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The impressive number of successful HR executives emerging from PepsiCo's rough-and-tumble environment of the 1970s and '80s begs the questions, "Why so many?" and "Was this the best way to develop HR leaders?"

Friday, September 1, 2006
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Just what was it about PepsiCo Inc. in the '70s and '80s that spawned a generation of highly successful and respected professionals now populating the senior HR slots at top U.S. corporations today? And what lessons about HR were forged in their baptisms-by-fire at the PepsiCo "academy" that guide their efforts today?

These questions are hardly academic. For one, they are of practical interest to many members of the Pepsi HR generation themselves, whose kinship draws them together for semiannual "thought leader" conferences around the country to swap old war stories and share ideas about present challenges (see sidebar). More to the point, however, the experiences and insights of this "who's who of HR" may yield valuable lessons, or reinforce key principles, for anyone (even those who favor Coke) aspiring to a successful career in this profession.

"If you look at the Fortune 500, there are about 100 or 120 [senior HR] people who were trained, at some point in their career, at PepsiCo. No other company can come close, not even GE," says Hal Johnson, a managing partner for Korn/Ferry International who has recruited top HR talent for and from Purchase, N.Y.-based PepsiCo over the years.

Recipients of such PepsiCo-trainees run the gamut of industries and scope. General Mills. Starbucks. Gap Inc. Levi Strauss & Co. Cendant. American Express. The Disney Co. The list goes on and on.

Make no mistake; shared memories of the PepsiCo HR experience are anything but warm and fuzzy. Quite the opposite, in fact. Legend and personal accounts tell the story of an environment that was, at times, harsh if not downright brutal. "There's no lifeguard at the PepsiCo pool," was one popular expression at the time.

In the words of one alumni who asked not to be identified, "When you started working there, you knew a bullet was fired, and sooner or later it was going to catch you [and you'd be fired], so you had to run like hell to put it off as long as possible."

Moreover, HR at PepsiCo was even considered by some alumni, in retrospect, as having been too powerful, a mind-bending notion for practitioners accustomed to career-long professional struggles for organizational clout.

And yet, more than one PepsiCo "graduate" has referred to his or her tenure there as a sort of charmed "Camelot" experience, unduplicated in subsequent career moves.

If PepsiCo HR was Camelot, King Arthur assumed the form of Andrall E. (Andy) Pearson, who served as president and chief operating officer of the company for 15 years until his retirement in 1985. When Pearson died in March at age 80, he was eulogized by current PepsiCo Chairman and CEO Steve Reinemund as an "iconic, gifted leader [who] shaped PepsiCo into a successful and respected global enterprise."

The development of HR at PepsiCo "would not have happened if Andy Pearson hadn't been there," says Michael Feiner, who was the top HR leader of the domestic Pepsi division of PepsiCo at the end of his 20-year HR career with the company in 1995.

Adds Michael Peel, the current HR leader at Minneapolis-based General Mills and another high-powered PepsiCo alum: "Andy was really the architect of the development of the human resource function at PepsiCo. He knew what it was capable of doing if used correctly, and got a lot of mileage out of it." Peel's 14-year career at PepsiCo culminated in the role of senior vice president of HR for PepsiCo Foods International.

Pearson earned an MBA from Harvard in 1947 after a three-year stint in the Navy. He briefly worked for Standard Brands before moving to McKinsey & Co., where his consulting practice focused on consumer product companies.

Throughout his PepsiCo career, he held the radical belief -- radical certainly for a corporate president -- that the "personnel" department holds the key to organizational success, say those who worked for him there. But what helped Pearson get his point of view across was an intense personality that neutralized potential skeptics -- or at least got their attention.

"Agent for Change"

"Holy cow, this guy's tough," is how Roger King says he reacted the first time he saw Pearson run a meeting. King, himself a key figure in the annals of HR at PepsiCo, ultimately served as the HR leader for the organization and reported directly to Pearson at the time of Pearson's retirement in 1985. King retired from the company in 1998 after a 30-year career that began as a personnel manager at Dallas-based Frito Lay in 1968, on the heels of Pepsi's 1965 acquisition of the company to form PepsiCo Inc.

"This guy's nuts!" was the reaction many senior managers had to Pearson when the subject was talent development, says Feiner. The characterization stems from the unpleasant grilling many line executives received from Pearson, who frequently had deeper insights into the performance and leadership potential of a division leader's staff than that leader himself. He also tended to be harsher in his assessments. When a line executive came up short in one of those sessions, suddenly the HR function was getting attention and the unit's HR leader became a much more important person in the eyes of the chastened executive.

