What Really Happened to Coke

2 February 2017

Sometimes even the most brightest of minds fail. Doug Ivester, head of the Coca-Cola Company for only a little more than two years, resigned after an unofficial meeting with the two board members Warren Buffet and Herbert Alan. Fostered by former CEO Goizueta for over 10 years, he took over this position of one of the highest ranked global brands after Goizueta’s unforseeable death. As it turned out, Ivester could not generate the results he was expected to (Morris & Sellers 2000). What happened along his short road as CEO? How and why could such a long time inducted person flop so badly?

In a first step, this essay examines Ivester’s actions, taken into account different theoretical leadership approaches. Furthermore, it will reveal a lack in ‘people skills’ like emotional intelligence and communication. This given, there will be recommendations on how Coke can find a better match. The approach to leadership by Doug Ivester Coming from and affected by the accounting and finance sector where he worked his way up to the very top (Watkins, Knoop, & Reavis 2005), Ivester was often described as a ‘numbers’ person, “obesessed with controlling the tiniest details” (Morris, Sellers 2000, p. 15).

What Really Happened to Coke Essay Example

Statements like “The highly disciplined organizations are the most creative… We operate with a rigid control system. ” (Morris & Sellers 2000, p. 116) indicate his rational, objective and authority driven approach to leadership. Furthermore, he even demanded regular communication with his senior executives (Hays 2004), making them inferior and demotivated. Hence, interactions between Ivester and his followers only occurred when the latter failed to respond to Ivester (Hays 2004). These behaviors are all signs of a transactual leader using the management by exception style (Judge & Piccolo 2004).

Introduced by Burns (1978) and contrasting with transformational leadership, it “is based on a fairly straightforward exchange between the leader and the followers” (Johns & Saks 2008). This means there is no social interaction between leaders and followers, thus no relationships can be established. It stays formal and an important source of inspiration and motivation is diminished. In times of crisis, which are an “ultimate measure of a CEO” (Morris & Sellers 2000, p. 115), Doug Ivester exposed disastrous communication skills. He reacted too mechanically and too late in the Belgium crisis.

In addition, he offended Coke’s bottlers, which are the basis of Coke’s success, by raising the price for concentrate and implying the development of vending machines (Watkins, Knoop, & Reavis 2005). This shows that in accordance to his thus far developed character traits, Ivester was “heavy on data and facts, light on such intangibles as emotions. ” (Hays 2004, p. 33). Leading without emotions Probably one of his biggest indulgences is his missing keen sense of how to deal with people and their emotions, resulting in insufficient communication like he displayed with Donald R.

Keough (Morris & Sellers 2000). Goleman (1995) calls this emotional intelligence, an ability to manage people and their emotions, which is essential in today’s changing organizations. Amongst other competencies are the understanding of others, communication and political awareness, in order to read “a group’s emotional currents and power relationships” (Goleman 1998, p. 27). In turn, these factors influence empathy and within that effective handling of relationships (Goleman 1998). Apparently this was not one of Ivester’s strengths, because he “lacked political skills” (Morris & Sellers 2000, p. 16), as well as the inability to send convincing messages to an external audience as seen in the Belgium crisis (Morris & Sellers 2000).

Another leadership competency under the focus of emotional intelligence is “Accurate self-assessment” (Goleman, Boyatzis & McKee 2002, p. 253), meaning that leaders should “exhibit a gracefulness in learning where they need to improve, and welcome constructive criticism and feedback. ” (Goleman, Boyatzis & McKee 2002, p. 253). Instead of using the received suggestions to improve his situation, Ivester favored neither learning nor getting feedback when he ignored the email from Donald R.

Keough (Morris & Sellers 2000). The deficient use of emotional intelligence in his leadership raises the question: what did he actually lead? To put it another way, looking at transformational leadership shows exactly what Ivester did not do. According to Avolio and Yammarino (2002), transformational leadership is highly motivational, inspirational and visionary and uses emotional attachment with followers to set higher standards. Doug Ivester never used emotions, he seemed cold and could not read the emotional signs of others.

