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Leadership Style at Coca-Cola Company -
May 4th, 2011
The Coca-Cola Company (NYSE: KO) is a beverage retailer, manufacturer and marketer of non-alcoholic beverage concentrates and syrups. The company is best known for its flagship product Coca-Cola, invented by pharmacist John Stith Pemberton in 1886. The Coca-Cola formula and brand was bought in 1889 by Asa Candler who incorporated The Coca-Cola Company in 1892. Besides its namesake Coca-Cola beverage, Coca-Cola currently offers more than 500 brands in over 200 countries or territories and serves 1.6 billion servings each day.
The company operates a franchised distribution system dating from 1889 where The Coca-Cola Company only produces syrup concentrate which is then sold to various bottlers throughout the world who hold an exclusive territory. The Coca-Cola Company owns its anchor bottler in North America, Coca-Cola Refreshments.
The Coca-Cola Company is headquartered in Atlanta, Georgia. Its stock is listed on the NYSE and is part of DJIA, S&P 500 Index, the Russell 1000 Index and the Russell 1000 Growth Stock Index. Its current chairman and CEO is Muhtar Kent.
In the past year, I've had the honor of speaking on a number of university campuses around the world -- from the London Business School to IMD to MIT. I always walk away from these experiences energized and inspired by the fresh thinking... the rigorous debate... and the entrepreneurial spirit I find at our world's leading business schools.
Coming to Wharton, however, is truly special. This, of course, is where collegiate business education began. More importantly, this is where many of the leading ideas are coming from that will shape business leadership and business development in the years ahead.
Believe me... new ideas and new thinking have never been in more demand in the business world. It's tough out there at the moment -- very tough. The global financial crisis has touched everyone in the world, and it will probably get tougher before it gets better.
Last week, I met with Chairman Bernanke in Washington and we talked about the need to keep the faith in our global markets. I acknowledged the issues were difficult but I also expressed my optimism about the future and our belief that this was exactly the right time to invest in our future. We both agreed that the American economy and the world economy could come out of this crisis stronger and better prepared for the future than when we entered into it.
I am a firm believer that times like these are not an excuse to sit back and ride out the storm. Rather, this is the time to focus on what matters most to our business, shed what is wasteful and unproductive, and invest in our brands, customer-facing communications and execution.
History has shown us, time and again, that world-class organizations and leaders proactively manage turbulence to sow the seeds for future growth and prosperity. With that said, I'd like to spend some time this afternoon talking about leading in challenging times.
My hope is that the world you will inherit upon completion of your MBA will have calmed down quite a bit.
Rest assured, though, that whether it's a financial crisis, or a geopolitical crisis, or an energy crisis, or an environmental crisis -- turbulence will be the new norm in the years ahead. And that's not necessarily a bad thing, either.
I believe that for every headwind we confront there's an equally powerful tailwind to be ridden. The trick is finding it.
We are living in a world of great paradox. A world of seemingly insurmountable challenges... but also one of breathtaking opportunities. Your leadership will help shape and define that world.
I want to get this leadership discussion started by sharing with you some defining moments in my career and how they shaped my own personal leadership style. Then I'd like to share a few thoughts on how I am putting those principles into practice as we lead The Coca-Cola Company and system through these times of great paradox.
Mostly, though, I'm looking forward to hearing what's on your mind, and my hope is that we can have a great conversation today as well.
So, let me start with my career journey and some of the key lessons I learned along the way.
When I first went to work for The Coca-Cola Company in Atlanta 30 years ago, America and the world were in a situation surprisingly similar to today. Fuel prices were spiking. A recession was draining our confidence. Across America there was widespread fear that we were losing our global political and economic leadership around world. Many people feared that a surging Japan would cripple American industry, jobs and the U.S. economy. Even greater numbers of people were worried about their jobs being replaced by technology.
But the system didn't collapse. In fact, America got stronger... much stronger... and that's because this great nation did what it has always done best -- America innovated and reinvented itself.
By the time I was 29, the early '80s economic boom was beginning to heat up both here in America and around the world. I was appointed to lead our first Pan European Customer Relationship function. A few years later, I was appointed director of International Accounts for Europe. Both of these roles taught me the importance of relationship-building and leading not by hierarchal control but by influencing and collaborating.
