Contemporary Leadership Practices &
Succession Planning in Companies
Organization Name: Microsoft and PepsiCo
Working Group F1
20F10
MR. Ananth Pedapudi
6
20F10
MR. Aniket Sharma
8
20F13
MR. Param Gera
1
20F13
MS. Prateeti Chanda
7
20F14
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Company Profile
Microsoft Corporation:
Microsoft Corporation is computer software and hardware corporation. Software products,
services, devices, and solutions are developed and supported by the company. Operating
systems, cross-device productivity apps, server apps, business solution apps, desktop and server
management tools, software development tools, and video games are among the company's
offerings. Gadgets like personal computers (PCs), tablets, games and entertainment consoles,
other intelligent devices, and related accessories are also designed, manufactured, and sold by the
company.
PepsiCo:
PepsiCo was founded by two iconic American food brands: Pepsi-Cola and Frito-Lay. Donald
Kendall and Herman Lay, the company's CEOs, envisioned "a marriage made in heaven" in
1965. PepsiCo was formed when the two corporations united. Frito-Lay, Gatorade, Pepsi-Cola,
Quaker, Tropicana, and SodaStream are some of PepsiCo's most well-known brands. Twenty-
three of the company's brands generate yearly retail sales of more than $1 billion. PepsiCo is
divided into seven divisions: PepsiCo Beverages North America, Frito-Lay North America,
Quaker Foods North America, Latin America, Europe, Africa Middle East South Asia
(AMESA), Asia Pacific Australia/New Zealand China, and Latin America, Europe, Africa
Middle East South Asia (AMESA), and Asia Pacific Australia/New Zealand China (APAC). In
2001, Quaker joined PepsiCo, extending the company's product line.
CEO Indra Nooyi is responsible for most of PepsiCo's recent success. By centring the
organisation on design thinking, Nooyi propels it ahead. "Every week, I go to a market to see
what we look like on shelves," Nooyi says. She's enthralled, enthused, and never complacent.
PepsiCo has been able to preserve and grow its client base under the leadership of Indra Nooyi.
“Design, in theory,” she argues, “leads to innovation, and innovation necessitates design.”
"We've only just begun."
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The system and design of business components, as well as how these components interact to
achieve the firm's mission and vision, are defined by the organizational structure of a company.
Features of PepsiCo’s Organizational Structure
In its early years, PepsiCo had a hierarchical organizational structure. However, the
company's organizational structure has altered because of some important mergers and
acquisitions, as well as global expansion.
I. Market divisions
II. Functional corporate groups/offices
III. Global hierarchy
Market Divisions. The market divisions are the most important components of
PepsiCo's organizational structure. These categories are made based on two factors: business and
geography. In terms of operations, PepsiCo has two global divisions: one for Frito-Lay and
another for Quaker Foods. The corporation is divided into sections for the Americas, Europe, and
other regions. The market divisions in PepsiCo's organizational structure are listed below:
1. Latin America Foods- Handles operations for major brands like Frito-Lay, Pepsi and
Quaker, and also smaller brands like Toddy, Tortrix, and Kero Coco, in over 34
countries.
2. PepsiCo Europe- Manages, Frito-Lay, Pepsi and Quaker foreign offers, as well as smaller
players like Alvalle soups, Duyvis Nuts, and Copella juice.
3. PepsiCo Asia, Middle East & Africa
4. Frito-Lay
5. Quaker Foods-
6. PepsiCo Americas Beverages- Manages Gatorade, Tropicana, SoBe, Pure Leaf Iced Tea,
Naked Juice, Aquafina, Dole Juice, and other North American beverage brands.
Functional Corporate Groups/Offices. The basic business functions are the focus of this
feature of PepsiCo's organizational structure. These functions handled by the company's
worldwide offices. The goal of functional groups at PepsiCo is to maintain corporate control and
quick implementation of policies and strategies. Each of these groups is led by an Executive Vice
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President or Senior Vice President. PepsiCo's primary functional corporate groups/offices are as
follows:
1. Human Resources
2. Finance
3. Government Affairs and Legal
4. Talent Management, Training and Development
5. Global Research and Development
6. Global Categories and Operations
7. Communications
Global Hierarchy. PepsiCo's organisational structure also includes a hierarchical framework
that spans the entire company. At the global/corporate level, a hierarchy often provides
monitoring, control, and governance. For top-down communications, control, PepsiCo has
maintained a significant structure. This feature of PepsiCo's organisational structure also allows
the company to minimise deviations from its policies and plans.
Factors of growth PepsiCo
Through internal development activities, LeAD demonstrates the company's commitment to
ensure that leaders with promise grow and accomplish at higher levels. The following are some
of the most important measures and outcomes that the TM COE team has tracked throughout
time:
Performance: Those who perform better on LeAD have greater long-term performance
based on three-year average performance ratings after completing the programme.
