CMR IBS Center for Management Research Case 10 Indra Nooyi: A Transcultural Leader www.icmrindla.org "If all you want is to screw this company down tight and get double-digit earnings growth and nothing else, then I'm the wrong person . . . companies today are bigger than many economies. We are little republics. We are engines of efficiency. If companies don't do [ responsible ] things, who is going to? Why not start making change now?"i - INDRA NOOYI, Chairman and CEO, PepsiCo, Inc. "If you look at the job entirely from the American perspective, then it becomes impossible to run a global business . . . you have to relate your interests to the interests of other parts of the world-to be relevant in their societies. Indra seems to understand this instinctively." - HENRY KISSINGER, Former Secretary of State, United States of America Indra Krishnamurthy Nooyi (Nooyi), chairman and CEO of and CEO of Starbucks Coffee Co. Rosabeth Moss Kanter de- PepsiCo, Inc. (PEP) and considered one of the most highly scribed Nooyi as a visionary who was cross-cultural, female, influential CEOs in the world, was for five consecutive years and values-driven whose approach would be required in this from 2006 at the very top of the list of the 50 most power- era of globalization, where an individual's problems belong to ful women prepared by Fortune magazine." PEP-one of the everyone else."x 500 biggest companies in the world-manufactured, distrib uted, and marketed a range of food and beverage items, with HER EARLY YEARS revenues from 200 countries in excess of US$57 billion for the fiscal year ended December 25, 2010." Nooyi rose through Nooyi was born on October 28, 1955 in Chennai, India. She was the ranks after joining PEP in 1994 as its chief strategic heavily influenced by her stay-at-home mother, Shantha Krish- officer." She went on to shatter the glass ceiling when she was namoorthy (Shantha), whom she considered the first manage- appointed its CEO in 2006. During her tenure, the firm took ment teacher in her life." Though she had a conservative South a serious look at the health issues involved with its products Indian upbringing, there were many contrasting influences in and redefined its links with business and society." She was her life. Observers noted that though she belonged to a Hindu regarded as the creator of PEP's growth strategy, "Perfor- home, she went to a Roman Catholic School. Nooyi admitted mance with Purpose," that strove to balance strong financial that Shantha "encouraged us but held us back, told us we could returns with giving back to communities all over the world. rule the country as long as we kept the home fires burning."x As part of the strategy, PEP offered a range of choices that Observers described how Shantha would remind a young Nooyi were healthy, convenient, and fun while reducing their impact that she would get her married at the age of eighteen, while also on the environment and promoting an inclusive culture at the giving her daughter the freedom to dream about rising high in workplace. In line with this strategy, PEP was listed both on life. *, xil Nooyi noted that she was made to compete with her the Dow Jones North America Sustainability Index and Dow sister for a piece of chocolate after meals, with questions like Jones World Sustainability Indexes. " "I have been particu- "What will you do if you were to become a prime minister?" or, larly impressed by her willingness to do the right thing for "How would you change the world?"* Nooyi believed that this her employees and consumers . . . I believe that all socially process encouraged her to think, and made her come up with responsible companies could learn from Indra Nooyi's style different ideas in order to get the reward.* Another influence of leadership," said Howard Schultz, chairman, president was her grandfather, who kept a tab on her scholastic progress while ensuring that she was always prepared in advance with her lessons.*" Nooyi recalled that while she was taught Indian 2011, IBS Center for Management Research. All rights reserved. classical music, she also had the permission to be part of a rock To order copies, call +91-08417-236667/68 or write to IBS Center for Man- band in which she played the guitar."vi agement Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: info@icmrindia Nooyi went on to graduate from Madras Christian College .org www.icmrindia.org. Used with permission. in Chemistry, Physics, and Mathematics." This was immedia ately followed by an MBA from the Indian Institute of Man- This case was written by Amrit Chaudhari and Debapratim Purkayastha, IBS agement, Calcutta. Then she went on to work with ABB* and Center for Management Research. It was compiled from published sources