Four years later, I was named president of our small and troubled operations in Turkey -- that was back in 1985. Our business in Turkey at the time had $55 million dollars in revenue. Today it's among the most successful operations in our system.
Being president at the age of 32 in a crisis situation taught me a lot about compassion... listening... empathy… and building trust -- while leading with confidence.
A few years later, as the Berlin Wall was falling, I went on to lead our operations in East Central Europe. These were dynamic times -- half a billion people from the Baltic to the Balkans lived behind an Iron Curtain for half a century. Our business had no relevance in this geography at the time. There was no infrastructure and no real currency. We did business through counter-trade.
We ramped up quickly and built Western-style production and distribution facilities in record time. In fact, we built 24 factories across 11 countries in 28 months. Today, we are the undisputed market leaders in these geographies and they are among the most innovative markets in our system.
Key lessons here for me were prioritization
... acting with urgency...
... focusing on execution
... and keeping your eye on the prize.
In 1998, I became CEO of Efes Beverage Group, a small Turkish beer company that had just invested in the Coca-Cola bottling system. At the time, we were a local business, with less than $300 million in revenue. Our vision was to establish "Beverage Leadership from the Adriatic to China."
By 2005, Efes had expanded to eight countries, was the No. 5 beer company in Europe, and was among the top 10 bottlers in the Coca-Cola system. Revenues had grown to nearly $3 billion, we were listed on both the Istanbul and New York stock exchanges, and we had indeed become the largest beverage company from the Adriatic to China.
The big lessons for me here were...
... respect for cash...
... and executing by building emotional networks among people.
In May 2005, I came back to work for The Coca-Cola Company, first to run our Asia-Pacific operations in Hong Kong. In 2007, I became president and COO. I assumed the CEO position this past July.
The big lessons of the past two years have been the importance of getting our system aligned and our people believing in winning again.
Throughout my 30-year career, I've been fortunate to interact with some truly wonderful leaders -- leaders from business, government and civil society. Regardless of their background, I've noticed one overarching and essential trait found in all leaders -- and especially leaders who manage through challenging times. They have the ability to create a clear and compelling vision for their organization, and to inspire their people to achieve that vision.
Let's face it, vision without execution is merely daydreaming. And execution without vision is like running in the dark -- you're moving but probably not in the right direction.
One of my first priorities as CEO has been to guide our entire system toward a system-wide vision for our business... and to develop the capabilities to execute against that vision.
It became apparent to me and to my leadership team that the world we inherited at the beginning of 2008 was shaping up to be significantly different than it was even a year ago. We saw some things happening today and over the near horizon that were going to fundamentally and dramatically reshape the nature of our business over the next decade and beyond. Changes that were going to make the last 10 years seem downright tranquil.
Specifically we saw -- and continue to see -- four massive global trends unfolding that will have great bearing on the world and our system in the years ahead.
1. The rising demand (and cost) for energy.
2. Rising food prices.
3. A growing middle class and...
4. Rapid urbanization.
Collectively -- I refer to them as the "New Equilibrium" because they are shifting the balance of the world and will so for next decade and beyond.
The current global financial crisis -- while painful and pervasive -- did not make this list because I believe it will be a distant memory in a few short years. As traumatic as it seems today, it will have little material impact on the much broader global developments already in place.
Let me just take a moment to review these four key developments in more detail because they are really the triggers for the strategic renewal process that we are going through right now.
First, the energy situation. Despite recent fluctuations, most energy experts today believe that oil demand and prices will rise significantly over the next decade as consumption continues to surge. This is already fueling one of the largest transfers of wealth in history. The United States will transfer nearly $500 billion dollars to oil producing economies this year alone.This will join the $2 trillion dollars that will be transferred out of the EU, China, Japan and India this year.
Of course, oil booms and busts are not exactly uncommon. What is different today, however, is the surging energy demand we're seeing from fast-growing economies around the world, adding to the already huge demand from the developed world.
The second component of this New Equilibrium is producing some unintended and far-reaching consequences. The surge in production of bio-fuels like ethanol, along with erratic weather, is partly responsible for food shortages and rising prices. So, here we are with both higher energy costs... and higher food costs.
As populations continue to expand and living standards continue to rise across the world, we will have to manage our business in an economy of constant scarcity and cost pressure. This is the new normal.
