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Monical's Piping-Hot Idea

March 1, 2004
Related Topics: Behavioral Training, Managing International Operations, Global Outlook, Featured Article
In 1995, Monical Pizza Corp. took a hard look at the future and saw a looming recession and an overbuilt, highly competitive fast-food industry. Management at the Bradley, Illinois, chain knew that, with 37 company-owned stores and 18 franchises, it would need a creative strategy to compete with large, well-financed companies during the coming economic downturn.

    It began to reorganize big-time. In 1997, the company instituted a process called the "service-profit chain model," which links employee satisfaction with profitability and growth. And the firm has been enjoying swift and steady success ever since. Turnover in the restaurant industry is notoriously high. In 2003 it ranged from 45 to 80 percent, with higher rates in fast food and lower rates in pricier establishments, according to the the National Restaurant Association. Monical’s turnover still exceeds those numbers, but it reduced its rate from 138 in 2001 to 88 percent today. There has been no turnover among managers within the past 18 months. Guest-satisfaction scores are an enviable 60 percent, and revenue is up almost $6 million since 1998--from $22.8 million to $28.8 million. For proactively changing its operating model to meet the challenges of a slowing economy and an ultra-competitive industry, Monical is the winner of this year’s Optimas Award for Vision.

    The transformation began with an article in the Harvard Business Review, "Putting the Service-Profit Chain to Work." Monical’s team leader for special projects, Max Brigham, made the electrifying discovery. "It made so much sense to us that we began our initiative centered on employee satisfaction as the primary driver of this chain." It was a two-year process in which the company reviewed every contact point employees had with both the company and customers. Brigham says that the self-examination resulted in "a near total overhaul" of the company’s structure and mission. "We involved everyone in the process--general managers, assistant managers, field supervisors, people from the office--and asked them how things should be structured and changed. We took almost all their recommendations." Everything did change: job titles and descriptions, the incentive plan and the company’s mind-set. Management and employees were organized into teams, and hierarchical structure was eliminated. And the company is also working with Harvard Business School as part of an experimental online learning program.

    For the fiscal year that ended April 30, 2003, revenue per store was up about $60,000 from 1998; 60 percent of guests gave Monical a 5 (on a scale of 1 to 5) when asked about their experience, jumping from 55.2 percent in the first quarter of 2000. Revenue climbed to $58.5 million since the company instituted the service-profit chain model.

Workforce Management, March 2004, p. 52 -- Subscribe Now!

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