and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. Rosabeth Moss Kanter is a professor at the Harvard Business School. Fortune is a global business magazine published by Time Inc. *ABB is a multinational headquartered in Zurich, with operations in power 2 The Dow Jones Sustainability Indexes were launched in 1999 and were and automation technology. the first global indexes for tracking financial performance of the leading Johnson and Johnson is a global American pharmaceutical, medical devices, sustainability-driven companies all over the world. and consumer packaged-goods manufacturer. PC4-9PC4-10 PART 4 . COMPREHENSIVE CASES Johnson and Johnson, where she successfully launched vari- a person in consulting (Refer to Exhibit I on the positions held ous products." However, Nooyi's heart was set on other things. by Nooyi). She said, "I always had this urge, this desire, this passion . . . After a stint in strategy with telecom ma elecom major Motorola Inc. to settle in the United States."* Nooyi said her parents were and with ABB, Nooyi made a move to PEP as its chief strate- apprehensive about letting her go to the U.S., and derived com- gist in 1994, attracted by the chance of making a difference to a fort from their belief that she would not get admission. How- company that was then struggling. "She began working under ever, she proved them wrong and got an excellent scholarship then-CEO Roger Enrico (Enrico). at Yale, where she pursued her Master's in Public and Private Management.*" For Nooyi, the experience led to a profound shift in thinking, and she observed: "You come from India off RISE AT PEPSICO the boat, you go to business school, and you realize that you PEP was going through a difficult time-its restaurant business come from a fairly sheltered life . . . I learnt everything over was not doing well in the saturated fast-food market and its again."* While studying, she worked as a dorm receptionist revenues from the international markets were lagging far be- on night shifts to support herself and saved some money to buy hind archrival Coca-cola Company' (Coca-cola). Nooyi was herself a Western suit for her first job interview out of Yale. Kili instrumental in the spinning off of the restaurant chains-KFC, Nooyi had opted for the night shift as it paid an extra 50 cents Pizza Hut, and Taco Bell-in 1997, a difficult move that shrank an hour.*xiv the company by a third."However, as a part of the strategic Nooyi learned to be herself the hard way. She recalled that view, the company acquired Tropicana in 1998 for US$ 3.3 bil- the Western suit that she bought for US$ 50 from the local bud- lion and Quaker Oats in 2001 for US$ 14 billion. *Xxii Nooyi get store was ill fitting and that she wore orange snow boots to went on to prove her mettle with a presentation to the board the interview, leading to gasps from the interview board. *X She in 1998. Enrico remarked, "At that moment the PEP board un- was rejected. When she sought the advice of a professor, the derstood Coke's business model better than Coke's board did"! professor advised her to wear a sari for the next interview, and They also realized that Coca-Cola's growth was not sustain- told her that "if they can't accept you in a sari, it's their loss, able. Nooyi was vindicated when the share price of Coca-Cola not yours."**vi Nooyi wore a sari for the next interview at the began sliding after four months. "*" The moves pushed up leading global management consulting firm, Boston Consulting earnings and grew Nooyi's stature in the company.*XXIV Enrico Group (BCG), and got the job. **" Nooyi averred, "Never hide admitted that Nooyi was "the best negotiator I've ever seen what makes you."*XVII' She added, "I am so secure in myself, in my entire life."* During the subsequent tenure of Steven I don't have to be American to play in the corporate life."XXIX Reinemund (Reinemund), Nooyi was elevated to president be- She followed the same philosophy ever since-of being herself cause he was impressed by her acquisition of Quaker. and not changing her basic beliefs and drawing strength from Nooyi progressed fast in her career and was eventually de- her traditions. clared as one of the two finalists-along with colleague Mike Describing her experience at the BCG, Nooyi said that White (White)-to succeed Reinemund as CEO in 2006. Af- each of her six and a half years there equaled three years in ter being appointed to the post, Nooyi personally flew down the corporate world, given the number of challenges thrown at to retain her former colleague, with whom she had worked for EXHIBIT | Positions Held by Indra Nooyi Academics: Bachelors in Mathematics, Physics, and Chemistry from Madras Christian College, Chennai, India, 1976. MBA from Indian