Evaluation of Leadership at Coca Cola
On October 24th 1997 Doug Ivester took over as the 10th CEO and Chairman of Coca Cola, the world’s largest soft drink company, after the tenure of his predecessor Roberto Goizueta came to an abrupt end due to his sudden and unexpected death. In the 16 years as CEO of Coca Cola Yale-educated Goizueta earned himself a reputation of setting high objectives and achieving all of them. Growth in total annual sales from $5 billion in 1981 to $18. 5 billion in 1997 and rises in net profits and company’s market capitalization of 700%, respectively 4000%, underline his more than successful leadership (Walter, Knopp & Reavis 2005).
In 1997 analysts expected former company president Doug Ivester, 50, who received unanimous support from the company’s board in the election process for the new CEO, to continuously meet annual financial targets set in the Goizueta era. The company’s board was completely convinced of Ivester’s qualification for the leading position in as he had already proven himself within in various tasks and jobs over the past decades (Walter, Knopp & Reavis 2005). “Whenever he sets a target, he hits it” (Morris 1998) is a quote of board member Allen recorded at that time which describes the general perception of Ivester in 1997.
Goizueta himself saw a “godsend” (Hays 2004, p. 36) in Doug Ivester, an aggressive worker, but most of all a financial mastermind. They worked together closely for more than a decade, kept on posting spectacular gains and beat market expectations constantly. Also, Goizueta referred to Ivester as his “partner” (Walter, Knopp & Reavis, p. 4), his predetermined successor, the one he carefully groomed to give him the experience and expertise in essential leadership skills (Morris & Sellars 2000).
Nevertheless, only 26 month later in December 1999 Doug Ivester was pushed to resign from his job as the head of the company on account of outsized pressure from board directors who had lost confidence in his leadership. Under his tenure return on equity declined significantly from 57% in 1997 to 35% in 1999. (Morris & Sellars 2000) Thus, the question arises, why did such a successful and celebrated manager fail at the very highest corporate stage and why did his tenure turn out as management story full of leadership lessons?
In this paper Ivester’s behaviour, actions, and traits are discussed in coherence to leadership literature and theories to evaluate his approach to leadership and to draw recommendations for the future selection of CEOs at Coca Cola. Leadership Evaluation of Douglas Ivester Given Ivester’s financial background as an accountant at Ernst & Young who at first worked for Coca Cola as an external auditor and was subsequently hired by officials in 1979 to work for the company’s financial department (Walter, Knopp & Reavis 2005), his approach to business and work was about being direct and analytical (Hays 2004).
Morris & Sellars (2000) mention his total focus on discipline within his work approach and his deep conviction of the fact that organizations that are highly disciplined entail most creativity. In accordance to Walter, Reavis & Knopp (2005) he was an introverted, even blunt leader who emphasized structure as a key issue in his leadership approach. Ivester compared business operations with chess games and imposed rigid control systems within the company. People referred to him as a brilliant and ambitious “adding-mashine” (Hays 2004, p. 34) until he was elected the new CEO of Coca Cola in 1997.
At this point in time, his biggest strengths arguably turned into his biggest weaknesses when his tasks changed from executing corporate strategy to setting corporate strategy, representing and leading a global multinational corporation. Ivester’s lack of flexibility and undersized cognitive ability became obvious in his inflexible acquisition strategy of Cadbury Schweppes despite rising European regulatory concerns in 1998 and his misinterpretation of the contamination scandal in Belgium in 1999 when Ivester ignored the perception of the European population which was still sensitized by Britain’s ’94 mad-cow disease.
In this respect Bazerman & Chugh (2006) argue that total focus can limit awareness, an essential prerequisite for leadership. After all, Ivester’s misjudgements and failures in both cases turned out to be extremely costly and unfavourable for the company’s image (Walter, Knopp & Reavis 2005). This indicates that Ivester simply lacked these character traits which Kirkpatrick & Locke (1991) claim to be essential personal traits of successful leaders.
In accordance to the situational leadership model of Hersey and Blanchard (1988) leaders are also required to adjust their styles contingent on present situations and the maturity of their followers. Being resistant to any kind of advice Ivester nevertheless kept on telling his employees what to do as he was convinced to know everything better than his employees (Morris & Sellars 2000). His leadership was described as a “one-man highwire act” (Morris & Sellars, p. 114+).
