Q&A with the CEO

- Steve Reinemund

Q: Steve, what are the PepsiCo

Leadership Competencies?

A: The previous Leadership

Competencies were designed in 1998 to provide a clear description of the behaviors that form the foundation upon which PepsiCo is building its future. In short, these competencies are an answer to the question, What is important at PepsiCo?

Q: How were they developed? A: One-on-one business strategy

interviews were conducted with members of the senior teams in each of the divisions, myself included, to establish a clear line of sight between specific leadership behaviors and emerging business trends and challenges. In addition, focus groups and a survey were conducted with a broad sample of managers to pinpoint the behaviors most tightly linked to performance and job success at different levels. Finally, focus groups and a survey were conducted with a representative sample of our front-line and hourly employees to get a comprehensive answer to the question, What kind of manager brings out the best in you? Each of these perspectives was used to identify, and weight, the final components in the model.

Q: Why were they updated? A: This year, with the transition to a

new senior leadership team, and with the integration of Quaker, we made the decision to refine our thinking about leadership. While the bedrock foundation of what is important has not changed, there are some new components and shifts in emphasizing the leadership equation. These enhancements reflect the changing needs of our businesses and our employees.

Q: What is the result? A: We now have a richer, more factual

understanding than ever before of what separates the best from the rest in terms of successful leadership and managerial performance. We also have a clearer picture of what is important to our businesses and how our leaders can contribute most effectively to that success.

Q: Do you have any final comments

about the leadership model, or leadership in general, that you would like to share?

A: Our success at PepsiCo did not just

happen. Furthermore, our continued success will not just happensuccess depends on our incredibly talented people working together to make it happen. This company needs leaders, at all levels of the organization, who can work with their people to set a clear direction and vision, build the talent around them, find ways to achieve results quicker, better, and more simply, create a collaborative and inclusive culture, and so forth. To maintain our growth trajectory, we must take the mystery out of leadership and give all managers a roadmap for success. The Leadership Competencies have been designed to do just that. What you will find on the following pages is the clearest definition possible of the individual talents and behaviors that align with the future success of the company. 2

Q: How will they be used? A: The Leadership Competencies define

what is important at PepsiCo. So, at one level, they communicate the kinds of behaviors that are linked to job success and, ultimately, to the success of the business. At a more concrete level, they will serve as the framework for leadership training programs, be built into our 360 development tool, measured as part of the performance management process, and used to guide people planning discussions.

Your PepsiCo Leadership Model

The PepsiCo Leadership Model is outlined below. At the highest level, the model is organized around the three Leadership Imperatives. The Imperatives are defined by seven basic Success Factors, which in turn are defined by the 17 Competency Dimensions. A summary definition of each Competency Dimension, and the specific Leadership Behaviors that define each dimension in detail, are presented on the following pages. You will see these 58 Leadership Behaviors again; they serve as the item content in our 360 feedback tool. In addition, a summary statement of why each competency dimension is important is presented from two perspectives: the Front-Line and the Senior Leadership Team. Since the development of this model followed a bottom-up and a top-down approach, we thought you might be interested to learn what individuals thought about each competency dimension from both a bottom-up and a top-down perspective.

Leadership Imperatives

Success Factors

Competency Dimensions
1. Thinking Skills 2. Innovation 3. Strategic Focus 4. Establishes Priorities 5. Drives for Results 6. Change Leadership 7. Motivates Others 8. Collaboration 9. Builds Talent 10. Inclusion 11. Supports Others 12. Communicates Productively 13. Negotiation

Setting The Agenda

Planning Execution Courageous Leadership

Taking Others With You

People Development Savvy Communication Integrity Operational Excellence

Doing It The Right Way

14. Inspires Trust 15. Walks the Talk

16. Knows the Business 17. Functional Excellence

Setting The Agenda

Planning
1. Thinking Skills: Possesses the perfect blend of smarts and practicality.
Nobody has cornered the market on insight. If you are really smart, you will include and leverage the insights of others.

Front Line

Sr. Leadership Team

We hire, and depend on, incredibly smart people with superior judgment; its why were good.

Behaviors:
Sees connections in data, events, trends, etc., not obvious to others. Quickly analyzes complex problems to find actionable, pragmatic solutions. Makes the right short-term decisions without sacrificing long-term results.

