Strategic Leadership

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Copyright 2011 by Sage Publications, Inc.

C CH HA A PP TT EE RR
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5
Strategic Leadership
Natalie Slawinski
The University of Western Ontario
Positional power may still matter, and because I said so can still compel action
from employees lower in the pyramid, but when ideas and directives support a
vision that peoplepeers, partners, even those over whom the leader has no direct
authoritybelieve in, they will be inspired rather than compelled.
Goldsmith, Greenberg, Robertson, and
Hu-Chan (2003, p. 115)
I
n the past 20 years, researchers have begun to pay more attention to the study of strategic
leadership, which has come to be viewed by many as a critical aspect of firm success (Daft,
2005). Broadly speaking, strategic leadership refers to the study of executives who have
overall responsibility for the firm and how their decisions affect organizational outcomes
(Finkelstein, Hambrick, & Cannella, 2009). The focus is on top managers because they
usually have decision-making responsibilities that affect the whole organizationincluding
the other organizational membersand its overall performance (Daft, 2005).
Strategic leaders create a sense of purpose and direction, which guides strategy for-
mulation and implementation within the firm (Daft, 2005; Hosmer, 1982; Shrivastava
& Nachman, 1989). They also interact with key stakeholders, such as customers, gov-
ernment agencies, and unions, especially when these relationships are critical to firm
performance (House & Aditya, 1997). Organizations and the environments in which
they operate are increasingly complex and ambiguous. Therefore, strategic leaders must
344
Chapter 12: Strategic Leadership 345
navigate through these complexities and develop strategies that will allow their organi-
zations to be successful, whether they are for-profit or nonprofit.
Another perspective of strategic leadership focuses on the specific activities and
behaviors of strategic leaders that can improve the success of the firm (Ireland & Hitt,
1999; Rowe, 2001). This perspective argues that in an ever-changing complex business
environment, strategic leaders may be a source of competitive advantage. Ireland and Hitt
(1999) define strategic leadership as the ability to anticipate, envision, maintain flexibil-
ity, think strategically, and work with others to initiate changes that will create a viable
future for the organization (p. 43). Given the challenges that firms face in an often tur-
bulent and unpredictable global environment, Ireland and Hitt have identified six com-
ponents of strategic leadership that will lead to enhanced organizational performance:
determining the firms purpose or vision, exploiting and maintaining core competencies,
developing human capital, sustaining an effective organizational culture, emphasizing
ethical practices, and establishing balanced organizational controls.
Determining the Firms Purpose or Vision

The first component of strategic leadership consists of determining the firms purpose or
vision. This means that strategic leaders must articulate a clear and realistic statement
about why the firm exists and what is distinctive about it. This statement will then
empower members of the organization to develop and execute strategies that are in line
with the vision of the firm.
Exploiting and Maintaining Core Competencies

Strategic leaders exploit and maintain core competencies. Core competencies are resources
and capabilities that give firms an edge over their rivals. Strategic leaders need to understand
which combinations of resources and capabilities are valuable, rare, costly to imitate, and dif-
ficult to substitute for, as these will allow the firm to gain a competitive advantage.
Developing Human Capital

Strategic leaders are effective at developing human capital. Human capital refers to the knowl-
edge, skills, and abilities of the firms employees. Because these employees are critical to the
success of the organization, strategic leaders invest in them through training and mentoring.
Sustaining an Effective Organizational Culture

Strategic leaders sustain an effective organizational culture. An organizations culture is a
complex combination of ideologies, symbols, and values that are shared by employees of
the firm. Strategic leaders learn how to shape a firms shared values and symbols in ways
that allow the firm to be more competitive.
Emphasizing Ethical Practices

Strategic leadership involves the emphasis of ethical practices. Top managers who use
honesty, trust, and integrity in their decision making are able to inspire their employees
346 CASES IN LEADERSHIP
and create an organizational culture that encourages the use of ethical practices in day-
to-day organizational activities.
Establishing Balanced Organizational Controls

Organizational controls refer to the formal procedures that are used in organizations to
influence and guide work. These controls act as limits on what employees can and can-
not do. There are two types of internal controls: strategic and financial. Strategic con-
trols are accomplished through information exchanges that help to develop strategies,
whereas financial controls are accomplished through setting objective criteria such as
performance targets. Strategic controls emphasize actions, whereas financial controls
emphasize outcomes. Financial controls can be especially constraining and can stifle
creativity in organizations. Strategic leaders must establish balanced organizational
controls by incorporating the two types in order to allow employees to remain flexible
and innovative.
In addition to accomplishing the above activities, strategic leaders must balance the
short-term needs of their organizations while ensuring a future competitive position.
Rowe (2001) defines strategic leadership as the ability to influence others to voluntarily
make day-to-day decisions that enhance the long-term viability of the organization,
while at the same time maintaining its short-term financial stability (pp. 8283). This
type of leadership is a synergistic combination of visionary leadership, which empha-
sizes investing in the future, and managerial leadership, which emphasizes preserving the
existing order. Strategic leaders focus on both the day-to-day operations and the long-
term strategic orientation of the firm, recognizing that neither can be ignored if a firm
is to be successful.
Importantly, strategic leaders have strong positive expectations of the performance
they expect from their superiors, peers, subordinates, and themselves (Rowe, 2001). These
expectations encourage organizational members to voluntarily make decisions that con-
tribute to short-term stability and long-term viability of the organization. As such, strate-
gic leaders do not have to expend as much effort on monitoring and controlling
employees. It is also important that those leaders who already exhibit strategic leadership
abilities encourage their development in other organizational members. In this way,
strategic leadership can exist at all levels of the organization. Strategic leaders also select
the next generation of leaders to ensure that the organization will continue to have strate-
gic leadership in the long term (Boal & Hooijberg, 2000).
Strategic Leadership Versus Leadership

In Chapter 1 of this casebook, leadership was defined as the process of influencing others
in order to accomplish a goal. The focus was on the relationship between the leader and
follower in a group context and on the process of leading in order to achieve a goal. So
how is strategic leadership different from leadership? The main difference is that leader-
ship can be accomplished at any level of the organization and can have an impact on dif-
ferent types of organizational goals, such as increasing the sales of a particular product
line or reducing the turnover of employees.
Strategic leadership, on the other hand, is mainly concerned with, but not neces-
sarily restricted to, the higher levels of the organization, given that executives are in a
Chapter 12: Strategic Leadership 347
unique position to influence the direction and vision of the organization (Finkelstein,
Hambrick, & Cannella, 2009). Strategic leadership has an impact on organization-
wide outcomes, such as the financial performance of a small manufacturing company
or the strategic change of a large multinational company. The difference can also be
thought of as leadership in organizations versus leadership of organizations (Boal
& Hooijberg, 2001). The leadership approaches discussed throughout this book are
mainly concerned with how leaders affect followers in the organization, whereas
strategic leadership is primarily concerned with the leadership of organization by
top managers. But as we saw earlier, leaders at all levels of the organization can have
an impact on organizational performance. The focus of strategic leadership is often
on top-level executives such as CEOs because they tend to have more power and are
given responsibility for the overall performance of the firm. They are also held
accountable by shareholders for the success of the firm, and poor performance can
lead to their dismissal.
Positional Versus Behavioral

In contrast to some of the other theories within the realm of leadership, such as the trait
approach and the skills approach, the strategic leadership perspective is not as well devel-
oped. Furthermore, there is a lack of agreement regarding what strategic leadership is. As
we have seen, strategic leadership has come to have several different, but often comple-
mentary, meanings. Some (e.g., Finkelstein, Hambrick, & Cannella, 2009) view it as hav-
ing to do with ones position in a company, while others (e.g., Ireland & Hitt, 1999) view
it as a set of behaviors that lead to superior performance.
The positional view argues that anyone holding the position of CEO or another top
executive position is a strategic leader because of his or her decision-making power and
level of responsibility. This perspective looks at the differences in psychological charac-
teristics of strategic leaders to examine how these differences affect their organizations
(Finkelstein & Hambrick, 1996). Others view strategic leadership as a set of activities that
leaders must perform if they are to enhance organizational performance. For example,
strategic leaders are those who sustain an effective corporate culture (Ireland & Hitt,
1999). A related perspective (Rowe, 2001) on strategic leadership views it as a leadership
style that individuals may possess at any level of the organization. Rowe (2001) argues
that organizations that have CEOs who are strategic leaders will create more value than
those who have visionary or managerial leaders.
As we saw in the definitions above, there is no consensus on exactly what strategic
leadership is, but certain themes do emerge. For instance, most of the definitions or con-
ceptualizations of strategic leadership mention the importance of studying CEOs and
other top managers to better understand why some firms outperform others. Whether it
is viewed as a style of leadership, a set of activities, or a broad area of study, strategic lead-
ership is viewed by many as critical to firm success, especially given our complex, global
business environment.
Several themes emerge in the literature concerning what strategic leaders do to
increase firm performance. They look after both the short-term operational side of
their organization and the long-term directional aspects, such as defining the firms
purpose (Phillips & Hunt, 1992; Rowe, 2001). Strategic leaders select and develop
other organizational members to ensure that these successful strategic leader abilities
348 CASES IN LEADERSHIP
will exist throughout the organization, not just at the top. They influence others by
behaving ethically and transparently. Strategic leaders who have overall responsibility
for the firm (such as a CEO) articulate a vision that will provide the organizations
members with meaning and guidance. They are also in a position to influence external
constituents, such as suppliers, unions, and government agencies. Strategic leaders
who incorporate these important activities can help ensure the future competitiveness
of the firm.
y References
Boal, K. B., & Hooijberg, R. (2001). Strategic leadership research: Moving on. Leadership Quarterly, 11, 515549.
Daft, R. L. (2005). The leadership experience (3rd ed.). Mason, OH: Thomson, South-Western.
Finkelstein, S., & Hambrick, D. C. (1996). Strategic leadership: Top executives and their effects on organizations.
St. Paul, MN: West.
Finkelstein, S., Hambrick, D. C., & Cannella, A. A., Jr. (2009). Strategic leadership: Theory and research on
executives, top management teams, and boards. New York: Oxford University Press.
Goldsmith, M., Greenberg, C. L., Robertson, A., & Hu-Chan, M. (2003). Global leadership: The next gen-
eration. Upper Saddle River, NJ: Financial Times Prentice Hall.
Hosmer, L. T. (1982). The importance of strategic leadership. Journal of Business Strategy, 3, 4757.
House, R. J., & Aditya, R. N. (1997). The social scientific study of leadership: Quo vadis? Journal of
Management, 2(23), 409473.
Ireland, R. D., & Hitt, M. A. (1999). Achieving and maintaining strategic competitiveness in the 21st cen-
tury: The role of strategic leadership. Academy of Management Executive, 13, 4357.
Phillips, R. L., & Hunt, J. G. (1992). Strategic leadership: A multi-organizational-level perspective. London:
Quorum Books.
Rowe, W. G. (2001). Creating wealth in organizations: The role of strategic leadership. Academy of Management
Executive, 15, 8194.
Shrivastava, P., & Nachman, S. A. (1989). Strategic leadership patterns. Strategic Management Journal, 10, 5166.
y The Cases
Strategic Leadership at Coca-Cola: The Real Thing
Muhtar Kent had just been promoted to the CEO position in Coca-Cola. He was reflect-
ing upon the past leadership of the company, in particular the success that Coca-Cola
enjoyed during Robert Goizuetas leadership. The CEOs that had followed Goizueta were
not able to have as positive an impact on the stock value. When his promotion was
announced, Kent mentioned that he did not have immediate plans to change any man-
agement roles but that some fine-tuning might be necessary.
Compassion Canada
Compassion Canada is a nonprofit ministry focusing on the holistic development of poor
children in developing countries. Over the past 10 years, the organization has only dou-
bled its sponsorships. The chief executive officer must analyze the organizations perfor-
mance and develop a strategic plan that will enable Compassion Canada to reach its goal
of fivefold growth over the next 10 years.
Strategic Leadership at Coca-Cola 349
y The Reading
Youre an Entrepreneur: But Do You Exercise Strategic Leadership?
This brief article describes the differences among the concepts of strategic leadership,
visionary leadership, and managerial leadership. In addition, it defines strategic leader-
ship. It describes two entrepreneurs who developed large organizations that created wealth
for their owners.
Strategic Leadership at Coca-Cola

