Motley Fool Hidden Gems Investing - Indra Nooyi on Leadership, Culture, and Steve Jobs

Episode Date: December 4, 2022

During her 12-year run as CEO of Pepsi, Indra Nooyi helped the company grow sales by 80%. Despite her success as one of the most powerful women in business, she's happy to be out of the world of “bits and bytes.” Motley Fool co-founder and CEO Tom Gardner caught up with Nooyi to discuss: - Other CEOs she's learned from - Building a culture of ownership - Decision-making as an art and a science Companies mentioned: PEP, AAPL, AMZN, PFE Indra Nooyi's best-selling book is "My Life in Full: Work, Family, and Our Future". Host: Tom Gardner Guest: Indra Nooyi Producer: Ricky Mulvey Engineers: Heather Horton, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

But I will say something, this is based on my biases from my past. I don't know how you build a corporate culture unless people come together. I really don't know. There's something to be said about the human interaction. I don't know how you do leadership development unless you have people coming together. I don't know how you judge people unless you have people actually physically coming together. The best thing I did when I was CEO across the world, I visited people. I met them.

I shook hands with them, talked to them, saw them in action. It was just an unbelievable feeling. I'm Chris Hill, and that's Indra Nooyi. She joined Pepsi in 1994 as a Senior Vice President of Strategic Planning. Over the next decade, she rose to become President and Chief Financial Officer, and in 2006 was named CEO, a position she held for 12 years. Motley Fool co-founder and CEO Tom Gardner caught up with her for a conversation at our company's recent annual meeting. And we're bringing you part of that conversation today.

They talk about the business leaders she's learned from and her path to the corner office at Pepsi. What was the process like for you in becoming CEO at Pepsi? How was the idea introduced? Were you an applicant? had that been something that you considered part of your pathway at different stages along the way at Pepsi? And what was that onboarding like? You know, all PepsiCo CEOs had run big businesses. And I was through strategy, the CFO job, then I was president running all the corporate functions. And Steve Reinemann, my predecessor CEO, did something very interesting. He said, look,

in all the work you've done, you've operated left of the decimal in big numbers. I want you to learn the right of the decimal, you know, small pennies, how you extract value from small pennies applied over many things and you get cost savings. So he had me do a project at Frito-Lay to improve the distribution system. So I had done projects on operations, but never really run a P&L in this entirety day to day. There were lots of other extraordinary people in PepsiCo that the board could have picked. We were not told there was a succession race going on. But, you know, some of us were on the board at that time. So the board knew us. And I honestly believe, Tom, that if you decide you want to be CEO and you start to run for it, you actually work against yourself because

you're so obsessed with becoming CEO, you forget that you have to do the work. I was focused on doing the work because at the end of the day, I didn't think my boss was going to retire when he did. I thought the two of us were going to retire at the same time because he was a young person and I enjoyed working with him. And so when he walked into my home one day and said, the board would like to tell you on Saturday that you're going to be CEO. I said, why are you leaving? That was my first reaction because I mean, I was enjoying working with him. He said, I'm going back to Dallas. My family would like to relocate. And I think the board felt there was the strategic repositioning that was needed of the company.

You know, companies go through ebbs and flows. You have great operational leadership. Then you need a strategic tweak. Then again, you get a great operational leadership, another strategic tweak. So I think Roger Enrico did all the strategic transformation. Steve extracted phenomenal performance from that transformation. I came in strategically repositioned. And the new CEO is extracting operational, you know, benefits from all that repositioning.

