Papa John’s Pizza Inc. is an international pizza restaurant franchise based in Jeffersontown, Kentucky. It is a publicly traded company on NASDAQ and the fourth largest pizza chain in the United States. For years, Papa John’s experienced growth and success, being an official sponsor of the NFL and having numerous recognitions. However, in late 2017, it began to experience severe decline, experiencing five straight quarters of declining sales.
In the first quarter of 2020 it saw a stagnating growth between 1-5% but that is expected to be wiped out by the ongoing coronavirus situation. Major reasons for declining sales included internal organizational factors and behaviors such as issues with leadership, poor management structure, lack of innovation, and quality issues among others. This report will investigate the causes to the decline of the Papa John’s Pizza corporation and provide a change plan on how organizational performance can be improved.
The company first began reporting slowdown in sales in October of 2017. Many of these issues stemmed from consumer sentiment challenges that the brand experienced in the United States. Associated costs of relaunching loyalty program initiatives as well as a number of ineffective promotions contributed to this. The creative and value offerings of Papa John’s were poorly resonating with consumers in a highly competitive market. This is further exacerbated by the company’s pricing and advertising strategy. Once partnered with the NFL in 2010, that became the chain’s sole focus of market targeting and advertising.
Spending tens of millions of dollars on game day advertising and emphasizing that the company is the partner of the NFL became more important than the food itself. Second, the pricing for Papa John’s pizza is extremely high in comparison to competition. Innovation is a significant issue at Papa John’s, with very few additions to the menu. While the company remained better than most in terms of quality for many years, its major competitors have caught up and innovated. Meanwhile, Papa John’s notably stagnated or even declined in quality, pushing consumers away in combination with high prices.
At the same time, Papa John’s experienced a crisis of leadership. John Schnatter, the founder and CEO of the company at the time got involved in two separate, but highly prolific controversies. At first, he voiced frustration at NFL which is one of Papa John’s biggest national partners, blaming sales decline on handling of player protests by the league. A few months later, it was revealed that Schnatter had used a racial slur on a company conference call.
By July of 2018, Schnatter resigned as CEO and stepped away from any executive roles. Despite, the company attempting to distance itself from its founder, Schnatter was the direct brand and literal image of the Papa John’s company and logo that had been embedded into marketing for decades. Internal organizational culture had been notably struggling and in disarray for years under the leadership of Schnatter.
The company was forced to launch an internal audit on diversity and inclusion practices as well. The company is currently undergoing a reshuffle of its top management as well because of the company lacking focus and stability for the past years. The current objectives currently for the company involve improving operations, marketing strategies, and changing the internal corporate culture.
Motivation is essential for effective organizational performance and is dependent on human activity. Various elements explored later such as work organization, leadership styles, and work design have impactful influence on attitude, satisfaction, and motivations of staff. Performance is directly associated with function which consists of ability combined with motivation. The motivation model cycle is based on needs and expectations being met that result in a driving force of action to achieve desired objectives, that in turn, provide fulfillment (Zhou, 2018).
For years, motivation at Papa John’s was based on attitude and passion, stemming from its leadership and founder Schnatter, famously noting “hire for attitude, train for aptitude.” This is based on intrinsic motivation of psychological rewards, using employee abilities and creating a sense of challenge and achievement. In a way, it was a poor application of Vroom’s expectancy theory model which included valence, instrumentality, and expectancy to combine the motivational force.
Expectancy is the perceived probability that effort will lead to first-level performance-related outcomes. There for expended effort leads to level of performance the first-level outcome is high productivity. Instrumentality is how first-level outcomes transition to second-level needs outcomes such as praise, higher wages, promotion, and camaraderie in the workplace (Mullins & Christy, 2016).
The reliance on intrinsic rewards and motivation stemming from leadership was ineffective in the long-term for the company, as it became a global corporation. The majority of Papa John’s workforce were low-level employees that were not motivated by intrinsic aspects but required material, needs rewards for better performance. For the change plan, the company should transition to the equity theory of motivation which emphasizes fairness of treatment, and expectations of rewards that are equitable and justified to their level of contribution and inputs to achieve organizational objectives. Managers can reduce inequity by influencing behaviors such as changing inputs and outcomes based on individual employees and locations to balance perceived inputs and outcomes (Mullins & Christy, 2016).
Last year Papa Johns has committed to increasing pay to its low-level employees who often rely on tipping, and work long-hours. Furthermore, the company began offering tuition assistance employee benefits, including to part-time low-level workers, helping individuals build a career, potentially within the company. This is consistent with equity theory of motivation approach to drive the motivational force throughout the organization.
Leader Behavior and Power
Organizational culture depends on a complex group of processes that is partially influenced by leader behavior. However, if the organization’s survival is threatened because of the culture has become maladapted, it is the function of leadership at all levels to recognize and act accordingly. Leaders may communicate their values and assumptions through both conscious, deliberate actions, as well as unconscious unintended actions, which are mutually contradictory. Subordinate may tolerate accommodate contradictory message since founders or owners may be granted the right to be inconsistent and hold tremendous power.
However, the emerging culture will reflect not only the potentially erroneous assumptions of a leader but the complex internal accommodations by subordinate to run the organization in spite of the leader driving it into the ground with inconsistency. The culture becomes a defense mechanism against the anxiety of an inconsistent leader and reflects the biases and unconscious conflicts of the founder (Schein, 2004). What occurred at Papa John’s leadership crisis was the definition of inconsistency of conflict as its iconic founder and leader Schnatter continuously demonstrated biases and inconsistencies.
