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PepsiCo, aside from boasting a $250 billion market cap, has an ace up its sleeve that few other corporations can claim: The company produces CEOs at an unrivaled pace. In the industry, many call Pepsi a “talent academy.”
“Did you ever notice how many CEOs come from PepsiCo?” Fortune senior writer Phil Wahba asked PepsiCo’s chief human resources officer, Ronald Schellekens, in an exclusive Fortune Connect panel last week. Wahba rattled off a handful of companies currently held by PepsiCo alums: Target, Dick’s Sporting Goods, Ulta Beauty, Petco, Vail Resorts. In fact, there are 16 Fortune 500 CEOs who have some PepsiCo pedigree—third behind McKinsey and General Electric.
Schellekens attributes this to being “a very people-sensitive company,” he said. “We have very little ownership. The belief is very deeply embedded in the company that our leaders make a difference internally and in our industry.”
As a result, company leaders are “super committed” to continuously cultivating great general managers and future CEOs. Clearly, their methods are working—not just with chief executives, but with general managers and finance leaders.
PepsiCo’s strong leadership development program relies on managers’ watchful eye on their direct reports, always rooting around for the highest performers, who earn the untold status of “hi-po,” or high-potential person. (See former CEO Indra Nooyi and current CEO Ramon Laguarta.) Bosses then give those workers challenges and resources—tests to see if they rise to the occasion and benchmarks for eventually landing in C-suite jobs.
This is where Schellekens’ unorthodox approach comes in: He and his fellow PepsiCo executives refer to these high-potential people as corporate assets.
“Basically we [tell managers that] ownership of these great people is being taken away from you. They are not owned by the corporation, or by you as an individual manager,” Schellekens said. The strategy is meant to ensure PepsiCo lets its best people tackle its biggest challenges—while providing them with the best development.
“The fact that we call them corporate assets—their [talents are] owned by the executive committee, and the keys are handed over to the HR function, to steer the assets so they get the best development, and we deploy them [for the] corporation’s biggest challenges,” Schellekens said.
Hi-po, meet “corporate asset”
Schellekens said the “people as assets” approach is well-understood across the vast company’s culture. He should know; he spent nearly a decade at PepsiCo before leaving to lead HR at Royal Dutch Shell and Vodafone, two of the largest European businesses, before boomeranging back to Pepsi in 2018.
He acknowledged that people may not like the approach, especially when executives start pulling assets aside to work on major company issues. But managers understand that they don’t own people anymore—and they trust that executives will staff the assets on the most fitting projects.
A prime example of the company’s insistence on maintaining its “talent academy” reputation: PepsiCo never has—and Schellekens said it never will—waver on its commitment to hiring 2,000 graduates in the U.S. each year.
“We need to do this, because otherwise we’re not building the pipeline,” he said. “That requires, I think, a kind of institutionalized culture where we say okay, this is the belief of the company. This is how we build leaders for the future.”
It’s in everyone’s best interest—workers and managers—to work at a company that values its employees and is committed to growth. Further, cultivating existing talent should be a greater investment than “fit-for-purpose” hiring, he said.
“We don’t like it when people leave our company and become CHRO or CEO of another company, but they always leave us for much bigger jobs. Very rarely does someone leave us for a lateral [position],” Schellekens said. “They always make a big jump.”
Despite the potentially polarizing move to refer to people as assets, Schellekens nonetheless thinks it’s good practice to always be assessing workers’ potential, unashamedly. “It’s a little bit elitist to say, although we love all of our people, we love, let’s say, 20% of our population more because these people have more value and future value for the company. And therefore we invest in this proportion,” he acknowledged.
To balance that out, he said, PepsiCo has built a culture where upward mobility is not a given—even for the highest achieving workers. Still, his commitment to advancement resonates among PepsiCo workers.
“We have a large cadre of people who have been here for 20 or 30 years,” he told Wahba. That’s because, he believes, the company tries to build a career proposition for 80% of its population to receive a promotion. If that figure wavers, he thinks it’s because managers aren’t moving people at the right velocity.
