Case 1 Domino’s Tries to Get its Strategic Recipe Right

Believe it or not, years ago it was normal for people to have wait an hour or more to get their pizzas
delivered. But those were the years B.D.-before Domino’s. Started by Tom Monahan and his brother in
Ypsilanti, Michigan, in the 1960s, Domino’s created a value proportion people were hungering for: Pizza
delivered in 30 minutes or less. Better yet, if a Domino’s pizza wasn’t delivered in 30 minutes, it was
free. That was unheard of in the pizza business.

Monahan changed the pizza industry not because domino’s created a better product but because it was
able offer a different value proposition than anyone else was offering as well as align its people,
processes, and systems to deliver against that promise. Domino’s used assembly line-based systems and
standardized processes to improve efficiency and reduce pizza preparation systems. For example, it was
the first to use conveyor bolt oven technology to ensure uniform temperatures and reduce baking times.
Domino’s also translated its strategy into HR deliverables by emphasizing and encouraging fast pizza
making and delivery. Annually the company holds a “world’s fastest pizza maker” competition in which
its pizza makers compete for cash and other prizes. As important as what Domino’s did is what it did not
do. Strategy is about making choices. Domino’s did not focus on great pizza-it focus on fast pizza. It did
not customize every order but prepared them in all advance. It didn’t hire premiere pizza chefs who
tossed pizza dough into the air to make lighter crusts. It didn’t use the wood fired stoves to give the
pizza an old-world taste. And it didn’t offer in-store dinning.

Each of the ingredients in Monahan’s formula was aligned around its value proposition of fast delivery-a
strategy that worked well for Domino’s for decades. This strategy and a franchise model helped the
company grow by leaps and bounds. Today there are over 10,000 Domino’s pizza stores, which are
located in 70-plus countries around the world.

Over time, however, Domino’s competitive environment changed. Other companies began delivering
pizzas in about 30 minutes, and consumers began wanting more than fast pizza: they wanted good pizza.
The problem was that Domino’s wasn’t delivering on that score. In taste tests, customers complained
Domino’s pizzas tasted like cardboard. At one point, the firms customers-satisfaction scores in terms of
its food and service were lower than any other pizza chain. Perhaps not surprisingly, the firm’s stock
price reflected as much.

To turn things around, the company had to rethink its value proposition. That included revamping not
only its food but its HR Strategies and policies. One problem Domino’s suffered from is rampant in the
fast-food industry: employee turnover. Domino’s turnover rate was 158% annually. In other words, for
every example hired during during a year another 1.5 employees quit.

Domino’s CEO at the time, David Brandon, wasn’t convinced that higher pay for hourly wage employees
was the solution though. “If we could have increased everybody’s pay 20% could we have moved the
needle a little bit to buy some loyalty? Maybe, but that’s not a long term solution.” Moreover, because
most of Domino’s store are individually owned rather than corporate owned, it is the individual owners
of the stores who have to decide for themselves whether to increase hourly wages.

Instead, Brandon focused on the quality of the store managers-choosing better ones, finding ways to
retain good ones, and coaching them to train and motivate employees by being respectful and polite.
The company also began offering managers stock options for growing their store revenues.
It’s store managers who cause employees to stick around-or not, said Rob Cecere, a regional Manager
for Domino’s. Employees can go to McDonald’s or Pizza Hut and make as much as the make at Domino’s.
“You’ve got to make sure they are happy to come to work for you.”Cecere explained. Domino’s also
worked harder to promote a culture of “fun” via its World’s Fastest Pizza competition and other
initiatives. Brandon thought employees were crucial he actually rename the company’s HR department
the “People First” department.

Human resources wasn’t the only part of the recipe Domino’s had to change, though. It also had to
create a new value proposition for its food. In 2009, it embarked on an effort and associated marketing
campaign it dubbed the “pizza turnaround” to do precisely that. As part of the effort, the company
developed a new recipe for its pizza crusts; began using fresher, gourmet types of ingredients; and
began offering new products such as artisan pizzas, pasta, and desserts. It also remodelled stores and
added in-store dining.

Domino’s chef strength still lies in its systems and technology. The biggest department at the firm’s
headquarters in Ann Arbor, Michigan, is its technology department. The department has built novel
applications over the years, such as an online ordering application that allows customers to “build” their
pizzas online and track their preparation, cooking, and delivery times. The department has also
developed mobile apps for 95 percent of the smartphones on the market. Computer and mobile
ordering now make up 40 percent of all Domino’s sales. In 2011, technology employees built a popular
game called Domino’s Pizza Hero, which challenges players to learn the demanding job of pizza making
and do it fast. Players who are good at the game are then prompted to apply for jobs with Domino’s.

Is Domino’s new recipe working? By most accounts, yes. Turnover dropped by more than 100 percent
following Brandon’s initiatives. Customer satisfaction scores have jumped up too. On this score,
Domino’s is now tied for the lead among its competitors in the pizza business. Wall Street has noticed
and rewarded the firm with an all time-stock price high.

