10 Mar Dr. Bob’s Reads: PepsiCo’s Performance with Purpose
My purpose is to help all people flourish by creating and supporting healthy organizations. As a part of this purpose, I am committed to finding and sharing best practices and resources regarding purpose-driven leaders, teams and organizations.
Today’s best practices come from the article “Becoming a Better Corporate Citizen” written by Indra K. Nooyi (former CEO, PepsiCo) and Vijay Govindarajan (Professor, Tuck School of Business). Nooyi and Govindarajan share insights regarding the design and implementation of PepsiCo’s “Performance with Purpose” initiative which focused on “putting environmental goals and employee and customer well-being on par with financial goals.”
Key takeaways regarding PepsiCo’s Performance with Purpose (PwP):
- “PepsiCo is one of the few established global companies that have produced superior financial returns while meeting the needs of all stakeholders.”
- PwP added a new perspective to PepsiCo’s strategic plan – “the sustainability of all stakeholders’ interests to ensure the long-term viability of the company.”
- Nooyi: “I wanted PepsiCo’s contribution to society to be rooted in its core business model. I did not want us to fund charitable programs to make ourselves feel or look good.”
- Nooyi: “Our social responsibility had to evolve away from corporate philanthropy and toward a deep sense of purpose that would also drive shareholder values. We need to change the way we made money – not just give away some of the money we earned.”
PwP is based on four pillars:
- Financial sustainability: delivering superior financial returns,
- Human sustainability: transforming our product portfolio by reducing the sugar, salt and fat in our foods and beverages,
- Environmental sustainability: limiting our environmental impact by conserving water, reducing our carbon footprint and our plastic waste and
- Talent sustainability: lifting people by providing new types of support to women and families inside the company and in the communities we serve.
- The above pillars were identified by an internal team of executives who focused on identifying the mega trends that would affect PepsiCo in the future – this approach to strategy development is referred to as “future back” modeling technique for “future proofing” the organization.
- “PepsiCo wanted all stakeholders, especially our employees, to understand that sustainability was critical for the company’s future.”
- “Taking bold actions early is critical for showing the organization that the purpose-driven strategy is not just the flavor of the day.”
- “A purpose-driven transformation may start out as the CEO’s passion, but it will not survive unless it is embedded in the organizational DNA. This requires reinforcement through communication, resource allocation, goal setting, recognition and rewards.”
- “Nothing bakes purpose into an organization more than leadership’s embodiment of it. Executing a purpose-driven is a long and arduous process, and senior executives are likely to stay the course only if the purpose matters deeply to them.”
- “It is easy to forget that purpose is fed by passion which must be refueled from time to time. Celebrate wins, showcase purpose-driven initiatives that are working and energize the organization to believe that transformation is possible.
”With “Performance with Purpose” as their north star, PepsiCo’s:
- Portfolio of more-healthful options grew from 38% of revenue in 2006 to roughly 50% in 2017,
- Water use in operations was reduced by 25% from 2006 to 2018
- Provided safe drinking water to 22 million citizens in the communities they served
- Tripled their investment in R&D to expand nutritious offerings and minimize their environmental impact
- Women held 39% of senior management roles after 2018
- Net revenue grew by 80%
- Stock outperformed both the Consumer Staples Select Sector Index and S&P 500.
Nooyi’s final quote in the article: “It’s now been 14 years since Performance with Purpose was birthed. I look back at PepsiCo and I am proud of the company that it is today and will be in the future. It has succeeded both commercially and ethically. It has learned to balance the short term and long term. A real sense of purpose is integrated into the company’s core operations.”
At Purpose & Performance Group (P&PG), we have helped clients discover and follow their purpose. These transformational journeys are often as challenging as they are rewarding. We are inspired by the courageous leaders who step up to the challenge of leading the purpose-driven, transformational journey required to create and sustain healthy organizations that benefit all stakeholders.
Let us know when you are ready.