The Real Thing
Prepared by Suhaib Riaz under the supervision of W. Glenn Rowe
In recent years, The Coca-Cola Company death from cancer in October 1997, the com-
(Coca-Cola) has seen a much lower rise in its pany witnessed some tumultuous times, and
stock price compared with the exceptional 5,800 Goizuetas three immediate successors have not
per cent rise during the 16-year tenure of its lasted for even half as long as his total tenure
well-known chief executive officer (CEO), (see Exhibit 1). Coca-Colas CEO succession
Robert Goizueta. After Goizuetas untimely process was widely regarded as being ad hoc, and
Exhibit 1 CEO Succession Timeline and Stock Price Performance at Coca-Cola
Adjusted Monthly Adjusted Monthly

Closing Stock Price Closing Stock
at Beginning Price at Ending
CEO Period of Tenure Month of Tenure* Month of Tenure*
Robert Goizueta March 1981 to October 1997 $00.78 $46.23
Douglas Ivester October 1997 to February 2000 $46.23 $40.54
Douglas Daft February 2000 to February 2004 $40.54 $44.25
E. Neville Isdell May 2004 to June 2008 $45.71 $51.61**
Muhtar Kent July 2008 to present
* Closing price adjusted for dividends and stock splits.

** As of June 30, 2008.
AUTHORS NOTE: This case has been written on the basis of published sources only. Consequently, the interpretation and per-
spectives presented in this case are not necessarily those of The Coca-Cola Company or any of its employees.
Copyright 2008, Ivey Management Services Version: (A) 2008-10-16
350 CHAPTER 12: STRATEGIC LEADERSHIP
each succession story had its own peculiarities i.e., their choices make a difference to their
and intrigues. The leadership styles of CEOs at organizations and, through their organiza-
Coca-Cola differed and were often a source of tions, to their environment.
interest in the media and the investment com- Strategic leaders are a synergistic combina-
munity, where many speculated on the type of tion of managerial and visionary leadership.
leadership that was needed at the helm. They oversee both operating (day-to-day) and
In general, leadership styles can be strategic (long-term) responsibilities, apply
described as managerial, visionary, or strate- both linear and non-linear thinking, and
gic.1 In this categorization, managerial leaders emphasize ethical behavior and value-based
are considered those who are risk averse, reac- decisions. Strategic leadership is defined as the
tive and for whom goals are based on the past ability to influence those with whom you work
and on necessities, as opposed to goals arising to voluntarily make decisions on a day-to-day
from desires and dreams. Such leaders relate basis that enhance both the long-term viability
to people according to their roles in the decision- of the organization and the organizations
making process, see themselves as conservators short-term financial stability.2
and regulators of the existing order, and
involve themselves in situations and contexts
characteristic of day-to-day activities. They
y Goizueta Is It!3
are concerned with, and are more comfortable
Background
in, functional areas of responsibility, ensuring
compliance to standard operating procedures. Robert Goizueta was born in Havana, Cuba, in
These leaders exhibit linear thinking and are 1931, a scion of a major sugar industry family
deterministic, i.e., they believe their choices in Cuba. Goizuetas maternal grandfather
are determined by their internal and external immigrated to Cuba from Spain, and, despite a
environments. lack of education beyond high school, was able
In contrast, visionary leaders are proactive; to save enough money to buy a sugar refining
they shape ideas, and they change the way peo- business and some real estate during the
ple think about what is desirable, possible, and Cuban depression. His grandfathers focus on
necessary. They are given to risk taking. They the importance of cash made an early impres-
bring fresh approaches to long-standing prob- sion on Goizueta. After attending a Jesuit
lems, concern themselves with ideas, and relate school in Cuba, Goizueta moved to a private
to people in intuitive and empathetic ways. academy in Connecticut for a year to improve
They feel separate from their environment, his English. His outstanding performance and
working in, but not belonging to, their organi- connections at the academy helped him gain
zations. Such leaders are concerned with admission to Yale University, where he
ensuring the future of the organization, espe- majored in chemical engineering with an eye
cially through development and management to a possible future in the family business.
of people. They engage in multifunctional and When he returned to Cuba, he chose not
integrative tasks, they know less than their to join the family business. Instead he
functional area experts, utilize non-linear answered a blind advertisement in a newspa-
thinking, and believe in strategic choice per that led to a job as an entry-level chemist at
1
W. Glenn Rowe, Creating Wealth in Organizations: The Role of Strategic Leadership, Academy of Management Executive,
February 2001, pp. 8194.
2
Ibid.
3
Slogans used in titles retrieved from The Coca-Cola Company website, Heritage section, http://www.thecoca-
colacompany.com/heritage/ourheritage.html on March 22, 2008.
The Coca-Cola Company in Havana. It was served in that position for decades, befriended
going to be a temporary thing for me, $500 a Goizueta. Aided by a close relationship with
monthmy friends thought I was absolutely Robert Woodruff, Goizueta moved up through
crazy, he recalled. However, he soon rose to the technical operations and became president
become chief technical director of five Cuban in 1980 after J. Lucian Smiths resignation.
bottling plants. Then, in 1959, Fidel Castro When the chairman, J. Paul Austin retired in
came to power and Coca-Colas Cuban opera- 1981, Goizueta became chairman and CEO. At
tions came under a strong threat of takeover. the time, the transition was seen as messy,
The family escaped to Miami, where because Woodruff (despite being retired) used
Goizueta, his wife, three children, and a nurse- his position as the companys 90-year-old
maid shared a motel room for a month. patriarch to overrule Austins choice for suc-
Fortunately, Goizueta landed a job with Coca- cessor, Donald R. Keough. Woodruff s pick,
Cola in a new Miami office. His only posses- the chemical engineer from Cuba, was
sions of value were 100 shares of Coca-Cola regarded as the darkest horse in the succession
stock in a New York bank and US$40. He later process. However, Woodruff and others on the
recalled the importance of that experience: board saw Goizueta as the person needed to
introduce change and improve performance.
You cannot explain that experience to Goizueta generously asked Keough to be
any person. That was ten times more his chief operating officer (COO) and presi-
important than anything else in my dent, sending the broader message that
life. It was a shocker. All of a sudden
you dont own anything, except the The day of the one-man band is gone.
stock. One hundred shares! Thats the It would be a crime for me to try to
only thing I had. It brings a sense of lead the bottlers the way Don Keough
humility. It builds a feeling of not can. I would look like a phony. . . . My
much regard for material things.4 job is to pick the people, then give
them the responsibility and authority
After working in the Miami office, he to get the job done.
worked as a chemist in the Bahamas for Coca-
Colas Caribbean region and later moved back to Goizueta created a two-page, double-spaced
headquarters in Atlanta, Georgia. At age 35, document, The Job of the Chief Executive
he was promoted to vice-president, Technical Officer, which delineated what he could and
Research and Development, the youngest person couldnt delegate.5 For 12 years, Goizueta and
to hold this position. He was then promoted to Keough complemented each other. Goizueta
head the Legal and External Affairs department was known as the business philosopher, whereas
in 1975 and became vice chairman in 1979. Keough did more of the footworktraveling to
bottlers, meeting customers and ensuring over-
all operations were in shape.6
Goizueta as CEO of Coca-Cola Goizueta stated that he had viewed Coca-
Robert Woodruff, widely regarded as Cokes Cola as having become too conservative and
main power broker because he revitalized the revealed his desire for major changes: It took
company after taking over as CEO in 1923 and us a little bit longer to change than it should
4
Betsy Morris, Roberto Goizueta and Jack Welch: The Wealth Builders, Fortune, December 11, 1995, p. 8094.
5
Betsy Morris, Roberto Goizueta and Jack Welch: The Wealth Builders, Fortune, December 11, 1995, pp. 8094.
6
Betsy Morris, The Real Story, Fortune, May 31, 2004, pp. 8498.
have. The world was changing, and we were management team to perform.8 A contempo-
not changing with the world. At a retreat for rary CEO characterized Goizuetas style in the
company executives, he unveiled a Strategy following manner: A lot of executives can
for the 80s and emphasized that Were going intellectualize the process, but [Goizueta] can
to take risks.7 follow through.9
When Goizueta took over, the company Although Coca-Cola had never borrowed
was in multiple businesses: soft drinks, wine, money, under Goizueta, it borrowed billions
coffee, tea, plastics, shrimp farming, orange and bought out independent bottlers around
groves, steam generators, industrial boilers, the world to upgrade its own distribution sys-
desalting plants, and industrial water treat- tems. With Douglas Ivester as chief financial
ment. Goizueta subjected each business to a officer (CFO), the 49 per cent solution was
standard financial formula: Is our return on devised. This involved Coca-Cola buying out
capital greater than our cost of capital? He U.S. bottlers that were not doing well and com-
then divested non-core businesses that did not bining them with its own bottling network.
measure up until the only business left by the The new creation was called Coca-Cola
late 1980s was the selling of bottled carbon- Enterprises (CCE) and was spun off to the
ated soft drinks (CSDs)predominantly public, with Coca-Cola retaining a strategic 49
Coca-Cola and minor quantities of Sprite and per cent of the stock. This arrangement helped
Tab (a diet soft drink)and one non-CSD Coca-Cola reduce its debt and divest itself of a
beverage (i.e., Minute Maid). He stated his low-return, capital intensive business.10
rule of investment: You borrow money at a Looking back at that time, Goizueta later
certain rate and invest it at a higher rate and commented during an interview:
pocket the difference. Its simple. He was a
pioneer in promoting the idea of economic We really lost focus on who our cus-
profit (i.e. after-tax operating profits in excess tomer was. We felt our customer was
of capital costs) and wrote to Wall Street ana- the bottler as opposed to McDonalds
lysts personally about it. Today, the concept and Wal-Mart. So consequently, we
has gained ground as economic value added were being either cheerleaders or
(EVA), a well-regarded tool for increasing critics of our bottlers. But hands off;
shareholder wealth. we didnt have anything to do with
Goizuetas style was less hands-on and itthat was their job. I think the
more intellectual. Despite the fact that Coca- worst thing we ever had to do was to
Cola earned up to 80 per cent of its profits establish a sense of direction . . . so
abroad, Goizueta visited only about a half- that they know where theyre going.
dozen countries a year and remained most Then you can let them have a lot of
comfortable defining the character of the freedom.11
company from his office at Coca-Colas
headquarters. Goizueta used rewards based During this same interview, Goizueta
on economic profit targets to motivate his emphasized the need for leaders to establish a
7
Coke CEO Roberto C. Goizueta Dies at 65, CNN Interactive News, October 18, 1997, http://www.cnn.com/US/9710/18/
goizueta.obit.9am, retrieved April 18, 2008.
8
Patricia Sellers, Where Coke Goes from Here, Fortune, October 13, 1997, pp. 8891.
9
10
Patricia Sellers, How Coke Is Kicking Pepsis Can, Fortune, October 28, 1996, pp. 7084.
11
sense of direction, so people both knew where his bets, but to pile up earnings until he could
they are going and had a lot of freedom to get sort out issues with the soft drinks business.
there. He added that if people did not know The new moves included launching New
where they were going, you do not want them Coke. Based on a sweeter formula, it was a
to get there too fast. Finally, he encouraged departure from the traditional Coke formula
people to create what can be, as opposed to and was developed to counter Pepsi, which
what is. was doing better on taste tests. In Goizuetas
Goizueta emphasized the importance of words, the launch of New Coke was the bold-
relationships. He enticed the Cisneroses est single marketing move in the history of the
(Pepsis most venerable bottlers in Venezuela) consumer goods business. However, when
away from Pepsi and signed the deal in the New Coke bombed in 1985 and loyal cus-
presence of three generations of the tomers demanded a return of the old formula,
Cisneroses at Coca-Cola headquarters. It was the old Coke was re-launched as Classic
a very family-like gathering, to symbolize that Coke, and over time New Coke was allowed
this was to be a long-term relationship, to die out. Coca-Cola learned a valuable les-
Gustavo Cisneros recalled. This is a people- son: its brand and marketing, not the taste of
relations business, Goizueta later said.12 the sugar water, was its asset, and Coca-Cola
These moves were also in line with marketing was consequently overhauled. I
Goizuetas overall approach of developing realized what I should have before, he
senior managers intimate strategic knowledge recalled. That this was a most unique com-
of, and engagement in, the core business. pany with a most unique product. We have a
Whereas CCE and other bottlers carried out product that people have an unusual attach-
the operational details on the ground, Goizueta ment to. I had never felt so bullish about it.13
focused his own role and that of other senior Goizueta encouraged speedier decision-
managers on brand building, making deals, and making and kept encouraging risk-taking. At a
selling concentrate. Coca-Cola did not rotate worldwide gathering of Coca-Colas quality
its successful managers through jobs rapidly, in assurance staff, in response to a concern about
contrast to its main rival Pepsi. If you do that, all the changes taking place, Goizueta said:
you can never see how good the people really
are, Goizueta explained. Dont wrap the flag of Coca-Cola
Goizueta encouraged calculated risk- around you to prevent change from
taking, epitomized by his decision to put the taking place. It is extremely important
Coca-Cola trademark on a new product, Diet that you show some insensitivity to
Coke, in 1982, which turned into the most your past in order to show the proper
successful product launch of the 1980s. respect for the future.14
Traditionally, the company had never put the
Coca-Cola trademark on other products. During Goizuetas reign, the company
Goizueta invested outside the core business expanded both domestically and internation-
only on one occasion, to buy Columbia ally, backed by the new slogan, Coke Is It!
Pictures in 1982, after it went bust. He later Goizueta turned Coca-Cola around finan-
sold it to Sony in 1989 for a large profit. He cially, organizationally and culturally, making
stated that this investment was not to hedge it Americas most admired company, against all
12
13
Ibid.
14
Ibid.
expectations. Coca-Colas stock price increased energy, the ability to excite others, a defined
5829 percent during Goizuetas tenure (see vision, the capacity to find change fun, and the
Exhibits 1 and 2). Its market value grew 34 facility to be as comfortable in New Delhi as in
times, from $4.3 billion to $147 billion during Denver. Goizueta added that while energy is
Goizuetas 16-year tenure. In addition, in a the number-one quality, two other qualities
Fortune story on Goizueta in October, 1997 were also importantintegrity and the intel-
describing The Goizueta Effect it was lectual courage to take a risk, a leap of faith,
reported that revenues had increased from whether the leap was big or small.
$4.8 billion to $18.5 billion, net income from Roberto Goizueta died of cancer at the age
$0.5 billion to $3.5 billion, and return on of 65 in October 1997. The 100 shares he had
equity from 20 per cent to 60 per cent from when he arrived in Miami were worth more
1981 to 1996 (see Exhibit 3).15 than $3 million. He was a billionaire by 1997
When asked what he looked for in a future and his belief in Coca-Cola was evidenced by
successor, Goizueta agreed with his fellow the fact that in 1995 more than 99 per cent of
interviewee, Jack Welch, General Electrics his personal wealth was tied up in Coca-Cola
CEO, that his successor needed incredible stock.16 He was replaced by heir apparent
Coca-Cola (KO) Stock Market Performance Compared to the Dow Jones (DJI) and
Exhibit 2
Standard and Poor (GSPC) Indices
Coca Cola Co The Splits:

