Papa Johns and Overcoming Controversy Personal Learning Assignment University of New Haven Spring 2023 MGMT 6663-85 Moeez Kadeer May 6th, 2023 2 During 2017 and 2018, Papa John’s share price fell roughly 13.8% after their former CEO and founder John Schnatter stepped down amidst a controversial situation where he criticized the National Football League and made racist remarks towards African Americans. The company was struggling without any clear leadership from a CEO who could guide them, but in 2019, Rob Lynch stepped up as the CEO and has done a remarkable job of turning the company around and correcting its course – an ongoing effort to this day. Lynch was able to overcome the difficult situation his company was facing by innovating their products, challenging traditional company norms, and taking advantage of a crisis. Lynch provided strong leadership and guidance to the company by displaying high emotional intelligence, leading discussions within his team to work through conflict, and sticking to his core values as an expert in product marketing. Before diving into the details on how Lynch helped his company, it is important to explore what led to this situation. In 2017, John Schnatter made the following comment on the NFL, “[they] hurt us by not resolving the current debacle to the players’ and the owners’ satisfaction” (Giammona, 2017). The NFL at the time was dealing with protests against racial inequality and police brutality and Schnatter’s comments here and the use of the N-word in a recorded 2018 call negatively impacted the public’s view on the company he founded. Schnatter stepped down at the CEO of Papa Johns’ but was still on the executive board, but as the controversies continued, he was forced by the rest of the board to retire and the company cut all ties with him. Schnatter was a very good leader for Papa Johns as he was the face of the company as man who built the company from the ground up, so after being forced into retirement, it is no surprise that Papa John’s sales declined by $364 million and ended up closing 172 locations. A strong leader is critical for a company as it is their job to provide guidance and essentially be the face of the company, and in 2019 when Rob Lynch was hired, he definitely stepped in ready to help Papa John’s get back to where it needed to be. When Lynch was hired as the CEO of the company, the executive board knew exactly who they were getting. Before coming to Papa Johns, Lynch was the president of Arbys and before that, he was their chief marketing officer for many years. Papa John’s hiring a marketing expert as their CEO was no accident, as they wanted someone with a “… proven record transforming organizations and realizing the growth potential of differentiated brands” (Lucas, 2019). Their 3 hope was to have someone help rebrand their image as well as innovate their products, which is exactly what Lynch did. As a leader, Lynch was able to provide the concept of power bases by French and Raven to innovate their products, launching new products every two months consistently. He did this through displaying two out of the five main power bases – legitimate and expert powers. As a CEO of a company, Lynch clearly has legitimate power which is the power that comes with a role, but the real reason his employees and executive board trust him is his expert power bases. This power bases is defined by French and Raven in their research paper on “The Bases of Social Power” as someone who has “special knowledge or expertness” (French & Raven, 1959). Lynch’s knowledge in marketing and innovation and proven success record in previous positions gave everyone the reassurance that he can lead them to their shared goal – success for Papa Johns. Prior to the all the controversies, Schnatter was a well-liked CEO of Papa John’s, to the point where he was featured in many commercial’s and the brand itself was heavily tied with his image (likely the reason his comments led to such an impact on the company). When Lynch was hired, he had no issues challenging this company norm and tradition, vying to not appear in any of the company’s commercials, instead the product was the focus. Being able to challenge tradition and norms, a person needs to show strong conflict management skills and even stronger values. Lynch showed a strong conflict management style by leading meetings where he would not hesitate to turn the floor over to the team and asking for ideas. In one situation, the team mentioned that when working on their product they were “never allowed to touch the dough” (Maze, 2021). Lynch reassured his team that things were different under his leadership and a couple of weeks later, they launched a brand-new product that had much success, the garlic parmesan crust. This trust in the team and their ability can be tied back to contingency leadership. It can be seen that Lynch recognized his team’s ability but saw that they were at a D3 maturity or readiness level, where the followers are generally self-directed but need some guidance and are slightly hesitant and tentative. Letting his team know he had confidence in them working on a part of the product they had never touched previously, completely allowed them to produce a product that performed above and beyond. 