The third major shift we're seeing is the rapidly growing middle class. Think about this: A billion new people worldwide will enter the middle class by the year 2020. These new middle class consumers will strive for the same things we want out of life -- better quality food and better quality beverages. And like their counterparts in the developed world, most of these new middle class consumers will reside in urban areas.
This brings us to the fourth component of this New Equilibrium -- the stunning rate of urbanization taking place around the world. Within the next 12 years, China, India and the Southern Hemisphere will be more urban than North America, Europe and Japan.
So, clearly, what you have here with these four global shifts are significant challenges and opportunities that impact the sustainability of our industry... our business... and our planet.
For our industry, this also means more people... with more wealth... leading highly mobile, on-the-go, urban lifestyles that are conducive to greater demand for ready-to-drink beverages.
It also means increasing cost pressures, environmental pressures, commodity scarcity, NGO pressures, global talent competition and a host of other implications.
Amid this backdrop of opportunity and turbulence, we truly believe that there is no better consumer products industry to be in than non-alcoholic ready-to-drink beverages. At Coca-Cola, we think we've really just scratched the surface of our potential.
Consider this: This year, people around the world will consume 1.5 billion servings of our products every day... but 50 billion servings of ALL other beverages. There is an incredible opportunity for growth.
Ours is a $650 billion dollar industry that is growing faster than the world's GDP and faster than all other consumer packaged goods, including cosmetics, alcoholic beverages, and household care.
By 2020, the non-alcoholic beverage space will be a trillion dollar industry. That's a huge opportunity.
If our industry were a nation, we would be among the top 18 largest economies in the world today.
We know that capturing new opportunities, however, is going to require both vision and execution across our Company and our wonderful system of bottling partners.
And that's where our vision -- which we call Vision 2020 -- comes into play. It's a look at where our Company and our bottling partners need to be heading over the next decade.
Our vision is centered on capturing the unprecedented opportunities emerging over the next decade in the global non-alcoholic beverage industry...
… as a billion new people enter the middle class…
…as expanding youth markets and affluent aging populations seek new beverage experiences and requirements...
… and as breakthrough technologies and innovations reinvent consumer marketing and shopper experiences.
In short, our vision is to harness new wealth, new beverage requirements and new innovations to accelerate growth and create the world's most respected consumer goods system.
I've been spending a lot of time this year getting my leadership team assembled and aligned in a way so that I am confident we can execute against our vision and strategies.
I think it's Professor Useem here at Wharton who refers to "leadership as a team sport." He couldn't be more right. Getting the right team in place to execute our vision and strategies has been absolutely critical.
Equally important is getting our bottling system leadership and our Company employees aligned behind our vision.
About two months ago, we assembled our top global bottlers and Company leadership for a rigorous two days of discussion on our vision. This was the first time we had convened as a system since the Roberto Goizueta era.
We spent a lot of time looking at our business and where we wanted to take it, and we also listened to some leading outside thinkers give their perspectives on the future.
We heard from Fareed Zakaria, the noted international affairs experts, former U.S. Secretary of State Madeleine Albright, the CEO of Goldman Sachs, Lloyd Blankfein (who joined us just days after the start of the global financial meltdown), and Dr. Rajendra Pachauri, the Nobel Prize winning climate-change scientist.
Most importantly, we received great input from the leaders of our bottling system about what we need to be doing better to grow as a system.
It was a rich discussion and we followed that with another important gathering just two weeks ago when we brought together our employees for a town hall to discuss our vision in Atlanta.
Getting our system leadership and people behind the vision and giving them an opportunity to contribute to the vision will play an essential role in the success of this renewal process.
Other extremely important constituencies that we need to communicate vision to are shareowners, retail customers, suppliers, government officials, NGOs and other parties who directly and indirectly influence our ability to grow.
There are two critical things a CEO cannot delegate and will have to own.
1. The first is communicating vision... and I've already talked a bit about that.
2. The second is owning the development of leadership talent and succession planning.
If you look at my senior management team, you'll see that we've got leaders from Mexico, Lebanon, the UK, Australia, Liberia, Turkey, France, Colombia, Ireland and the U.S. At times, Coca-Cola resembles the United Nations... and in fact we are in more markets than our represented by the UN today.
