Indra Nooyi's Journey of Leadership to Grow PepsiCo to a $100B Company

Indra Nooyi's Journey of Leadership to Grow PepsiCo to a $100B Company

This post is the first in the series of 12 leaders we will cover over the next 3 months.

We're excited to kick off the series with the only woman who has led a business as CEO and of a Fortune 50 company. Her journey from being born in a conservative middle-class family in Chennai (then Madras) to becoming the CEO of a well-known brand has inspired people all over the world. We are talking about Indra Nooyi, former CEO of PepsiCo. This post is full of anecdotes. Enjoy reading.

It's cool to be on the cover of Forbes, Times Magazine, or be named in the top 10 leaders of the world. But you know what's cooler?

To help conserve 3.2 billion litres of water in a year that would have been used for soda production and to save $80M in production cost while doing so. It's cooler to prove that you can make profits by doing good for the environment and society, especially when people raise eyebrows at such ideas and predict your doom. It's cooler to say no to exorbitant spending on Super Bowl advertisements but redirect $20M to social media campaigns inviting people to give ideas on how they can make the world a better place.

Indra Nooyi accomplished all of that and much more in her tenure as PepsiCo CEO.

Under Nooyi’s leadership since 2006, PepsiCo has delivered strong results:

  • Net revenue grew from $35 billion in 2006 to $63.5 billion in 2017, a compound annual growth rate of 5.5%
  • Total cash returned to shareholders through dividends and share repurchases of $79.4 billion from the beginning of 2006 through the end of 2017
  • Dividends per share jumped from $1.16 in 2006 to $3.17 in 2017, a compound annual growth rate of nearly 10%

I would play a journalist for a moment and introduce you to her journey. At a time when girls in India were educated just so they could find a suitable boy to get married to, Indra was focused on her vision of doing bigger things. She completed her MBA from IIM, Calcutta, and earned her Master’s degree in Public and Private Management from Yale School of Management in the USA in 1980. In 1994, she joined PepsiCo and worked there for 24 years before receiving an opportunity to become the CEO.

The success of PepsiCo would not have been possible if Indra was not a wise, compassionate, and thoughtful leader. She is an exceptional leader, a business visionary, and the only woman who has led a business as CEO and Chairperson of a Fortune 50 company.

In this post, we aim to break down Indra’s leadership qualities. Hopefully, it will inspire both experienced and upcoming leaders who want to grow their businesses without submitting to a dramatic display of power or imposing their decisions as last and final.

Traits of Indra Nooyi's Leadership Style

Be open to learning new things

Indra had the humility to say, “I am clueless about this topic. I want to learn more.”, which gave her the confidence to say, “I won’t sign anything until I understand every detail about it.”

And of course, it strengthened her belief in the strategy she would choose after learning about a topic.

PepsiCo wanted to strengthen its position in China. They knew that they would have to do business in China, with China, and for China. Indra understood that she couldn’t go to China without understanding the country, its culture, political structure, etc. So, she went through a six-month training program where an expert on China would come to her office every two weeks, give a 2-3 hours session, and assign a bunch of reading material.

When she decided to overhaul PepsiCo’s IT systems, she read 10 textbooks over her holiday. She had professors on call to answer her questions just so that she could understand the technologies and what was needed. This legwork made her more informed and overcame cynics who were hesitant to make a change.

Takeaway:

It’s hard to be intentional about growth and invest in learning when you can take the easy route of asking your subordinates to figure out the things for you. But as leaders, it's important to understand that you need to seek new information to build new strategies continually.

Always set the right tone

When Indra became a CEO, the company started looking at the pay parity and realised that men are paid 5% more than women. When she told her team to fix the disparities, she got the typical response, “Come on, Indra, it’s so small. Don’t make such a big deal out of it.”

She could have let it go. It only meant more burden on the top line. But she knew that if leaders at the top don’t set the tone of these issues, then they may grow bigger, or many more problems like that can crop up. Understanding why a level playing field needs to be created to help everyone bring their whole selves to work helped her look at the problem creatively.

So, Indra said, “Good, then we’ll pay all the women two-to-5% more and fix it another way.” And immediately, the pay parity issue got fixed inside the company.

Takeaway:

As leaders, you can set the tone of how the culture at your company will be shaped. If you have the power to bring in positive change, you should do the things in your control to make it happen.