Word about his hard-nosed leadership approach got around. By 1980, Fortune magazine put him on its list of the "10 toughest bosses."

The good news for HR is that, while tough, Pearson expected the function to play a vital role. "Use the personnel department as an active agent for change . . . expect as much from them as from other top managers," he advised fellow executives in a classic 1987 Harvard Business Review article entitled, "Muscle-Build the Organization." (Read the entire article on www.HREOnline.com.)

Pearson was particularly insistent on the need for executives to have highly detailed knowledge of the strengths and weaknesses of their employees -- not only their immediate subordinates, but those two or three levels down.

Back in the late 1970s, Pearson "knew everyone at the director level and above," King recalls. He remembers delivering an assessment of a particular vice president in a routine "human resource planning review" session run by Pearson. "He challenged what we were saying about the guy, and was very adamant about what he thought were the strengths and weaknesses. We kept trying to defend him, and Andy said, 'You're never going to build a good function with this guy.'"

"People were scared to death of Andy, but they also revered him in most ways, because he was tough, but he was not unfair," says King.

That fear had a rational basis -- the certain knowledge that "you either did [what Pearson wanted], or you weren't going to be there."

In Pearson's HBR article, he complained that "very few executives are willing to adopt the tough, aggressive approach to managing people that's required to produce a dynamic organization." Yet, he added, "the hard truth is, only an aggressive approach can make a big difference, quickly."

The strategy he outlined in that article, and carried out over his 15-year tenure at PepsiCo, had a price: "Managers have to be willing to sacrifice continuity for a thorough shake-up," he wrote. But the payoff for managers -- ultimately creating a "huge gulf between themselves and their competitors" -- was worth it, according to Pearson. Disciples either concurred -- or left.

He didn't advocate aggressiveness for its own sake, but aggressiveness applied in a focused manner to deliver results. A particular focus of Pearson's, as outlined in the article: "Identifying and grooming talent at every level." Plus, routinely discarding people -- typically 15 percent to 20 percent of a given class of managers -- deemed to be at the bottom of the heap. And constantly raising the performance bar. "Recognize that performance can always be improved, and cultivate a spirit of constructive dissatisfaction with current performance among all executives and managers," he wrote.

Fast-Track Initiation

At the root of Pearson's approach, King believes, is that "he was a McKinsey guy." Pearson had been a managing director of the fabled consulting firm and worked with PepsiCo founder Donald M. Kendall on a consulting basis prior to coming on board. That professional background had big implications for his approach to HR, says Connie Colao, who joined PepsiCo in 1980 and now holds the top HR position for Irvine, Calif.-based Taco Bell, part of the 1997 Yum Brands restaurant business spin-off from PepsiCo.

" 'You get the best people, and they'll figure it out,' that was the mind-set," Colao says. "The way McKinsey works, they hire the best and the brightest . . . and before you know it, people who have no expertise in anything are viewed as having the same expertise as the people they're consulting with."

In HR, however, that didn't mean starting from scratch. PepsiCo often recruited talent from the top "labor relations" schools, such as Cornell University.

Colao, a graduate of Cornell, says he and other young recruits were given mountains of responsibility in short order. At age 22, he found himself as the sole HR manager at a location with 600 employees, three unions, a manufacturing plant and six warehouses.

"Andy was the one who said HR isn't about having a 'caring culture,' but getting the best people they could send out to the field," says Colao.

But fast-track recruits weren't left in the field very long before being whisked into headquarters jobs to be rotated around staff assignments where they were expected to quickly learn the ropes within various HR specialist functions. "Then," Colao says, "they'd send you out again, [this time] to lead a division. We had a lot of license to have impact on the business."

For some young HR executives, it was a "sink-or-swim" experience. Indeed, many sank. But for others, including Colao, it was a stepping stone for more responsible positions, with mentors playing an important role in guiding their development.

"You had a senior HR guardian leader who was watching over you," he says. "You didn't know it at the time, but looking back, you realize it, that someone was looking out for me, that if you took a job that maybe you weren't ready for, you didn't implode."