Promotion. Those who perform well in LeAD and meet their development goals are
promoted 1.5 to 2.5 times faster than those who do not. Surprisingly, people who engage
in the programme have a higher chance of being promoted than those who do not,
refuting a popular misconception that being graded is always a bad thing.
Engagement: All LeAD participants expressed high levels of participation and felt
supported by the organisation (between 82 per cent and 92 per cent depending on the
program). They also have a lot more direction in their careers.
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Turnover: Regardless of assessment results, there are no significant differences in
turnover among LeAD participants. The idea that high-potential players would feel
anointed and depart sooner was unfounded, as was the fear that the previously designated
"B players" would flee.
Potential: Those who fared better on LeAD were three times more likely than those who
did not have assessment data to have their potential status re-evaluated during talent
conversations. When predictive data is accessible, the stigma of not being a high potential
is less significant.
Behavior change: Within 12-18 months, participants who follow through on their
development plans are more likely to show changes in their leadership behaviours as
judged by their managers, peers, and direct reports on a 360-degree survey.
Factors of Growth:
Microsoft
The organizational structure of Microsoft Corporation allows the company to expand, notably
after the firm's structural reform in 2015. The organizational structure of
Microsoft emphasizes the importance of business production. The corporation exploits its
structure to preserve a competitive edge as a major player in the IBM PC-compatible operating
system industry.
1. Product Type Divisions. Microsoft's organizational structure is characterized by
product type divisions. The company utilizes product or output as the primary
criterion for classifying workers and related resources in this characteristic.
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2. Global Corporate Groups. Microsoft's organizational structure is defined by
global corporate groups, which constitute a secondary characteristic. These divisions
are based on the functions that are critical to the computer technology industry.
3. Geographic Segments. The least significant element of Microsoft Corporation's
organizational structure is geographic subdivisions. In the company's financial
reports, these segments are used to organize operations.
Employees usually move within their division or group verticals. In case of special requirements
for a specific skill set, they may be moved onto other groups as well.
Employee bands are roughly organized into 3 different categories.
Level 59-63: This track comprises designations like Program Manager (PM), Software
Development Engineer (SDE), and Software Development Engineer in Test. Within this
band considerations like budget availability, pace and contribution are evaluated for
promoting employees.
Level 64-66: This band consists of Principal PM/SDE/SDET positions. For progress
within these positions, an active agreement from the group CVP is also required in
addition to the above parameters. Diversity in performance portfolio is also given due
weightage.
Level 67+: These are Partner level positions considered Senior managerial positions and
the promotion process gets quite complex. Firstly, an executive sponsor needs to vouch
for the candidate who has mentored and reviewed the candidate previously. Additionally,
the candidate then requires an open position and sponsorship from the division president.
Succession Planning:
Succession planning at Microsoft
Microsoft follows a process called ‘Talent Talks’ ensuring that the processes are rigorous,
making the entire process of building organizational capability comprehensively.
As part of the succession planning process, each leader and they are directing identify their
potential future leaders. The focus is on having a conversation to see if the identified individual
is interested in taking up the leadership role. And simultaneously an exhaustive comparison
between external and internal candidates to check the suitability for the role. And once
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the leaders’ directors identify potential candidates, each of them will be having a one-to-one
session with the CEO.
The crucial part of succession planning is the talent talks. CEO, Chief Human Resources Officer
(CHRO), the senior leader with their HR partner have a discussion. They talk about
the leaders’ directs, their plans about their succession planning, any external talent they have
brought in and in case of any external talent, look at the different parameters and factors which
are being used for nourishing the leadership. The leaders also assess the competitor influence, by
discussing scenarios on how a leader might be exposed if someone in the leadership exits the
organization.
Each leader’s direct will share his/her goals and summarize the current capabilities of the
potential leaders, the cultural factors and the action plan which will be utilized to ensure that
quality time and resources are invested in the holistic development of the future leaders. The
concluding step of this process is the combined talent talks with other teams. The CEO will have
a separate discussion with the go-to-market (sales and marketing) leaders. The second combined
talk is with the engineering groups where leaders of the engineering team will evaluate all the
areas from a talent perspective.
And finally, the leaders create plans that are real and identify potential successors. This entire
process of talent talks helps in cultivating talent in a way that encourages growth.
Succession planning at PepsiCo
PepsiCo uses the specialized methodology to produce an assessment index that evaluates
individuals on four main categories. PepsiCo uses a specialized program called LeAD which is
part of the competency framework called the PepsiCo GREAT5, which focuses on the leadership
development programs and assessing the talent across the leadership pipeline.
Highlights of GREAT5 competency framework:
Growth: This component reflects a person’s curiosity and interest to learn from unique
situations by constantly pushing the candidates out of their comfort zone
Relationships: It involves maintaining relationships across different teams by focusing
on integrity, transparency and authenticity and being respectful to everyone across the
organization
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Execution: This emphasizes the qualities which the leader brings in to drive the results.
