Pepsi's Quest to Win the Talent War

An In-Depth Look at How CMO Cie Nicholson is Developing the Company's Next Generation of Marketers

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Cie Nicholson didn't join Pepsi-Cola North America with the thought that she'd someday become chief marketing officer. "I just didn't think that far ahead," says the 42-year-old head of the company's marketing organization, first hired in 1997 as director of innovations. "But I thought [Pepsi] had a lot of growth opportunities."
Cie Nicholson devotes a large part of her job to developing marketing talent and considers it an investment in Pepsi's future.
Cie Nicholson devotes a large part of her job to developing marketing talent and considers it an investment in Pepsi's future.

Ask any executive who has risen through the Pepsi ranks, and they'll likely tell you that Ms. Nicholson's is an understatement. Situated on a bucolic campus in Purchase, N.Y., and famed for its ability to spawn high-ranking general managers, the company and its parent, global food-and-beverage giant PepsiCo, is an incubator for top marketing talent. Where companies such as Procter & Gamble Co. and Kraft Foods once were viewed as the de facto standard for developing marketing talent, teeming with tomorrow's next C-level managers, Pepsi appears in recent years to have absconded with that crown (see sidebar).

"Recruiters would love to get marketing talent from Pepsi because Pepsi marketing people are aggressive and think outside the box," says Michael Feiner, a 20-year veteran of Pepsi human resources, author of "The Feiner Points of Leadership" and now a professor of management at Columbia Business School. "When you're fighting the world's most powerful trademark, [Coke], you've got to be faster, smarter, better."

It's an honor company management views with equal parts satisfaction and concern; in Pepsi-Cola North America President-CEO Dawn Hudson's words, "it's a double-edged sword."

"It's a good thing to be known as a place that develops people," Ms. Hudson says. "The flip side is if you are known to develop top talent, you always run a risk [of losing people]."

But ingrained in Pepsi's corporate consciousness is the drive to combat that risk by continually offering new and varied career opportunities for all its hires. "You have to actively make sure that you don't just hire them, but that you also give them career opportunities and training so that they want to stay with you, because there will be other companies knocking at their door at some point," Ms. Hudson says.

Pepsi's talent-development practices are a treasured jewel in its efforts to be a market leader, and they filter throughout all areas of the company, particularly the marketing organization. Of course, actively thinking about talent development has been a Pepsi cornerstone and source of pride for the company for decades. The practice's history, Mr. Feiner says, can be traced to Andy Pearson, president-chief operating officer of PepsiCo from 1970 to 1985 and a former McKinsey & Co. managing partner, who prioritized quality of strategy and quality of management to focus on that strategy, putting equal weight on business results and human capital as the company's competitive advantage.

More recently, senior management has placed emphasis on career development in addition to offering breadth of experience, Ms. Hudson says. "We've always been known as a place where you get great experience, but we've worked very hard in the last 10 years to also be a place that develops people's careers," she says.

As a result, Pepsi has produced a slew of general managers. "A lot of people want to be general managers," Mr. Feiner says. "They want full P&L responsibility. Pepsi enables that and [finds] high-quality marketers who are eager and able to be general managers." Of course, he says, successfully transitioning into a general-management role at Pepsi is no cakewalk. "It's one thing to want it, but you've got to earn it."

Big Jobs Early

Ms. Nicholson's own career path at Pepsi began in 1997, when she joined as innovations director in the foodservice division. A 1986 graduate of the University of Illinois, Ms. Nicholson received her M.B.A. in marketing and finance from Indiana University just two years later. Her first job out of school was at R.J. Reynolds Tobacco Holdings' R.J. Reynolds Tobacco Co., where she stayed for nine years, holding a series of jobs within brand marketing. When she left in 1997, she was marketing director.

From there she headed to Pepsi. Her reasons for seeking out Pepsi were simple: "I wanted to go someplace that had great marketing," she says. "The brands are completely fun and exciting, and I thought that it was a great portfolio to work on." Plus, says the native Chicagoan, who actively volunteers at an animal shelter and enjoys outdoor activities such as biking and golf, "I wanted to be in the New York area."

Her view of Pepsi at the time was as a "dynamic company doing most things first," on the cutting-edge of marketing. She also found the diversity of products and divisions appealing.