So I think the board was very clever in deciding what kind of CEO you needed for the times. And so I was surprised I was picked, but I now in retrospect, I understand why I was picked. What are the biggest differences between being a CFO, then being the president, running all the corporate functions, and then being CEO? What does that progression look like as we each look at our own career journeys and what it means to level up to that next spot? There are two kinds of CFOs. There's what I call the control and numbers-oriented CFO. And then there is the strategically focused numbers CFO. PepsiCo typically had CFOs that came from a strategic focus, became the partners to the CEO.

okay and so I came from that ilk big picture strategy but I was also good at zooming in to the numbers and running the finance function and because I was president also and because I was part of so many of the transformations I knew every nook and corner of the company around the world I knew every one of our bottling partners our joint venture partners employees knew me and the CEOs before me gave me a lot of visibility because I was the first woman in that, an immigrant woman of color in that executive suite. And so I was given a lot of visibility by my predecessors and pushed and promoted. And so I thought I was totally prepared when I was told I was going to be CEO. But then when you become it, like you do in a game of tag

term, the view is completely different. Because when you're president and CFO, your CEO is still your first line of, you know, first line for the shareholders, for everybody outside. When you become it, you are the front, you're the first line of attack. And you're fair game. CEOs are fair game for anybody who wants to attack a CEO. And so you've got to retool your mind to say, I thought I knew everything about the job, but now I am the one making all the decisions. I get great input, but I'm making the decisions. I have to think about my 250,000 employees, their families, the suppliers, the partners. So you have a very different sense of responsibility.

And boy, I tell you, I came to work every day with a little bit of butterflies in my stomach saying, I hope I do right by this company. Thank you so much for that. As the CEO at Pepsi, you introduced Performance with Purpose, PWP. and that was kind of maybe quoting directly a plan to put environmental goals and customer and employee well-being on par with financial goals and I was wondering to what extent your pathway to becoming CEO and that CFO background for example and running businesses I'm wondering to what extent you think anyone at any level in a company anywhere inside the Motley Fool or inside of Pepsi or any other company, how important you think it is to work with a purpose and understand

the business realities, to see both of those things together. Because naturally, some people come to work and they're like, I'm the transactional, I'm the numerical, I'm the money side of it. They'll figure out how to make it all come across in the right way in the world. And others will say, I'm the one who's out front interacting with you. I don't really know how the pricing works. I'm not sure distribution, the costs. I don't know what the cost of acquisition is for a new customer. I don't really know those details. How important do you see it to continually try to bring those two things together within an individual's career, no matter the company? So in my experience, I've come across two kinds of people. People who come to work saying,

I've got to do a job. I've just got to go do the job, get a paycheck, and go home, which is perfectly good as long as they do a job well. Then there are those who go to work saying, this is my company even if it's a big public company they say it's my company they have an ownership culture about it they feel they're part of this company and when they whenever they have to do whatever job they're in they redefine the job to be more expansive thinking about all the linkages of the job to other functions okay i'll give you an example but let me start off by saying i was the second type whatever i was given to do i would do it well but then i would ask the question, who's going to use the output of my work? How is it going to be used? I always thought

about people two levels above me. How would they use it? If it was a board, I'd say, what's the board going to say when they see this document? What can they do with it? What information are we trying to give them? But by sort of doing the work at ground level, but then levitating about 10,000, 15,000 feet and looking at the work and impact on others, you have a different perspective of the work. That's the way I was trained at the Boston Consulting Group. So that's a skill I brought to PepsiCo. And I think in many ways, that ability to zoom in and zoom out constantly is what got me the attention of all of the leaders in PepsiCo saying, here's an unusual person. And I'd say to anybody, those that do that sort of zooming in and zooming out

have an ownership culture about the company and want to make the company a better place are those that develop a sense of purpose about coming to the company, getting up every morning and coming to work, whether you're doing it remotely or in person. They're the people who get up every morning saying, I care deeply about this company. And I cared deeply about PepsiCo. I mentioned in my book saying I had an irrational love for the company.

And to this day, I carry that irrational love. When you have that sort of a love and think it's your company, the way you act is completely different. You care about everything. Everything I do, I worry about the broader impact of it. And that gave me a tremendous purpose. And how about having the business detail alongside that sense of purpose? Understanding, I mean, you essentially shared your thoughts on that with the zooming in, zooming out. And then how about somebody who zooms in, zooms out, but just doesn't quite yet understand the business implications of decisions?