Pre-Need Hiring

The urgency Pearson attached to luring and cultivating top talent ultimately meant hiring people before a specific job slot was open. In what was labeled the "designate" program, new hires, such as Eva Sage-Gavin -- a Cornell classmate of Colao's who was lured to PepsiCo after a decade at Xerox -- had three months to get up to speed on PepsiCo HR strategy and goals before an important job at a business unit opened up. Sage-Gavin, currently the executive vice president of human resources for San Franciso-based GAP Inc., left PepsiCo in 1997 as head of corporate HR for Taco Bell following the spin-off of the restaurants division.

The "designate" program reached a feverish pitch in the late 1980s when the company was scrambling to fill new HR jobs at newly acquired, formerly independent Pepsi bottling franchises, a process that added about 15,000 employees to the corporate payroll.

Pearson's approach to HR initially was carried forward by pioneering senior PepsiCo HR leaders such as John Ewing, Olden Lee, Bill Bensyl, Roger King, John Pearl, John Bronson and Feiner, most of whom retired after full careers at PepsiCo. Feiner, who joined PepsiCo in 1975 after nine and a half years at TWA (the former New York-based airline purchased by AMR Corp. in 2001), felt both philosophically -- and temperamentally -- in tune with Pearson. While he never reported directly to him, "I got to see him at close range. I understood what he was saying. He had a huge impact on me," Feiner says.

Like Pearson, Feiner moved to the academic world after leaving PepsiCo. Pearson taught at the Harvard Business School; Feiner has been teaching at Columbia University's graduate school of business since 1997. He took a break to publish a book immodestly entitled The Feiner Points of Leadership, organized as a series of "basic laws that will make people want to perform better for you."

"What separates good HR people from great HR people," says Feiner, "is intellectual courage -- having the guts to tell very tough-minded, self-confident people, who believe deeply that they're doing the right thing, what they need to hear, even if they don't want to hear it.

"It's not only courage, but savvy and artfulness to tell them in a way that they'll appreciate the fact that you did it."

Feiner carried out Pearson's demand for "muscle-building" the HR function with a vengeance, recruiting a generation of talent that populates the top HR slots at top corporations around the United States today.

If things were so great at PepsiCo, why didn't they stay?

"I was there 20 years and kept everybody I wanted to keep, with maybe a couple of exceptions," says Feiner.

Perhaps the biggest reason why talented HR professionals would have wanted to continue working in the demanding environment at PepsiCo lies in the expression, "The cobbler's children will have shoes." That was the philosophy of early leaders such as King, Bensyl and Feiner, according to Sage-Gavin.

"The investment they made in walking the talk of talent development" was such that "the HR guys got just as much, if not more, development" as other executives, she recalls.

"Many people in HR talk about the importance of training, but the training dollars go to everyone but HR people; . . . at PepsiCo, they invested in HR capability."

In addition, the fact that HR was assumed to have a natural and vital role in the execution of the business strategy provided the psychic rewards that talented, self-respecting people craved.

Because HR practitioners at PepsiCo "had the imprimatur of Andy, they went out and accomplished a great deal, which made it an exciting place to work," says Bronson, who left the company in 1999 after 20 years as executive vice president of HR for Pepsi Worldwide.

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So enticing was that environment, Bronson says, that "people would come to Pepsi to work in HR even if they [feared they might] fail, because they knew they were going to have an incredibly accelerated experience . . . because most other companies at the time saw HR as a backwater function."

Bronson left PepsiCo to take the top HR job at San Francisco-based home-furnishings retailer Williams-Sonoma, and, apparently failing to find another Camelot, subsequently moved onto other business pursuits.

The practical reality at PepsiCo -- or any other company, for that matter -- is that there is a finite number of top jobs highly talented and motivated executives can get. So even many of the most talented elite who had earned a permanent professional home at PepsiCo eventually succumbed to the lure of taking the top HR job at another company. (See sidebar.)

Spreading the Gospel

But it wasn't simply a matter of cashing in their chips, although that surely played a part for many. Rather, many PepsiCo alums have sought to extend the lessons and strategies rooted in their "muscle-building" days at PepsiCo to their new corporate homes, and share the PepsiCo gospel. As Peel says, "once you understood the power of that model, you would never go back to something less aspirational."

In Peel's case, things have worked well; his aspirations have been fulfilled at General Mills. Similarly, Fred Paulenich, who landed the top HR role at Levi Strauss & Co. after 15 years at PepsiCo, says he's been spreading the PepsiCo gospel at his new employer since joining the company in 2000. Three key take-aways from his PepsiCo years:

* The critical importance of building the talent base of the HR organization;

* An understanding of very clear ways talent could make a difference; and

* A "very explicit, unapologetic belief about the ability of the HR organization to contribute to the business."