Her ascent up the Pepsi marketing ladder has been quick. Since she's been at the company, she's overseen, starting in 2000 as director of marketing for Mountain Dew, the rollout and promotion of Code Red, a super-caffeinated Mountain Dew line extension.

She was named VP-Mountain Dew in 2001, then served as VP of carbonated-soft-drink-flavors in 2002. In 2003, she assumed the post of VP-noncarbonated beverages, overseeing brands such as Aquafina, Dole and SoBe, as well as joint ventures with Lipton and Starbucks. And in November 2005 she was named senior VP-CMO, Pepsi-Cola North America, reporting to Ms. Hudson and succeeding Dave Burwick, who was named president of Pepsi-QTG Canada. In assuming that role, Ms. Nicholson took on responsibility for all traditional marketing practices across the company's full portfolio of brands in both the carbonated-soft-drinks and noncarbonated-beverages divisions.

"If you're successful, the growth opportunities are definitely there for you," Ms. Nicholson says of her rapid rise through Pepsi.

Ms. Hudson is quick to sing Ms. Nicholson's praises. "To be a successful CMO at Pepsi-Cola, you have to have a broad knowledge of the skills of marketing, and she has all the core skills, but she also has natural instincts and great leadership abilities," Ms. Hudson says. "You not only have to be able to identify great ideas, but you also have to align people to get behind those ideas. Cie is a great leader."

One of the things Pepsi is known for is its habit of giving people "big jobs" early in their careers-moving them quickly so that they are challenged and are exposed to a diversity of experience. Pepsi hires marketing people who are interested in pursuing a marketing ladder, finance people interested in following a finance track, salespeople who are interested in following a sales track, Mr. Feiner says. "But they are constantly evaluating if they can do more."

Although others might have viewed it as premature, Ms. Hudson felt Ms. Nicholson was ready for her transition to CMO. "All of our executives are ready for their jobs; we just catch them on the early side of their readiness," she says. "We will develop their talent by stretching them, which is how I believe we are able to retain top talent. We want PepsiCo to be known as the place that develops you and moves you through positions so that you get great opportunities and experience."

Giving people big jobs early, Ms. Nicholson says, "keeps you motivated, makes you step up and grow." Now in her role as CMO, she is taking advantage of Pepsi's entrepreneurial, nonbureaucratic environment, one that fosters breadth of creativity and open communication. As Ms. Nicholson explains, "We believe in an empowered culture, and we've found that an environment that allows for a free flow of ideas, keeps people interested in their assignments and develops people who feel that they can have an impact on the business." And those who do well at Pepsi, Mr. Feiner says, are those interested in having a much bigger role in brand development than they would at, for example, Procter & Gamble, which, in contrast, is a much more conservative organization in which "you don't have a whole lot of say about the mother-lode brand," he says. Pepsi "is a much more fast-paced, think-outside-the-box, risk-oriented" environment, he says.

Leveraging that culture, Ms. Nicholson interacts often with Ms. Hudson, who herself used to hold the top marketing post. Even though she has other divisions reporting to her-finance and operations, for example-Ms. Hudson has a special affinity for the marketing organization, Ms. Nicholson says, given her background. "Bouncing things off her is very helpful. You can seek her opinion," she says. "She's definitely a great mentor."

Ms. Nicholson also interacts regularly with Mr. Burwick, whom she replaced when he became president of Pepsi-QTG Canada-a perfect example of someone who went from marketing to a general-management position within PepsiCo.

Making the Commitment

In keeping with Pepsi's collaborative approach to talent development, Ms. Nicholson and Ms. Hudson are on the same page when it comes to nurturing marketing prowess within the organization. "It's very important to Cie and to me that we are a place that doesn't give you just one opportunity, but that we're reviewing your career over the long term" and looking for the right next move within Pepsi-Cola and PepsiCo, Ms. Hudson says.