What would you advise to them? It's a terrible thing, Tom, because if you make decisions in a vacuum without knowing how it's going to land on people and businesses and processes, you might actually make a big blunder. Because the whole idea of leaders making good decisions is that you're not just making a good decision on what you think is the right decision for the company. You're thinking about how it's going to be implemented. And that's why they say people who actually run P&Ls know how it's going to land and how people will interpret it and act on it. So I think anybody who's CEO or in a C-suite has to know what the impact is and how it's going to land on businesses, functions, people, regions, any decision you make.

So for example, performance with purpose as an overarching strategy, we had to take it on the road to see how is it going to land in various countries. How are they going to interpret it? How can they execute performance with purpose? Should we tweak performance with purpose at the margin for certain countries? So we had to go through that exercise. So I think anybody who thinks decisions can be made up on high and miraculously it will land is making a mistake.

You've got to constantly think about all of the pitfalls when it lands and then go back and tweak the decision. Not too much, but enough to make it work. it's an art and a science an art and a science we are in obviously in a very tough market environment now with a lot of unexpected factors that nobody few people i think would have imagined the collection of them five years ago i don't know that anyone in the world would have been able to put together the scenario that we're in and i want i want to hear a little bit about how you manage through change and through crisis i would just say for the motley fool we face a

unique challenge in that even though our assertions and our advice may be right in the long term, it can look very, very wrong in the short term. You could recommend what could end up becoming a great company, or is a great company, could be a great investment seven years from now. But in the next year, it's down 58%. And for a member coming in to see that and experience that and not be able to process that harsh early experience doesn't mean a long-term failure. Although, of course in investing, you do also make mistakes that do end up being long-term mistakes. So the complexity of laying that out for our members in an environment like this, obviously there are plenty of things that are analogous in your work career and at Pepsi and Pepsi facing recessions.

How do you suggest managing through change and through crisis for all stakeholders, for the employees and making sure everyone understands the mission and why we're here and what we're working on, but for all the stakeholders that are suffering at different points along the way as well so let me give you three scenarios tom because i think it's important they're very different when we are transforming future back which is what you're talking about we know what the future is going to be we have to change the company it behooves me to paint a beautiful picture of the future in vivid terms to people tell them why we need to change and make the change happen and those that stand in the way after you know sometime when you try to change them and they

don't, you've got to move them out. Because you have such a clear idea of what changes need to be made for the future. So that's one kind of change. The second kind of change is when you've got force majeure, you know, war in Ukraine, geopolitics with China, you've got inflation, you've got stuff that you don't control, financial crisis, all these, you know, you don't make happen, but they happen around you. And you've got to navigate the company through that. When you have something like that, just have to bring the employees together and say, you know what, we can do it. Give them confidence when they are feeling nervous. Give them stability when they feel like the world is spinning out of control. Just give them stability. Tell them, we'll go

through a tough time, but we'll come out of this. The third kind of change, the unsettling aspect is when an activist comes into this talk and demands you do all kinds of things. Now, this is not stuff you're planning. This is not stuff that happened to you. This is an activist who thinks they know a lot more about the company than you do, even though they don't. What do you do then? At that point, again, is when the best of a CEO has to come out and say, our strategy is clear. This is what it is. We are not backing off of that. Our board is not backing off of that. You guys keep running the company and delivering results. I will take care of the activist with the CFO and the legal counsel. You have to have separation of roles so that everybody's not worried about the

same issue. So I think in each of these cases, you have to behave differently. You've got to really understand what you're trying to do and behave differently. I'll be honest with you, Tom. One of the things that I was blessed with, I ran a company like PepsiCo, which made products, you know, to eat and drink them. If I was running a company that made products that are based on bits and bytes, which is being disrupted every which way to Sunday, I don't know how I would have run that. Because anything that's bits and bytes and digitally movable is going through massive disruption at this point, just like what you're talking about. A whole different ballgame. I guess in the difference between ideas and products, some of the way the