as of 11-Apr-2008
+5000%
+4000%
+3000%
KO
+2000% GSPC
DJI
+1000%
0%
1965 1970 1975 1980 1985 1990 1995 2000 2005
60.0
Volume
Millions
40.0
20.0
0.0
SOURCE: Yahoo Finance website, accessed April 11, 2008. Copyright Yahoo! Inc. 2008. Reproduced with permission of
Yahoo! Inc. YAHOO! and the YAHOO! logo are trademarks of Yahoo! Inc.
15
16
Patricia Sellers, Where Coke Goes from Here, Fortune, October 13, 1997, pp. 8891; Betsy Morris, Roberto Goizueta and
Jack Welch: The Wealth Builders, Fortune, December 11, 1995, pp. 8094.
Graphical Comparison of Net Profit/Sales and Net Profit/Equity During the Goizueta and
Exhibit 3
Ivester Timeframe
Net Profit/Sales (%)

25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
5.0% 1975 1980 1985 1990 1995 1996 1997 1998 1999 2000
Coke Pepsi CCE PBG
Net Profit/Equity (%)
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
1975 1980 1985 1990 1995 1996 1997 1998 1999 2000
Coke Pepsi CCE PBG
SOURCE: David B. Yoffie, Cola Wars Continue: Coke and Pepsi in the Twenty-First Century, July 30, 2002, Harvard Business
School, Exhibit 4, pp. 19.
NOTE: CCE: Coca-Cola enterprise; PBG: Pepsi Bottling Group.