2. Innovation: Is a source of fresh perspectives and breakthrough ideas.

Dont forget, some of the biggest ideas come from those closest to the customer, consumer, work process, or technology. The key to driving growth is innovation (product, marketing, work process, etc.). Everything else will fall into place.

Front Line

Sr. Leadership Team

Behaviors:
Generates innovative ideas, fresh perspectives and creative solutions that add value. Actively seeks and takes advantage of ideas, best practices and solutions developed elsewhere. Fosters an environment that supports innovation and breakthrough ideas.

3. Strategic Focus: Is future focused and sees big-picture business trends, implications and possibilities.
Dont get too internally focused. We need executives to be externally oriented and hungry for knowledge about the world.

Lets make sure time spent looking forward doesnt get brushed aside so easily in the rush to get period-to-period results. Front Line

Sr. Leadership Team

Behaviors:
Looks ahead to reasonably anticipate business opportunities and obstacles. Creates long-term strategies and plans that reflect a thorough understanding of how the business operates. Demonstrates an understanding of the cross-cultural implications when conducting business or executing initiatives around the world. Demonstrates an understanding of the organizations global market position, opportunities, capabilities and competitive threats.

Setting The Agenda

Execution
4. Establishes Priorities: Keeps work directions logical and crystal clear.
None of us has a crystal ball in our heads. Tell us where you want to go, and we will help you figure out how to get there. Business consistency depends on great execution. Great execution depends on efficient effort against priorities.

Front Line

Sr. Leadership Team

Behaviors:
Translates strategies into plans that can be effectively executed. Establishes clear responsibility for action against clear priorities. Minimizes bureaucracy and process inefficiency that distorts a focus on customers or results. Balances competing priorities without losing momentum behind execution.

5. Drives for Results: Has laser-beam focus on end results.

Give us a challenge, and some room to work, and let us show you what we can do! Front Line

Sr. Leadership Team

This company needs people with an insatiable appetite for accomplishment and results.

Behaviors:
Sets challenging but attainable performance goals. Provides timely and direct feedback to others regarding performance or workplace issues. Demonstrates a passion for winning in the marketplace. Demonstrates perseverance and resilience in the pursuit of goals.

Taking Others With You

Courageous Leadership
6. Change Leadership: Embraces change as a natural part of business.

Change can be either thrilling or threatening; make sure we see the opportunity in change. Front Line

Sr. Leadership Team

Every single manager and executive needs to be on a mission to make things simpler, faster, better.

Behaviors:
Champions breakthrough ideas and initiatives. Takes appropriate, well-reasoned risks. Confronts and works to resolve tough issues. Takes the initiative to find ways to get better results. Demonstrates courage and optimism during times of crisis or change.

7. Motivates Others: Energizes and inspires others.

Being passionate about the business, and being able to inspire passion in others, is an indispensable leadership characteristic.

The spirit of a workplace can be a competitive advantage that is difficult to replicate. Front Line

Sr. Leadership Team

Behaviors:
Articulates a compelling vision, purpose and direction that inspires others to follow. Inspires passion and excitement around shared goals and values. Builds a sense of urgency in the team to get results. Projects a credible and confident executive image.

8. Collaboration: Leverages the ideas, learning and expertise of others.

Maybe you can get results as a solo act. But think about how much more might be achieved if you work effectively with others! If we are going to win over the long haul, we have got to win as a team. Learn to share insights, best practices, Sr. peopleeverything. Leadership Team

Front Line

Behaviors:
Collaborates and makes compromises for the greater good without sacrificing personal principles or business ethics. Proactively shares information, best practices and ideas with others throughout PepsiCo. Builds cross-functional, cross-divisional and global partnerships that create synergy across PepsiCo.

Taking Others With You

People Development
9. Builds Talent: Feeds the organizations talent pipeline.
The biggest challenge this company has is finding, and growing, enough talented people to fuel our plans for growth.

We are on a path to bigger and better things too; we are counting on you to help us get there. Front Line

Sr. Leadership Team

Behaviors:
Gives constructive, actionable feedback to help people improve their performance. Encourages and coaches people to build their skills. Hires and develops people who fit the organization and have a positive impact. Provides others with challenging assignments and training experiences to promote their development.