Institute of Management, Kolkata, 1978. Masters in Public and Private Management, Yale University, 1980. Before PepsiCo: Manager positions at Mettur Beardsell Lid. and Johnson and Johnson Ltd. Senior Vice-President of Strategy and Strategic Marketing for Asea Brown Boveri. International Corporate Strategy Projects at Boston Consulting Group Motorola-Vice-President and Director of Corporate Strategy and Planning. At PepsiCo: Senior Vice-President of Strategic Planning and Development. Chief Financial Officer, 2001. Source: www.mba.yale.edu/alumni/alumni_profilesooyii.shtml The Coca-cola Company is a beverage retailer, manufacturer, and marketer 6 Yale is a private Ivy League university in Connecticut, U.S. of non-alcoholic beverages, concentrates, and syrups.A TRANSCULTURAL LEADER PC4-11 EXHIBIT II Food Portfolio of Press Esc to exit full screen Fun for You These products are a part of PepsiCo's core food and beverages business. They include Pepsi Cola, Mirinda, Doritos, Lays, Cheetos, Mountain Dew, 7Up, and Red Rock Deli Potato Chips. Better for You These products are foods and beverages that have levels of total fat, saturated fat, sodium, and sugar that are in line with global dietary intake recommendations. They include Lay's Baked Potato Crisps, Pepsi Max, Diet Mug Root Beer, Diet Sierra Mist, H20h!, Diet Pepsi, and Propel Zero water. Good for You These products offer positive nutrition through inclusion of whole grain fruits, vegetables, low-fat dairy, nuts and seeds or significant amounts of important nutrients, while moderating total fat, saturated fat, sodium, and added sugar. They also address the performance needs of athletes. They include Quaker Instant Oatmeal, G series, Tropicana, Nut Harvest, and Naked juice. * Data as of 2011. Source: www.PEP.com/Download/PEP_Annual_Report_2010_Full_Annual_Report.pdf several years. Nooyi offered him a compensation that nearly on PEP's formidable distribution system to tackle the under- matched hers, creating in the process her right-hand man.*xvi nutrition issues facing the world. *lv The following week, while addressing PEP employees, White Observers appreciated the unusual and tremendously am- remarked "I play the piano and Indra sings." Nooyi emphas bitious vision that Nooyi had of reinventing PEP. This came sized, "I treat Mike as my partner. He could easily have been under her leadership banner and corporate mission of "Per- CEO." She ensured that he was always next to her during key formance with Purpose," which ensured that PEP achieved fi- meetings. *Xxvii nancial success and social responsibility along with it. lil The Nooyi was candid enough to admit that she had had a diffi- initiative was composed of three important elements: human cult journey to reach the top from her humble middle-class back- sustainability, environmental sustainability, and talent. (Refer ground in South India. She said, "Immigrant, person of color, and to Table I.) woman, three strikes against you. . . . So I would work extra hard The company began to focus on getting an increased at it. More hours, yes. More sacrifices and trade-offs, yes. That has amount of earnings from health products, such as oatmeal been the journey." *XXVII Some observers said Nooyi was true to There was a push away from snack food, caffeine colas, and her name Indra, the Hindu "God of War."XXXX According to Nooyi, shareholder value toward health foods, fruit juices, and sustain- it was essential to focus on establishing an ethical corporate cul- able enterprise."For Nooyi, the most important issue was the ture and long-term planning to avoid any corporate scandals." linkage of performance with a sense of purpose in the sense of "a very closely linked ecosystem" and not performance and A NEW CORPORATE VISION purpose or performance or purpose. She emphasized that un- Nooyi continued to be a major change agent at PEP after tak- less one focused on purpose, there could not be performance; ing over as CEO. Observers said that the earlier acquisitions of unless there was performance there could be no purpose in the Tropicana, Quaker Oats, and Gatorade pointed to the direction that PEP would take in the future-toward "better-for-you" TABLE | Food Portfolio of Pepsico Inc. * products, and away from junk foods. * (Refer to Exhibit II on the Food Portfolio of PEP.) Components of "Performance with Purpose" Initiative At the World Economic Forum in Davos in 2008, Nooyi Human Sustainability Ensuring that products ranging remarked that it was essential that "we use corporations as a from treats to health foods allow productive player in addressing some of the big issues facing customers to make balanced, the world."She said that an important way of achieving this sensible choices. was to inspire people to have a vision that everyone could re- Environmental Sustainability Ensuring that the company late to.