Deck 14: Leadership

Question 1

Improving Leadership Effectiveness
Form groups of three to five people, and appoint one member as the spokesperson who will communicate your findings and conclusions to the class when called on by the instructor. Then discuss the following scenario:
You are a team of human resource consultants who have been hired by Carla Caruso, an entrepreneur who has started her own interior decorating business. A highly competent and creative interior decorator, Caruso has established a working relationship with most of the major home builders in her community. At first she worked on her own as an independent contractor. Then because of a dramatic increase in the number of new homes being built, she became swamped with requests for her services and decided to start her own company.
She hired a secretary-bookkeeper and four interior decorators, all of whom are highly competent. Caruso still does decorating jobs herself and has adopted a hands-off approach to leading the four decorators who report to her because she feels that interior design is a very personal, creative endeavor. Rather than pay the decorators on some kind of commission basis (such as a percentage of their customers' total billings), she pays them a premium salary, higher than average, so they are motivated to do what's best for a customer's needs and not what will result in higher billings and commissions.
Caruso thought everything was going smoothly until customer complaints started coming in. The complaints ranged from the decorators' being hard to reach, promising unrealistic delivery times, and being late for or failing to keep appointments to their being impatient and rude when customers had trouble making up their minds. Caruso knows her decorators are competent and is concerned that she is not effectively leading and managing them. She wonders, in particular, if her hands-off approach is to blame and if she should change the manner in which she rewards or pays her decorators. She has asked for your advice.
What steps would you advise Caruso to take to increase the decorators' motivation to deliver high-quality customer service?

Answer 1

Motivation is an internal and external factor which stimulate the desire to do some action.
It is very important for the management or the owner to motivate their employees to provide best customer service to their customers. C should establish a structure and a set of goals to target on for the employees to increase the decorator's motivation.
Goals should be established and help them to achieve them by giving their highest possibility to achieve them. She should also show them that she has confidence on her employees that they can meet the targets set by her and achieve success. Bonus system should be introduced, and employees should be rewarded based on the performance.
Therefore, C should take steps to increase the decorators motivation to deliver high quality customer service.

Question 2

Analyzing Failures of Leadership
Think about a situation you are familiar with in which a leader was very ineffective. Then answer the following questions:
What sources of power did this leader have? Did the leader have enough power to influence his or her followers?

Answer 2

Power refers to the ability of the individual to influence the behaviour of others due to the position he or she is in. Sources of power of a leader are those which will help the leader to execute their power.
Sources of power for a leader are classified into legitimate, coercive, reward and expert power. The source of power the manger utilised in our group was coercive power. Coercive power is considered as an ability of the manager to punish their subordinates for not doing a task. These punishments can vary from verbal to dismissal from the job or action.
Yes, the leader has enough coercive power to influence his followers. But the reasons he failed is that coercive power is a very dangerous power as it creates demotivation immediately in the subordinate's minds when it is misused. Coercive power needs to be followed with in the boundary lines made by the management. The effectiveness of the leader can be achieved only when coercive power is used where ever necessary with in the limits of its usage. When this is misused, employees are demotivated and fail to perform their daily activities effectively which will affect the organisational effectiveness.
Therefore, it is very important for the managers to follow any power within its boundaries and make use of it effectively.

Question 3

Analyzing Failures of Leadership
Think about a situation you are familiar with in which a leader was very ineffective. Then answer the following questions:
What steps did this leader take to motivate his or her followers? Were these steps appropriate or inappropriate? Why?

Answer 3

Motivation is the process done by the leader which involves in stimulating the subordinates to achieves the set goals and objectives.
Motivation is a very important tool which the leader has to stimulate their subordinates to complete the tasks. The steps the leader must follow to motivate their subordinates as a task-oriented leader are listed below:
• Leader practising the open communication with their subordinates will motivate them to perform the tasks better.
• Expectations should be well communicated to the subordinates to make sure the targets are clear.
• Guiding the subordinates on what should be followed and done to meet the goals and the targets set.
• Providing support to the subordinates when issues arise in the process of performing the tasks.
• Providing required training for performing better in the tasks allotted.
Yes, these steps are appropriate to motivate the subordinates as these help the subordinates help better and yield good results. The final goal of the team will be fulfilled when leader and subordinates go hand in hand.
Therefore, the steps discussed to motivate the subordinates are appropriate enough.

Question 4

You are the CEO of a medium-size company that makes window coverings similar to Hunter Douglas blinds and Duettes. Your company has a real cost advantage in terms of being able to make custom window coverings at costs that are relatively low in the industry. However, the performance of your company has been lackluster. To make needed changes and improve performance, you met with the eight other top managers in your company and charged them with identifying problems and missed opportunities in each of their areas and coming up with an action plan to address the problems and take advantage of opportunities.
Once you gave the managers the okay, they were charged with implementing their action plans in a timely fashion and monitoring the effects of their initiatives monthly for the next 8 to 12 months.
You approved each of the managers' action plans, and a year later most of the managers were reporting that their initiatives had been successful in addressing the problems and opportunities they had identified a year ago. However, overall company performance continues to be lackluster and shows no signs of improvement. You are confused and starting to question your leadership capabilities and approach to change. What are you going to do to improve the performance and effectiveness of your company?

