Note to PepsiCo’s CEO: Start Reporting Long-Term Performance Today

Indra Nooyi CEO of PepsiCo and one of the world’s most powerful corporate leaders gave an interview to the Telegraph a few days ago from Davos where she discussed PepsiCo’s current success and future strategy.  Today, $10B of PepsiCo’s revenues come from healthy items such as Quaker oats and Tropicana orange juice.  In ten years, Ms. Nooyi wants that number to grow to $30B.  Analysts will wonder if this goal will be reached at the cost of growth and profitability in the core soft drink and snack foods business.  Is this a case of encouraging social value at the price of shareholder value? 

Ms. Nooyi doesn’t think so.  She believes Wall Street’s emphasis on quarterly earnings helps keep businesses ‘in check’; current profitability can and should be delivered in conjunction with growth toward future goals.  She does wonder however if the current measurement practices can accommodate this balancing act.   She states, “[But] everything does have to be reformed. So, what if there was a balanced scorecard which had different metrics? What if there wasn’t quarterly earnings?  And as her interviewer notes, “Ms Nooyi suggests that the balanced scorecard, with longer term measures measuring long-term returns and social impact, could be added to quarterly earnings but, in a world that demands transparency, it would be difficult to move away from regular reporting.”  Difficult indeed if the Balanced Scorecard were used only for quarterly financial reporting.

So here’s the good news for Ms. Nooyi (and she didn’t even have to travel to Davos hear it):  you and your counterparts in the executive suite can put your long-term strategic measures on your Balanced Scorecard starting today.  The Balanced Scorecard is specifically designed to merge your top strategic goals–along with their corresponding measures–in a format that can be reviewed by your senior team regularly.  Moreover, your long-term strategic measures related to your shift toward healthy lifestyle products doesn’t even have to be reported to Wall Street, although reporting them might be a great way to start the reform you’re hoping for.  The reality is the Balanced Scorecard is a tool to actively manage your highest level corporate objectives–not just the ones deemed essential by analysis.  CEOs everywhere might want to keep this in mind when measuring strategic performance.

Read the Telegraph article here:  http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/7126037/PepsiCo-chief-executive-Nooyi-brings-in-healthy-profits-in-lean-times.html