For PepsiCo alumnus Garrett J. (Gary) Ulrich, vice president of HR for Friendly's Ice Cream Corp. since 1991, a decade at PepsiCo reinforced "the impact of leadership and the ability to influence people around an agenda, the need to manage a few things really well to make the biggest impact and [the need to] make sure you're working on the things that are going to make a big impact."

Spoken like a true heir to the Pearson legacy. As Feiner recalls, Pearson believed in the power of focus. "He wouldn't try to second-guess management on things like the design of the Pepsi can or the ad copy. The only two things Andy gave a darn about were the quality of the business strategy and the quality of the management."

Ulrich reflects the tough-boss Pearson legacy as well. He says that to persuade other leaders that one's personal-agenda items are the right ones, one needs to be "assertive, not afraid of conflict," an approach he developed during his PepsiCo days.

Abuse of HR Power?

Of course, there are limits to how hard one can push before assertiveness becomes bullying, and ultimately self-defeating. Did Pearson and the HR leaders he empowered at PepsiCo cross over that line? Did HR become, in effect, too powerful?

When asked for candid self-assessments, some former PepsiCo muscle-builders respond affirmatively. "I think we could have been a little more judicious in the way we exercised our clout because line guys, in some cases, ultimately came to resent" HR, says Feiner. That was because HR played the dual role of supporting division executives by helping them secure the talent they needed (along with providing other basic HR services), and also having a lot to say about the executives' own performance and compensation.

"You need to be careful about that," Feiner says. If he were alive today, "Andy might not agree with me. He might say, 'Screw them; you're doing your job.' But you can't just rely on power."

Feiner suggests HR, as a staff function, should operate on an "advise-and-consent" basis. "You shouldn't try to win every battle," he says. "If you win too many times, people want to know who's running the candy store. You want line people to do what you want them to do because of the value of what you're suggesting, not because of the size of your stick."

Adds Colao, "sometimes we did not use our power properly. . . . We might tell the line they need to fire somebody who, perhaps in retrospect, should not have been fired. Not only do you lose a good person but, ultimately, that impacts the culture. I think that happened quite a bit with certain individuals."

Another critique of HR at PepsiCo during the muscle-building era relates to the obsession with talent. "This idea of focusing on the talent, at times, probably made it more about the individual and less about process or a systemic way of doing things," says Paulenich.

"The focus on the individual may have fostered a bit of competition of ideas, as opposed to ways to make all that talent collaborate."

Those lessons appear to have been learned by the HR leaders who remained at PepsiCo. John Delpino, director of executive staffing for PepsiCo Inc., recalls the muscle-building years as "a very tough and necessary part of our growth and development as an organization."

Delpino, who has worked for PepsiCo since 1983 (with a two-year gap in the mid-1980s), recalls a period when the company had a reputation "for walking that fine line between self-confidence and arrogance." When interviewing job candidates, "We'd ask them, 'What makes you think you're good enough to work here?' "

PepsiCo eventually shifted to more of a "courtship model," he adds, following a period of transformation in the '90s, when the company's rate of profit and revenue growth slowed and the organization realigned its portfolio of operating companies. "At the end of the day, we realized that the customer is the reason we exist."

Still, PepsiCo alumni and retirees believe the basic tenets HR has practiced at the company during the earlier years, particularly the zeal for talent acquisition and development, shine as a beacon for organizations today. The subject comes up on occasion at their semi-annual "thought leader" meetings, initiated and organized by Maumee, Ohio-based Root Learning. Yet, they add, most CEOs stop well short of emulating the Pearson legacy.

"What Pearson did is even radical today, when you look around," says Feiner. "I do a lot of consulting, and a lot of line executives -- even the smart ones -- often just don't make the link between the strength of the organization and the strength of their people."

Why not?

As Peel sees it, many executives, even when they believe in the importance of "setting high standards for people," simply don't know the difference between having good people and not. "Knowing the difference is part of it. And having systems and processes, and a smart human resource function to help you, is the rest of it."

For King, the failure often comes down to something more basic. He often talks to CEOs who want him to share "the PepsiCo philosophy."

"Some of them are excited about it, but they don't have the stomach for it . . . . They talk a good game, but they don't want to do it."

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