This extraordinary diversity of ideas and cultures and beliefs is undeniably one of the most important competitive advantages we have as a business system.
I sense more and more businesses will begin to resemble us in this regard in the coming years. In fact, CEOs in the US and Europe recently told an Economist survey that their senior management teams will become more international over the next three years.
We feel strongly that the next generation of leadership will need to be able to recognize and harness the power of diversity.
One of the most fulfilling diversity programs I am personally involved in is serving as the chair of our Company's Women's Leadership Council. In this role, I work with senior women executives throughout our company to identify strategies to attract and develop more women into leadership positions.
The keen insights women bring to our business are profound, to say the least. Today, women account for the majority of purchase decision makers for our beverages. Globally, women make up 70 percent of all grocery shoppers. As more and more women around the world gain economic power, we need to be there with the right shopper insights, the right mix of products, and the right marketing and merchandising strategies. Women's leadership has never been more important.
As the CEO, my job is to create a climate of success for our people and inspire them to achieve the vision we have created for our business. That's really the true essence of leadership. At the end of the day, it all comes down to execution. As I mentioned earlier, vision without execution is simply daydreaming.
For The Coca-Cola Company, execution involves focusing on our three core capabilities of...
consumer marketing -- which generates that bond and emotional connection with our consumers...
commercial leadership -- which involves all the strategic actions we take with our 20 million retail customers who sell our brands around the world each day...
and franchise leadership -- which is working with our 300 bottling partners around the world to create greater system alignment.
Fore effective leadership -- especially in these times of challenge, there can be no substitute for strategic thinking and tireless, relentless execution. There can be no alternative for attracting and retaining the absolute best people to lead and creating a dynamic environment for them. And there can be no job more important than communicating effectively with your customers and all your key stakeholders.
As you can see, our strategic renewal is a journey that's at its beginning stages. But by formulating a clear and compelling vision... getting our system aligned behind it... executing... and constantly communicating our intentions -- I'm extremely confident that we will succeed.
Muhtar Kent is Chairman of the Board and Chief Executive Officer of The Coca-Cola Company.
Mr. Kent joined The Coca-Cola Company in Atlanta in 1978 and has held a variety of marketing and operations roles throughout his career. In 1985, he was appointed General Manager of Coca-Cola Turkey and Central Asia. From 1989 to 1995, he served as President of the Company's East Central Europe Division and Senior Vice President of Coca-Cola International, with responsibility for 23 countries. Between 1995 and 1998, Mr. Kent served as Managing Director of Coca-Cola Amatil-Europe, covering bottling operations in 12 countries.
From 1999 until his return to The Coca-Cola Company in May 2005, he served as President and CEO of the Efes Beverage Group, the majority shareholder of Turkish bottler Coca-Cola Icecek. Headquartered in Istanbul and listed on the London and Istanbul Stock Exchanges, Efes is a publicly traded beverage enterprise whose Coca-Cola and beer operations extend from the Adriatic to the Pacific Ocean. Under Mr. Kent's leadership, Efes experienced extraordinary growth, with triple-digit revenue growth and a 250 percent increase in market capitalization. During that time, in addition to taking Efes Breweries International public on the London Stock Exchange, Mr. Kent also served as a board member of Coca-Cola Icecek.
Mr. Kent was named President and Chief Operating Officer of The Coca-Cola Company's North Asia, Eurasia and Middle East Group from 2005 until early 2006, where he was responsible for the operations across a broad and diverse geographic region that included China, Japan and Russia. Mr. Kent served as President of Coca-Cola International through most of 2006, responsible for operations outside of North America, until his appointment as President and Chief Operating Officer of The Coca-Cola Company, overseeing all operations of the business, including Bottling Investments. He succeeded Neville Isdell as Chief Executive Officer of the Company on July 1, 2008, and as Chairman of the Board of Directors on April 23, 2009.
Mr. Kent holds a bachelor of science degree in economics from Hull University, England, and a master of science degree in administrative sciences from London City University
The news last week that The Coca-Cola Company's heir apparent and chief operating officer, Muhtar Kent, is to succeed E. Neville Isdell as chief executive officer in July next year will have come as a huge relief to those with a vested interest in the soft drinks giant's success.