This also portrays his arrogance and his underdeveloped emotional intelligence – people even referred to him as “the iceman” (Hays 2004, p. 174). Goleman (1998) argues that emotional intelligence includes five critical components. Besides self-awareness and self-regulation emotional intelligence perceives social and motivating skills as well as empathy as essentials for leadership success. Ivester, however, commonly showed no interest in small talk, he even discouraged staff by inappropriate criticism and intimidations.
In general he refused to motivate and empower his employees. On account of his rigidity regarding corporate structures Ivester minimized information, responsibility, authority and trust provided to his staff demanding steady notifications and justifications about every single action (Hays 2004). He did so regardless of the fact that empowered people tend to be more committed to their tasks and as a result more creative and higher performing (Campling et al. 2008). Ivester who detested risk and kept his focus on the “sure-thing single” (Morris & Sellars, p. 14+) ignored that innovative and sustainable successful companies require a certain extend of risk and flexibility. (Barsh, Capozzi & Davidson 2008)
Evaluating the leadership approach of Doug Ivester additionally it is to mention that effective leadership requires power to influence other people’s behaviour. Campling et. al. (2008) distinguishes between position power in the form of reward, coercive and legitimate and personal power in the form of expert and referent sources of power. The latter sources of power demand knowledge, charisma and interpersonal skills.
Having established a rigid control system, Ivester exclusively relied on legitimate power to get things done (Hays 2004). Whetten & Cameron (1991) argue that successful leadership requires all types of power and appropriate use to achieve goals and to pursue a shared vision in the long run. As such, Ivester’s leadership approach can basically be described as contrary to the one of his predecessor Robert Goizueta who considered management as a “people-relations business” (Walter, Knopp & Reavis, p. 3).
They complemented each other perfectly as long as they were leading the company together and Ivester flourished in his role as the financial mastermind of the company (Hays 2004). But as soon as Goizueta was gone it became obvious that Ivester who “knew the math, but not the music” (McKay, Deogun & Lublin 1999) was not only unable to share visions and goals (Morris & Sellars, p. 114+).
On top of that he was not even able to set up clear visions and values for the company itself as “he seemed to lose sight of the big picture” (Morris & Sellars, p. according to his oversized focus on details and numbers. Being a leader with visions and the ability to communicate them in a compelling sense however is an important characteristic of transformational leadership which Gardner (1998) urges to be the appropriate leadership style in settings with continuous and vast changes to retain sustainable corporate success. This leadership style requires charismatic leaders that inspire staff members with thorough uses of personal power, empowerment, motivation, rewards and intellectual stimulation.
As previously discussed in the evaluation of Douglas Ivester’s leadership approach neither did he apply any of those tools nor did he value them at all. In accordance to Bass (1985) Ivester could best be described as a transactional leader as someone who is more methodical and structured in his leadership approach. This leadership style however is considered to be insufficient to cope with challenges and demands of dynamic work settings (Campling, et al. 2008). Recommendations concerning the election of a new CEO for Coca Cola
In retrospect on his 26 month long tenure as the CEO of Coca Cola it became more and more obvious that Ivester emphasised “substance over style” (Morris & Sellars, p. 114+). For more than a decade excellent financial expertise made him the perfect second in command but subsequently his narrow-mindedness also prevented him from being a successful leader. Given the tremendous impact of the selection of the CEO in the life of an organization the board of directors at Coca Cola Company are ought to be more careful in setting selection criteria regardless of the eligibility of internal candidates.
Primarily, a strategic fit and leadership capability of candidates are essential and given the leadership lessons evaluated in this paper the election of an external candidate providing adequate leadership experience can often be the logical and more reliable choice in many cases. According to the evaluation of deficits in Doug Ivester’s leadership approach the board is therefore strongly recommended to consider characteristics of transformational leaders in their CEO-selection process who can accomplish excellent performance predominately by “providing followers with a vision that instills true commitment” (Johns & Saks 2008).
Also considering the fast changing organizational and economical environment this paper argues that future CEOs at Coca Cola need to embody not only flexibility but also proven skills in cognitive ability. Leaders have to be able to focus on the big picture and make the right decisions especially in times of crisis and change. On top of that the global dimension and worldwide operations of Coca Cola deserve attention within the selection process. Thus, future leaders of Coca Cola need to provide a global mindset, high tolerance for ambiguity and cultural adaptability.
In accordance to Petrick et al. (1999) excellent global leadership competencies, which complement transformational leadership, will meet the demand for sustainable competitive advantage and result in superior corporate performance in the 21st century.