Indra Nooyi is leading PepsiCo on a journey. But folks like Barron’s Andrew Barry believe she has chosen the wrong path. He argues in the November 21, 2011 edition that Indra Nooyi is a “potentially vulnerable CEO whose departure probably would be greeted favorably on Wall Street.” Let’s hope he is wrong, suffering like so many of his downtown brethren from a case of short-term thinking.
At the center of the debate lies the following question: Can a large established multi-national corporation change its way of doing business from the quarterly earnings focus to a shared value approach? Or must this approach be built from the ground up, as was the case with Jeffrey Hollender’s (www.jeffreyhollender.com) 7th Generation and John Mackey’s Whole Foods.
The story of 7th Generation is a great one. Even the name selection was purposeful- derived from the Iroquois Indians’ credo to think of your actions in terms of how they will affect your community and the world at large seven generations from now. It is just as admirable to see Indra Nooyi, the CEO of PepsiCo, beginning the journey on behalf of one of the world’s largest and well-established companies.
At Trust Across America (www.trustacrossamerica.com) our model takes a broad cross-silo view of the holistic health of a company, a full body scan of sorts, to determine its trustworthiness. We examine both financial and non-financial drivers of trustworthy business behavior- specifically, financial stability, accounting conservativeness, corporate integrity, transparency and sustainability. So while, for example, environmental sustainability efforts are critically important, they only tell a small portion about the company’s overall well being.
According to our model, PepsiCo has enjoyed relatively strong scores with regards to both “transparency” and “sustainability” for several years. But what currently catches our attention is the significant increase in its “accounting conservativeness” and “corporate governance” scores. This leads us to believe that the company is getting healthier in ways that may not be important to the pervasive short-term thinking on Wall Street.
Yes, Pepsi’s financial metrics appear weaker in our model than they were a year ago. So do Coke’s. But we know that companies starting out on the journey of improvement might not show an immediate increase in shareholder value. According to Dov Seidman, the author of How (www.howsmatter.com) and the head of LRN (www.lrn.com), organizations take non-linear roads through periods of self- improvement. He quotes legendary Hall of Fame basketball coach John Wooden who said, “It isn’t what you do, but how you do it.” While Wooden’s first few years were not exemplary, he went on to build perhaps the strongest and most successful college basketball program in history.
Setting off on a journey, by its very meaning, does not imply a simple straight road to a destination. Even on successful journeys unfruitful trails may be encountered and backtracking is often required. While the short-term thinkers may be focused on splitting PepsiCo up to enhance short-term shareholder value, our guess is that Ms. Nooyi is making strategic decisions based upon longer-term “deeper meaning” Performance with Purpose implications. She is among a handful of CEO’s that do more than just talk about this somewhat new management approach. Lenny Mendonca of McKinsey echoes these sentiments in a recent video he produced for The Management Exchange. www.managementexchange.com/video/lenny-mendonca-true-accountability-journey-0 Building great companies is no easy journey. We hope Indra Nooyi is allowed to continue down the path she has chosen.
Barbara Brooks Kimmel is the Executive Director of Trust Across America, a program that is setting the “Gold Standard” for trustworthy business behavior. Let us know what you think about Indra Nooyi’s performance at PepsiCo. Leave your comments here or email Barbara@trustacrossamerica.com
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