4 During the pandemic, many companies were forced to shut down locations or even completely close the company down. However, some companies were able to not only survive in the pandemic, but also thrive. The pandemic was a difficult time for everyone, but especially for businesses. Companies with clear goals and leadership were able to overcome these difficulties and come out of the pandemic stronger and more profitable than ever. In August 2021, Rob Lynch delivered the Papa John’s earnings, beating expectations significantly (“The Exchange” 2021). The company did many things to accomplish this, first, as mentioned in the video from CNBC “Papa John’s CEO Rob Lynch on expansion plans, labor shortage and dealing with delta variant” Papa John’s was able to expand internationally during the pandemic to continue with sustained growth. Opening up a completely new demographic comes with its risks, but Lynch and his team did a great job of working on this project to hit their goals. In the video where Lynch is describing this plan, he displays strong body language. In this course, we watched Amy Cuddy’s Ted Talk on body language and how many studies indicate the positive results that come from even just faking confidence. In his video, Lynch is showing great body language and confidence, that can also be tied to French and Raven’s Power Bases. One of the five power bases, as mentioned previously, is expert power. Lynch is clearly an expert on the topic, and thus has the confidence and ability to thoroughly explain their plan and why the team is seeing so much success. Lynch and his team also had to overcome staffing and supply chain issues during the pandemic. Lynch describes in in the video above how he decided to significantly increase bonuses and benefits during the pandemic to incentivize workers. This type of management can be tied to Contingency Leadership as Lynch was able to see that his workers needed a little push to work harder, landing them in the either D2/D3 development stage. At this stage, motivation is either low or variable, so hanging a bonus as well as increased benefits is a great way to motivate the team. Another way he was able to motivate his team was through inspiring acts. In the video, “Papa Johns President and CEO Rob Lynch Discusses 10 Million Meals Commitment” Lynch describes his plan to deliver 10 million meals to those who need over the course of the next five years. This type of charitable act can inspire his workers and team to work for a company that helps those less fortunate. While Lynch did a great job of digging Papa Johns out of the hole caused by their former CEO, there are many possible ways he could’ve done a better job. For example, Lynch could’ve done a 5 better job with showing his face more publicly as the CEO of the company. The former CEO, Schnatter, despite his shortcomings, did a great job of being the public representative of the company. Lynch did not really do this, as when researching this topic, there weren’t many public interviews of his done. However, this aligns with his own plan of forgoing the traditional practice of Papa Johns to highlight their CEO/owner, and instead have the focus shifted completely to their products and innovation. In conclusion, Rob Lynch stepped up into a difficult situation dealing with controversy and a lot of negative media attention and did a great job turning Papa Johns around. He was able to accomplish this through bringing in new ideas, challenging traditions and foundational company concepts, and taking advantage of a crisis – both internal and external. Lynch also applied many of the concepts and models we learned in this course to successfully resolve issues and lead the company to exceptional earnings, beating expectations by a large margin. Lynch provided strong leadership and guidance to the company by displaying high emotional intelligence, leading discussions within his team to work through conflict, and sticking to his core values as an expert in product marketing. Lynch is definitely someone young leaders who are working on their growth as managers can use as a great example on how to effectively deal with controversy and lead a team to not only recover but become stronger than before. 6 Works Cited 1. "Papa John's Blames NFL Debacle for Hurting Its Pizza Sales." The Florida Times-Union, 1 Nov. 2017, https://www.jacksonville.com/story/news/nation-world/2017/11/01/papajohn-s-blames-nfl-debacle-hurting-its-pizza-sales/16289584007/. 2. Luna, Nancy. "Papa John's Rob Lynch slaughters some sacred cows, keeps others." Restaurant Business Online, 15 May 2020, https://www.restaurantbusinessonline.com/leadership/papa-johns-rob-lynch-slaughterssome-sacred-cows-keeps-others. 3. Lucas, Amelia. "Papa John's names Arby's president as CEO." CNBC, 27 Aug. 2019, https://www.cnbc.com/2019/08/27/papa-johns-names-arbys-president-as-ceo.html. 4. French, J. R. P., & Raven, B. (1959). The bases of social power. In D. Cartwright (Ed.), Studies in social power (pp. 150-167). Ann Arbor, MI: University of Michigan Press. 5. "Situational Leadership: A Guide to Coaching Employee Performance." Purdue University, Manufacturing Extension Partnership, https://mep.purdue.edu/news- folder/situational-leadership-a-guide-to-coaching-employee-performance/. 6. Cuddy, Amy. "Your Body Language May Shape Who You Are." TED, TED Talks, June 2012, https://www.ted.com/talks/amy_cuddy_your_body_language_may_shape_who_you_are. 7. "Papa John's CEO Rob Lynch on expansion plans, labor shortage, and dealing with Delta variant." CNBC, 5 Aug. 2021, https://www.cnbc.com/video/2021/08/05/papa-johnas-ceorob-lynch-on-expansion-plans-labor-shortage-and-dealing-with-delta-variant.html. 8. Fiedler, F. E. (1964). A contingency model of leadership effectiveness. In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 1, pp. 149-190). Academic Press. 9. Papa Johns President and CEO Rob Lynch Discusses 10 Million Meals Commitment." YouTube, uploaded by BusinessWire, 26 Sep 2022, https://www.youtube.com/watch?v=4079vIVWHps 10. QSR Magazine. "Rob Lynch Takes Over as Papa John’s CEO." QSR Magazine, 29 August 2019, https://www.qsrmagazine.com/fast-food/rob-lynch-takes-over-papa-johns-ceo.