Douglas Ivester. Some said that Goizuetas Goizuetas leadership, Ivester helped create a
strategic planning showed in his leaving separate bottling company, Coca-Cola
behind a solid management team. Herbert Enterprises (CCE), and spun it off to sharehold-
Allen, a director at Coca-Cola since 1982 ers while keeping 49 per cent equity for Coca-
stated, Roberto has filled in behind him so Cola to control the business. Goizueta groomed
well. He established at least four people who Ivester and provided opportunities for varied
can run the company . . . and behind them are experiences in marketing and international
ten more people who could fill their jobs. operations. Ivesters first operations job was as
president of Coca-Colas European operations in
mid-1989. When the Berlin Wall came down
y Always Douglas Ivester later that year, Ivester cut deals with bottling
plants across Eastern Europe, and his oppor-
Background tunism saw Coca-Cola seizing control of the
In a few ways, Ivester was comparable to region that had long been dominated by Pepsi.
Goizueta. He had his own rags-to-riches story As president of Coca-Cola in 1990, Ivester
and was regarded as a dark horse who came visited overseas markets and sent out a new
from corporate backwaters. Ivester was the only message. Instead of setting goals in the tradi-
child of conservative Southern Baptist factory tional style, he asked executives to think about
workers raised with discipline and rigidity in what kind of growth would be possible in a
the Georgia mill village of New Holland, 60 market, and to figure out how to knock down
miles north of Atlanta. He described his par- the barriers to attain that growth. He also stated
ents as strong savers, [with] very strong reli- that, like Goizueta, he would remain focused on
gious values, partly due to their being children one businessnon-alcoholic beverages. During
of the Depression. They had very high expecta- his time as president of Coca-Cola USA, he
tions of him. When he got an A in school, his spent every Saturday morning for a year learn-
father would remark, They give A-pluses, ing marketing from Sergio Zyman, who went
dont they? As a child, Ivester worked after on to become Coca-Colas global marketing
school doing odd jobs. He hardly had time for boss. He added the position of chief learning
any extra-curricular activities or team sports. officer and encouraged its first incumbent,
One thing I learned in Gainesville was to Judith A. Rosenblum, to turn the company into
never let my memories be greater than my a learning organization. His goal was to cap-
dreams, Ivester recalled. He graduated from ture all of the growth in Coca-Colas markets.
the University of Georgia with an accounting Upon Goizuetas unexpected death due to
major and worked as an accountant at Ernst & cancer in 1997, Doug Ivester was the heir
Whinney. Ivester headed the audit team for apparent and became CEO. However, it was
Coca-Cola and was recruited by Coca-Cola as rumored that his appointment was not sup-
assistant controller in 1979. Six years later, CEO ported by Don Keough.18
Goizueta, impressed with Ivesters solutions to
complex financial problems that helped maxi- Douglas Ivester as
mize returns on investment, made him CFO.17 CEO of Coca-Cola
As CFO, Ivester was the brains behind get-
ting Coca-Colas low-return bottling operations As CEO, Ivester made some important changes
and its debt off the companys books. Under in positions. His competitor for the CEO
17
18
position, E. Neville Isdell, was moved to head president of Coca-Cola USA, going from store
a bottler in Britain. Carl Ware, a senior vice- to store and even identifying the hairdressing
president was demoted. Don Keough, who, salons and laundromats where Coke couldnt
after his retirement, had continued attending be found. On one Saturday morning, he drove
Coca-Cola board meetings as Goizuetas con- from Atlanta to Rome, Georgia, with a video
sultant, lost his consulting contract and his crew to identify missed opportunities along
place at the boardroom table. the way.20 He encouraged people to avoid
Ivesters personality, like Goizuetas, was doing things sequentially and pushed for viral
seen as reserved on the surface. Yet, despite growth. As an example, he suggested if you
wide recognition for being brilliant, Ivester opened offices in China, not to open them one
seemed to lack some of Goizuetas characteris- at a time but to have each new office assist in
tics. Ivester was known for an obsession with a opening several more.21
rational and orderly way of operating. He was Ivester was known to be a CEO who com-
considered arrogant and insecure, blind to his municated with people at all levels and ignored
own weaknesses and not forthcoming in solic- hierarchy. He wanted employees to think of
iting advice. He placed less emphasis on themselves as knowledge workers, to think of
Goizuetas tradition of having almost daily their office as the information they carried
chats with directors. During his reign, Coca- with them, supported by technology that
Cola alienated European regulators and several would allow them to work anywhere. With
executives at major customers, such as Disney Ivester, business planning was not done annu-
and Wal-Mart. Some major bottlers, including ally, but became an ongoing discussion involv-
Coca-Cola Enterprises, were also alienated. In ing top executives. Ivester focused on getting
time, he became more and more obsessed with lots of information, aided by technology,
controlling the most minor details of every which he believed was necessary for real-time
operation. To make matters worse, the Asian decision making. Although past CEOs had
currency crisis occurred during his reign and focused on letting executives find their own
affected Coca-Colas business. The U.S. dollar, solutions, Ivester involve himself in finding
which had remained weak for a long time and solutions for them. Ivester explained his
had contributed to Coca-Colas earnings, involvement by stating that in such a fast and
strengthened during Ivesters tenure.19 complicated world, a CEO could not run a
As CEO, continuing on in his earlier business by sitting in an office. To many, this
approach, Douglas Ivester was known for approach sounded like micromanaging.22
working seven days a week and nearly all the Jack Stahl, senior vice-president and pres-
time. On visiting Shanghai as CEO, he was ident of Coca-Colas North America group,
known to have walked out on the streets while reported that he often got six or seven notes a
the World of Coca-Cola traveling multi- day from Ivester. And Ivester expected prompt
media exhibit was going on. Ivester walked replies to all his communications, includ-
into little stores and asked why Coke was not ing his voice mails. Ivester went without a
prominently displayed on shelves and noted number-two person for about a year, working
where fountain machines were turned off. instead with a flat structure that had 14 senior
He was known to have done similar walks as vice-presidents, including six operating heads,
19
Ibid.
20
Betsy Morris, Doug Is It, Fortune, May 25, 1998, pp. 7184.
21
Ibid.
22
Ibid.
reporting to him directly. Ivester took less Whereas Goizueta had focused on stock-
naturally to the ceremonial nature of his job, holders, Ivester spent his energies on cus-
remarking to the mayor of Shanghai, Nice tomers, If you focus on the customer, the
place you have here, on visiting the mayors business will prosper, and if the business pros-
opulent meeting room. While he delivered a pers, the stock will eventually be priced
message to all officials about helping China, he right.25 However, when dozens of Belgian
was known to enjoy his time most with his school children fell sick after drinking Coca-
troops in the trenches.23 Cola products, Ivester maintained silence for a
Ivesters thirst for information was rarely week before going to Belgium to apologize.
satiated and he continued delving into every Coca-Cola ultimately recalled 65 million cans
little detail of the companys worldwide opera- due to this incident. When he failed to pro-
tions. When an executive from Coca-Colas mote Carl Ware, senior vice-president for
biggest Mexican bottler talked about tens of African operations and Coca-Colas top
thousands of mom-and-pop stores, Ivester African-American executive, the doors opened
jumped in and asked, So which are they for four past and current employees to sue
moms or pops? The bottlers COO could only Coca-Cola for racial discrimination.
muster a weak response, I think its more Ivester took much of the credit for
moms than pops, Doug, but Im not sure.24 improvements in the bottler system, including
The downturn in overseas markets, where the creation of CCE and technological
Coca-Cola derived about three-quarters of its improvements across the company. Some of
profits, was met head on as an opportunity to these claims served to isolate Don Keough,
buy bottlers, distribution, and rival brands at Goizuetas erstwhile president and COO, who
bargain prices. Ivester was betting that the was also connected to two powerful Coca-Cola
investments would help fuel growth in the board members, Herbert Allen and Warren
future. Whereas Goizueta had handled inter- Buffet. Keough became the person all con-
national operations from a distance, Ivester stituents, including customers, bottlers and
worked 14-hour days and stayed in contact employees, gradually started complaining to.26
with executives worldwide through email, Commenting on his earlier successes
voicemail, and pagers even as the business under Goizueta, Ivester had stated, I look at
grew in size and complexity around the world. the business like a chessboard. You always need
Under Ivester, the era of exclusive contracts to be seeing three, four, five moves ahead.
in the soft drink industry became very aggres- Otherwise, your first move can prove fatal.
sive. Coca-Cola and Pepsi pursued such con- His methodical approach extended to all areas,
tracts not only in restaurant chains but in other I learned that marketing is not a black box,
locations, such as schools and convenience he stated, Marketing can be even more logical
stores. A marketing consultant for Cadbury than finance. If you ask enough questions and
Schweppes remarked, Coke is the No. 1 icon in listen closely, you find that people are very
the world; it has to be a good corporate citizen. logical.27 He was also reported to have once
They are not in a situation where they can cre- said, I know how all the levers work, and I
ate shareholder value by being a bully. could generate so much cash I could make
23
Ibid.
24
Man on the Spot, BusinessWeek, May 3, 1999, pp. 142151.
25
Ibid.
26
27
everybodys head spin. However, after price rise over 5800 per cent during Goizuetas
Ivesters more than two years as CEO, Coca- 16-year tenure.30 During Ivesters tenure the
Colas market value remained stuck at $148 stock price had dropped 12.3 per cent (see
billion compared with the $147 billion market Exhibits 1and 2).
value when Goizueta had left the helm.28
In early December 1999, Ivester flew to y
Chicago for a regular meeting with Douglas Daft. Enjoy.
McDonalds executives and during the same
Background
trip also had a private meeting with Coca-
Colas two most powerful directors, Warren The next CEO of Coca-Cola, Douglas Daft,
Buffet and Herbert Allen. The two directors was born in 1943, in Cessnock, New South
informed Ivester that they had lost faith in his Wales, Australia. He received a bachelor of arts
leadership, and it was time for a change. Don degree with a major in mathematics from the
Keough, who had been Goizuetas number-two University of New England in Armidale, New
person for 12 years as COO and president was South Wales. He later received a post-graduate
said to have played a role in this meeting. Upon degree in administration from the University
retirement in 1993, Keough had remained of New South Wales.
involved in Coca-Cola as a consultant and later Daft was a first-generation college student,
rejoined as a director when Coca-Cola abol- being the first in his family to attend university.
ished its 74-year age limit for board member- He later recalled that the opportunity had led
ship. Keough was chairman at Allen & Co., him to develop a passion for lifelong learning
Herbert Allens small investment firm housed about the world and different cultures. In an
in Coca-Colas building in New York. interview, he mentioned his profound respect
At only age 52 and after just more than for the differences and similarities of people
two years as the chairman and CEO, Ivester and his experiences of cultural and intellectual
was pushed to retire from the position. On diversity across Singapore, Tokyo, and Beijing,
returning from the meeting in Chicago, which shaped him for leadership roles at Coca-
Ivester publicly announced his departure from Cola, one of the most international companies
Coca-Cola, After extensive reflection and in the world.31
thought, I have concluded that it is time for Daft started at Coca-Cola as a planning
me to move on to the next stage of my life and, officer in the Sydney (Australia) office in 1969.
therefore, to put into place an orderly transi- He progressed through the company, holding
tion for this great company.29 In reaction to positions of increasing responsibility, and
the news, Coca-Colas share price, which had became vice-president of Coca-Cola Far East
already lagged the American stock market by Ltd. in 1982. Daft was named president of the
30 per cent over the previous two years, fell 12 North Pacific Division and president of Coca-
per cent in two days. This drop was quite a Cola (Japan) Co., Ltd. in 1988. In 1991, he
contrast for investors who had seen the stock moved to Coca-Colas Atlanta headquarters as
28
Betsy Morris and Patricia Sellers, What Really Happened at CokeDoug Ivester Was a Demon for Information, Fortune,
January 10, 2000, pp. 114116.
29
Coke CEO Stepping Down after Difficult Tenure, CBC News, December 6, 1999, http://www.cbc.ca/money/story/
1999/12/06/coke991206.html, retrieved April 19, 2008.
30
New Doug, Old Tricks, The Economist, December 11, 1999, p. 55.
31
Interview with Doug Daft, Institute of International Education, IIENetwork.org http://iienetwork.org/?p=29253, accessed on
June 21, 2008.
president of the Pacific Group with responsi- where he had developed the idea that bureau-
bilities including the Africa Group, the Middle cracy at headquarters was a problem. Daft
and Far East Group, and the Schweppes challenged Coca-Colas matrix system, which,
Beverage Division. He was elected president created and nurtured by Goizueta, had
and COO in December 1999. ensured that the finance, marketing, technical,
law and quality control departments at head-
Douglas Daft as CEO of Coca-Cola quarters networked with and controlled the
corresponding departments in other countries.
Daft was preparing for retirement in Australia Dafts approach was to get rid of corporate
when he was brought in to replace Ivester. It bureaucracy and give more decision-making
was said that Daft neither aspired to, nor was power to the field managers.
groomed for, the CEO job and was an acci- Under Dafts tenure, Don Keoughs advice
dental CEO.32 Daft had spent most of his 30 and attendance at board meetings was again
years with the company in Asia, and had suc- welcomed. Under Dafts leadership and
ceeded as president of Coca-Cola in Japan, one Keoughs approval, several key executives who
of the companys most difficult and largest had served under Ivester were ousted. Turnover
markets outside the United States. among senior managers during Dafts tenure
Dafts personality was described as low- was severe. In just more than four years, Coca-
key, unassuming, media-shy, and not commu- Cola had two new marketing heads, two new
nication friendly. He was known for a European operations heads and new manage-
consensus-driven style and for avoiding con- ment in the companys human resources
flict. He began by making changes that were departments and in the North America, Asia
seen as culturally new, such as removing flags and Latin America divisions.34
that had traditionally flown at Atlanta head- Daft also built the companys forays into
quarters: the American flag, the Georgia flag, the fast-growing area of non-carbonated
the Coca-Cola flag, and a flag to honor the vis- drinks, including bottled water and juices,35
itor of the day, generally a bottler or customer. exemplified by Dafts attempts to buy Quaker
He called upon a feng shui consultant to make Oats, maker of Gatorade in 2000. Although
interior decoration changes and to rearrange Quaker Oats broke off talks with Pepsi and
telephones so that the cords would not coil in Danone, in the end the Coca-Cola board did
the wrong direction. Life-sized ceramic roost- not pass the deal. Reportedly, directors Warren
ers were installed in the offices of Daft and two Buffet and Peter Ueberroth objected, seeing
senior executives.33 the exchange of Coca-Colas 10 per cent stock
In his first few weeks, Daft started the for Quaker Oats as too risky. A joint venture
process of cutting 5,200 jobs to reduce costs. with Procter & Gamble Co. (P&G) was created
However these cuts were not seen as steering to develop synergies between Coca-Colas
the company in a clear strategic direction. Minute Maid juices and distribution prowess
Whereas Ivesters mantra had been Think with P&Gs potato chip and juice brands. Ideas
globalact local, Dafts vision leaned more included developing a half-size can of P&Gs
toward Think localact local. This mindset Pringles potato chips for distribution through
reflected his experience away from headquarters Coca-Colas machines and other channels. A
32
Patricia Sellers, Whos in Charge Here? Fortune, December 24, 2001, pp. 7680, 83, 86.
33
34
Ibid.
35
Repairing the Coke Machine, BusinessWeek, March 19, 2001, p. 86.
similar deal with Nestl was crafted to develop general counsel Deval Patrick investigate.
tea and coffee drinks using Nestls research However, the decision was abruptly reversed
and development labs. Historically, Coca-Cola four months later and an announcement
had not succeeded in using its distribution and about Patricks resignation leaked out. At an
marketing to develop a presence in the high- annual meeting, stockholders were distributed
margin premium beverage market dominated leaflets by demonstrators who shouted, Coca-
by Snapple, AriZona, SoBe and Gatorade. Cola, killer Cola, toxic Cola, racist Cola. None
These changes epitomized Dafts approach of the directors faced the crowd, and Daft,
as a passionate, idea-a-minute manager, build- seemingly losing control, unwittingly urged a
ing upon intuitions from his Asia-Pacific expe- child questioner to Drink Coke, Sam, later
rience. His approach contrasted sharply with amending the line by saying That is, if your
Ivesters numbers-based accountants approach parents let you.37
to decision making. At a retreat in San At the same meeting, Keough commented
Francisco, Daft asked for new ideas from two on Coca-Colas succession plan saying that the
dozen Coca-Cola executives and, on the spot, company would find the best candidate for the
funded four of the ideas with $250,000 each. job. A very public search was launched, which
Under Dafts tenure, scientists and marketers included talks with Jim Kilts, CEO of Gillette,
united to build new products ranging from and Jack Welch, the retired CEO of GE. During
calcium-fortified waters to vitamin-enriched Dafts tenure as CEO, Cokes stock price
drinks bearing Disney characters names. increased 9.15 per cent (see Exhibits 1 and 2).
Coca-Colas advertising was also over-
hauled, because the Always campaign had y
lost people, lost humanity and become clini- The Isdell Side of Life
cal, according to Coca-Colas Marketing
Background
Director, Stephen C. Jones. In a new move,
Coca-Cola began to allow bottlers to customize Coca-Colas next CEO, Edward Neville Isdell,
promotions to local events. Although Ivester was born in Downpatrick, Northern Ireland,
had opposed tie-ins with movies, Daft made a in 1943. He moved to Zambia in childhood
deal with Warner Bros. Entertainment Inc. to and later completed a bachelors degree in
co-market movies such as the Harry Potter social science at the University of Capetown,
series around the world.36 South Africa. In 1966, Isdell joined Coca-Cola
Daft announced another major step in his through the local bottling company in Zambia.
restructuring when he let go president and Moving up on the bottling side of operations,
COO, Jack L. Stahl. Steve Heyer, formerly pres- in 1972 he became general manager of the
ident and COO at Turner Broadcasting, was Johannesburg bottler, the largest Coca-Cola
brought in as the new president. Subsequently, bottler in Africa. In 1980, he became the
Daft used this time to be out in the field to regional manager for Australia, and the follow-
improve relations with bottlers. However, Daft ing year became the president of the bottling
remained known for making quick decisions joint venture between Coca-Cola and San
and sometimes being unsure about them later. Miguel Corporation in the Philippines. Isdell
Coca-Colas bottlers in Colombia had faced was subsequently credited with turning
violence, and Daft announced at an awards around and renewing the entire Coca-Cola
dinner in Washington that he would have business in the Philippines.
36
Ibid.
37
Isdells international career continued importance of this position and the

