Out with the old, in with the… old
After much deliberation, Coca-Cola has named its new CEO and chairman to succeed Doug Daft. But the appointment of retired Coke veteran, Neville Isdell, to the top job has arguably raised as many questions as it has answered. Ben Cooper reports.
Well, white smoke finally puffed from the Atlanta HQ of soft drinks giant, The Coca-Cola Company, as the successor to CEO and chairman, Doug Daft, was named. And the name that finally emerged surprised a few people too. Coke's new supremo is Neville Isdell, a three-years' retired Coca-Cola veteran who had been with Coke for 30 years before leaving in 1998 having failed to be named as Doug Ivester's successor for the top job.
While a significant vindication and affirmation for Isdell himself, the appointment has raised a few interesting questions. Not least among these regards the fate of Steven Heyer, Coke's chief operating officer who had been considered for some time Daft's heir apparent.
In addition, the very choice of Isdell, who comes out of retirement at the age of 60 to take on one of the highest profile corporate captaincies in the world, rather than someone younger or someone from beyond the Coca-Cola universe, has also raised eyebrows.
For that reason perhaps more than any other the fairly mixed response from analysts has tended to err towards an acceptance of Isdell as a safe pair of hands and someone who knows the business backwards. Bill Pecoriello, analyst at investment bank, Morgan Stanley, said Isdell's big asset was vast experience in the soft drink business so he won't face "a learning curve beyond a brief immersion period."
Meanwhile, Marc Cohen of Goldman Sachs, welcomed the fact that Coca-Cola had opted for "evolution rather than revolution". J.P. Morgan analyst, John Faucher, also saw Isdell as the "safe" choice, likely to focus on "continuity rather than change." Faucher said Isdell offered the advantages of support from Coke's bottlers, a limited learning curve, no change in strategy and a potential boost to morale. However, on the negative side Faucher said Isdell was not well known by investors and is unlikely to "aggressively" take on the board of directors to initiate change.
In choosing Isdell, Coca-Cola certainly has someone with an in-depth knowledge of the workings of the soft drinks giant. He joined Coca-Cola in Zambia in 1966 and held positions of increasing responsibility in South Africa, Australia, and The Philippines. Having been named president of the company's Central European division, based in Germany, in 1985, from 1989 to 1998 he was group president for North East Europe, the Middle East and Africa.
However, Isdell left the company in 1998 after being passed over when the company was searching for a successor to Doug Ivester, to serve as chairman of Coca-Cola Beverages, a company that went public the same year. In 2000, he negotiated its merger with Hellenic Bottling Company to form Coca-Cola HBC, at the time the world's second-largest Coca-Cola bottler, and became its chief executive officer. He left CCHBC at the end of 2001 and retired.
The fact that he has been out of the loop for some three years was thought at one stage to count against his chances. Indeed, it is widely believed that the board only opted to tempt Isdell out of retirement when it failed to net a high-flying corporate player from outside the soft drinks industry. Possible outside candidates had included Mattel's Robert Eckert, Carlos Gutierrez of Kellogg and Gillette CEO, James Kilts.
That the board was known to be courting an outsider, one who could provide fresh thinking and steer a new course for a company which is said sometimes to suffer from being too wedded to its old familiar ways, has itself made Isdell's appointment slightly problematic for Coke.
However, there are some who believe it is wrong to assume Isdell is a dyed-in-the-wool company man who won't be able make radical changes where necessary or who, because he is steeped in the Coke way of doing things, won't be able to see what might need to be changed. Coca-Cola is generally considered to be facing a raft of daunting problems which will require sound and decisive leadership, including a discrimination suit, a federal accounting probe, the mounting pressure on soft drinks companies from health lobbies and perceived financial under-achievement.
In short, some observers believe that even though he is a "Coke man" is well capable of sufficient objectivity to tackle Coke's problems. Moreover, the fact that he is been out of the loop for three years gives him precisely that outside-in perspective which the board craved. Only in Isdell's case he will be looking at the challenges in a fresh way, with more than thirty years of experience of Coca-Cola's structure and way of doing business to back it up. "I've been outside the system for two years, and that has made me far better prepared to lead this company than I was in the past," Isdell himself was quoted as saying following his appointment.
This is an extremely "glass half-full" way of looking at things but there are precedents for successful corporate turnarounds being masterminded by experienced former executives coming out of retirement, with examples including Procter & Gamble and Xerox. It seems that the combination of intimate in-depth knowledge of the company's systems, its strengths and weaknesses, coupled with some time away from the grind is a potent one.
Coke's Donald R. Keough, the director who headed up the committee charged with finding Daft's successor, seems now to be refuting the suggestion that the company was looking for a new broom.
"We were not looking for a change agent," said Keough the day after the appointment was made. "We were looking for the best person to take this company into the future, and all of the board members went to sleep last night convinced that we have this place in proper hands." Keough added that Isdell's three years away from Coke had given him "a wonderful opportunity to see the system without being a part of it".
However, some sceptics feel that Coca-Cola not only missed the chance to get in fresh thinking, but has been seen to have failed in its quest to get the man they really wanted. "I'm not too thrilled with the choice, and most of the investors I've talked to are disappointed," said Robert van Brugge, analyst at Sanford C. Bernstein & Co. "They searched for an outsider and got the consummate insider instead."
Interestingly, another reservation being expressed about Isdell's appointment is that his particular experience in opening up new markets for the company is not the specific type of experience currently required. According to van Brugge, it is in the mature markets, such as the US, Japan and Germany, where the problems lie.
The other chief talking-point regarding the Isdell appointment has been the fact that it has left Steve Heyer, Coke's chief operating officer and assumed by many to be a strong candidate for the top job, out in the cold. Heyer has not commented on the appointment and is thought not surprisingly to be less than happy to have been passed over. Many observers expect the highly able executive to move on and his leaving could precipitate the departure of other senior management. Caroline Levy, analyst at UBS Securities, predicted more executive departures at Coke because Heyer is likely to leave and then "those people loyal to him may look to leave the company as well."
Interestingly, it has already been suggested that one of Isdell's first challenges will be to fill some gaps in the company's management. He may also be looking for a new No. 2 and one or two others to boot. One name which has already been suggested as a possible candidate for a return to Coke is Irial Finan, another Coke veteran who succeeded Isdell as CEO of Coca-Cola Hellenic Bottling Company.
As for Heyer himself? It might be borne in mind that ironically enough Isdell left Coca-Cola having been passed over for the top job. Perhaps the answer for Steve Heyer is to head straight for the beach and wait a few years. Isdell is only five years away from Coke's customary retirement age. Who knows, if history repeats itself, he may yet get his chance.
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