The enthusiasm, inspiration which the individual brings in to motivate the fellow
employees is of utmost importance
Agility: It validates how a person would adjust as per the situation of the business
environment. The leader must be able to handle pressure and drive the transformation
Thinking: The employee must be proactive in bringing external insights (business,
customer, industry) and have a 360-degree view to make informed decisions
The LeAD employs various methodologies such as 360-degree feedback, cognitive tests,
personality tests and business simulations to evaluate the associated behaviour of the employees.
This framework helps in getting insights into different areas of development and a predictive
outcome of future leaders' characteristics.
In addition to this comprehensive framework, PepsiCo also incorporates the 70-20-10 framework
in developing future leaders.
Careers as a series of diverse experiences (70 per cent): The centre of excellence team works
closely with the senior leadership to come up with a good mix of experiences encompassing
functional, leadership and broadening experiences
Comprehensive Coaching (20 per cent): An internal team of seasoned coaches design the
development plans. The company also offers advanced training as part of targeted key
transitions
Corporate University (10 per cent): PepsiCo University includes diverse learning assets. The
assessment and various processes are designed with a focus on developing leadership and
functional competencies.
How leadership has changed the company in its path to success
PepsiCo:
The company's net sales increased at an annualised pace of 5.5 per cent under Nooyi's leadership,
hitting $63.5 billion last year, with $79.4 billion returned to shareholders in the form of
dividends and share repurchases.
A successful leader has been consistent in his mission, clear in his vision, aimless in his goal, and
strategic in his execution.
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After overseeing Pepsi's acquisitions of Tropicana in 1998 and Quaker Oats in 2000, Nooyi had
always been a proponent of healthier alternatives. Nooyi pushed a transition in PepsiCo's snacks
and drinks business toward healthier foods in expectation of further declines in demand for soda
and junk food, particularly in the developed world.
She lowered the size of chip packets and drink bottles as part of a company goal to reduce
obesity rates, cut salt, fat, and sugar levels, and offered diet brands as aspirational
alternatives. Many healthier food options were launched, ranging from hummus to baked chips
to cold-press juices and probiotic drinks, in addition to zero-sugar versions of the company's
staple soft-drink brands and chips without chemical preservatives.
She has prioritized worldwide expansion. Under her leadership, the company has made a
concerted effort to extend its distribution network and improve sales by focusing on the middle
classes in emerging markets such as Asia and Latin America.
Microsoft :
Recently in a survey of close to 13,000 Microsoft employees, Satya Nadella, CEO of the
company, received 3.9 out of five overall employee satisfaction rates, a 92% CEO approval, and
83% willingness to recommend Microsoft to a friend. Nadella's laser focus on the cloud platform
has also been noticed by the financial markets. Microsoft stock share price has appreciated and
has reached an all-time high primarily as the result of Nadella’s quick and decisive leadership in
embracing and shifting to the cloud service offering. Let us understand how he achieved this
through the leadership principles he believes in.
Clarity Of Purpose
“In an unambiguous situation, where there cannot be complete information, that is where
leadership matters.” According to him, leadership is to come into an uncertain time and
uncertain future and give the situation. In a panic-inducing situation, a true leader will be
able to provide clarity and this is an invaluable skill to have.
Generate Energy
“There is no simple thing that is always under your control.When Mr Nadella says this,
he means that generating energy will drive employees to be more efficient and be more
able to keep things under control.
Deliver Success
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“Great leaders can’t expect circumstances to be perfect before they deliver success”.
According to him, leaders can never say that one has to get rid of all the constraints to say
that a situation is “perfect”. A leader should always be adaptable and ensure
that the result is delivering success
Transforming Cloud Computing
Besides the leadership principles, Nadella also implemented changes and transformed the
company almost as soon as he was appointed CEO. The company had a new mission, a new
strategy, and there was a shift towards building a sustainable cloud platform. Under Mr Nadella,
the Microsoft Azure cloud computing platform has changed to support various new platforms
like Linux operating system, Apple iPad, and Microsoft Outlook for iPhone and Android
platforms. As a result, Nadella has earned the respect and love of both employees and investors.
References:
1. https://timesofindia.indiatimes.com/gadgets-news/3-leadership-principles-that-helped-ceo-
satya-nadella-make-microsoft-a-1-trillion-dollar-company/articleshow/73371111.cms
2. https://www.livemint.com/news/business-of-life/how-satya-nadella-brought-a-growth-
mindset-to-microsoft-11614874643362.html
3. https://www.forbes.com/sites/rickmiller/2018/12/13/leadership-during-microsofts-
turnaround/
4. https://www.latimes.com/business/technology/story/2019-12-21/satya-nadella-reinvigorated-
microsoft
5. https://techcrunch.com/2019/02/04/after-5-years-microsoft-ceo-satya-nadella-has-
transformed-more-than-the-stock-price/
6. https://csnews.com/change-leadership-pepsico-ceo-nooyi-announces-retirement
7. https://www.worldfinance.com/special-reports/how-indra-nooyi-changed-the-face-of-pepsico
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