Spring 2020

Performance Management
Batch: RMBA, EMBA (12th, 13th)
Case Study
A. Indra Nooyi Draws on Vision and Values to Lead (7.5)
She is among the top 100 most influential people according to Time magazine’s 2008 list. She has also ranked
number 4 in Forbes’s “Most Influential Women in the World” (2010), number 1 in Fortune’s “50 Most Powerful
Women” (2006 through 2009), and number 22 in Fortune’s “25 Most Powerful People in Business” (2007). The
lists go on and on. To those familiar with her work and style, this should come as no surprise: Even before she
became the CEO of PepsiCo Inc. (NYSE: PEP) in 2006, she was one of the most powerful executives at PepsiCo and
one of the two candidates being groomed for the coveted CEO position. Born in Chennai, India, Nooyi graduated
from Yale’s School of Management and worked in companies such as the Boston Consulting Group Inc., Motorola
Inc., and ABB Inc. She also led an all-girls rock band in high school, but that is a different story.
What makes her one of the top leaders in the business world today? To start with, she has a clear vision for
PepsiCo, which seems to be the right vision for the company at this point in time. Her vision is framed under the
term “performance with purpose,” which is based on two key ideas: tackling the obesity epidemic by improving the
nutritional status of PepsiCo products and making PepsiCo an environmentally sustainable company. She is an
inspirational speaker and rallies people around her vision for the company. She has the track record to show that
she means what she says. She was instrumental in PepsiCo’s acquisition of the food conglomerate Quaker Oats
Company and the juice maker Tropicana Products Inc., both of which have healthy product lines. She is bent on
reducing PepsiCo’s reliance on high-sugar, high-calorie beverages, and she made sure that PepsiCo removed trans
fats from all its products before its competitors. On the environmental side, she is striving for a net zero impact on
the environment. Among her priorities are plans to reduce the plastic used in beverage bottles and find
biodegradable packaging solutions for PepsiCo products. Her vision is long term and could be risky for short-term
earnings, but it is also timely and important.
Those who work with her feel challenged by her high-performance standards and expectation of excellence. She is
not afraid to give people negative feedback—and with humor, too. She pushes people until they come up with a
solution to a problem and does not take “I don’t know” for an answer. For example, she insisted that her team find
an alternative to the expensive palm oil and did not stop urging them forward until the alternative arrived: rice
bran oil.
Nooyi is well liked and respected because she listens to those around her, even when they disagree with her. Her
background cuts across national boundaries, which gives her a true appreciation for diversity, and she expects
those around her to bring their values to work. In fact, when she graduated from college, she wore a sari to a job
interview at Boston Consulting, where she got the job. She is an unusually collaborative person in the top suite of
a Fortune
500 company, and she seeks help and information when she needs it. She has friendships with three ex-CEOs of
PepsiCo who serve as her informal advisors, and when she was selected to the top position at PepsiCo, she made
sure that her rival for the position got a pay raise and was given influence in the company so she did not lose him.
She says that the best advice she received was from her father, who taught her to assume that people have good
intentions. Nooyi notes that expecting people to have good intentions helps her prevent misunderstandings and
show empathy for them. It seems that she is a role model to other business leaders around the world, and PepsiCo
is well positioned to tackle the challenges the future may bring.

DISCUSSION QUESTIONS

1. Do you think Indra Nooyi’s vision of “performance with purpose” has been effective? Why or why not?
2. How does charisma relate to leadership? Do you think the CEO of PepsiCo possesses this characteristic?
3. What makes Indra Nooyi so successful at her job? Is it her level of authority, or is it something else?
4. What do the types of advisors that Indra Nooyi relies on tell you about her values?
5. How much passion does Indra Nooyi seem to bring to her role as CEO of PepsiCo?
B. Nucor Aligns Company Goals With Employee Goals ( 7.5 marks)
Manufacturing steel is not a glamorous job. The industry is beset by many problems, and more than 40 steel
manufacturers have filed for bankruptcy in recent years. Most young employees do not view working at a steel mill
as their dream job. Yet, one company distinguished itself from all the rest by remaining profitable for over 130
quarters and by providing an over 350% return on investment (ROI) to shareholders. The company is clearly doing
well by every financial metric available and is the most profitable in its industry.
How do they achieve these amazing results? For one thing, every one of Nucor Corporation’s (NYSE: NUE) 12,000
employees acts like an owner of the company. The overarching goal is “take care of our customers.” Employees are
encouraged to fix the things they see as wrong and have real power on their jobs. When there is a breakdown in a
plant, a supervisor does not have to ask employees to work overtime; employees volunteer for it. In fact, the
company is famous for its decentralized structure and for pushing authority and responsibility down to lower levels
in the hierarchy. Tasks that previously belonged to management are performed by line workers. Management
listens to lower level employees and routinely implements their new ideas.
The reward system in place at Nucor is also unique, and its employees may be the highest paid steelworkers in the
world. In 2005, the average Nucor employee earned $79,000, followed by a $2,000 bonus decided by the
company’s annual earnings and $18,000 in the form of profit sharing. At the same time, a large percentage of
these earnings are based on performance. People have the opportunity to earn a lot of money if the company is
doing well, and there is no upward limit to how much they can make. However, they will do much worse than their
counterparts in other mills if the company does poorly. Thus, it is to everyone’s advantage to help the company
perform well. The same incentive system exists at all levels of the company. CEO pay is clearly tied to corporate
performance. The incentive system penalizes low performers while increasing commitment to the company as well
as to high performance. Nucor’s formula for success seems simple: align company goals with employee goals and
give employees real power to make things happen. The results seem to work for the company and its employees.
Evidence of this successful method is that the company has one of the lowest employee turnover rates in the
industry and remains one of the few remaining nonunionized environments in manufacturing. Nucor is the
largest U.S. minimill and steel scrap recycler.

DISCUSSION QUESTIONS

1. What negative consequences might arise at Nucor Corporation as a result of tying pay to company performance?
2. What effects do penalizing low performers have on Nucor employees?
3. What other ways can a company motivate employees to increase productivity, in addition to monetary incentives?
4. How might the different reward systems at Nucor, individual empowerment and economic incentives, motivate
people differently? Or do they have the same effect?
5. How would unionization at Nucor impact the dynamic of the organization?