pandemic played out would naturally be different. Because in the product world, there are maybe a point of sale with a customer or a necessity to have somebody at a distribution point. Whereas in the world of ideas, perhaps everyone can be in their home office because you're able to really, there are gaps and differences in the way you work, but for the most part, you were actually able to make your way through, learn as you go, but continue to work remotely. I'm wondering if you were running Pepsi now or looking at any company, what sort of insights, what sort of advice would you have for how to think about how work is going to be different and not in a temporary way? Sort of a longer term bet on the way work will be different

now because of what we've been through. In a way, I'm glad I'm not a CEO now because this is a confusing time in some ways. But I will say something. This is based on my biases from my past. I don't know how you build a corporate culture unless people come together. I really don't know. There's something to be said about the human interaction. I don't know how you do leadership development unless you have people coming together. I don't know how you judge people unless you have people actually physically coming together. The best thing I did when I was CEO across the world, I visited people. I met them. I shook hands with them, talked to them, saw them in action it was just an unbelievable feeling and the thing that I always worry about

in my in PepsiCo but I'm sure you do in some shape or form in Motley Fool is if you're a servant leader really a servant leader you won't allow some people to come into work and all others stay home people will figure out a way to come together because you're serving the people that work for you. So net-net, what I'd say is conduct a few experiments and see what works best. My bigger concern is productivity, I think, is not where it should be, given the lack of clarity on hybrid working. I'm all for flexibility, don't get me wrong. It makes for good family building. But I think what we should agree on is X number of days of the week you're going to come in. so we can actually build a community, we can build, you know, culture,

we can build a leadership team, we can get to know people so we can put name and face together in a human way and shake hands. There's a lot to be said for that. And talk about productivity. If we work at home or in the office, let's talk about all that. And then do experiments in different parts of the company, two days, three days, everybody coming in some coming in rotation do that but do not disadvantage any group don't say women didn't come and therefore they're disadvantaged men came and therefore they're

advantaged be very careful about you know favoring or not favoring one group of people i thank you for that i want to uh respect your time uh but i also have three more questions but go ahead you could okay good good um so i'm wondering i think you've expressed that you feel career-wise, you won the lottery because the journey of an immigrant woman of color was not a well-worn path into the executive suite at a company like Pepsi or any other Fortune 50, Fortune 100, Fortune 500 company or many companies. I'm wondering to what extent you think that is different now. How far along are we that the odds are not so long and so stacked against let's specifically take an immigrant woman of color but in any other forms of obstacles that

exist to the merited rise of talent to create the most dynamic marketplace with the greatest rate of innovation and enthusiasm how far are we from that impossible to achieve perfect setting How far are we today versus when you began your journey inside of Pepsi? So from my time when I first came to the U.S. to now, I'd say that my journey would have been possible only in the U.S., not in any other country in the world. So I still think, you know, we have to pat ourselves on the back as citizens of this great nation and say we are still one of the wonderful meritocracies in the world that gives everybody a chance. So on a relative basis, we are out there. Phenomenal. Now let's talk about what could be improved. I think that we're making progress on saying the

most talented people should rise to the top. We're making progress. But there are biases, there are barriers that exist to people like women or diverse people rising. It doesn't happen overnight. You've got to build the pipeline very methodically and get them up. It's not just we say we need CEOs who are diverse and then all of a sudden CEOs show up. You've got to build the pipeline very, very systematically. I will say one thing, Tom, because I was only one of a kind when I was early in my life in corporate America and then when I became CEO, a lot of people saw me, my hard work and how much I felt ownership about the company and stepped up to support me, push me, mentor me, critique me, and really give me a leg

up. Now there's more like me. There are more diverse people in leadership positions. They're now being viewed as competition. Normal competition is happening. So where I was singled out for help because maybe it's a combination of my hard work and the people I was surrounded by, I think I was given a real push and a pull-up today i think the environment is better but there's more people like me and the competition is more intense so on balance different issues but still issues but we're making progress i'd say overall we're making progress the tech world we've gone so long but i think in mainstream we're slowly making progress i mean it's unfair to do this but i always love to play the game, scale of 1 to 10, what would you say in terms of relative to other countries,

