answer questions

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