One of Pepsi's distinguishing features is that "there are quality people at level after level after level," Mr. Feiner says. "At Pepsi, there are no turkeys, and 99% of the people are very, very good. That comes from this passion, this hunger, this intensity day in and day out to constantly think about, 'How good is Joe or Nancy? Is it time to give them a different responsibility within marketing?' Built into the DNA is [the thinking that] how good you're developing your people is just as important as how good your numbers are, and I don't think that's the case in many organizations. There are far too few companies that really practice this notion of developing human capital so that they can succeed as a business," he says.

"It's hard to do," he adds. It takes a lot of discipline, it takes perseverance, it takes time, and so a lot of companies don't have the mind-set, the commitment, the senior sponsorship to insist that it be done."

But it's a commitment smart companies are making, says Chris Bartlett, Thomas D. Casserly Jr. professor of business administration at Harvard Graduate School of Business Administration. In fact, he says, the most important resources for companies are human capital and intellectual capital. "And as you move into this service-driven economy, for most companies, the financial capital is not the constraining resource and, therefore, not the strategic resource," he says. "You talk to CEOs today and what constrains their growth is a shortage of great management and leadership within the organization. The really scarce resource is human capital and the innovation that can come from an environment [flush with such a resource]."

It's a responsibility that must start at the top, Mr. Bartlett says. While companies have always had to effectively manage human resources, it has become particularly critical over the last decade and will become even more so as baby boomers, a demographic with 76 million people, retire. In comparison, Generation X has 44 million, while Generation Y has only 26 million. "Even together, they don't replace the baby-boomer generation that has now begun to retire," Mr. Bartlett says. The sheer dearth of people alone will lead to a shortfall of talented hires, in marketing and otherwise. "That's a lead-pipe certainty," Mr. Bartlett says.

So what must companies do to get a leg up? "A part of it is not accepting the blind belief that there is a free-market economy for talent," he says. In this new era, there is no room for what he calls "lazy management," where all companies feel they need to do is throw money at recruits. The three core responsibilities of management today are: understanding how you build talent and how you attract the best and brightest; then linking the talent- turning bright individuals into effective teams; and finally creating a bonding mechanism, engaging people and getting them to commit to the organization, he says.

People Results

At Pepsi, executives are required to periodically provide feedback on their direct reports, demonstrating how they are developing talent and making tough management decisions. In this way, they are measured against not only the business results they are delivering but also the "people results."

"We're always trying to figure out how we have well-rounded executives so that we have a very deep bench," Ms. Nicholson says. Indeed, Pepsi is proud of its bench strength. Look no further for evidence than PepsiCo's recent announcement that it was elevating President-Chief Financial Officer Indra K. Nooyi to CEO, effective Oct. 1. Ms. Nooyi is replacing 22-year Pepsi veteran Steve Reinemund, who is reportedly retiring from his post as chairman-CEO.

"We're constantly searching for and meeting with talented executives," Ms. Nicholson says. "Sometimes we're looking to fill a position, but there are many occasions when we will meet with people when there isn't necessarily a job to fill."

Where does Pepsi go to find the people it hires? "Anywhere," Mr. Feiner says. Adds Ms. Nicholson, "Twenty years ago I would have said consumer-product companies ... but now it's across the board-technology, telecommunications, management consulting, banking."

There isn't "one set formula" for finding talent, she says. Pepsi will seek new hires from college campuses-it has an established internship program that the marketing organization regularly leverages-but it also relies on referrals. "We like people with diverse backgrounds," she says. "A majority are M.B.A.s, but not all are. Some come from other companies. We just want someone who has a unique perspective and who looks at things differently."

Ms. Nicholson is actively involved in the process of hiring higher-level marketing talent. She interviews candidates and helps with the marketing organization's on-campus recruiting process. She is also involved in a summer-internship program.

But her involvement in talent development doesn't stop once candidates are hired. The marketing organization stages several courses for employees that are taught by executives. Ms. Nicholson teaches a course with Ron Coughlin, senior VP-international marketing for PepsiCo, called 3D Marketing. It "attempts to prepare PepsiCo marketers for the dramatic changes occurring in the consumer-engagement and communication environment today," she says, by culling best practices from around the world. Pepsi's human-resources department, which is "very involved" with the marketing organization's talent-development practices, helps develop course curricula, among many other tasks, Ms. Nicholson says. "There's not a week that goes by that I'm not talking to HR about four times."