you identify the U.S. in a very positive way, relative to the potential within the U.S. of what could be if we addressed biases more effectively and really looked at the system? You could begin in the schooling system. You could begin anywhere you wanted all the way through. Where do you think we are on a scale of 1 to 10 on fulfilling the true potential of the talent of the U.S.? I think it's somewhere between a 7 and an 8 because it's a relative thing. We don't know what the absolute is

because there isn't anybody that much better than us. Relative to what I know we have in our country, I mean, we have talent pools that are not fully utilized because there's no childcare for them to come to work. I think that if we taught STEM in a very different way in schools and colleges, more people will stay in STEM and we can have more people homegrown who become quantum physicists or software engineers

or all of these advanced technologies. So I think that there are changes we can make if we stopped, if we invested more in our own country, like we're doing now, you know, and that'll open up more jobs for people here. So I think our potential is endless. I think we're somewhere between a seven and an eight, a little push here, a little tug there, we could just be unbeatable. Really, really.

I think we underestimate what a great country we live in. We underappreciate it. Thank you for that. I'm wondering if there are a few CEOs, alive or not, that you either looked to as you were running the company. In many ways, I would say the vast majority of my useful ideas for our company, and I have plenty of bad ideas as well. And the vast majority of the useful things that I've done in my role, and there are mistakes that I've made, have come from other people that I've been able to sit and study. Because at The Motley Fool, we're studying other companies all the time. So we're able to see what Pepsi does in its culture and introduce that as a test in our culture, see what that CEO did in deciding whether to make an acquisition or invest in R&D

or not, et cetera, to just constantly be looking at the playbooks of other companies has been so helpful for me. And I'm wondering if there are a few leaders today or when you were beginning as CEO at Pepsi or at any point in your life that stand out as people that you admire and learn from, loved, and why? You know, all of us say Steve Jobs. I had a chance to meet him and talk to him. I think he was a difficult person, but an extraordinary person. How passionate he felt about Apple. That was his company, the sense of ownership he had and the changes he had to make. He just faced the world head on and said, I've got to make the changes. The way he introduced design thinking into Apple, the way he invested in new technologies were all fantastic. So,

you know, anybody who had the opportunity to meet Steve Jobs, lucky them. And if you didn't, I feel sorry for you because you're such an unusual person. You know, Albert Bourla of Pfizer impresses me, too. The way mRNA was developed for COVID and launched it. And what a humble guy he is. I just like him. And I think people like him are hard to come by. And I've liked Albert Bourla.

Recently, I've run into a woman called Penny Pennington who runs Edward Jones. private company but extraordinarily smart in the way she runs the company how she's made the edward jones culture her own and how she acts like the owner of edward jones in this partnership is spectacular and that's what you really need people who say i might be one of the partners or the managing partner but i'm going to make it one of my own very important I'd be remiss if I didn't mention Jeff Bezos. He built one of the most consequential companies of our times from the back of his car.

Let's not forget from the back of his car. So people like me stepped into an existing infrastructure and processes and systems and made it better. He built them ground up. And so somebody like Jeff Bezos transitioning to Andy Jazzy today, I just, I'm in awe of them. So I never learned from one. I look at many people and I take a little nugget from each of them.

I think there's a wonderful, it may be a Seneca quote. I can't remember the philosopher, but it's essentially the idea that you may not, you may not love the author. You may not love the book, but you probably can find a really good line or a really amazing paragraph. And it's a wonderful way to study other leaders. You don't have to evaluate whether they meet every single, check every single box for you. I can convey one message to you that is profound.

If you're interested in learning more from Indra Nooyi, pick up a copy of her New York Times bestselling book, My Life in Full, Work, Family, and Our Future. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow. you