with a stint in Germany, starting in 1985 as trust placed in me by the board of
president of the companys Central European directors. We are all grateful to Doug
division. He moved up the ranks of the com- Daft for his enormous contributions
pany in 1989, when he was elected senior vice and look forward to building upon
president, and concurrently became president the tremendous foundation he and
of the Northeast Europe/Africa Group (later to his team have built. I am excited to get
become the Northeast Europe/Middle East started and help shape our future.39
group in 1992). During this phase, Isdell over-
saw the companys expansion into new mar- During Isdells CEO tenure, Coca-Colas
kets, such as India, Middle East, Eastern profits rose steadily, in particular from interna-
Europe and the Soviet Union. He became pres- tional operations. Right at the start, Isdell had
ident of the Greater Europe Group in 1995. laid out his plans, based on his belief in signif-
Isdell subsequently moved to Great Britain icant future growth for the Coca-Cola brand.
in 1998 as CEO of Coca-Cola Beverages Plc in Some growth was expected to come from new
Great Britain. Under his watch, that company markets, such as China and India, while fur-
merged with Hellenic Bottling and resulted in ther growth was still possible in the United
the largest Coca-Cola bottler of that time, States and Europe. Keough let his confidence
Coca-Cola Hellenic Bottling Company (HBC). in Isdell be known, mentioning that it was the
He left Coca-Cola in 2001 to form his own first time in 119 years that the company would
investment company in Barbados.38 have a CEO who had worked on both sides of
the system, referring to Isdells experience of
being involved both as a bottler and concen-
Isdell as CEO of Coca-Cola trate person and his experience on working on
Doug Dafts retirement announcement in five continents.40 Under Isdells leadership
February 2004 was followed by two months of Cokes stock price increased 12.9 percent.
speculation regarding his successor. Some Overall, the three CEOs who had served after
wondered whether an outsider such as Goizuetas untimely death in 1997 had
Gillettes president and CEO, James M. Kilts, increased Cokes stock price 11.6 per cent.
might be the likely candidate. Instead,
E. Neville Isdell was named the new chairman y
and CEO. Interestingly, Isdell had been passed
Epilogue
over for the top job in 1997 (in favor of In December 2007, Isdell announced that he
Douglas Ivester), despite having been Keoughs would step down from the CEO position in
preference at the time. July 2008 to be replaced by Muhtar Kent, the
On accepting the position, Isdell said: companys COO. However, Isdell would
remain chairman of the board until the com-
I am both proud and humbled to be panys annual meeting in 2009, splitting the
given the opportunity to help write position of CEO and chairman at Coca-Cola
the next chapter in this illustrious for the first time. To questions on why Isdell
companys history. I appreciate the chose this time to announce his departure, he
38
The Coca-Cola Company website, http://www.thecoca-colacompany.com/ourcompany/board.html, accessed February 15, 2008.
39
The Coca-Cola Co. 8-K report filed with SEC on 5/5/04. http://www.secinfo.com/dkrf.12f.d.htm, accessed on June 21, 2008.
40
Compassion Canada 363
said, Because its the right time. Ive been At the time of this announcement, Kent
working on succession since Day 1. Although mentioned that he had no immediate plans to
a national search had been launched when change any leadership roles but that some
Doug Daft left, there would be no doubt as to scope was available for fine-tuning manage-
who the next CEO would be this time. ment. He pointed out that he knew he faced
Commenting on the news, John Sicher, a challenges: We have confidence the United
beverage industry expert remarked, Kent States has growth left in it, he said. Regarding
understands the company and the system liter- the bottling issues, he added, We were at each
ally as well as anybody in the world and better others throats with our bottlers a year ago
than most. Deutsche Bank analyst Marc we are aligned now.41
Greenberg said, Kent has played a formative As the plane headed toward Atlanta and
role in shaping the current coursesteady as Coca-Colas corporate headquarters, Kent
she goes is likely the mantra. In the position of looked out at the Atlantic ocean and thought
COO, Kent saw major strategic initiatives about the companys previous illustrious lead-
undertaken, such as the $4.1 billion acquisition ers, their times and strategies, and wondered
of glacau in 2007, strengthening Coca-Colas how he would take charge and lead the com-
position with new brands, such as vitaminwater. pany into the future.
Compassion Canada
Prepared by Hari Bapuji under the supervision of Glenn Rowe
Barry Slauenwhite, chief executive officer (CEO) y Compassion International

of Compassion Canada, had reason to be happy
when he reviewed the figures of sponsorship
Incorporated
growth in 2002. Compassion Canada had grown Compassion Canada was associated with
from 18,684 sponsorships in 2001 to over 21,886 Compassion International Incorporated, a
in 2002, a growth of 17 per cent against the Christian non-profit ministry dedicated to the
11 per cent projected for the year. However, long-term holistic development of poor chil-
Slauenwhite needed to turn his attention to the dren, particularly those in developing nations.
target of reaching 100,000 sponsorships by 2013. Everett Swanson, an American evangelist,
In the last 10 years, Compassion Canada had established the ministry in 1952 in the base-
only doubled its sponsorships. Now, the goal was ment of his house in Chicago. During the early
to achieve a five fold growth in the same amount 1950s, Swanson went to South Korea to preach
of time. He needed a strategic plan that was to soldiers. In Korea, he witnessed the condi-
based on a comprehensive analysis of the com- tions in which many orphaned and abandoned
petitive landscape and resources and capabilities children lived. He was moved by their condi-
of Compassion Canada. tion and established the Everett Swanson
Copyright 2003, Ivey Management Services Version: (A) 2006-10-13

41
Coca-Colas CEO Isdell to step down, Associated Press, MSNBC, December 6, 2007; http://www.msnbc.msn.com/
id/22127700/, accessed June 22, 2008.
Evangelist Association (ESEA). He appealed to y Compassion Canada

American sponsors to help the needy Korean
children with their schooling, clothing, food Compassion Canada was established in 1963.
and health care. In his words: It began its operations in the basement of a
home in Blenheim, Ontario, and moved to its
Christians have a responsibility to own office suite in London, Ontario, in 1972,
share with those in need. Surely our shifting to a bigger office space in 1986.
homes are the finest in the world, and Compassion Canadas activities, as reflected in
our children are well clothed and its mission and purpose, revolved around help-
happy. Our tables are spread with ing needy children in developing countries in
good things, and we enjoy many lux- the areas of education, food, health care and
uries. Our babies do not need to cry overall development.
for food or milk. We ought to thank
God for His great goodness to
America. But while God is good to us,
Mission
in Korea there are thousands of boys In response to the Great Commission,
who walk the street carrying a little Compassion Canada exists as an advocate for
tin can or pail, begging for a little children, to release them from their spiritual,
morsel of bread. Americans put more economic, social and physical poverty and
in their garbage can every day than enable them to become responsible and ful-
Koreans have to eat. filled Christian adults.
Soon ESEA grew and attracted a large

