Case Study

WE HAVE DISCUSSED in this semester that one of the underlying tenets of being a transformational leader is it requires ethical leadership. A transformational leader may have a vision that they seek to bring followers along on that journey, but if that vision is not guided by some form of moral or ethical compass, is it truly transformational?

Indra Nooyi is a leader who appears to demonstrate that being guided by a strong ethical lens is not a weakness, but indeed a key strength of a leader. Previously CEO and chairperson of PepsiCo, a company ranked second in the world in terms of its net revenue, she also consistently ranks in the lists of the world's 100 most powerful women.

Born in Madras, she completed her MBA at the Indian Institute of Management Calcutta (now Mumbai) before moving on to study a Masters in Public and Private Management at Yale. After holding a number of notable positions (including in Motorola), she joined PepsiCo in 1994, moving on to being Chief Financial Officer (2001) and then named CEO in 2006. Since she commenced as CFO, PepsiCo's net profit has risen from $2.7 billion to about $6 billion in 2014, falling slightly to $5.5 billion in 2015. In 2017, she was also announced as a member of the President's Strategic and Policy Forum, a group of CEOs from leading corporations that provide perspectives to help inform the White House's economic agenda.

Nooyi's strategic direction since taking over the helm at PepsiCo has been particularly enlightening as to her personal as well as her business values. Beyond her clear focus on the financial viability and profitability of the company, she also clearly has a personal ethical direction that comes through in her vision for the company. From the moment she took on the role as CEO, she had a clear vision that the future of the company lay outside its traditional offerings. She recognised that people were switching off 'junk food', and wanted the company to move toward offering healthier options. She has broadened the company's product portfolio, reducing the company's focus on the eponymous soft drink that has been the bedrock of its image and heavily investing in a more diverse, and healthier, portfolio. PepsiCo's purchase of brands such as Quaker Foods reflects this, as does her decision to remove aspartame from Diet Pepsi in 2015.

Such a move was generally considered as potential corporate suicide for a business that was already in a precarious position, with falling market share of its flagship brand. However, time has proven Nooyi right, with Pepsi in a clearly stronger position now than it was 10 years ago, and most importantly with its stock comfortably outperforming its main rival, Coca Cola. However, it took Nooyi's commitment to her vision to make this happen.

Throughout her career, Nooyi has stayed consistent with what she has outlined as her 'Five Cs of Leadership', five qualities she advocates as essential for effective leaders: competence, courage/ confidence, communication skills, consistency and one's compass, or integrity.

Competence. Nooyi states that to be a successful leader, you need to be seen and known in your field; in other words, become the 'go to' person. That occurs by standing out as highly competent in your field. She argues that this requires lifelong learning, to upskill and stay ahead of the curve in your area.

Courage/confidence. Confidence may come from competence, but it is also having courage in your decisions and confidence in your convictions.

Communication skills. Both written and oral communications are critical to a successful leader as they are the mechanism by which to motivate and mobilise your staff they help staff to see the vision you are presenting. She has a reputation of building great teams with a common purpose.

Consistency. Erratic or irrational decisions do not engender faith in a leader and staff may begin to second guess the leader's decisions. This does not mean that a leader can't change their mind. It does mean the changes should have a backdrop of a consistent framework.

A compass. A compass or a guiding moral or ethical framework is critical, Nooyi argues, to a leader being successful. This relates to the leader's integrity. As Nooyi suggests, a leader can have courage, they may be competent, have great communication skills and consistency, but if they don't have integrity, the organisation is in deep trouble. Recent examples such as the Volkswagen emissions scandal, FIFA and the Brazilian Government corruption scandals add weight to Nooyi's claim here. Integrity is the essence of 'walking the talk'. The leader's behaviours match their stated position.

This is the basis of a recent area of research interest in leadership the concept of the authentic leader. Authentic leaders are those whose actions match their statements. In an increasingly uncertain world, in a world where we are losing faith in our institutions political, financial, government and corporate authentic leaders may be even more important than they ever have been.

1. Consider Nooyi's list of Five Cs of successful leaders. How do these match with the characteristics of a good leader identified by Ralph Stodgill in 1948? Specifically Dominance, Intelligence, Self Confidence, High energy, Task relevant knowledge (week 10, slide 13)
2. From a 'behavioural perspective' do you think Nooyi appears to be more democratic or autocratic in her approach? Give evidence to support your argument. Do you think a transformational leader needs to be one or other of these types? Explain why!
3. Coronavirus has changed the world in a short space of time and many experts believe that global business has changed forever. With that in mind, research and then describe one long term implication for business leaders. Explain the implication and how leaders will need to respond.