Former CEO of a $33 billion fast-food company shares the biggest leadership insight he's ever had

David Novak Yum CEO 3Hollis JohnsonYum Brands cofounder and former chairman and CEO David Novak.

When David Novak was appointed COO of PepsiCo in 1992, he began the practice of regularly holding roundtable discussions with 10-15 employees representing a sector of the workforce.

He had spent years in marketing, and believed that the best way to learn about operations was by building relationships with the workers on the frontlines.

One week in 1994, Novak decided to spend a week on the road, travelling from bottling plant to bottling plant and starting each morning with a roundtable chat. During his stay in St. Louis, he met with 12 or so route salespeople, the truck drivers who deliver and sell products to customers, to discuss merchandising.

“They all started raving about this guy named Bob at the end of the table,” Novak told Business Insider. The salespeople took turns laying on praise, and when Novak looked at Bob, he noticed he was crying. He asked Bob why.

“And he said, ‘You know, I’ve been working in this company for 47 years, I’m retiring in two weeks, and I didn’t know anyone felt this way about me,'” Novak said.

“I thought to myself, gosh, here’s a guy who’s so talented, and had worked so long and so hard and didn’t feel appreciated for what he did. Plus, he was so good at it. And if he had been recognised for what he did, he may have even had a bigger impact in the company.”

He decided from that moment on that recognising great work would be his No. 1 priority at any company he led. Novak is best known for his tenure as the CEO of Yum Brands — a collective of Taco Bell, KFC, and Pizza Hut founded in 2002 — during which he oversaw the creation of a fast food empire that now has 41,000 restaurants across 125 countries and a market capitalisation of about $33 billion.

David novakYum BrandsFormer Yum Brands CEO David Novak presents a recognition award to an employee.

Novak stepped down as CEO last year and retired as executive chairman this month, giving him time to reflect on his entire career. And from all of the lessons he’s learned, he’s confident that the best leadership insight he ever had was how powerful recognition is, and he credits it as the foundation to his success as an executive.

He’s incorporated scenes like the PepsiCo roundtable with Bob into his new book “O Great One!,” a business parable based on the argument that there is no greater motivator to do excellent work than to be recognised for it.

During his time at Yum and its properties, he found ways to make a culture of recognition as fun as possible, awarding exemplary performances with a gift and cash bonus. As head of KFC, he gave out rubber chickens; as head of Pizza Hut, he gave out foam “cheese heads;” and as head of Yum, he gave out a plastic set of teeth with feet.

Each award came with a framed photograph of Novak with the employee, and Novak received a framed copy, as well, which he would hang in the office he deemed “the best in corporate America.” He guessed that he gave an average of 10 of these recognition awards each month, and so each office wall, as well as the ceiling and the hallway outside, became covered with photographs of him with employees across Yum.

Additionally, he would liberally give out “Customer Maniac” pins to employees whenever he saw great customer service during one of his trips to a Yum-owned restaurant.

“The important thing is that it’s not just me that did the recognition,” Novak said. “I started it, but now every company, every leader at Yum has their own individual recognition award. Like the president of Taco Bell gives away a sauce packet, if you go to one of our construction groups, they might give away a shovel, and if you go to a regional coach in Florida, he gives away this can — he calls it the ‘You Can’ award.”

As for how to implement it at your own company, Novak suggests you:

  • Don’t overthink whether or not good behaviour should be recognised and how often it should be. If an action registered as good work, then recognise it, even if it’s just with words. (“I would rather much err on the side of too much recognition than not enough,” Novak said.)
  • Ensure that the highest praise is reserved for only the most excellent work.
  • Recognise bad performance just as readily, but not publicly.

In retirement, Novak will be spending his time and energy promoting the value of recognition through his book, which serves as the launch of the O Great One brand.

“If you can create a work environment where everyone counts and everyone’s appreciated, you’re on your way to success,” Novak said.

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