Purpose
number of supporters who were willing to
sponsor the costs of providing food, educa- Assisting children to be:
tion and health care to the needy children. In
1963, ESEA changed its name to Compassion Christian in faith and deed
International Incorporated. It worked solely Responsible members of their family,
in South Korea until it expanded its opera- church and community
tions to Indonesia and India in 1968. As of Self-supporting
June 2002, its operations spanned over 22 Able to maintain their health
countries in Africa, Asia, the Caribbean,
Central America, and South America, helping In pursuit of its mission and purpose,
a total of 350,484 children in these countries Compassion Canada found individuals who
with food, shelter, health care, and educa- were willing to sponsor the expenses for
tion. ESEA consisted of eight entities: children, linked individual sponsors with
Compassion International Incorporated, individual children and helped them main-
the founding entity in the Compassion tain that link. Compassion Canada believed
International Incorporated (United States), that most people cared enough to help
Compassion Canada; TEAR Fund Great needy children, if they could find a depend-
Britain (Compassion United Kingdom); able and reliable mechanism through which
Compassion Australia; TEAR Fund New to do so. Compassion Canada aimed to pro-
Zealand; SEL France; Compassion Netherlands; vide that mechanism in an efficient manner
and Compassion Italia. A brief sketch of so that most of the money collected from
Compassion organization is presented in the sponsors was spent on the children. In
Exhibit 1. addition, it implemented projects aimed at
Exhibit 1 Schematic Diagram of Compassion Activities
Examples of
Co-ordination Project
with Sponsors Co-ordination & Project
and Donors Administration Implementation
D Compassion Local
O
Compassion
Italia
Project Office
Dominican
Republic
Implementing
Partners N
N Compassion Local
E
O Compassion
Nederlands
Project Office
Ethiopia
Implementing
Partners
E
R
S SEL France
Compassion
Project Office
Local
Implementing
D
Guatemala Partners
Y
A TEAR Fund
N New Zealand
C
D H
Compassion
S
Australia
I
P TEAR Fund
Great Britain
(Compassion
Compassion
Project Office
L
O United Kingdom)
Mozambique
D
N
S
Compassion
Canada
Compassion
Project Office
Tanzania
R
O Compassion
E
R International
Incorporated
Compassion
Project Office
Uganda N
S (U.S.)
child development through partnerships mentioned, it found sponsors who would sup-
with local churches and community members port one or more children. In addition,
who approached Compassion Canada and Compassion Canada found donors who would
were approved through a stringent screening support larger projects aimed at developing
process. the communities in which the sponsored
The child is the absolute key to whatever children lived. A list of current community
we do, said Slauenwhite. The activities of projects of Compassion Canada is presented in
Compassion Canada aptly reflected that. As Exhibit 2.
Exhibit 2 Community Project Types
Education
Vocational and Primary Education
These projects focus on skills development for young people. Compassion Canadas primary
education efforts are presently related to programs with children that fall outside of standard
child development work (e.g., street children). Vocational training involves essential life trade
skills for teens in areas such as carpentry, metal-work, hairdressing, tailoring and other
clothing pattern work.
Current Projects
Bujora Childrens Home Vocational Training CentreTanzania
Casa de Plastilina Childrens EducationMexico
Community Leaders Educated AIDS Response (CLEAR) Phase IIKenya
Kumi Staff TrainingUganda
Meals for Children Program: Day Love Childrens Project 20012002Kenya
Meals for Children Program: Mathare Street Children Rescue Centre 20012002Kenya
Mukura Technical School ExpansionUganda
Ukuru Community DevelopmentUganda
Health
Primary Health Care
Compassion Canadas primary health-care partnerships focus on important preventative
measureslike immunization, personal hygiene, nutrition, and health training for mothers
with children under five years of age.
Current Projects
Childrens Medical Program: House of HopeHaiti
Childrens Medical Program: Kiwoko Hospital Community Health CareUganda
Community Leaders Educated AIDS Response (CLEAR) Phase IIKenya
Dessalines Community Health ProgramHaiti
Rubirizi Gravity Flow Water ProjectUganda
Clean Water
Clean-Water Supply
Compassion Canada supports initiatives aimed at supplying clean water to families. This may
take the form of gravity-fed water systems in mountainous areas, well drilling or spring capping.
Often the projects also include a sanitation component, such as the building of pit latrines, as
uncontaminated water and effective waste management measures need to be in harmony.
Current Projects
Agwata Water and SanitationUganda
Rubirizi Gravity Flow Water ProjectUganda
Micro-Finance
Small-Business Microenterprise Development (MED)
MED helps poor people by giving them access to capital and training so they can launch and
grow small businesses. It is highly effective in lifting people from the lowest ranks of poverty
and does so in a way that provides dignity and a sense of self-respect. Compassion Canada
supports microcredit loan projects, including programming that can involve the parents and
guardians of Compassion-sponsored children.
Current Projects
Dominican Trust BankDominican Republic
Faulu Microfinance ExpansionUganda
Agriculture
Agriculture
Compassion Canada supports community-based efforts that concentrate on objectives such as
experimental crops, reforestation activities to conserve water and prevent soil erosion,
vaccinations for livestock, the use of organic fertilizers and the developing of small farmers
co-operatives. The co-operatives help farmers to bring their produce to larger markets, while
avoiding stiff profit charges from market middle-men.
Current Projects
Bujora Childrens Home Vocational Training CentreTanzania
Casa de Plastilina Childrens EducationMexico
Comitancillo Fruit Growers AssociationGuatemala
SOURCE: http://www.compassioncanada.ca/ca_communityprojects/project_types.html.
y Child Sponsorship Cdn$31 per month to Compassion Canada.

Sponsors could choose the child of their choice
An individual willing to sponsor a child was or request Compassion Canada to randomly
required to make a tax-deductible donation of select one. The child so sponsored would be
enrolled in the project of Compassion Canada were other Christians. The remaining three per
and provided education, food and health care. cent were non-Christians who shared the phi-
When Compassion Canada enrolled a child in losophy of Compassion Canada in its entirety.
any of its projects, the funds were committed
to help the child through to graduation from It is not simply child sponsorship that
school (usually until attaining the age of about we are interested in but child develop-
16 or 17 years, depending on the education ment in a Christian way. If we have a
system of the country in which the child lived). large number of non-Christian spon-
However, it was not binding on the sponsor to sors, it would be difficult for them as
continue to sponsor a child until this age. well as for us. There were occasions
Sponsorship could be discontinued anytime. when we turned down offers of huge
Compassion Canada facilitated the inter- money from some donors because they
action between sponsor and child. The spon- did not share our philosophy. They
sor was encouraged to write to the child would either ask us to work on areas
regularly and was allowed to send monetary that we were not interested in or ask us
gifts two times in a year. Compassion Canada to be secular. In fact, we even stopped
suggested that such gifts be in the range of $15 actively approaching the Canadian
to $40. Implementation agencies helped the government for financial support
child in writing to his/her sponsor three times because it expected agencies that received
in a year. Compassion Canada sent the sponsor government aid to maintain a secular
periodic updates on the progress of the child. nature in their activities. In addition,
In addition, it sent a biannual publication government aid had the potential of
(Compassion Today) that featured Compassion diverting a large part of our energies
Canadas work worldwide and a newsletter towards interfacing with them.
about Compassion Canadas work in the coun- Barry Slauenwhite, CEO
try where the child lived. If a sponsor decided
to visit his/her child, Compassion Canada pro- In the past, Compassion Canada targeted all
vided translators and gave out necessary infor- segments of the population, including young and
mation to the sponsor. The customer service high school-age sponsors who were more ready
centre of Compassion Canada handled the to lend a helping hand. However, over time, the
interaction with all sponsors. focus has been refined to target young married
Compassion Canada was very particular couples and post high school sponsors who
about emphasizing its belief in Christianity tended to remain sponsors for a longer time.
and its philosophy of using the Christian mes- Compassion Canada enlisted the support of
sage to help develop each child and that childs sponsors largely through promotion and adver-
family. It believed that church was a reliable tising. It adopted a multipronged approach to
and dependable infrastructure in most parts of promotional campaigning. First, it deployed
the world. Therefore, it partnered only with Christian speakers and artists who supported
churches and Christian agencies to support Compassion Canada and were willing to pro-
each child and to implement community promote its cause as part of their speaking or singing
jects. It focused on obtaining sponsorships engagement. These artists became the ambas-
from Christians, particularly the Evangelical sadors of Compassion Canadas cause. Second, it
Christians, because Christians have a biblical advertised on a growing network of 15 Christian
obligation to help the poor. Of Compassion radio stations throughout Canada. Third, it
Canadas over 20,000 sponsor-base, 60 per cent requested sponsors to promote its cause, in what
were Evangelical Christians while 37 per cent was termed Awareness to Advocacy. Sponsors
were encouraged to approach pastors to promote concept of child sponsorship and enrol new
Compassion Canada one Sunday each year (the sponsors. It received sponsorships as a result of
last Sunday in May). Further, sponsors were the Compassion Sunday that was held in
encouraged to enrol new sponsors and volunteer churches. Speakers and artists who promoted
their own time and effort to promote the cause of the cause of Compassion Canada often per-
Compassion Canada. suaded their audience members to sponsor
Compassion Canada acquired sponsors children. Compassion Canadas own staff, vol-
through many ways. It participated in unteers, existing sponsors, Internet and the
Christian events such as Kingdom Bound, Compassion Today magazine were other
Creation West, Teen Mania, Missions Fest sources through which new sponsors were
Edmonton, and YC Edmonton. It helped spon- acquired. Acquisition of sponsorships through
sor these events and used them to promote the each of these sources is presented in Exhibit 3.
Exhibit 3 Sponsorships by Source (July 2000 to June 2001)
Source Number
Christian events 766
Canadian office (from another sponsor/donor, Web, etc.) 749
Campaigns (such as Compassion Sunday) 529
Speakers 310
Staff 302
Volunteers 213
U.S. office (from other sponsors, Web, etc.) 116
Artists 46
Advertising (Compassion Today magazine) 31
Other 303
SOURCE: Company files.
Acquiring sponsors was not an easy task Compassion Canada strived to ensure that
and required investment of resources in adver- overhead costs (cost of raising funds and admin-
tising and marketing. Compassion Canada istration costs) were less than 20 per cent and
believed that it was important to be cost-effective, program costs (costs towards child support,
not only in sponsor management but in the grants and services, field services, sponsor min-
sponsor acquisition as well. Accordingly, the istry and gifts in kind) were over 80 per cent. A
ministry strived to bring down these costs con- breakdown of the costs over the last five years is
tinuously each year. In 2001, Compassion presented along with a pictorial representation of
Canada spent an average of $103 to acquire a how sponsorship money was spent in Exhibit 4.
sponsor, whereas in the years 1999 and 2000, Compassion Canada consisted of 27 full-time
the costs were $121 and $130, respectively. employees. Besides the full-time employees,
Exhibit 4 Usage of Sponsorship Income (1997 to 2002)
Activity 2002 2001 2000 1999 1998 1997
Raising funds 838,367 722,639 676,558 660,881 646,761 601,032
Administration 522,267 495,512 430,420 438,813 335,638 328,519
Child support 6,311,438 5,407,600 4,842,005 4,498,724 3,482,028 3,215,897
Sponsor ministry 431,236 442,808 315,630 266,564 294,198 273,411
NOTES: All amounts given in dollars. Child support component reflects the money used to provide learning opportunities for
registered and sponsored children. Sponsor ministry supports letter translation, pays cost of child photographs and other inci-
dental expenses related to strengthening the relationship of child and sponsor.
Typical Distribution of Sponsorship Income
Sponsor
Ministry Gifts in
Field Services
6% Kind
10%
1%
Fund-raising
10%
Grants and
Services
15% Administration
9%
Child Support
49%
many individuals who shared its cause volun- performed the work of three full-time staff
teered their services. These volunteers attended members in 2002. Availability of staff was
the office as per a prearranged work schedule reviewed every quarter to ensure that an
and performed activities such as mailing, read- appropriate number of employees were avail-
ing letters, sending letters, etc. About 40 volunteers able to smoothly manage the operations. An
additional employee was hired for every 1,000 Compassion Canada was high, it was con-
new sponsorships expected. When a new trolled growth.
employee was hired, besides the qualifications,
their sense of commitment to Compassion
Canadas cause and philosophy was evaluated. y Child Development
Typically, Compassion Canada employees were Strategy
over-qualified for their jobs but joined because
they had a sense of calling and decided to Compassion Canadas approach to child devel-
do something that was intrinsically satisfying. opment was different than the approach of other
Each employee was trained in Compassion similar organizations. The organization believed
Canadas systems department for a period of that to develop a child, one must help the child
six months before being given a formal directly by providing food, education, health
responsibility. Compassion Canada had not care, shelter and spiritual development in a
laid off any employee in its 40-year history Christian way. Accordingly, Compassion Canada
although some were asked to leave for reasons focused most of its energies on child sponsor-
of under-performance. ship. Other agencies followed a somewhat differ-
When an employee had served Compassion ent strategy. They focused their energies on
Canada for a period of five years, that person helping the communities and families to become
was sent to visit one of the overseas projects to self-sufficient. Focus on children was, therefore,
meet with sponsored children and to witness in not as visible in their projects and activities,
person the real impact of their work. Major although their mission was child development.
events and achievements were celebrated within Most of the child sponsorship agencies
Compassion Canada. For example, when followed a community-based approach to
Compassion Canada crossed the 20,000 spon- child development, while Compassion Canada
sorships mark, Slauenwhite organized a huge employed a direct approach in which the child
dinner for the employees because crossing that sponsorship money was spent exclusively on
mark meant that Compassion Canada had child development by linking the sponsor and the
changed the lives of 20,000 children. child on a one-to-one basis. Compassion Canadas
Compassion International Incorporated, other programs ran parallel to child sponsorship
with which Compassion Canada was asso- and supported child development in an indirect
ciated, relied heavily on planning and co- manner. The organization raised money for com-
ordination. Consequently, Compassion Canada munity projects through a separate stream, and
was required to send monthly projections utilized them and accounted for them under a
of its growth to Compassion International separate heading. On the other hand, the money
Incorporated. These projections were made raised by the organizations that followed the
one year in advance and were based on community-based approach was pooled together
sound planning. Each of the projections was and centrally allocated for various projects aimed
supported by the campaign events planned, at child development, including direct benefits to
number of people expected to attend and the children in the form of education, food and
number of people likely to become spon- health care. Among the child sponsorship agen-
sors. When an individual became a sponsor, cies in Canada, World Vision Canada, Foster
their profile was prepared and added to the Parents Plan and Christian Childrens Fund of
sponsor database. These profiles were peri- Canada were prominent competitors for the
odically analysed to understand the char- sponsorship revenue that Compassion Canada
acteristics so that persons with similar needed to fulfil its mission. Financial and other
profiles could be targeted in the future for details of these organizations and Compassion
child sponsorships. Although the growth in Canada are presented in Exhibit 5.
Exhibit 5 Financial and Operational Details of Compassion Canada and Other Organizations (as of 2001)
Compassion Foster World Vision Christian Childrens

