Conversation with Steve Reinemund

Al Erisman, executive-in-residence in the School of Business and Economics at Seattle Pacific University, spoke with Steve Reinemund, dean of Wake Forest University's two business schools and former CEO of Pepsico, about what's happened recently to business leaders — and how we can fix it.

The interview was originally published in the June 2010 issue of Comment Magazine under the title "Connecting Faith and Corporate Leadership" (pages 14–20). It is reproduced by permission.


Al Erisman: When you look back on your time at PepsiCo, what achievements bring you the most satisfaction?

Steve Reinemund: : In my final role as chairman and CEO, I had the opportunity to set the agenda for the corporation and what we stood for, so that was probably the most satisfying. However, all of the roles through the years were meaningful to me.

Three things stand out. First, I was able to work on things like articulating the values of the organization with our people from PepsiCo around the world. We committed to a process wherein we would challenge ourselves when we did not live up to those values we aspired to represent.

Another was the area of diversity and inclusion, and the importance of these both as a business imperative and as the right thing to do.

Diversity is an extension of respect for the individual. We articulated very clear positions on what we wanted to be in terms of diversity as an inclusive environment, and we measured our resources and reflected our results in our performance reviews and compensation.

The third was in the area of health and wellness. We wanted to encourage both our associates and our consumers to look at their health and wellness in ways we hadn't articulated before. We examined our product portfolio and actively looked for ways to improve our process, develop new healthy options, and seek out companies that we could acquire to bring in products that we could build on to expand our focus on healthy foods.

These three areas are where I spent a large part of my discretionary time as the chairman.

AE: Are there some things you wish you had done differently?

SR: I am certainly conscious of the fact that I make mistakes like everyone, but as a general practice, I look forward and not backward. There is nothing that dramatically pops out as something I would do differently. That said, I would be the first to say we didn't do everything right.

AE: Which influences from your time at PepsiCo have affected your work as dean at Wake Forest?

SR: One of my major objectives, and one of the reasons I took this position, was to help young people find their fire, passion, or calling — whatever word you want to use. So many young people today — and, frankly, people of all generations — are seeking to find where they fit.

What is right for them? Where can they make their contribution to society? What is unique about them that aligns with something meaningful they can pursue? My passion at this point in my life is to help people find answers to these questions.

I spent 30 years in business, understanding what it takes to do different jobs and what kind of jobs require which kind of skills, and now, I am building on that knowledge and experience to help young people find a meaningful vocation. I probably spend at least 25 percent of my time directly with students. I speak in different classes, and next year I am starting a class with our vice president for career development, Andy Chan, on finding your passion.

One of my pet programs here is a master's degree in management for recent liberal arts grads with no prior work experience. We have 90 students from 26 different schools, with a heavy emphasis toward diversity: 45 percent underrepresented minorities and 45 percent women, an unusual demographic for a business program.

It has been exciting to watch these very smart, broad-thinking liberal arts undergraduate students with no prior understanding of business and see how they change over the course of the year.

AE: How did your faith affect how you thought about business while at PepsiCo?

SR: This looked different for me, and likely for others, at two different stages of my career. In the early part, I needed to learn about myself as a leader, developing as a whole person and a contributing member of the team. Developing my moral compass, my work ethic, and my understanding and respect for individuals were all deeply seeded in my strong faith.

In the second stage, I had the opportunity to take actions to influence the organization and society.

Al Erisman: In this second stage, you have must faced the challenge that in a diverse world you must be very careful at how you impose your faith on those under your responsibility. Can you be cautious and bold at the same time?

Steve Reinemund: That's a good point. That's why the first stage, translating what you believe into how you act, is so important. We are all humans and make mistakes, but we must try to ensure that our actions reflect much more than what we say. Understanding that in a pluralistic environment is critical.

As you move into a position of formulating values, they should be developed with those actions as an outcome, and not the set of beliefs as an outcome. There will be times where people are curious and the situation is appropriate, and you can share your basis for why those values exist and matter to you.

AE: Can you give an example of this when you were CEO and Chairman?

SR: The most dramatic example came during 9/11. Our headquarters are located outside New York City in Westchester County, and when the attack happened, we closed the building shortly after we realized what was going on, as many others did.

As I walked around the building after that announcement, I realized there were a lot of people that had not left. Then I became aware that many were standing around outside because they had no place to go. Many of our people were reverse commuters who couldn't get over the bridges back into the city.

So we decided to get on the public address system to make an announcement that we would have a prayer session in the cafeteria. I remember going down and kicking off the meeting, starting with about 25 people. But I looked up a bit later and there were several hundred people there. That was quite meaningful. I led it in a way that I thought would be respectful, but added my own thoughts and beliefs. I wondered what kind of reaction we might have, but there was no pushback from anyone saying what we did was inappropriate.

Everybody has to choose their own way of expressing what they believe and sharing that with others. I didn't have other experiences like the 9/11 time during my tenure, but I did have many individual discussions with people who had a need and asked questions, or were simply curious, and usually on a one-to-one basis.