Both a positive or a negative tone set by the leaders at all levels can spread like wildfire leading to great success or complete failure.

Think about the last time you did or didn't pay attention to something because it doesn't make a direct 'business impact' or 'it's not a big deal' for you, but might bring a massive change in how the world operates?

Show gratitude towards your team

Indra acknowledged that all the success wasn’t hers to take credit of. There was a team of real-human beings behind all the milestones she was able to achieve in her tenure as a CEO.

To show her gratitude, she wrote 400+ letters to the parents of her executive team members.

It’s no surprise that people felt honoured and humbled to be part of her team. Some of her executives told her, “My God, this is the best thing that’s happened to my parents. And it’s the best thing that’s happened to me.”

Takeaway:

Gestures like this help employees feel that they are not just resource number 32,233 in the directory and are acknowledged for their work. It helped Indra build a team of trustworthy people whom she could rely upon for support.

Be realistic and optimistic

She believes in being realistic and overly projecting doom or gloom. When PepsiCo’s numbers didn’t look great during the financial crisis, she kept saying to the employees, “The economy’s bad, unemployment is going up, but we’ll do okay. And the reason we’ll do okay is because of A, B, C, and D. And the good news is that we’re a consumer staple company, so we won’t be affected as much.”

Takeaway:

As a leader, your words should not sugarcoat the problem and or hide the harsh reality but inspire perseverance in the company. Choose optimism with a good dose of realistic expectations and brings clarity to the next steps. It helps manage the mindset of a team in challenging situations.

Collaborative, respectful, and empathetic

At PepsiCo, Nooyi was well-liked and respected. She listened to those around her, even when they disagreed with her. She had a reputation of being a collaborative person rather than an authoritarian leader.

Her culturally rich background that cuts across different nations helped her appreciate diversity.

She followed the mantra of “Assume positive intentions until proven otherwise.” which was taught to her by her father. She believed that expecting people to have good intentions helps her prevent misunderstandings and show empathy for them.

When she was selected as the CEO of PepsiCo, she made sure that her rival for the position got a pay raise and was given influence in the company, so she did not lose him.

Takeaway:

If you want to find innovative and creative ways to solve a problem, a collaborative approach would be quite useful. It also leads to more job satisfaction amongst your team members as they feel they are competent enough to give opinions and be part of the decision.

Be a lifelong learner

In 1998 Nooyi was Pepsi’s vice president of strategy. At that time, investors valued their competitor’s stock price at a much higher rate than PepsiCo’s. So her boss, CEO Roger Enrico, asked Nooyi to analyse Coke’s business and figure out if the competitor’s stock is worth that much or overvalued.

For the next four months, Nooyi and her team immersed themselves in the global beverage business. She pored over thousands of pages of documents collaborated with a consulting firm to make a competitive analysis. The final report was 300+ pages.

Nooyi synthesised the message into six graphic, easy-to-understand posters and presented them to the board. Nooyi was confident that Coke’s stock price at the time was unsustainable. And she was proven right when the stock fell 35% in the third quarter of that year.

In an interview with Linkedin, Nooyi revealed how she could simplify such complex things. She said, “When somebody gives me a complex problem, I become a student. That was my skill then; it is my skill today,” she said.

Takeaway:

The importance of simplification to become a good leader who is expected to show the path to a solution was very well put together by another phenomena leader, Steve Jobs:

“That’s been one of my mantras – focus and simplicity. Simple can be harder than complex – you have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.” ~ Steve Jobs

Long-term vision and strategy

In 2006, Indra Nooyi launched the ‘Performance with Purpose’ approach. The idea was that the company would deliver financial returns while shifting to healthier products, limiting the company’s environmental impact, and empowering women and families both inside the company and in the outside world.

This is how she wanted PepsiCo to do business.

“My honest belief is that corporations are little republics in their own way. Look at PepsiCo. Our market capitalization is almost $100 billion. We’re bigger than many countries. But we cannot be guided purely by the earnings cycle, or we might end up adding costs to society. We have a profound role in society, and we have to make sure that we are constructive members of society.”
~ Indra Nooyi
(source)

It was seen as silliness that would tank the company at a time when Coca-Cola was growing stronger. Analysts trashed her decisions and called the doom of PepsiCo. But that didn’t deter her from going ahead with her mission and in 2016, PepsiCo beat its quarterly expectations.