Item Canada Parents Plan Canada Fund of Canada
Revenue
Child Sponsorship 7,065,231 36,892,048 131,082,000 9,960,794

Income
Government Grants 185,391 2,507,319 21,292,000 317,568
Investment Income 161,160 577,698 274,000 n.a.
Other Income1 890,045 2,294,478 43,074,000 16,962,304
Total Income 8,301,827 42,271,543 195,722,000 27,240,666
Expenses
Program Expenses2 6,690,790 33,575,328 157,002,000 22,633,973
Fundraising3 1,026,443 5,233,845 27,675,000 2,296,944
Administration 559,143 3,463,798 8,463,000 1,610,020
Total Expenses 8,276,376 42,272,971 193,240,000 26,540,937
Surplus 25,451 (1,428) 2,482,000 699,729
Number of Children 18,684 110,000 272,186 n.a.

Sponsored4
Number of Sponsors 15,945 n.a. 223,995 n.a.
Sponsorship Cost in 31 31 31 29
Cdn$ (per month
per child)
NOTE: All amounts in U.S. dollars except where noted.
1. Other income includes income in the form bequeaths, value of goods donated, and grants and donations for one or more
specified or non-specified causes.
2. Expenses on all programs except in the case of Compassion Canada (where they pertain only to the expenses on child
sponsorship).
3. Compassion Canada costs mentioned under two heads: marketing and community development.
4. Foster Parents Plan figure based on the information on the Web whereas figures of other agencies are taken from their
annual reports.
World Vision Canada Children in Spain to help children whose lives

were disrupted by the Spanish Civil War. With
World Vision Canada (WVC) was a Christian the outbreak of the Second World War, Plan
humanitarian organization that reached out to International extended its work to include dis-
the Worlds poor. It was established in 1950 to placed children within war-torn Europe in the
care for orphans in Asia. WVC worked to cre- 1940s. Gradually, its operations expanded to
ate a positive and permanent change in the lives other countries and as of 2001, it was orga-
of people suffering under the oppression of nized into 16 national organizations, of which
poverty and justice through long-term sustain- Canada was one (also known as donor coun-
able development. WVCs approach to child tries), an international headquarters and over
development was based on its community- 40 program countries.
based strategy, i.e., to initiate projects that were FPP implemented projects in health, edu-
aimed at community development so that the cation, water, sanitation, income-generation
community itself became self-sufficient over and cross-cultural communication. Most of
time and took care of its children. It developed the funds for its community projects came
an area development program (ADP) model to from individual sponsors. FPP actively
help communities achieve sustainable develop- involved local communities in setting up and
ment. Activities included emergency relief (in implementing projects, including families and
cases of natural calamities such as drought, children. Its motto was sustainable develop-
floods, earthquake, etc.), health related projects ment: a better world for children now and in
(such as tuberculosis, AIDS and nutritional the long-term future. FPP believed that to help
health projects), and long-term development a child in a lasting way, the organization must
projects (such as sanitation, irrigation, voca- also help that childs family and the local com-
tional training and farming). munity to become self-sufficient.
Almost 80 per cent of WVCs funding FFP identified the countries in need of
came from private sources, including individu- development work with the help of a number
als, corporations and foundations. The remain- of criteria, such as infant mortality rates (more
der came from governments and multilateral than 25 deaths per 1,000 live births), per capita
agencies. Besides the cash contributions, WVC gross national product (less than US$1,700),
accepted gifts in kind, typically food com- and physical quality of life index (less than 80).
modities, medicine and clothing donated As of 2001, about 111,000 children were spon-
through corporations or government agencies. sored by Canadians, and more than 1.3 million
Approximately half of WVCs programs children were sponsored throughout Plan
were funded through child sponsorship. In International worldwide.
2001, more than 207,000 Canadians supported After identifying the need, FPP worked in
its child sponsorship program. The money so partnership with local non-government orga-
received from Canada and other countries nizations and communities to effectively reach
across the world was pooled together and cen- its goals. It aimed to work with them as long as
trally allocated to projects that were designed was necessary to strengthen their capacity to
to support 1.6 million children in 40 countries. provide their children with stability, protection
and security in a sustainable way. Each com-
munity project took at least 10 to 12 years to
Foster Parents Plan achieve sustainable development.
Foster Parents Plan (FPP) of Canada was a In 2001, when Canadian contributions
member of Plan International, which was were combined with those of other supporters
founded in 1937, as Foster Parents Plan for around the world, over $365 million went to
program implementation. Of this amount, The organization derived its revenue

over 24 per cent was spent on habitat projects, mainly from monthly sponsorship support for
roughly 20 per cent on education, over 11 per children, families and communities. Other
cent on health, 12 per cent on building rela- sources of support were: donated goods and
tionships and six per cent on livelihood. contributions, general contributions and
bequests from public, and restricted or specific
Christian Childrens Fund of Canada contributions that were donated for a particu-
lar purpose or project.
Christian Childrens Fund was founded in
1938 by Dr. J. Calvitt Clarke, a Virginia mis-
sionary, to care for Chinese-Japanese war y Compassion Canadas
orphans. He called it the China Childrens Target of 100,000 by 2013
Fund. It expanded into Europe during the
Second World War and became Christian Barry Slauenwhite, the chief executive officer
Childrens Fund. CCF Canada (CCFC) was of Compassion Canada, believed in taking a
formed in 1960. As of 2001, more than 600,000 professional approach to the management of
children were supported by CCFC and its non-profit organizations. With experience in
International Co-operative of Christian industry and pastoral service and the sense of
Childrens Fund around the world. Gods calling in his heart, he was in a perfect
CCFC believed in making the communi- position to professionalize and grow the activ-
ties self-sufficient so that children were taken ities of Compassion Canada.
care of by the community in the long run. The Compassion Canada had set itself a target
sponsorship amount received each month was of 100,000 child sponsorships by 2013. To
spent on providing food, clothing, shelter, achieve that target, the organization needed to
medical care, education, school supplies and reach its projected figure of 26,150 for 2003 and
love to the sponsored child. It was also spent then grow at the rate of 15 per cent per year.
to provide food, health care, vocational train- Projections and growth in child sponsorships
ing, and agricultural expertise to the spon- over the past few years are presented in Exhibit
sored childs family and to the childs 6. Reaching the figure of 100,000 in 2013 would
community. CCFCs projects included clean be a great achievement for Compassion Canada
water wells, immunization programs and for it would mark two milestones: 50 years of
micro-enterprise training. operations and 100,000 children.
Exhibit 6 Growth in Compassion CanadaProjected Versus Actual
Number of
Children
Sponsored 2002 2001 2000 1999 1998 1997 1996 1995
Projected 20,775 17,800 16,473 15,732 14,898 14,196 13,330 12,310
Actual 21,886 18,684 16,659 15,377 14,505 13,556 12,818 12,088

Youre an Entrepreneur 375
Youre an Entrepreneur
But Do You Exercise Strategic Leadership?
Prepared by W. Glenn Rowe
If you are an entrepreneur, you are already in a mean that they are not moral or ethical people,
leadership position. An important question but that as entrepreneurs they may not include
you need to ask is: what type of leadership do values in their decision making because of cer-
I exercise? Answering this question may deter- tain pressures such as enhancing profitability.
mine how your business will perform in the These leaders are driven by bottom-line
future. This article describes three types of agendas that affect financial performance in
leadership (Managerial Leadership, Visionary the short-term. They want to maintain stabil-
Leadership, and Strategic Leadership) and the ity and to preserve the existing order. They are
expected consequences of each on future busi- more comfortable handling the day-to-day
ness performance. activities, and are short-term oriented.
Managers will, at best, maintain wealth
y Managerial Leadership that has already been created and may even be
a source for future wealth destruction as they
Some entrepreneurs exercise managerial lead- are generally unwilling to invest in long-term
ership. As managerial leaders they influence investments such as human resource training
only the actions/decisions of those with whom and development, promotion, marketing, cap-
they work and are involved in situations and ital investment, and capital renewal.
contexts characteristic of day-to-day activities. Table 1 summarizes characteristics of
They may make decisions that are not sub- managerial leaders, visionary leaders, and
ject to value-based constraints. This does not strategic leaders.
Table 1 Strategic, Visionary, or ManagerialWhat Kind of Leader Are You?
Strategic Leaders
Display a synergistic combination of managerial and visionary leadership. Emphasize ethical

behaviour and value-based decision making.
Oversee operating (day-to-day) and strategic (long-term) responsibilities.
Formulate and implement strategies for immediate impact and preservation of long-term
goals to enhance organizational survival, growth, and long-term viability.
Have strong, positive expectations of the performance they expect from superiors, peers,
subordinates, and themselves.
Believe in strategic choice, i.e., their choices make a difference in their organization and
environment.
(Continued)
Table 1 (Continued)
Visionary Leaders Managerial Leaders
Are proactive, shape ideas, change the way Are reactive; adopt passive attitudes
people think about what is desirable, towards goals. Goals arise out of
possible, and necessary. necessities, not desires and dreams; goals
are based on past.
Work to develop choices, fresh approaches View work as enabling process involving
to long standing problems; work from some combination of ideas and people
high-risk positions. interacting to establish strategies.
Are concerned with ideas; relate to people Relate to people according to their roles in
in intuitive and empathetic ways. the decision-making process.
Feel separate from their environment; See themselves as conservators and regulators
work in, but do not belong to, their of existing order; sense of who they are
organization. depends on their role in the organization.
Influence the attitudes and opinions of Influence actions and decisions of those
others within the organization. with whom they work.
Know less than their functional area experts. Are experts in their functional area.
More likely to make decisions based on values. Are less likely to make value-based decisions.
Are more willing to invest in innovation, Are more likely to engage in, and support,
human capital, and creating and short-term, least-cost behaviour to
maintaining an effective culture to ensure enhance financial performance
long-term viability. figures.
Believe their choices make a difference in Believe their choices are determined by
their organizations and environment. their internal and external environments.
y Visionary Leadership and creating/maintaining an effective culture