Still, strategy changes and their implementation are continually evolving challenges for firms, and
Domino’s is no exception. The company still faces issues with HR piece of the puzzle and ensuring its
strategy is aligned all the way down the food chain. In 2011, the company received a raft of negative
publicity after two Domino’s workers posted a Youtube video of themselves deliberately contaminating
a pizza in a very disgusting way. In 2013, 20 Domino’s workers in Manhattan were fired for taking part in
a nationwide food strike. The workers claimed they were being paid less than the legal minimum wage.
Recently, the company made news after it asked the European Union to relax immigration laws so the
firm could bring in unskilled workers from abroad to meet its needs. An immigration official suggested
Domino’s could solve its problem by paying workers more.

Would paying hourly-wage employees a little more buy Domino’s a little more loyalty and prevent
negative publicity for the company-loyalty its CEO at one time didn’t think was needed? And if so, would
the costs have been worth the benefits? And who should incur these costs since most of the stores are
privately owned? These questions are food for thought, ones that Domino’s will have to resolve. After
all, even with the best technologies and systems, pizzas don’t cook and deliver themselves. People do.

Questions

1. Explain how Domino’s strategy differed from its competitors.

2. Has the firm been able to achieve a long term strategic fit between its strategy and HR practices
in your opinion? Why or why not?

Answer

1. Explain how Domino’s strategy differed from its competitors.

Domino's strategy differed from its competitors because it relied on the speediness of service -
pizzas were delivered to customers' homes in under 30 minutes. However, that did not offer
Domino's pizza a sustainable competitive advantage because competitors have imitated and
replicated this part of Domino's strategy, such that they are no longer offering a unique value.
Domino's competitors were not only offering pizza in about the same amount of time as Domino's,
but they were also making better tasting pizza, or pizza at a lower cost. Domino’s through its
turnaround strategy diversified its products and improved the taste of its pizzas. However, in order
to create and maintain a sustainable performance over time it should rely on rare, hard to copy and
valuable resources, like its culture (focusing not only in managers but also in employees).

2.Has the firm been able to achieve a long term strategic fit between its strategy and HR practices
in your opinion? Why or why not?

A long-term strategic fit between strategy and HR practices assumes that strategy will not change
over the long-term. This is highly unlikely because the supporting workers—the employees who
could just as easily work at McDonald's, Wendy's or Starbucks—are not valued to the same extent
as management. They are underpaid, and in the eyes of many employees, this is equivalent to being
undervalued. When people feel undervalued, they are likely to quit when a better opportunity
arises, neglect their work duties when possible, and even engage in deviant behaviours to harm the
organization or its stakeholders.

Case study 2: Staffing, Down to a Science at Capital One

1. Why do you think it’s important for Capital One to calculate the “disengagement” factor of its
employees when it comes to workforce planning?

There are three reasons that is important for Capital One to calculate the cost of disengaged
employees. First, they are less likely to be productive for the company. The disengaged employees
are working to be financially secured and not to get ahead within the company’s objectives. So, they
don’t work so hard as they are disconnected from their workplaces or they are not involved to the
vision of company. The disengaged employees can also make costly mistake because they are not
paying attention to their job. Second, it decreases morale. For example, when co-workers are trying
to come up with new ideas, the disengaged employees can discourage others through their lack of
interest. The most harmful part of the disengaged employees is that it can be contagious to others.
Last, it will help Capital One to get out from the crisis. For example, if Capital One figures out the
cost of disengaged employees they can either replace them, or try their best to reengage them.

We have learned from this chapter five steps of strategic planning: establishing a mission, vision,
and values for organization, analysing external opportunities, analysing internal strengths and
weaknesses, formulating strategy, and implementing strategy. Calculating the cost of disengaged
employees is one of internal analysis. It is important to analyses and evaluate the capacity and cost
of employees, and a company should know which segment the employees are occupied.

2. What merits do you see to breaking down the planning process by business units through multiple
layers of leaders? Do you see any drawbacks of doing so?

Breaking the planning process down to the lowest level business manager is ideal because in
complex organizations such as Capital One, these managers are likely to have a better idea of which
jobs and people are critical than a high-level manager might. In addition, each manager is also likely
to have a better idea of what the “endgame” for her/his unit should be. Moreover, mixing the staff
with each business units gives flexibility when it comes to decision-making. Each business units has
different duties and different views; it can bring the best options by combining ideas. Also, it is time-
saver when they make decision without the need for forwarding information to each department
and for waiting responses of other department. By breaking down the planning process by business
unites through multiple leaders, it keeps the workforce focused on the corporate goals. It allows the
financial resources to be used wisely, and human resources to be productive.

We don’t see many drawbacks in breaking down the planning process by business units since it
increases the productivity of the employees and encourages the development of the workplace.
However, braking down to lower level managers is likely to be somewhat less useful in simple, or
small, businesses in which top level managers have a good understanding of all of the HR “pieces of
the puzzle” and the business’s ultimate “endgame.” Also in some types of cooperation which the
time is very important, planning could be costly and time consuming.