The ambitious vision set by Indra Nooyi helped PepsiCo deliver sustained performance while making more nutritious products, limiting the environmental footprint, and lifting all the communities they served.

Takeaway:

This shows that a true leader should be comfortable making decisions that shape the decades ahead and not just bring short-term profits. A leader has to help others accept the misery of disruptions to the status quo.

Indra's Leadership Style: Democratic

What is democratic leadership?

Democratic leadership allows multiple people to participate in the decision-making process. The leader makes the final decision, but employees get their voice heard and their ideas considered during the decision-making process.

Indra led by involving her subordinates and team members in analysing any problem and reaching a conclusion. This helped her gain support in the company even if her ideas sounded ambitious and detrimental at first. Her democratic leadership style was also demonstrated by the fact that she took the time to appreciate her team member's contribution by writing letters to their parents.

The idea of democratic leadership was introduced by John Gastil in the 1990s. His framework provided three core principles of this leadership style:

  • The distribution of responsibility - The democratic leader’s role is to distribute the responsibility among team members according to their competency and involve them in achieving the desired objectives.
  • The empowerment of others - The democratic leader empowers their team members to make intelligent decisions. They help subordinates to practice decision-making, critical thinking, and other skills that can increase competency and confidence.
  • The aiding of decision-making - Democratic leaders play the role of facilitator when it comes to decision-making. They should be able to guide groups through productive conversations and create a space where everyone’s voice is heard.

What are the pros and cons of the democratic style of leadership?

Democratic leadership styles, like all other styles, is not perfect. There are both advantages and disadvantages of using it.

Advantages of democratic leadership style:

  • Fosters innovation and creativity to solve complex problems
  • Improved job satisfaction amongst employees as their opinions are heard
  • A strong team is built as decisions are supported by the majority

Disadvantages of democratic leadership style:

  • The decision process can be slow as many opinions need to be considered
  • Not effective in a crisis situation as a leader might not be confident enough to take quick decisions without taking ideas from others
  • Dealing with rejection or pushback from the leaders can hamper employee's morale

When should you use democratic leadership?

Here are a few scenarios when using the democratic style of leadership is most effective:

  • When your team includes experienced, highly skilled people who can provide accurate information and unbiased opinions. It will allow you to capitalise on their strengths to reach the best decision.
  • If the decisions you need to make don't depend on sharing any confidential information.
  • When a company is looking to implement operational changes that will need cooperation and consensus from the stakeholders involved.

When is democratic leadership least helpful?

If you have a situation opposite of the ones mentioned above, then the democratic style can be detrimental to the company's progress. Don't opt for a democratic leadership style when you have:

  • A team that needs more experience, skills and expertise on the matters at hand
  • Confidential information that is vital to arriving at an objective decision
  • Less time to take everyone's opinion and any delay in decision making can cause problems

A High Note

In 2016, when she stepped down from the CEO position, she wrote a parting letter in which she shared some simple, often missed, but valuable lessons with her employees.

  1. Always have a clear, compelling vision for what you want to accomplish.
  2. Focus on the short-term and the long-term.
  3. Bring people along with you.
  4. Be good listeners.
  5. Be lifelong students.

She understands that everyone is just human before CEOs, and her profound note below on making mindful choices as humans is an excellent way to end this.

“Finally, think hard about time. We have so little of it on this earth. Make the most of your days, and make space for the loved ones who matter most. Take it from me. I’ve been blessed with an amazing career, but if I’m being honest, there have been moments I wish I’d spent more time with my children and family. So, I encourage you: be mindful of your choices on the road ahead.” ~ Indra Nooyi

Stick Them in Your Journal

To summarize, below are the key points we should remember from Indra's journey. To manifest them in your leadership style you can write them in your journal, mail them to your leadership team, or save a screenshot in your notes. Whatever helps.

  • Be intentional about growth. Invest in learning things you don't know about. Seek new information to build new strategies.
  • Create & protect a positive culture. If you have the power to bring in positive change, do the things in your control to make it happen.
  • Show gratitude towards your team. It will help you build a team of reliable people.
  • Choose optimism with a good dose of realistic expectations to bring clarity for yourself & everyone else in the company.
  • Collaborate, ask for opinions or involve team members to find creative & innovative ideas to solve problems.
  • Learn to simplify things.
  • Be comfortable making decisions that shape the decades ahead and not just bring short-term profits