to ensure an organizations long-term viability.
Most entrepreneurs are visionary leaders who Not only is visionary leadership future-
influence the opinions and attitudes of others oriented, but it is concerned with risk-taking.
within the organization. They are concerned with Furthermore, visionary leaders are not depen-
insuring the future of an organization through dent on their organizations for their sense of
the development and management of people. who they are. Under these leaders, organiza-
Their task is multi-functional, more com- tional control is maintained through social-
plex and integrative. Visionaries are more likely ization and the sharing of, and compliance
to make value-based decisions and are more with, a commonly held set of norms, values,
willing to invest in innovation, human capital, and beliefs.
It is imperative that entrepreneurs exercise It makes sense to suggest that if you can
visionary leadership to ensure the long-term count on employees to voluntarily make deci-
viability of the organizations they lead. sions that benefit the organization, entrepreneurs
However, organizations that are led by vision- will not have to expend as much effort on moni-
aries without the constraining influence of toring and controlling their employees. Further,
managerial leaders are probably more in dan- entrepreneurs will have more capacity to exam-
ger of failing in the short-term than those led ine what the organization needs to do, both in
by managerial leaders. Since visionary leaders the short and long term.
are willing to risk all, they may inadvertently On the other hand, if employees do not
destroy the organization and destroy wealth. know the strategic direction of the organization
they may inadvertently make decisions that dam-
age it. Influencing subordinates to voluntarily
y Strategic Leadership make decisions that enhance the organization is
the most important part of strategic leadership.
Strategic leadership presumes that Noel Tichy argues that When you cant
entrepreneurs and their employees control, dictate or monitor, the only thing you
have a shared vision of what your can do is trust. And that means leaders have to
organization is to be. be sure that the people they are trusting have
There are three categories of people values that are going to elicit the decisions and
the person who goes into the office, actions they want.
puts his feet up on his desk, and As presented above, the definition of strate-
dreams for 12 hours; the person who gic leadership presumes an ability to influence
arrives at 5 a.m. and works for 16 ones employees. It further presumes that the
hours, never once stopping to dream; entrepreneur understands the emergent strat-
and the person who puts his feet up, egy process given that it has a greater impact on
dreams for one hour, then does some- performance than the intended strategic plan-
thing about those dreams. ning process. This is related to understanding
Steven J. Ross, the importance of voluntary decision making.
Former Chairman and The decisions voluntarily made and the
Co-CEO of Time-Warner actions voluntarily taken by employees on a
day-to-day basis eventually determine what
Strategic leadership is defined as the ability to strategy will emerge. Entrepreneurs who are
influence your employees to voluntarily make strategic leaders understand and utilize this
decisions on a day-to-day basis that enhance the emergent process to ensure the future viability
long-term viability of the organization while at of their organizations.
the same time maintaining the short-term Strategic leadership presumes that entre-
financial stability of the organization. preneurs and their employees have a shared
Entrepreneurs and employees make deci- vision of what the organization is to be so that
sions every day as they interact with their day-to-day decision making, or emergent
firms stakeholders, customers, suppliers, the strategy process, is consistent with this vision.
communities in which they operate, and each It presumes agreement between entrepreneurs
other. What needs to be addressed is: are these and their employees on the opportunities that
decisions in accordance with the strategic can be taken advantage of, and the threats that
direction of the organization? Will these deci- can be neutralized, given the resources and
sions enhance the future viability of the orga- capabilities of their organization.
nization, as well as the short-term financial Entrepreneurs need to develop the skills
stability? The answer is absolutely. and abilities that are required to exercise
strategic leadership. Those few that are man- The second entrepreneur is Bob Kierlin.
agerial in nature need to develop their vision- Kierlin is the CEO of Fastenal, a company
ary side and those who are visionary need to that sells nuts and bolts. His leadership style
develop their managerial side. To demonstrate is characterized by employee empowerment,
that entrepreneurs need to exercise strategic participation, wage compression (he pays
leadership two entrepreneurs who made a dif- himself $120,000 US per year) and promo-
ference to their firms and to their industries tion from within. However, he strongly
will be discussed next. encourages profitable revenue growth. This
has been very beneficial for his employees,
Without effective strategic leadership, customers, and shareholders. In 1998,
the probability that a firm can achieve Fastenals market value added was $0.077B
superior or even satisfactory perfor- it was $1.609B in 1996an increase of $1.53
mance when confronting the challenges billion. Kierlin started Fastenal in 1967
of the global economy will be greatly because he was unhappy with the bureau-
reduced. cracy at IBM.
These strategic leaders believed that their
R. Duane Ireland
decisions would affect their companies envi-
and Michael A. Hitt
ronments. They put great emphasis on
achieving their visions by influencing the atti-
y Two Entrepreneurs Who tudes as well as behaviours of their employ-
ees. Moreover, they also ensured that their
Were Strategic Leaders visions were achieved in a manner that was
Konosuke Matsushita is the founder and for- best for their employees, customers, and
mer CEO of Matsushita Electric. At $49.5 bil- shareholders. In essence, these leaders were
lion, his revenue growth was the highest of any able to manage the paradox of investing
20th century entrepreneur. The next closest strategically in their employees, in promotion
were Soichiro Honda at $35.5 billion and Sam through advertising, in research and develop-
Walton at $35.0 billion. Matsushita was an ment, and in capital equipment while still
incredible visionary who demanded revenue ensuring that their organizations were finan-
growth but with even more dramatic profit cially stable in the short term.
growth. One story describes how he told his
senior managers that within five years he y The Paradox of Leading
wanted revenue growth to quadruple and and Managing
profit to more than quadruple. This goal was
achieved in four years. How did he do this? A recent Statistics Canada study found that the
Matsushita concentrated on creating products two most important reasons for the bank-
for his customers that created value in their ruptcies of small-to-medium-size firms were
minds that was greater than what they (1) poor overall management skills, such as
expected. However, he always wanted it done at lack of knowledge, lack of vision, and poor use
a profit for his company. Matsushitas long- of outside advisers, and (2) imperfect capital
term vision was for the products his compa- structures due to either institutional con-
nies sold to create worldwide prosperity in straints or managerial inexperience.
such a way that in several hundred years there The authors argue that managers in
would be world peace. small firms need to be trained in general
management and financial management more, as they become more creative and
skills. It is interesting that this study found a innovative, and more prone to taking risks
need for visionary and managerial leader- because they know this enhances long-term
ship in small-to-medium-size firms just as it viability.
is needed in large firms such as General Working through the paradox of leading
Motors and IBM. and managing is an exciting challenge, one
Being a strategic leader is exciting as you that is demanding and difficult, but one that is
create chaos, make mistakes, get occasionally achievable for entrepreneurs. Entrepreneurs
rapped on the knuckles by your employees, should start thinking of themselves as strategic
and even occasionally have to apologize to leaders who have to accept and merge the
your employees for creating too much disor- visionaries and managerial leaders in their
der before they were ready for it. But the organizations. Fight against the constraining
rewards are worth it as those with whom you influence of financial controls and fight for the
work become energized and more productive exercise of strategic and financial controls with
they accomplish more in less time and do not the emphasis on strategic controls. The reward
have to work dreadfully long days away from will be wealth creation and the achievement of
their families. Employees come to enjoy work above normal performance.

Strategic Leadership

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Copyright 2011 by Sage Publications, Inc.

The University of Western Ontario

Determining the Firms Purpose or Vision

Exploiting and Maintaining Core Competencies

Developing Human Capital

Sustaining an Effective Organizational Culture

Emphasizing Ethical Practices

Establishing Balanced Organizational Controls

Strategic Leadership Versus Leadership

Positional Versus Behavioral

Strategic Leadership at Coca-Cola

Exhibit 1 CEO Succession Timeline and Stock Price Performance at Coca-Cola

Adjusted Monthly Adjusted Monthly

* Closing price adjusted for dividends and stock splits.

Coca Cola Co The Splits:

Net Profit/Sales (%)

Coke Pepsi CCE PBG

Net Profit/Equity (%)

Coke Pepsi CCE PBG

NOTE: CCE: Coca-Cola enterprise; PBG: Pepsi Bottling Group.

Isdells international career continued importance of this position and the

Barry Slauenwhite, chief executive officer (CEO) y Compassion International

Copyright 2003, Ivey Management Services Version: (A) 2006-10-13

Evangelist Association (ESEA). He appealed to y Compassion Canada

Soon ESEA grew and attracted a large

Exhibit 1 Schematic Diagram of Compassion Activities

Exhibit 2 Community Project Types

y Child Sponsorship Cdn$31 per month to Compassion Canada.

Exhibit 3 Sponsorships by Source (July 2000 to June 2001)

SOURCE: Company files.

Exhibit 4 Usage of Sponsorship Income (1997 to 2002)

Activity 2002 2001 2000 1999 1998 1997

Raising funds 838,367 722,639 676,558 660,881 646,761 601,032

Administration 522,267 495,512 430,420 438,813 335,638 328,519

Child support 6,311,438 5,407,600 4,842,005 4,498,724 3,482,028 3,215,897

Sponsor ministry 431,236 442,808 315,630 266,564 294,198 273,411

Typical Distribution of Sponsorship Income

SOURCE: Company files.

Compassion Foster World Vision Christian Childrens

Child Sponsorship 7,065,231 36,892,048 131,082,000 9,960,794

Government Grants 185,391 2,507,319 21,292,000 317,568

Investment Income 161,160 577,698 274,000 n.a.

Other Income1 890,045 2,294,478 43,074,000 16,962,304

Total Income 8,301,827 42,271,543 195,722,000 27,240,666

Program Expenses2 6,690,790 33,575,328 157,002,000 22,633,973

Fundraising3 1,026,443 5,233,845 27,675,000 2,296,944

Administration 559,143 3,463,798 8,463,000 1,610,020

Total Expenses 8,276,376 42,272,971 193,240,000 26,540,937

Surplus 25,451 (1,428) 2,482,000 699,729

Number of Children 18,684 110,000 272,186 n.a.

Number of Sponsors 15,945 n.a. 223,995 n.a.

SOURCE: Company files.

NOTE: All amounts in U.S. dollars except where noted.

World Vision Canada Children in Spain to help children whose lives

program implementation. Of this amount, The organization derived its revenue

Exhibit 6 Growth in Compassion CanadaProjected Versus Actual

Projected 20,775 17,800 16,473 15,732 14,898 14,196 13,330 12,310

Actual 21,886 18,684 16,659 15,377 14,505 13,556 12,818 12,088

SOURCE: Company files.

Table 1 Strategic, Visionary, or ManagerialWhat Kind of Leader Are You?

Display a synergistic combination of managerial and visionary leadership. Emphasize ethical

Visionary Leaders Managerial Leaders

y Visionary Leadership and creating/maintaining an effective culture