Papa John’s has since established a new CEO and significantly optimized its management structure, cutting down on the number of top managers and introducing new roles. These are good first steps towards changing leadership behavior and power. It has introduced new leadership styles to the company, with top management that emphasizes cooperation and communication among each other and with subordinates.
There is a necessity to build a new culture of trust and teamwork that would address the anxieties of inconsistencies that have formed in the company. Given the numerous practical challenges of reforming operational aspects, transactional leadership may be a viable option. It establishes a legitimate authority within the structure of the organization and focuses on clarification of objectives, work tasks and outcomes, and organizational rewards or changes (Mullins & Christy, 2016; Zhou, 2018). It is appealing to self-interests of subordinates as it clarifies an exchange process of rewards for inputs as discussed earlier in motivational aspects and creates a relationship of mutual dependence.
Furthermore, leadership power and influence are dependent on subordinate perception. With Schnatter in charge, the company was run under coercive power based on fear with the CEO having the ability to punish or bring undesirable outcomes for those who does not comply.
It is detrimental in the long-term for motivation and success. Papa John’s has begun steps to shift towards leadership with expert and reward power. Expert power is based on the competency of the leader and knowledge in a given area (most new management and CEO are highly experienced in reforming other restaurant chains). Reward power is based on the perception that the leader has ability and resources to reward (pay, promotion, benefits) to those who comply with ongoing changes and directives (Mullins & Christy, 2016).
A key feature in a successful organization is its culture, health and performance, as well as the ability to adapt to change. Successful implementation and management of organizational change comes from understanding the internal culture and climate of a company. In a holistic system, any change will affect culture which will either perpetuate or constrain the change processes. Culture is an important element of organizational performance, and in combination with a strong business model, a company can be successful with a strong and healthy culture. Change is a constant force in the business world and an inescapable part of social and organizational life.
Various forces of change exist including political, economic, social, scarcity of resources, competition, innovation, and others and organizations must be able to adapt to the demands placed it on. These demands may include changes in quality or service, flexibility of structures and patterns of management, workforce compositions, conflict management or socio-cultural influences such as diversity practices (Mullins & Christy, 2016).
Under previous leadership, Papa John’s refused to adapt or actively innovate, in virtually all aspects ranging from its menus to the organizational structure and adopting new technologies. It must adopt a new approach to change processes. Under the new CEO Rob Lynch, the company seeks to create an environment and culture that is focused on innovation across every part of its business. As part of its rebranding, the objective is to launch a new innovation in any part of the business every two months, this include new product offerings, new platforms, culture enhancement. The company must seek to adapt its change processes to be more flexible as well as allow for the free flow of ideas from its subordinates.
Other changes process may include improved labor efficiencies, product innovation, and shifts in its operations such as a centralized order system and customer service center. These change processes can only succeed by fostering a culture of innovation and openness, as well as leadership that is constantly seeking to drive the company forward, not only financially, but operationally and offer support to its numerous franchisees.
Work design is a key aspect of a company, which defines the content, structure, and organization of jobs within their characteristics, autonomy, workload, and activities that the building blocks of work design. The modern economy has become dominated by the deskilling position theory suggesting that workers and their jobs become deskilled through fragmentation, rationalization, and mechanization. They lose craft and traditional abilities as well as knowledge for progressive. Therefore, a worker, regardless of talent or abilities, does not have to exercise traditional skills and may be easily and cheaply substituted in the production process.
In the restaurant industry, this was applied through a process of McDonaldization, named after the famous burger chain. These principles allowed fast food to dominate sectors and society through routinization and standardization of product and services. This allows for efficiency, calculability (measurability of everything), predictability (uniformity), and control. This leaves workers as passive and compliant despite evidence of both individual and collective resistance to deskilling and overlooks possibilities of potential skill transfer (Buchanan & Huczynski, 2017).
While this work design has a number of benefits, and Papa John’s had adopted it in the 21st century alongside other fast food chains in the industry, it has associated risks as well. These include lack of quality since employees have little discretion in how food is prepared and delivered to consumers, and a lack of innovation. With all aspects outlined in detail and preprogrammed, it leaves little room for creativity on the part of the employee, and in turn, the organization (Buchanan & Huczynski, 2017).
For the change plan, it would pertinent for Papa John’s to explore some aspects of work design. While some elements, such as taking orders from consumers or prepping ingredients should be automatized to the best of ability to make the process more efficient, other aspects should allow for more creativity. For example, the making of the pizza itself or creative choices that are available to consumers. In a modern consumer culture where choice and personalization are highly valued, organizations in the food industry (i.e. Qdoba, Chipotle) that allow for such work design structures while maintaining efficiency are extremely successful.
Papa John’s Pizza is an international and one of the largest pizza chains in the world, having built its success and image on its founder John Schnatter and promise of quality ingredients. However, it has experienced significant downturn in recent years due to a crisis of leadership and associated public relationships disaster, a lack of innovation, and poor organizational structure and demotivating culture.
As the company welcomed a new CEO and is making significant changes, it will benefit most from addressing aspects of employee motivation, leadership behavior, change processes, and work design. These elements were discussed in this paper, offering suggestions on improvements based on management theory.
Buchanan, D. A., & Huczynski, A. A. (2017). Organizational behaviour (9th ed.). Pearson.
Mullins, L.J., & Christy, G. (2016). Management and organisational behavior (11th ed.). Pearson.
Schein, E.H. (2004). Organizational culture and leadership (3rd ed.). Jossey-Bass.
Zhou, X. (2018). BABM core reading: Volume 3. Pearson Education Limited.