Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-1 Denny’s Restaurants Creating a Diverse Corporate Culture

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-2 Overview Key Events. Company History. CEOs on Diversity. Stakeholders. Critical Issues. Outcomes. Challenges

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-3 What Happened? April 1, 1993: Six African-American U.S. Secret Service agents are refused service, while 15 fellow agents are being served second helpings. “I didn’t want to believe it was discrimination. But I couldn’t think of what else it could be.” The six U.S. Secret Service agents file a class action lawsuit against Denny’s Restaurants.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-4 What Happened? Similar class action lawsuit is filed in California, where young African-Americans are asked to pre-pay before being served their meals. Denny’s becomes “a poster child for racism.” Law firms urge victims to contact them. December 1995: Denny’s pays out $54M to 294,000 customers and their lawyers.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-5 Company Timeline 1963: Jerry Richardson and Charles Bradshaw form a partnership to operate a Hardee’s franchise in Spartanburg, SC. 1969: Spartan Food Systems. 1979: TransWorld Corporation. 1986: TW Services.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-6 Company Timeline 1987: TW Services buys Denny’s and El Pollo Loco. 1989: Company acquires huge debt due to hostile takeover. 1992: KKR invests $300M, the company is renamed Flagstar Companies.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-7 CEOs on Diversity Jerry Richardson –“I’m sure you’re right about us being behind on diversity, but I never thought about it.” Jim Adamson –“We’re going to treat each other with dignity. If you don’t like the way the train is going, get off.”

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-8 Racism Within Flagstar No deliberate corporate policy advocating discrimination, but discriminatory practices were widespread and well known throughout the company. Restaurant managers’ policies included: –Asking for identification; –Requests for prepaying meals; –“Blackouts,” or locking out minority customers. Non-existent relationships with minority vendors.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-9 Jim Adamson Grew up in a racially- mixed environment on U.S. Army posts. CEO Burger King. Henry Kravis hired him to replace Jerry Richardson as Flagstar CEO in 1995.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-10 Critical Issues Change of control in parent company. Role of a transformational leader. Managing rapid cultural change. Working with organizations hostile to your own. Role of news media. Dealing with racial discrimination.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-11 Key Stakeholders Employees Customers Kohlberg, Kravis, Roberts and Company Restaurant managers Minority Community

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-12 How should Jim Adamson proceed as the new CEO?

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-13 Adamson’s Initiatives Adamson hired Ron Petty, former head of Burger King USA, as CEO of Denny’s to manage the chain’s transformation. Committed to making the company “a better place for women and minorities.”

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-14 Adamson’s Initiatives Adamson also hired Ray Hood-Phillips to help develop a diversity program that would make Denny’s and Advantica less vulnerable to charges of racism and discrimination.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-15 Adamson’s Initiatives The CEO becomes a champion for change. Business unit chiefs “get it.” New Vice President for Diversity position. Diversity training throughout the company. New minority supplier contracts. Aggressive minority franchising, hiring. Regular, standardized performance evaluations.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-16 Adamson’s Initiatives More women, African-American, Hispanic, and Asian managers. Diversity becomes a performance criterion. More local authority, empowerment. Never miss an opportunity to preach the gospel of diversity.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-17 Adamson’s Initiatives Symbolic changes included a declaration that Martin Luther King’s birthday would be a company holiday.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-18 Results Videotaped examples of publicity, both before Jim Adamson’s initiatives and after. Several examples of Denny’s nationwide television advertising campaign.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-19 Results 49% of the workforce are people of color. 33% of the officers and management are people of color. 27% of senior management are women and people of color.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-20 Results Of Denny’s 823 franchise owners, 309 of them are people of color. In 1992, the company’s supplier base did not include a single minority contract. Today, 20% of Advantica’s contracts are with minority suppliers of goods and services, valued at $120m annually.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-21 Results Jim Adamson was named “CEO of the Year” by the NAACP in Advantica rose to #1 on Fortune magazine’s list of “Best Companies for Minorities” in 2000 and again in 2001.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-22 Next Steps Improve the company’s financial performance Better numbers against key competitors in both fast food and casual dining restaurant chains. Lower debt load. Continue the fight against racism Continue to change corporate culture. Continue to expand opportunities for people of color at all levels within the company.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-23

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-24 Credits A Notre Dame case study produced by research assistants M. Jennifer Abes, W. Brent Chism, and Thomas F. Sheeran under the direction of Professor J. S. O’Rourke, IV. Power Point to accompany Opportunities and Challenges of Workplace Diversity: Theory, Cases, and Exercises by Kathryn A. Cañas and Harris Sondak.

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-25