10. Inclusion: Promotes inclusion and fairness as core business imperatives.

When you treat us with respect and value our unique differences, you set the tone. In the chair you are in, you can never not lead.

Front Line

Sr. Leadership Team

Our ability to operate effectively in a global marketplace is driven by our inclusion mindset.

Behaviors:
Treats all people with respect and fairness. Values and leverages people with different perspectives and experiences. Recognizes diversity as a business imperative and takes specific actions to drive it.

11. Supports Others: Is committed to making this a great place to work.

We want PepsiCo to be THE employer of choice, and one part of the equation is ensuring this is a Great Place To Work.

If you dont show us you care, we will conclude you dontand then we will stop caring too. Front Line

Sr. Leadership Team

Behaviors:
Creates a work environment that makes work rewarding and enjoyable. Recognizes and celebrates the significant achievements of others. Balances a concern for results with a concern for the needs of individuals in his/her work group.

Taking Others With You

Savvy Communication
12. Communicates Productively: Is a clear, simple, persuasive communicator.
Be confident enough to communicate clearly and listen to opposing views; dont hide behind jargon or convoluted logic.

Front Line

Sr. Leadership Team

The ability to inspire trust is the foundation upon which all the other executive talents are built.

Behaviors:
Clearly communicates ideas, plans and priorities to others. Encourages the honest expression and debate of different views and ideas. Keeps others informed so there are no unnecessary surprises.

13. Negotiation: Builds and uses work relationships to get results.

A selling approach can be even more effective than a telling approach when you want us to take action.

Front Line

Sr. Leadership Team

You either have it or you dont; there is no such thing as varying degrees of integrity.

Behaviors:
Communicates persuasively to win support. Can be direct/forceful as well as tactful/diplomatic. Understands and uses informal networks to get things done.

Doing It The Right Way

Integrity
14. Inspires Trust: Inspires trust, both up and down the organization.

Front Line

We will forgive good-faith errors of judgment, but integrity mistakes are forever.

Sr. Leadership Team

The ability to inspire trust is the foundation upon which all the other executive talents are built.

Behaviors:
Is trusted by those with whom he/she works. Makes decisions based on what is best for the company, rather than personal gain. Makes people proud to be part of the company because of his/her personal standards.

15. Walks The Talk: Delivers on commitments without sacrificing personal or business ethics.

When you tell us youre going to do something, we have to be able to consider it done. Front Line

Sr. Leadership Team

You either have it or you dont; there is no such thing as varying degrees of integrity.

Behaviors:
Acts consistently with his/her words. Does not compromise personal principles or business ethics to win. Can be counted on to do the right thing.

Doing It The Right Way

Operational Excellence
16. Knows the Business: Is passionate about understanding the business, both now and for the future.

If you really want to understand the business, join us in the trenches once in a while. Front Line

Sr. Leadership Team

Nothing can replace a deep understanding of the business and an almost instinctive feel for how the company makes money.

Behaviors:
Demonstrates a passion for mastering the details of the business and the marketplace. Leverages understanding of key business drivers (customers, consumers, competitors, costs & people) to get results. Creates customer/consumer-focused strategies and plans. Works to understand the current and future needs of customers/consumers.

17. Functional Excellence: Possesses superb functional/technical expertise.

How can you understand us if you dont understand what we do? Front Line

Sr. Leadership Team

Being a leader doesnt mean one is at the plateau of the learning curve.

Behaviors:
Demonstrates functional/technical mastery of the current job. Leverages technical/functional expertise to solve broader business issues.

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For Your Information

There are several FYIs about the research underpinnings of the new leadership model that may be of interest to you. First, part of the work to update the leadership model involved one-on-one meetings with 38 of the top executives of the company to discuss (A) the Company Strengths we must leverage and (B) the company weaknesses we must overcome if we are to maintain our growth trajectory. Those things that most everyone agreed on are listed below; the tie-in to the leadership model should be clear.

FYI #1:

Company Strengths + A laser-beam focus on growth and results + Our ability to execute + An ownership culture that promotes individual accountability + Talented people/many functional experts + Incredibly strong brands -

Weaker Areas Fostering a culture of innovation Proactively collecting and using customer/consumer insights Collaborating and sharing best practices Developing future leaders with broad business experience

FYI #2: In addition to the above, the updated leadership model included input from 578
front-line and hourly employees across our divisions. These employees provided detailed input via a survey designed to answer the question, What kind of manager brings out the best in you? As you can imagine, there were a lot of interesting differences of opinion. However, from the Americas to Europe to China, there were three Defining Characteristics that stood out as being universally important.

