Performance With Purpose

By: Kim DeCoste Issue: Innovation, Growth, Job Creation Section: Business

PepsiCo’s Indra Nooyi

Pepsi It may be hard to imagine how the CEO of an iconic American consumer product company can truly be innovative. We all know what happens when our favorite products try too hard to reinvent themselves. (Pepsi’s rival cola certainly learned that the hard way a time or two.) Consumers are funny and fickle, and they do not like change when it comes to some things. American consumers are particularly challenging as we take the freedom of “choice” quite seriously in all that we do. We like to choose, and we do not like people to limit the options. Give us healthy chips on the store shelf where we want Fritos and we get angry. We choose with our dollars and we go to the next store, where the Fritos are in the right place.

While few can relate to the pressure faced by those in the top Fortune 100 companies, few will ever have to. It is an elite group of some of the most talented and accomplished people in business. Their dedication to their companies and the industries in which they operate is unmatched. In that crowd, Indra Nooyi stands out among CEOs in the United States for a couple of obvious reasons: she is Indian-born and raised, and well, she is a she. Asked which of those two factors makes a greater difference in her leadership style in a conversation with the Asia Society in April of 2009, Mrs. Nooyi said, “I cannot separate those things.” She further noted that the title “CEO” now has a lot of negative connotations to consumers and citizens. She is highly aware of her obligation to serve not only shareholders and employees, but to maintain a quality organization with far-reaching connections.

Then there is the whole problem of the global economy. PepsiCo does not just operate in the United States, but rather it has a massive international reach with presence in more than 200 countries. It is in its own way a “citizen” of many cultures and lands, and as such, it must be a “force of good in society,” said Nooyi when discussing Innovation with the Business Roundtable.

The products that PepsiCo represents are some of our most familiar brands in the U.S. Together, the 19 product lines under the main businesses of Quaker Oats, Tropicana, Gatorade, Frito-Lay, and Pepsi-Cola constitute the world’s largest portfolio of billion-dollar food and beverage brands. And, each of the brands generates “more than $1 billion in annual retail sales,” according to company reports. This amounts to approximately $60 billion in revenue.

GROWTH & JOB CREATION

Nooyi commands a mighty army of people at PepsiCo. With its global presence comes nearly 300,000 people worldwide, and with that, she recognizes a tremendous responsibility. Listening to her speak, you know right away that she is keenly aware of the, “soul of the company” and her own long-term legacy as the fifth CEO in a line of accomplished gentlemen. She also maintains an excellent relationship with her predecessors (and in one case the widow of a predecessor).

Collaboration is obviously part of her leadership style. Indeed, she is profoundly humane in her approach and in the way in which she clearly values the individuals who stand beside and behind her. When she talks about her Vice Chairman Mike White, respect and friendship are clear in her voice. The story of her ascension to president and CEO on October 1, 2006, and then later to chairman in May of 2007, is an inspirational one. The grace and humility with which she approached the roles is an example to all leaders, current and future, about how one can rise to power with dignity and authority without alienating the workforce. To hear the story told or to read the details, the striking absence of ego in the process she underwent is remarkable and admirable.

PepsiCo has a clear sense of its own corporate culture. Listening to Mrs. Nooyi talk about her team and her advisors, she refers to the, “kitchen cabinet” of former CEOs with whom she is regularly in touch, with great respect. She talks about her 27 executive committee members and how she regularly handwrites notes to their spouses, thanking them for supporting their spouses’ involvement in the organization. Finding and sustaining talent is one of her great concerns. Indra Nooyi is the chief architect of the company’s multi-year growth strategy which she labels Performance with Purpose.

Performance with Purpose resonates with those who share ICOSA’s approach in that it purports to have a multi-dimensional agenda. Item one - Human Sustainability: Nourish consumers from treats to healthy eats and shift toward, “good for you” products. Item two - Environmental Sustainability: PepsiCo does not just want to be environmentally impact neutral; it seeks to put back more than it takes out!

And then arguably, the most daunting challenge because the human element has inherent unpredictability, is the talent sustainvability. The way in which Nooyi discusses this reflects her correct perception that making PepsiCo an attractive and competitive work environment is key from a functional and operational standpoint, of course, but more importantly, if you want a culture that is innovative, you must have bright, motivated, satisfied people.

Her take on the challenge, “How do we create an environment at PepsiCo where people can bring their whole selves to work?” Stunning! The notion that one does not, and in fact cannot, leave his/her “life” at the door when the work day begins is refreshing and allows people the freedom along with the responsibility to do what they need to do when they need to do it. Particularly for the newest generation of young workers, this question around “work/life” balance is significant. Often the requirement for flexibility is seen by older generations as arrogance or laziness, but it is not always the case. In fact, the “Gen Y’ers” or the “Millennial” generation are happy to work longer hours and multitask. They value being respected to manage their own time, and they highly value companies that not only do well, but also do good.