And, in keeping with the priority of continuing talent assessment, she says that twice a year she and Meena Mansharamani, senior VP-innovation and insights, and the rest of the senior marketing team conduct a review of individuals within the marketing organization to determine "who's ready to move," she says. "We game plan where we think people should go and how long they've been in the assignment," also taking into consideration the needs of the individual and the needs of the company. "We do this to make sure we keep the teams fresh, keep people motivated," she says.

Making major shifts twice a year is enough to refresh the talent without disrupting brand continuity, she says. "We make sure each of the brand teams are balanced with experienced people who have been working on the brand for some time and newer team members who offer fresh perspectives," she says. "We would never replace an entire team during an executive job rotation."

She measures how well her direct reports are developing their reports as well as business results.

"I put a high value on creativity," she says, adding that people must be able to work collaboratively and cross-functionally, and have high energy. "You want the people who want to do things first and are mad when they end up second."

Given her intense focus on the people who make her marketing organization tick, Ms. Nicholson finds herself in good company.

"Jeff Immelt spends 30% of his time on what he calls 'people direct'-teaching, evaluating, coaching, recruiting," Mr. Bartlett says, referring to the chairman-CEO of that other talent powerhouse, GE. "There's another 40% that he calls 'plumbing'-business decisions, operating decisions-but the result of that, he says, is 'people indirect.' He says, 'I'm evaluating the people as much as the decisions.' So 70% of this time, [his job is] about people, either directly or indirectly.

"In organizations where this is embedded, it's not just about putting it into the metrics, it's about role modeling it throughout the organization," Mr. Bartlett says. "Management must spend time listening, coaching. It's constant. It's part of the fabric of the organization."

For her part, Ms. Nicholson seems to have no qualms about devoting a large part of her job to developing talent; indeed, she sees it as an investment in Pepsi's future-and insurance against poachers. "If people feel like they are contributing, feel well-valued, they'll stay put," she says. "When people leave, the thing they say they miss most are the people and the culture. We are a company of a lot of camaraderie. It's hard to replicate this experience."

Pepsi's Hall of Fame

A Sampling of Pepsi Alumni: Where They've Been, and Where They Are Now

Brenda Barnes

Then: President-CEO, Pepsi-Cola North America

Now: President-CEO, Sara Lee Corp.

Abelardo Bru

Then: Vice chairman, PepsiCo and chairman-CEO, Frito-Lay

Now: Board member, Kimberly-Clark Corp.

William C. Cobb

Then: VP-new business, PepsiCo; senior VP-CMO, Pizza Hut

Now: President, eBay North America

Craig Coffey Then: VP-marketing and strategy, PepsiCo Foodservice Now: VP-marketing, Nokia

Mary Dillon

Then: President, PepsiCo's Quaker Foods division

Now: Exec VP-global CMO, McDonald's

Cammie Dunaway

Then: VP-general manager of kids and teen brands, Frito-Lay

Now: CMO, Yahoo

Kim Feil

Then: Marketing posts at Frito-Lay and KFC (former PepsiCo property)

Now: Senior VP-CMO, Sara Lee Food & Beverage

CJ Fraleigh

Then: VP-cola marketing, Pepsi-Cola North America

Now: CEO, Sara Lee Food & Beverage

Aylwin Lewis

Then: President-chief multibranding and operating officer, Yum Brands; COO, Pizza Hut

Now: President-CEO, Sears Holdings Corp.

Anne MacDonald

Then: VP-brand management, Pizza Hut

Now: CMO, Macy's

Phil Marineau

Then: CEO, Pepsi-Cola North America

Now: President-CEO, Levi Strauss & Co. (retiring in November)

David Novak

Then: Senior VP-marketing, Pizza Hut; exec VP-marketing and nat'l sales, Pepsi-Cola (among many others)

Now: Chairman-CEO-president, Yum Brands

Don Quigley

Then: VP-customer development, PepsiCo

Now: President-North Atlantic consumer product customer management, Kimberly-Clark

Stephen Quinn

Then: CMO, Frito-Lay

Now: Senior VP-marketing, Wal-Mart

Gary Rodkin

Then: President-CEO, PepsiCo Beverages & Foods North America

Now: President-CEO, ConAgra Foods
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