
Several trends in organisations indicate that servant leadership will become progressively more relevant. The increasing size of the retail-food sector combined with escalating levels of competition point to the need for leadership approaches that are best suited for developing employees so that their full potential is reached. As employees’ education levels increase, autocratic approaches will not be tolerated. Instead, employees are looking for a personal, individualized, and cooperative leadership style. The beneficial outcomes continue as employees adopt a focus on helping others and contributing to meeting goals that satisfy the needs of multiple stakeholders, including customers, other staff, management, and communities in which the organisation is embedded.