* Critics noted that as a child growing up in a develop- replenishes the planet and ing India, she had seen the success of the Green Revolution in leaves the world a much better transforming society; they felt that this had made her sensitive to place than it was before. the role of the corporate sector in sharing their expertise in the Talent Sustainability Ensuring that the employees developing world. Going forward, Nooyi wanted to leverage of PEP also have a life while they earn their living with the Green Revolution refers to the introduction of high-yielding varieties of company. seeds after 1965, along with the increased use of fertilizers and irrigation, to increase production and make India self-sufficient in food grains. Source: www.leadership.bcg.com/americasooyi.aspxPC4~11 PARTA - COMPREHENSIVE (ASES aetions.'\"" She claried further. "It doesn't mean subtracting from the bottom line , . . (but rather) that we bring together what is good for business with what is good for the world. . People these days are bringing their principles to their purchasing . . . we. in return. are bringing a purpose to our performance."I N ooyi emphaSized that the economic downtum since 2008 had made the idea of performance with purpose even more im- portant. For instance, it required that PEP's portfolio be trans- formed in such a way as to ensure performance. PEP's green initiatives ensured that costs were controlled. while talented and young people were attracted to work with the rm." Observers appreciated the fact that the vision had enabled the rm to be adaptable in order to continue growth at a time where there was increasing public aWareness about the environment. customer concern about health. and a ditiicult economic climate.\" Her philosophy made her back \"Pepst Refresh" and other socialrresponsibility posnioningm The "Pepsi Refresh" project worked under Nouyt's vision of \"Performance with Purpose" and allowed tapping into the Millennials,9 who would be more likely to choose brands that would contribute to the society at large. Observers termed the prtuect a phenomenal success in terms of participation as it allowed people to put their ideas into action in the form of grants that were voted on by the public.\" Critics noted that Nooyi was able to understand the culr ture of Pepsi. and to go on to challenge its accepted beliefs and practices in ways that were quite nonrconfrontational. For many critics. this was the result of Nooyi's Indian cultural background that had various regional and lingual inuences.\" Nooyi was named the CEO of the year 2009 by the Global Supply Chain Leaders Grttup'n (GSCLG) for her continued contribution to respcmihle corporate citizenship even at a time when there was a global economic slowdown. They acknowlr edged Nouyi's longrterm vision and execution capabilities and her efforts to provide a wider portfolio of healthier foods and beverages.In Some experts said that if Nooyi could actually de- liver on both wholesome food and healthy prots. the future of PEP would be very bright.\"\" LEADERSHIP AND MANAGEMENT STYLE Nooyi had the good fortune of being guided by three former PEP CEOsikememund, Enncrt, and Don Kendall Observers noted that her mix of South Asian heritage and mentoring at PEP had given her a strategic view of world markets. Though critics held that Nooyi might not treat everybody the same way as she did White, they agreed that she was ready to take help from others in whatever areas she felt there was a need."'\" Nooyi admitted that even after retirement. Reinemund contin- ued to reply to her emails within seconds and was ready to be at her side if she needed advice. Experts felt that her experiences early In her Career With organizations such as the ECG had taught her the inductive \"The Millenniuls are Genetattutt v with birthrdales between the and 1th to the late '90:. Given thc stronger reach otthc media during the tunnativc )eari oi [MM generation, many oi these menthen have a neorliberal approach "' The GSLG an and is given to individuals who get the highest aggregate latr mg in leading. developing. and maintaining sustainable. responsible business practices on a global scale. thinking that had shaped her leadership style. "I don't think I could have gotten here without a strategy consultant back- ground because it taught me inductive thinking. It taught me huw to think of the problem In micro terms but also to zoom out and put the problem in the content of its broader envtron~ merit and then zoom back in to solve the problem.""' she said. Experts noted that she could successfully predict the slowdown in the aerated soft drinks market and lead the foray of PEP into the sports drink market with Gatorade." Her deep knowledge or the products and nancial allairs of the company was wrdely appreciatedm Nooyi felt that no matter what the previous experience ofa person, nothing could really prepare him/her for the top job at an organization, She believed that leaders should have the abile ity to draw on their prevtnus experiences while having an en during commitment to the learning process According to her. \"if you want to improve the organization. you have to improve yourself and the organization gets pulled up With you. That is a big lesson. 