RETENTION OF THE BEST AND
BRIGHTEST AT PEPSICO
Team Red
Claudius M. Hanke
Deboleena Bose
Maham Mukhtar
Frederick Feller
PROBLEM AND STATUS QUO
3/4/2014 Dahwan, E. 2012 / PricewaterhouseCoopers 2012 / Robert Half International 2008
Two core factors drive Millennial retention.
Y
“They’ve seen their
parents get downsized,
rightsized, laid off and
sidelined.” – RHI
“Emotional connection
drives retention.” – PwC
75%
of Millennials in the global
workforce by 2025
12%
current annual
turnover at PepsiCo
2
EMPLOYEE VALUE PROPOSITION
“Meaning is the new money.”
3/4/2014 3 Ericksen 2011
Balancing meaning and money is key to retention.
EMPLOYEE VALUE PROPOSITION:
TOTAL COMPENSATION
3/4/2014 RHI 2008 / Ng et al 2010
Long-term financial security is a key concern.
Job considerations for Millennials:
1) Salary
2) Benefits
Transparency & equity issues are
fundamental for satisfaction.
Benefits are key to retention:
1) Healthcare coverage
2) Paid time off
3) Dental coverage
4) 401k
5) Bonuses
Y
Total
Compensation
$26,699
Avg. expected salary
increase within 5 years
after graduation
4.44
Attractiveness of
better benefits
out of 5
4.63
Attractiveness
of higher pay
out of 5
4
EMPLOYEE VALUE PROPOSITION:
TRAINING & LEARNING
3/4/2014 RHI 2008 / PwC 2011
Professional & personal advancements are crucial.
Define PepsiCo-specific human
capital development targets
Proactive educational
opportunities satisfy learning
drive and aid retention
Age-neutral workplace:
resolve stereotypes and
improve sense of belonging
Y
Training
&
learning
73%
of Millennials would
consider leaving for
educational opportunities
34%
of Millennials consider their
personal drive intimidates
older generations
5
EMPLOYEE VALUE PROPOSITION:
SUPERVISOR GUIDANCE
3/4/2014 RHI 2008 / PwC 2013
Face time instead of FaceTime.
Role of supervisors changes
from knowledge center to
career guide.
Personal contact remains key.
“Generation Nintendo”:
Constant feedback &
recognition of performance
Performance appraisal: Who
are the best and brightest?
Transparency is crucial
Y
41%
of Millennials expect
performance feedback
very frequently
Supervisor
guidance
96%
of Millennials want
career discussions
face-to-face
6
EMPLOYEE VALUE PROPOSITION:
UNIQUE LEADERSHIP DEVELOPMENT
3/4/2014 Brack 2007
Meaningful work trumps unattractive locations.
“PepsiCo’s firefighter initiative”:
A-players rotate among
troubled facilities
Participants enjoy great
autonomy and ownership
Addresses desire for
challenging and significant
opportunities
PepsiCo’s leadership pipeline to
exploit key traits and foster
career progression
Y
PepsiCo’s
firefighter
initiative
7
30%
of Millennials consider
meaningful work as
most important
EMPLOYEE VALUE PROPOSITION:
UNIQUE LEADERSHIP DEVELOPMENT (CONT.)
3/4/2014 Brack 2007
Selection of firefighters is a corporate-wide task.
How to ensure common
understanding of an A-player
across all PepsiCo-facilities?
1. Continuous performance
appraisal at local facility
2. Outstanding candidates are
invited to PepsiCo’s HQ
3. Central HR-Committee
conducts assessment center to
select firefighters
Alignment of A-players with
PepsiCo’s corporate goals
Highlight differences in quality of
performance appraisal
Y
25%
of Millennial seek
personal accomplishment
in their jobs
PepsiCo’s
firefighter
initiative
8
FINANCIAL PROJECTION
Cost of doing nothing: $9,720,000 annually
Year 0 cost:
Training & learning ($360k) + Supervisor guidance ($20k) +
PepsiCo’s firefighter initiative ($90k) = $470,000
PepsiCo’s WACC: 4%
Net Present Value: $2,201,740
Return on Investment: 38.29%
3/4/2014 9 WACC: stock-analysis.com, 2/22/2014
Implementation of the model is financially advicable.
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
(470k) (470k) (830k) (830k) (830k) (830k)
— — — 810k 2,230k 6,480k
Turnover decrease (from 12%): -1% -3% -4%
METRICS & MEASURES
Metrics for successful retention
Satisfaction of A-players/of regular employees
Turnover of A-players/of regular employees
Trend analysis of exit interview content
Success rate of “PepsiCo’s firefighter initiative”
Acceptance rate among target facilities
Learning outcomes
Performance outcomes
Final cost per employee
3/4/2014 10
What gets measured, gets managed.
THANK YOU FOR YOUR ATTENTION.
Do you have any questions?
3/4/2014 11
Team Red:
Claudius M. Hanke
Deboleena Bose
Maham Mukhtar
Frederick Feller
Y
PepsiCo’s
firefighter
initiative
Supervisor
guidance
Training
&
learning
Total
Compensation
REFERENCES
Brack, J. (2007): Maximizing Millennials in the Workplace. UNC Kenan-Flagler Business School. http://www.kenan-
flagler.unc.edu/executive-development/custom-programs/~/media/DF1C11C056874DDA8097271A1ED48662.ashx
Dhawan, E. (2012): The Gen-Y Workforce And The Workplace Are Out Of Sync. Forbes Online.
http://www.forbes.com/sites/85broads/2012/01/23/gen-y-workforce-and-workplace-are-out-of-sync/
Ericksen, T. (2011): Meaning Is The New Money. Harvard Business Review Blog Network.
http://blogs.hbr.org/2011/03/challenging-our-deeply-held-as/
Ng, S.W., Schweitzer, L. & Lyons, S. (2010): New Generation, Great Expectations: A Field Study of the Millennial
Generation. Journal of Business Psychology (25), pp. 281-292. http://link.springer.com/article/10.1007/s10869-010-
9159-4/fulltext.html
PricewaterhouseCoopers (2008): Managing tomorrow’s people: Millennials at work – perspectives from a new
generation. http://www.pwc.com/en_M1/m1/services/consulting/documents/millennials-at-work.pdf
PricewaterhouseCoopers (2011): Managing tomorrow’s people – Key findings. http://www.pwc.com/gx/en/managing-
tomorrows-people/future-of-work/key-findings.jhtml
PricewaterhouseCoopers (2013): PwC‘s NextGen: A global generational study. http://www.pwc.com/en_GX/gx/hr-
management-services/pdf/pwc-nextgen-study-2013.pdf
Robert Half International (2008): What Millennial Workers Want: How to Attract and Retain Gen Y Employees.
http://www.accountingweb.com/sites/default/files/generationy_robert_half.pdf
Stock-analysis.com (2014): PepisiCo Inc. (PEP) Financial indicators. http://www.stock-analysis-
on.net/NYSE/Company/PepsiCo-Inc/DCF/Present-Value-of-FCFF
Image sources:
Slide 1 PepsiCo image (edited): http://davemosher.com/blog/wp-content/uploads/2010/07/pepsi-cola-300×225.jpg
Slide 2 Brain (edited): http://4.bp.blogspot.com/-
rEs5nLBq0M4/Twhp9dSCiOI/AAAAAAAAAhg/QIgxditbb2g/s200/02brainfromabove991907.gif
3/4/2014 12
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