Kent has been groomed by Isdell for the position since he rejoined Coke in May 2005 and became president in December 2006. However, Coke's recent track record in executive succession made nothing a certainty, and a repeat of the last two CEO appointments, which left the company demoralised and haemorrhaging executive talent, could never be ruled out.
Most recently, this was seen four years ago when Isdell came out of retirement to beat then COO Steve Heyer to the CEO's chair. For some, Heyer was Coke's natural heir and the decision to pass him over left the boardroom and management divided. Although Isdell's track record over the last four years suggests the move was the right one, at the time it summed up a company that was struggling to convince itself or its investors that it had any direction at all.
Isdell, who will remain as chairman until the company's annual shareholders' meeting in April 2009, has worked hard to turn that situation around. Those looking back over his tenure will judge positively a man who has overseen rejuvenated beverage sales and profits across the world, improved bottler relations and the arrival of new talent to replace that which had been lost during a difficult time in the company's history.
But perhaps, given the past, his greatest triumph has been to ensure a smooth handover to Kent, as this epitomises the new confidence the Atlanta-based group wants to portray.
"I have a very, very strong belief that successful management transition is one of the key jobs of the CEO and the chairman," Isdell said in an interview recently. "It's one of the key goals I set for myself. ... I've been working on it for three and a half years, and I'm trying to do it the right way."
That "right way" was to convince Kent to rejoin the Coke family after a stint as president and CEO of the Turkish drinks company Efes Beverage Group. Before that, he had been in the Coke ranks since 1978 in a variety of marketing and operating roles. But his relationship with Isdell really grew from 1989 to 1995, when he was president of Coke's East Central European division. During this period, Isdell and Kent jointly oversaw the company's successful move into Eastern Bloc countries as the Iron Curtain fell.
His rise up the Coke ranks was not without its hurdles though, and after three years at the helm of Coca-Cola Amatil Europe, he left the company in 1998, following controversy surrounding insider-trading allegations. Kent settled out of court and continues to deny any wrongdoing.
On balance, however, the drinks community seems to think Coke has got its man.
"We have confidence in the board's judgment and continue to recommend KO [Coca-Cola] shares believing that operating performance will continue at or above long-term targets," said Stifel Nicolaus beverage analyst Mark Swartzberg.
Importantly, Kent has been right at the forefront of so much of the progress that has been made at Coke in recent years. Isdell has turned to him to fix troubled international markets and he headed up the company's largest acquisition, its US$4.1bn purchase of Energy Brands, the producer of Glaceau Vitaminwater. His stock is also high amongst the bottlers after working to repair relations with some of the bigger partners.
John F. Brock, president and CEO of Coca-Cola Enterprises (CCE), said last week: "Muhtar and Neville are a strong leadership team. Muhtar has a solid understanding of our unique challenges and opportunities in North America and Europe."
Kent still faces challenges. North America remains problematic for carbonated drinks and Coca-Cola is still playing catch-up with rival PepsiCo in efforts to diversify a portfolio still heavily reliant on this unspectacular category. Improving morale in-house is also a job in progress - the self-inflicted wounds of the beginning of the decade are deep.
But in truth the only black mark appears to be the decade-old insider-trading fiasco at Amatil. "This event may be taken as an occasion to re-raise the question of Mr Kent's ethics," warned Swartzberg.
Coca-Cola's board had an outside law firm investigate the matter before re-hiring Kent and as Swartzberg points out: "Local regulators ultimately dropped their investigation of the matter and…this subject has been vetted by Mr Isdell and the board, implying the board's knowledge of and confidence in Mr Kent's character is high."
However, others believe the matter still needs addressing. "The issue remains on investors' minds and, given Kent's increasing role at the company, we think Coke will need to continue trying to get investors comfortable with the situation," another analyst was quoted saying.
At the moment, Isdell talks as if the issue is closed, but many in the investment community still seem to feel there are questions to answer. Convincing them otherwise could be Isdell's final triumph.
here are four main types of management styles that each business
would use. Coca Cola have four principles of citizenship that they
would have to incorporate into the management style:
* Provide quality in the marketplace
* Enrich the workplace
* Preserve the environment
* Strengthen the community
A management style is an overall method of leadership used by the
manager. The Coca Cola Company use the following management styles,
but each one in different departments. There are three main types of
management styles used in businesses:
Where the leader makes all the decisions, there is no negotiation and
is very prescriptive and there is little job satisfaction. However,
the job gets done quickly and there is less conflict between different
ideas. This style is hardly used among the company as they believe
that the lack of input could lead to poor results. Autocratic does
save a lot of time as quick decisions can be made and there is no time
wasted on discussion resulting in the business saving time and money.
