More than a dozen PepsiCo executives have gone on to become Fortune 500 CEOs—here’s the secret to the company’s secret to creating future leaders.
- CEOs of some of America’s largest companies including Target, McDonald’s, and Visa have at least one thing in common according to a Fortune report—they all worked at PepsiCo for a time.
- Currently, 16 Fortune 500 CEOs have at some point worked at PepsiCo, making the company one of the most proficient leadership development corporations.
- In addition to current CEOs, the company has also produced hundreds of current C-suite executives and CEOs outside of the Fortune 500.
- The 57-year-old company has established a proven program that focuses on developing high performers within the company that includes training programs, mentorship opportunities, and more.
Why it’s important
PepsiCo is a massive institution, bringing in nearly $80 million in annual revenue. Like many major companies, it has a focus on investing in employee development and leadership training, but it stands out as one of the most highly developed systems.
Through this system, the company is able to identify highly performing employees—what PepsiCo calls “hi-pos”—and focus intense development on these employees. This development includes assignments around the globe, mentorship and training programs, and the chance to experiment with new ideas—even if those ideas fail.
This system is nothing new to the company. The practice of investing in current employees and developing talent has resulted in every PepsiCo CEO coming from within the company. Methods used by the company were developed by organizational psychologist Bob Eichinger who developed tests to discern the effectiveness of an executive and how they can become a better leader, Fortune reports.
One of the ways PepsiCo stands out from other companies is by providing clear paths for advancement to its employees. However, if an employee has been selected for potential executive status, they are not explicitly told. While the employee may suspect they are being groomed for higher levels of management due to special treatment and opportunities, they can’t know for sure.
PepsiCo keeps the exact standing of employees secret in order to prevent resentment building between coworkers and to ensure that the hi-pos have continued incentive to keep working.
The identified hi-pos don’t have an easy route to the top. In fact, they may go through years of intense training that can include multi-year assignments in international markets.
PepsiCo doesn’t ease its employees into larger assignments either. The company hopes to develop swift decision-making skills.
“Our model is first and foremost based on risk-taking and putting people into big jobs, uncomfortable jobs, and trusting they will flourish if you take a chance on them,” chief human resources officer Ronald Schellekens explains.
Managers at PepsiCo aren’t limited to certain types of jobs when identifying hi-pos. Anyone within the company can be identified as a hi-po through the company’s performance review system. Performance reviews and personality tests through the company’s human resources department play a major role in identifying hi-pos.
Hi-pos are given special attention from the company including opportunities for further education or a chance to try tackling a difficult assignment such as establishing the company in a new market. Upper level executives in the company often mentor stand out hi-pos.
Though some of these hi-pos may eventually move on to other opportunities at other companies, they often take some of these principles with them—such as mentoring employees that they view as having potential.
PepsiCo also stands out in its program by allowing its hi-pos to fail.
“There has to be room for failure, because odds are they will eventually, and the CEO role is not the place for that to happen,” consultant firm Korn Ferry’s Jane Stevenson says.