He lacked in empathy, thus made it hard for himself to find the right tone when dealing with a crisis or people as well as to inspire people or even get them to motivate themselves. Knight and Willmott (2007) distinguish between management and leadership, stating that “leadership is therefore linked with a process of organizing in which (in principle) greater emphasis is placed on inspiring, listening, facilitating and involving people, rather than instructing them to act. Leadership is linked to communication and innovation. ” (Knight & Willmott 2007, p. 59).

In the short 26 months as CEO of Coke, Doug Ivester never evolved from a manager to a leader, due to his underdeveloped skills in emotional intelligence and communication. Finding a new leader In order to find a new and suitable leader for the Coca-Cola Company, it is crucial to first find out what went wrong with the last CEO and why it went wrong. This, in turn, gives an insight into what qualities to seek in a new leader. As highlighted before, Ivester’s leadership style is best summarized by the transactual leadership approach.

To be more efficient with people in organizations, transfomational leadership should be used, because it “has a greater effect on followers and collectives than does transactual leadership, which in turn is focused on promoting self interest and thus limited in scope and impact” (Antonakis & House 2002). Transformational leadership is mostly based upon five characteristics, such as inspirational motivation, intellectual stimulation, individualized consideration and charisma. Emotions play an important role in all of these characteristics, especially in charisma (Johns & Saks 2008). The importance of emotional intelligence

Therefore the new CEO should contain a high level of emotional intelligence, because “leadership is an emotion-laden process from both the leader’s and follower’s perspective. Thus, emotions and moods should play an important role in leadership, and emotional intelligence is very likely a key contributor to leadership effectiveness. ” (Johns & Saks 2008, p. 329). In his research, Goleman (1998), who was the first person to adapt the concept of emotional intelligence to business, found out that not only traditional qualities like intelligence, toughness, determination or vision are required to be successful as a leader.

They are only the foundation of what a leader needs to have, but they are insufficient. In addition, his research identified a positive correlation between emotional intelligence and business results. This model of emotional intelligence is influenced by characteristics such as self-awareness, self-regulation, motivation, empathy and social skills created by Goleman (1998), which will help us find the right match for the position as CEO of Coke. Recommended characteristics for a matching leader

First of all, the next CEO should bring all the basic fundamentals needed for this managing position, like Ivester did. Moreover, the person should show a high level of emotional intelligence manifested in the following characteristics introduced by Goleman (1998): Self-awareness is the ability to recognize feelings, in oneself and in others and how they affect performance. People with self-awareness “can often intuit the best course of action, seeing the big picture in a complex situation. ” (Goleman, Boyatzis & McKee, 2000, p. 253).

Those people can be recognized if they speak openly about emotions and admit failures (Goleman 1998). The managing of good and bad emotions as well as impulses and even utilizing them in useful ways is called self-regulation. People who remain calm even in a crisis or during high stress have good self-regulation (Goleman, Boyatzis & McKee, 2000). Motivation, in the context of leadership, means that a person is motivated within themself. It is easy to detect people who are intrinsicly motivated, because they seem restless and always want to achieve and learn more (Goleman 1998).

Empathy enables people to sense emotions from other individuals or a group. Hence, those who are good at empathizing can get along better with teams and persons from different cultures and backgrounds (Goleman 1998). If a person is good in building rapport with different kinds of people to create a network, which the can use if the time comes, this is called social skill. It is the sum of the characteristics explained above and can be seen in any social interactions at work.

It is, compared to the other characteristics, the most important one along with empathy, because both play an important role in managing relationships (Goleman 1998). Choosing Ivester as the next CEO was a missunderstanding. He has had a very good track record but lacked, nevertheless, all of the competencies above. Considering the consumer goods industry and the globalized structure of Coke, as well as the need to communicate its products, it is highly recommended to select someone who also has excellent skills in communicating with employees, shareholders, stakeholders and authorities.

A good way to find such a person is to create a group of board members, high-ranked executives and other people who will work with the new leader on a constant basis. Bearing in mind the importance of the described ‘soft factors’, it has to be looked at the ability to solve crisis and mastering social interactions. It takes time to detect these talents and therefore it is most likely to find the new leader inside the Coca-Cola company.

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