What Are the Key Points to Dennys Turnaround with Regard to Diversity - Case Study Example

What are the key points to Denny’s turnaround with regard to diversity? After settling its $54 million action lawsuit, Advantica’s CEO Jim Adamson immediately acknowledged that the company did indeed have a diversity problem. Accepting that the company not only had a problem and elevating it into a crisis as Kotter (97) states, provides the great enough sense of urgency needed to initiate the change process within the company. The first point that comes out of Denny’s case therefore is the importance of identifying when a problem has metamorphosed into a crisis so as to warrant the need for a radically new approach. The second lesson coming from this case is the need for top management to openly and clearly indicate their desire to pursue the radically new approach. At Denny’s the CEO made his intentions clear by making diversity an area of strategic focus. This is manifested through the holistic approach that the CEO put in place through the four-part strategy he devised to set cultural diversity in motion. These four parts were: making mandatory intensive diversity training for all members of staff; re-engineering the people systems / organizational structure; making diversity a core competence for appraising management performance, and consistently preaching the gospel of diversity (Brathwaite 1; Rice Para 9). The third point raised by Denny’s turnaround with regard to diversity is that tackling this particular challenge within organizations requires a multi-faceted approach that goes beyond the often promoted mandatory diversity training in many organizations. For starters the Denny’s case highlights that training in itself needs to be implemented through a tiered approach, where training needs are based on position, power and roles and responsibilities of the individual within the company. The second reason why a multifaceted approach is needed is because tackling diversity issues necessitates both cultural and structural changes to the organization. On the one hand, Denny’s recruitment, firing, promotion, development and promotion policies reflected its organizational culture that needed to be changed. On the other hand, Denny’s long hierarchical structure shielded the CEO from the misdeeds committed by the lower management levels. The final point obtained from the success of Denny’s turnaround is the need for consistency from top management with regards to effecting and sustaining a diversity policy within the organization. This has to be done through verbal communication – the fourth part of CEO Adamson’s strategy – and also through non-ambiguous actions. Nothing undermines change more top management behavior that is inconsistent with their words (Kotter 100). Denny’s CEO’s consistent message was manifested through tying up senior management bonuses on diversity, increasing supplier diversity, training and supporting minorities to become franchisees, and through the company’s CSR activities such as increasing their donations to civil and human rights organizations. What lessons can other companies learn from Denny’s experience? From Denny’s experience other companies should learn that workforce diversity offers greater benefits to them than it takes away. For example after is turnaround Denny’s African American traffic increased by 10 million in a little less than three years while its turnover also rose to reach a company record of $2.2 billion (Brathwaite 2). The message here is that it is profitable to have a culturally diverse workforce. Moreover, this profitability is not merely the “feeling good” that results from doing the right thing but it also comes in monetary terms. Secondly, the turnaround from being the victim of a class-action lawsuit on discrimination to wining the Fortune magazine’s “Best Company in America for Minorities” for two consecutive years demonstrates that it is possible for other companies to successfully implement diversity in their businesses. However, these companies must be aware that this will not happen automatically. Companies must be willing to implement the four key factors discussed below as Denny’s did. Thomas (6) identified the following factors as important for the successful adoption of workforce diversity at an organization: need for strong support from the top leadership, integrating management practices with the diversity effort, creating an employee base that is fully engaged with the initiative, and developing and communicating a strong business case for the action. Support from the top at Denny’s was manifested by the CEO Jim Adamson’s personal involvement in developing the four-part strategy to tackle the problem. Further, in a classical agency approach tactic, Denny’s pegged management performance to initiatives geared towards hiring, developing and promoting women and minorities. This management practices were supported by revamped organizational policies. Finally, through an employee training program, the organization and new policies the company was able to actively engage its employees in the initiative. What is the likely impact of diversity on the company’s performance? Thomas (4) argues that businesses should focus on diversity as a major business opportunity. This argument naturally presumes that workforce cultural diversity will have a positive impact on a company’s performance. In the case study, Denny’s African American customer numbers rise sharply from 51 million in 1998 to 61 million in 2000. The company also reports reaching a company sales record of $2.2 billion (Brathwaite 2). Given the direct relationship of customer visits to sales at restaurant businesses we can safely deduce the rise in sales to this rise in minority customer segment. However, this explanation may be too simplistic. A more insightful explanation of the improved company performance as a result of workforce cultural diversity could be looked at in three ways. Firstly, greater diversity helps the company to attract a more diverse customer set. Minorities and women would rather consume products and services that they perceive to be promoting more of their kind. This means that increased workforce diversity helps organizations in gaining unique market positioning among a wider consumer segment. The second reason why increased diversity improves company performance arises from legislation. This is more so for businesses that transact with the federal government. The US government pays premiums to organizations that meet certain diversity criteria set forth in various legislations. However, the greatest reason why diversity improves company performance is that diversity gives the company a wider and deeper pool of talent. The richer pool of talent availed by workforce diversity helps the organization to better understand its markets, which are similarly diverse and multicultural (Thomas 2). For example having Asian minorities at Denny’s will enable the company gain insights into development of new products that not only meets the palates of Asians but could create a whole new market segment. Diverse workforce could also help the company overcome cross-cultural difficulties when exploring new markets across the globe. Works Cited Brathwaite, Sonya T. “Denny’s: A Diversity Success Story.” FranchisingWorld Aug. 2002: 28. Print. Kotter, John P. “Leading Change: Why Transformation Efforts Fail.” Harvard Business Review January (2007): 92 – 107. Print. Rice, Fay. “Denny’s Changes Its Spots.” Fortune. 13 May 1996. Web. 24 Feb. 2012. Thomas, David A. “Diversity as Strategy.” Harvard Business Review (2004): 1–10. Print. Reprint 0409G.  Read More