This emphasises on group agreements to generate new ideas. There are
two types of democratic management styles; democratic and consultative
democratic. Democratic is where all the managers, junior managers and
employees are involved in the ideas and final decision process. Out of
all the workers, no-one has a higher level than the others n this
This is where the managers allow the employees to make the ideas but
the ideas are forwarded to the executive's or the manager consults
their team to make the final decision. Coca Cola applies consultative
management style to the company more as there can be less conflict for
what the final decision is. The advantage of this is that it helps to
motivate staff as they are aware that they have a say in the company
to some extent. The disadvantages of this that the process is very
time consuming and effort will be needed by a manager to do this.
Management encourages employees to set goals in line within the
organization aims. There are reviewed regularly in performance
appraisals. The advantages of this style are that it will increase
efficiency of individuals and help to motivate them and train them so
they are productive. The disadvantages of this are that it needs to be
well organized and will not work in highly structured jobs.
Democratic style is the management style that Coca cola adopts. This
sort of management style involves empowerment. In this management
style individuals and teams are given responsibilities and decisions
to make, usually within a given framework. If anything wrong happens
then the individuals and teams are then held responsible for the
decisions that are chosen. With this type of management style it
allows the manager to feel comfortable with other people in the
organization making some of the decisions. Democratic managers will
often want feed back from their employees on decisions being made.
Democratic leaders listen and act on the opinions of the group. This
type of management is good as it makes the employees happy and
productivity is high. This is a very good method because employee's
thoughts and suggestions are listened to by the business. This makes
the employees seem as if they are respected and that their thoughts
Coca Cola's Management by Objectives
Management by objectives is a process of management that emphasises
the role of leadership and communications in the organisation and
control of the business. It is a method of managing managers rather
than the workforce at large. The following shows how Coca Cola is
managed, by the three basic elements in management that Coca Cola uses
by the objectives:
· The identification of agreed goals by a manager and a subordinate
· The definition of the subordinate's responsibilities in terms of
· The use of agreed goals and responsibilities to control the progress
of the business
Every business is made up of different cultures and the cultures that
are present within the business depend on the management style and the
organisational structures that are used. The different types of
Role Culture- This is best suited to a hierarchy organizational
structure. This type of culture works best by every employee playing
the role that he or she has been predetermined and corresponds with
the rules and regulations of the business
Task Culture- This culture encourages people to work as a team; this
works best in a star structure.
Power Culture- This works well in a matrix structure. It is based
around one dominant individual/leader.
Person Culture- this culture focuses on providing administrative help
and support and close attention to one person in the organization.
Role culture is the culture that Coca Cola adopts. This is where all
members have a defined job or role to carry out. Role culture is
normally split up into a number of functions that are organized in a
hierarchical way. Coca Cola would divide themselves into various
functions like accounts, marketing and production. These also have
hierarchical ordering of office examples of these are production
director, production managers, supervisors, technicians, operatives
etc. This type of culture works by logic and rationality. Role culture
is mainly used in large organization. In this culture position in the
main source of power and rules and procedures are the main source of
influence. They also use task culture s the employees from the I.T
department might have to work together to teach their goal or target
Management style of Coca Cola.
If the culture of the business is not good, it can affect the number
of absenteeism and punctuality. This means that if Coca Cola had a
hard and unfriendly culture it can force their staff not to come to
work because they might be picked on every day by other staff members,
or they might not like the work they are given so they either come in
late or take a day of work. This would result in the business losing
out on work, and have less time to call in for a replacement.
The culture of Coca Cola could have an affect on industrial relations,
between managers and workers. So if Coca Cola didn't have a warm and
genial culture it would cause more disagreements between staff and
managers and staff would not be motivated to work, for example, staff
may have to cut down on rest days, this could cause arguments as all
staff would be tired from working everyday and would not have time to
recover or spend it with their family. However, if the company had a
warm culture then the managers and staff would get very well as staff
would have less stress to compete with and would have a friendly
environment to work in without having someone constantly shout out at