A leader of a large organization, particularly a publicly-held multinational company, needs to live what he or she believes, and this is more important than what one might say. Respecting the multicultural nature of the workplace is very important. At least, that's the way I see it, though I recognize some people see it differently.

I had the privilege of working with many people who shared all of the same explicit values of conduct that I did, but came to that point from different religious backgrounds. This included my successor, with whom I had a close personal relationship in the workplace, even though she and I came from very different places. She is a strong person of very high integrity, and very principled. I can't recall a time when we ever disagreed on a values-based issue.

AE: In what way might your faith influence how you thought about financial resources at PepsiCo?

SR: There are several ways to answer that question. Most people I have dealt with in any senior positions have managed their personal wealth in a very similar way as they deal with the stewardship of the company's assets.

While I am sure there are exceptions, most people are honest, frugal, and prudent in the way they invest for the future on a broad basis. They are not so singularly focused on maximizing the short-term bottom line number that they don't invest and take risks for the future. They have a holistic way of doing this. Most people do this same thing in their personal lives.

AE: Are you saying the Enrons of the world and the more recent banking problems are the exception in your experience?

SR: It is important to separate the kind of issues we have dealt with over the last tumultuous 10 years from blatant ethical mistakes like Enron, which are, frankly, easier to understand, though no less reprehensible. The more difficult issues require separating the issues of judgment, foresight, and narrowness from blatant misconduct.

A lot of mistakes over the last 10 years were made by leaders who were far too narrow in the way they defined their responsibilities and therefore measured their success. They shut out the other factors that influence the success of a business. They were just not the leaders that those organizations needed. Of course, some were influenced by personal greed for personal gain. But not all of them.

AE: In that sense, would you say that your faith could inform your thinking, forcing you to be more holistic as a person?

SR: Faith, unfortunately, doesn't isolate you from making bad judgments or even making mistakes of greed. But hopefully it defines the basis for how decisions are made and on what basis you judge success.

Al Erisman: What about the non-financial areas in product decisions, directions of growth, and that kind of thing? How does your faith inform these kinds of decisions?

Steve Reinemund: It's a great question. In product development, you want to be committed to making only quality products. Your purpose is to satisfy the consumer with the products you serve. If you do that in a way that is appropriate, your constituencies will be properly rewarded. If you start with that, then you can work your way back and ask, "Where is it that what we are doing doesn't quite fit?"

AE: Does your faith offer an advantage to thinking about such issues in a way that another person might not think?

SR: Yes, but I want to put a caveat here. I don't think that my faith is the only faith that would cause a leader to make the appropriate decisions in the area of product development. But consider this in reverse. It would be inconsistent for a Christian to not think about these issues.

AE: How about the same question related to employee policy?

SR: The same principle applies, in the sense that treating people with respect is a very basic part of the Christian faith. It is also a basic part of other faiths. To not take actions that demonstrate respect for individuals is inconsistent with Christianity, as I understand it.

No compromise is possible which says the end justifies the means or that there is some relative way of defining respect. But there are others who could define their conduct the same way. I find it hard to believe that someone could demonstrate respect for the individual without some basis in their belief system that says that is the right thing to do. For me, it comes from my Christian faith.

Unfortunately, belief system or not, we are very good at rationalizing our behavior. My experience with people who profess to be Christians is that there is more damage and misconduct done by rationalization of the faith than anything else. This has done tremendous damage to society and to the Christian faith, more than someone who does the same thing but doesn't identify it with their faith.

AE: What do you believe is the purpose of business and purpose of business schools? Both have been under a fair amount of scrutiny recently.

SR: Frankly, the purposes of both are under scrutiny by lots of people for very good reasons today. I think the purpose of business is to provide goods and services for society in an ethical manner that provides a sense of well-being for employees, supports a livelihood for families, enhances the economy of communities, and provides a reasonable return for owners.

The purpose of business schools is under a lot of scrutiny because, frankly, we can't look at the last 10 years without questioning business education. Where were we in turning out the leaders that made some of these mistakes that have cost society so much?

I think we all have to take a step back and ask if we have produced a group of leaders who are too narrow. Maybe they are functionally and technically skilled, but unprincipled in what they are trying to achieve in the name of short-term profit. No one consciously tried to do that, but it was the effect. Have we trained well-rounded, broad-thinking, principled leaders who have a much broader sense of their purpose in life?

The curriculum of most business schools shows that we have been too narrow. We have been short on ethics, defining what conduct is, defining how you develop that conduct, defining who the constituencies of business are and why they are important. We need more on how to develop and demonstrate the importance of leadership in directing an organization. These are what some people call softer skills. We have probably mastered the technical skills at the expense of the softer skills.

You could go back to the evolution of business schools over the last 50 years and see the threads for this. There was a push a number of years ago to be more rigorous in business education. Some thought that it was too vocational or soft, but we have likely reacted too much to that criticism and not gotten the right balance.

Our vision at the business schools at Wake Forest is to advance the greater good through the development of ethical business leaders, who get results with integrity and through thought leadership that positively impacts business.

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