Do Business Well

For the 12 years after Pizza Hut was founded in 1958, itsonly formal planning consisted of putting together yearly budgets. In 1969, recalls Carney, “We got in trouble.”

In an effort to broaden its base of operations in order toposition itself to go public, the company acquired 40% of its franchise operations, or 120 stores, to go with the 6 company- owned outlets it already had. Recalls Carney, “We acquired 33 different accounting systems. It took us eight months to get to one.”

In the meantime, revenues flattened and profits tumbled. A hastily developed weekly profit reporting system solved the immediate problem, but Carney decided the time had come for additional action, so he took an American Management Association course, “The Management Course for Presidents.” In early 1970, Carney began the Pizza Hut planning process by assembling the top officials who reported to him as CEO.

Setting a mission and philosophy.

“We would closet ourselves for two days at a time,” he recalls. “We did this four times during a three-month period.” At the end of the eight days, the company had a plan that was good for a year.

Carney started with the company’s mission. “One guy can write the mission in ten minutes,” he notes. “But to get everyone committed to the same thing takes about half a day.” As the 1977 Pizza Hut business plan notes, “Only when we fully understand the basic concept of our business can we then proceed to establish priorities, strategies, and plans”.

The company’s mission in 1977 was simply “to increase our share of the pizza market and be a leader in the food service industry.”

Once the mission was hashed out, Carney turned to the company’s “philosophy.” That took another two hours or so of discussion. “The first day was frustrating because we spent the whole day on the mission and philosophy.”

Identifying weaknesses.

While settling on the company’s mission and philosophy was tedious, coming to grips with its weaknesses was painful, especially for Carney. Indeed, the process occupied an important part of the planning effort. He recalls one session during the first planning effort with his managers at which they listed more than 45 weaknesses on a blackboard.

Carney had hired a facilitator for that session, who asked Carney not to attend a subsequent session focused on listing additional weaknesses. “I told him that my people wouldn’t be afraid to say something in my presence. But I agreed to stay out. When I walked back in after an hour, there were 70 weaknesses listed.” Among the weaknesses cited, he says, was a group of beliefs about the company that the managers thought Carney and his brother (also a founder) held. It turned out that those weren’t true, and Carney had a chance to straighten matters out.

But, he concludes, “All the weaknesses don’t come out until the CEO is out of the room for part of the session.” The development of the mission and philosophy and the analysis of weaknesses and strengths leads naturally to the development of a strategy and, finally, to realistic financial projections, says Carney. “That thinking process has to be in all plans.”

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