1 cannot just expect the organization to improve ii I don't improve myself and lift the organization."\"" According to some experts, Nooyi also had the traits of being a Level 5 leader that lead the company's transition from good to great. \""l Nooyi saw ve ihings that would change the workings of a CEO. First, she believed that there had to be an emphasis on the long-term outcomes rather than a focus on shortrterrn earnings emphasized by shareholders. Second. for working ct fectively in a world that was becoming increasingly complex, there would have to be an emphasis on strong public-private partnerships, Nooyi felt that governments had become intrue sive and had begun to challenge corporate governance since the trust in companies had touched an all-time low: that the par- ties saw themselves as adversaries. Third, there had to exist a strong ability to think local while acting globally, especially in the Context of newer markets in the developing world. Nooyi said that in developed countries there were large stores that allowed the development of hundreds of new products. Home ever. tor the developing world which typically had small. tiny stores. the need was to give choices in a completely different way, Fourth, Nooyi wanted CEOs to be more open minded so that they not only understood better leadership principles but also the needs of the newer technologies and the younger gen eralions. She wanted greater openness toward cultures. To get th he believed in havtng great people to run the company so that the CEO got a chance to travel Nooyi herself spent nearly two weeks In China. where she went to Customers homes and interacted with people to understand how they lived, what they thought about the products. and what the company should do ditt'erently in order to succeed. Fifth. she felt that there would be increased requirements of emotional intelligence for leaders. so that they could create a bond between the company and the employee. through the business model and the values the com- pany stood for.'m Nttoyt was known to be highly charismatic. with a clear ioice,IW She retained her Indian accent and went on to use Americanisms in her interactions.\"" Experts noted that Nooyi could inspire employees to take on monotonous and difcult iaslrs.\"\"' According to Nooyi. a great leader was one who could get people to follow her to the ends of the earth. She remained CASE 10 . INDRA NOOYI: A TRANSCULTURAL LEADER PC4-13 tough on herself and set high standards for everyone. Experts values to work, and to use them every day. Observers pointed pointed out that since she had been held to high standards in to the increased levels of pride at PEP, an integration of work her childhood, she applied the same to everybody else. They and life values, and the satisfaction of contributing to consum- pointed to her practice of using green, red, and purple pens to ers, communities, and countries. They noted that the initiatives highlight issues on documents. Nooyi admitted that her scrib- had enabled employees to hit their career "sweet spot" and to bles were legendary, and she would write statements like "I have make talent sustainability a strategic advantage at PEP." Nooyi never seen such gross incompetence," or "this is unacceptable" launched the "Leading with Purpose" program at Yale University and would underline "unacceptable" three times. Employees re- for all the divisions at PEP, which enabled leaders to move in the membered the time when they were asked to find an alternative direction of "Performance with Purpose."XXX She treated the em- to the use of palm oil. Nooyi pushed them hard until they came ployees at PEP as leaders and built a culture that recognized hard up with a solution. One employee recalled, "Don't try to del- work and encouraged initiatives from employees. She defined egate up, because she will bounce it right back in your face."xvili her leadership philosophy into the "Five C's". Ixxxii However, she nurtured the employees at the same time so that her followers aspired to be like her in the future."xix . Competency: Being an expert in your field, stand out from