Beyond these concerns, Indra Nooyi’s PepsiCo is facing a paradigm shift that impacts all of us. She calls it, “an era of profound change” and says, “The era of thrift is upon us.” She notes, “People are rethinking today how they spend and what their priorities are.” Governments are struggling to understand what their role is in these challenging times as they look to drive business and support industry while balancing the political pressures they face. And whole economies are being revolutionized – literally – by their people. “What,” wonders Nooyi, “is the new capitalism? Is it unfettered capitalism? Is it regulated capitalism?” She goes on to point out, “Companies like ours that tried to ‘go global’ are now faced with the threat of protectionism.”

INNOVATION

This is when the conversation gets interesting. Mrs. Nooyi goes on to talk about the fact that, “Governments are starting to realize that they can’t do it all themselves. They need private partnerships…corporations are going to be held accountable not to add cost to society.”

Taking the charge, for example, that companies like hers contribute to childhood obesity, Nooyi addresses this head on, and with a highly innovative long-term approach. Although the company produces a sugary beverage that is criticized, of the approximate $45 billion in revenue, (in 2008) about 10 percent of that was from soda. She goes on to remind us that nobody forces anyone to drink it, and “anything consumed in excess is bad.” But where the innovation comes into play is that by carefully managing that portfolio, overall in recent years we have seen, “growth in servings of beverages to be up about four to five percent; however the growth in the calories in those servings is decreasing — of course due to the penchant for sugar free and zero calorie drinks.”

PepsiCo understands the pressure that it is under to be responsible with the products it offers, so it continues to drive toward healthier foods and balanced offerings. It was the first company to take all trans fats out of its products. PepsiCo continues to grow its whole grain portfolio, like SunChips, and it uses heart healthy oils whenever possible around the world in the production of its foods.

PepsiCo is also a member of the Food and Beverage Retail Manufacturing Industry Association and is working toward common labeling conventions on food and beverage in the United States. This will help consumers know what is in all the products they eat and drink. And while government cannot afford to make physical education mandatory, industry can and does come to the table to help support healthy lifestyles. As of April 2009, when she addressed these points, she said that in the United States, Illinois was the only state that had mandatory elementary physical education.

We have to look at our own eating habits as a society, and decide what we can do to adjust generation-long bad habits and try to instill new, healthy habits. “This too can come from private and public partnership,” Nooyi asserted. “Industry creates jobs, keeps the wheels of the economy turning. Government should celebrate us, not regulate us.” And she goes on to say, “If we work together, I think we can get to the right solutions.” However, she does not want to be perceived as an armchair quarterback of government. When asked if she had any advice for the current U.S. President, she said, “In administration we trust. We have to.” But she also invites participation in the process, noting, “When you have a problem of this magnitude — in government in the U.S. today and with respect to the economy — I don’t think there is anyone in government who is not listening. Be participatory.” These challenges will only be addressed if citizens lend their interest and their expertise to help drive for solutions.

LOOKING AHEAD

None of us has a looking glass, of course, so we cannot be sure about the future, but when asked to look ahead and surmise what PepsiCo and she personally might be up to in, say, 2020, Mrs. Nooyi is clear in her vision. “I want PepsiCo to be a defining corporation. That would be my dream.” As she is looking to her future legacy, she says her goal is to create a, “corporation that can be a force for good.” She continues, “Nobody’s going to remember you for the earnings delivery. You will be remembered for what lasting impact you had on society. Did you run a company which after you left, sustained itself? Created jobs? Grew its footprint?”

What might she do at some far-off time in the future? Well, it’s too soon to say, but Mrs. Nooyi would like to give back to the United States. She would like to, “work on a serious problem” at some point and she does not, “want a paycheck for it.” She just wants to solve something. As to whether or not a government position is in her future? No, she says, “I cannot go through a confirmation process. It would be too intrusive.” She is, after all, the mother of two and happily married. It is not her calling to serve government in that way.

In the meantime, as she continues to lead PepsiCo forward, she is able to inspire and educate those who watch her approach to leadership and her success. At the heart of it, there is still something special and different in Nooyi. She is a very people-oriented leader for a massive organization and, at the end of the day, she says she still is mindful of her upbringing and her cultural roots. She reminds her own daughters, “Don’t let your net worth define your self worth.” And she continues to bear in mind an ancient Sanskrit quote, “Treat the world as if it is your family.”

Kim DeCoste is the Director of Career Services for Colorado Technical University and President of DeCoste & Associates, LLC. She can be reached at: kdecoste@colroadotech.edu or 303.362.2948.