High Integrity
(i.e., Keep your promises because weve got to be able to depend on you.)

Clear Communications
(i.e., Keep priorities clear and keep us informed; no surprises!)

Being Supportive
(i.e., A focus on development, and an effort to make work enjoyable and more than just a job, means a lot!)

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More FYIs FYI #3:

A third source of information used to guide the updates to the leadership model came from 2,312 PepsiCo managers. These managers, representing all bands, responded to a survey that took a detailed look at which leadership behaviors were most linked to job performance at different management levels. In other words, not all behaviors are equally important in different jobs and roles. However, we uncovered a few Super Behaviors that help define success regardless of band, geography, or function. These include: Is trusted by those with whom he/she works. Makes decisions based on what is best for the company, rather than personal gain. Acts consistently with his/her words. Treats all people with respect and fairness. Establishes clear responsibility for action against clear priorities. Translates strategies into plans that can be effectively executed. Quickly analyzes complex problems to find actionable, pragmatic solutions. Takes the initiative to find ways to get better results.

FYI #4:

The relative importance of the competencies and specific leadership behaviors do change as one moves up through the management ranks. A high-level summary of these Shifting Priorities is presented below.
Emphasis on Technical vs. Leadership Competencies Emphasis on Leadership Imperatives Doing It The Setting The Taking Others With You Right Way Agenda

Sr. Leader:

Manager:

Entry Level Manager:

More Important

Less Important

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Capstone Comments From

Roger Enrico, Vice Chairman of the Board
There should be nothing mysterious about leadership and success. This definition of leadership takes the mystery out of whats needed to succeed. All of us are capable of being leaders. The best leaders among us will get there because they work the hardest at it.

Bob Morrison, Vice Chairman of the Board

Our future demands that we develop leaders, and give them the tools to lead successfully. It starts with articulating the behaviors we value those that drive results and inspire others to deliver their best.

Indra Nooyi, President & Chief Financial Officer

We need to improve the feeder system that cultivates people for bigger jobs. This leadership model is a big step in the right direction.

Al Bru, President & CEO, Frito-Lay North America

The new PepsiCo Leadership Model brings to life winning, field-tested competency dimensions. The sharper focus on change leadership, thinking skills, collaboration, and inclusion highlights competencies essential to our success in building the Worlds Premier Convenience Foods and Beverage Company.

Brock Leach, President & CEO, Tropicana Products, Inc.

The new leadership model gives us a very clear answer to the first question I hear at every new employee gathering: What does it take to be successful at PepsiCo? This model allows us to answer that question in a consistent way that is supported by our own experiences at PepsiCo. Its a great development tool.

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The Senior Leadership Team

Rogelio Rebolledo, President & CEO, Frito-Lay International
The PepsiCo Leadership Competencies provide a useful tool for projecting our corporate values to employees, customers, distributors, and consumers worldwide.

Gary Rodkin, President & CEO, Pepsi-Cola North America

The leadership competencies in this brochure will support the professional development efforts we have underway at PCNA. They provide clarity on the leadership skills our managers will need to develop and hone to achieve their career objectives. Well incorporate these competencies in our professional development at PCNA.

Peter M. Thompson, President & CEO, PepsiCo Beverages International

We now have a leadership model that reflects our global aspirations, and that will effectively shape leadership in any corner of the world.

Sue Wellington, Senior Vice President & President U.S. Beverages, The Quaker Oats Company
Leadership without management is chaos. Management without leadership takes you nowhere. Im glad to join a team that recognizes the need for both.

Michael D. White, President & CEO, Frito-Lay Europe/Africa/Middle East

The PepsiCo Leadership Competency Model paints a crystal clear picture of the leadership skills and values that have consistently proven to be a winning success formula for PepsiCo in all parts of our global company. More importantly, this effort to update and refine the competencies gives us an enormously valuable tool for developing the next generation of PepsiCo international leaders given how geographically and culturally diverse all of our operations are around the globe.

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