Reinemund considered Nooyi a "deeply caring person . . . who the crowd and be a lifelong learner. can relate to people from the boardroom to the front line."xx . Courage and Confidence: Having the courage and confi- Nooyi always seemed comfortable with her leadership pres- dence to do and say what you believe is right. Establish the ence, as she often moved around in the office barefoot, singing knowledge base and be confident. in the halls." She was said to have gifted former CEO Enrico Communication skills: Good communication skills are a karaoke machine and was herself known to sing out during critical for progress. management conferences." Known to be a style apostle, she . Consistency: Being steady, reliable, and determined so that preferred wearing saris topped with a simple shawl and pearls. Nooyi's attire showed her deep connection with India. xxill one is credible and has a baseline to measure successes and failures She attended board meetings in a sari, as she believed that the corporate world preferred people who were genuine. "xxiv . Coaching: Being surrounded by mentors that enable She became a mother figure at PEP, looking after the com- change. pany as if it were her family. Observers noted that she made . Having a Moral Compass: Having the desired strength and time for regular staff who needed to interact with her-be it courage to do what is right and not what may be expedient. xxxili even the security guards at the Purchase, New York, headquar At PEP, Nooyi ensured that employees balanced life and ters. Every quarter, she sent a hand-written letter to the spouses work and had an extended family at the workspace to achieve of all 27 of her top executives, thanking them for their support that balance. despite the long hours of work and travel that the executives had to undergo. XX As she was very demanding at the work- STRIKING A BALANCE place, she made up by throwing dinner parties for the members of her team and their spouses. At these dinners she interacted Nooyi sums up the trade offs and sacrifices she has made in her with her team members' spouses and fielded questions from life "Any woman who reaches the kinds of positions we do, and them. Nooyi also took the personal initiative to thank the par- I'll speak for myself here, there are so many tradeoffs, compro- ents of the senior executives at PEP for the great job they had mises, heartbreaks, regrets that we've had to make along the done in bringing up capable children, and this unleashed strong way. It has not been easy. You know, I have two daughters. I emotions that created a bond between the executives, their par- have a husband, been married for 28 years. I have a mother still ents, and her. XX She also insisted on celebrating everyone's alive, and my family is very close."XXXIV She candidly admitted birthdays with a cake. Her extracurricular activities were not that between the roles of being a mother and a CEO, it was the limited to playing the electric guitar at office parties, but also role of the mother that came first. She said that she would take included reading a book every day from1 1 p.m. to 2 a.m. to a call from her daughters any time, even during work hours. keeping herself up-to-date on innovation.ixxvii She held on to her value system that gave emphasis on being Nooyi strongly believed that globalization and the spread there for her children. " During long trips, Nooyi called up of information technology had turned organizations inside her family to keep in touch; if she was on a domestic trip, she out and upside down. The decision-making ability had shifted tried her best to be there with her daughters for breakfast. She to lower levels that tended to operate through self-organizing also acknowledged the support she got from her husband in networks. "xxvill PEP saw a broadening of the power structure when her progress. According to her, she faced enormous pressures the executive team was nearly doubled to reach 29 members. in meeting the expectations of being a wife, a daughter, and a High-profile additions included Mehmood Khan, who be- daughter-in-law while being responsible for the affairs of PEP. came PEP's first chief scientific officer for looking into food She admitted that it was late in life that she stopped being con- research. xxx Nooyi used her leadership banner of "Performance sumed by the guilt of not being good at everything and did with Purpose" to ensure that PEP's leaders had an opportunity to work for achieving an integrated life."While focusing on the talent sustainability pillar, Nooyi rolled out her "cherish" prin- " A career "sweet spot" enables employees to work harder with higher impact iples for valuing employees, encouraging people to bring their and yet feel less stressed