Question 5

Kraft's Sugar Rush
I rene Rosenfeld hasn't been around Kraft Foods' suburban Chicago headquarters much lately. The door to her wood-paneled office is kept closed. Her desk is bare. Rosenfeld has grabbed her leather folders of meticulously compiled research and is traveling to London and around the United States in Kraft's Gulfstream jet. These trips weren't supposed to be urgent or secretive, but they've become both as Rosenfeld scrambles to reassure shareholders that her surprising $17 billion hostile bid to buy British candy maker Cadbury will be good for them.
Rosenfeld, 56, has led Kraft since 2006 and has worked there for almost her entire professional life. She can be pretty persuasive. Early on she told her bosses that commercials for Kool-Aid should be aimed at kids (not mothers) and that Jell-O could be made modern with new flavors. In the late 1990s she turned around Kraft's business in Canada; troubled as it was when she arrived, the first thing she had to do was show skeptical colleagues that an American could understand Canadian consumers. As chief executive, she has won most employees' cooperation for a wrenching reorganization. "When she is trying to persuade you of something, she will be relentless in coming back with facts and showing you she has the support of other people," says John Bowlin, who ran Kraft North America in the mid-1990s. "She will be totally emotionally and intellectually committed to her idea."
Now Rosenfeld must summon all of her powers as she takes on her biggest marketing challenge yet: selling the Cadbury deal to shareholders. Her task is all the more difficult because she has alienated her biggest shareholder and one of the world's most influential investors, Warren Buffett.
So confident was Rosenfeld of the deal's potential to transform Kraft into a global juggernaut that she told investors on December 18 she planned to issue new stock to help pay for the purchase. The subtext: She might be willing to raise her original $17 billion bid, which Cadbury management had complained was too low. But Buffett didn't like the idea of paying more. On January 5 he issued a press release warning Rosenfeld not to sell more stock or increase her price, even if other bidders emerge. It was an unusually public smackdown for an investor used to operating behind closed doors. Rosenfeld and Buffett declined to comment.
Now, to save the deal, Rosenfeld is traveling the world to placate two groups of shareholders: Kraft's, who are increasingly worried that she'll pay too much, and Cadbury's, who are being told she's offering too little. She has until January 19 to make her final offer and until February 2 to persuade them all. Win or lose, says former Kraft CEO Robert S. Morrison, the Cadbury affair "will be defining for her career."
Kraft is the world's No. 2 food company after Nestlé, selling $42 billion worth of Kraft Macaroni Cheese, Oreos, Oscar Mayer cold cuts, and hundreds of other brands each year. It is the product of two decades of deal making. Philip Morris International, seeking to broaden its reach beyond cigarettes, bought General Foods (which had among its brands Jell-O, Minute Rice, and Kool-Aid) in 1985, succeeded in a hostile takeover of Kraft in 1988, merged the two companies by 1995, and five years later bought Nabisco.
Midnight Brainstorming
During the 1980s General Foods, which was based in Westchester County, New York, had a reputation as an intellectually challenging workplace where debate was encouraged. It was here, in 1981, that Rosenfeld got her start in market research. She had spent most of the previous decade at Cornell University completing an undergraduate degree in psychology, an MBA, and a PhD in marketing and statistics. Her thesis adviser, Vithala R. Rao, recalls that even though she was working and pregnant she was determined to finish her dissertation on how consumers make decisions about purchases. "She knew a PhD would give her an edge in the business world," says Rao. "And her husband was getting one. They were a little competitive."
When Rosenfeld presented her bosses at General Foods with research showing that Kool-Aid should be marketed directly to kids, the pitch won her a job working on the brand full-time. It was an unexpected turn for a researcher. After a presentation at one of her first meetings with Grey Advertising, Rosenfeld was so excited that she applauded. Back then, junior employees were expected to stay silent. "We were all so shocked and amused by her reaction," says Carol Herman, who worked at Grey and remains a close friend of Rosenfeld's.
As Rosenfeld came up through the ranks at General Foods and Kraft-eventually overseeing the Nabisco integration and serving as president of Kraft North America-she developed a reputation as a tough and insistent boss. She would call people with ideas, however big or small, late into the night. Conversations about kids turned into discussions about Kraft products. "I can't tell you how many midnight talks we had about Minute Rice and Stove Top stuffing," says Herman, who worked on various accounts for Kraft through the 1990s. Says James M. Kilts, a former Kraft president who later ran Gillette, "Irene didn't need a lot of advice. That's why I liked her. She was giving me the right answers." Yet her intensity and self-confidence didn't always endear her to colleagues. One former executive recalls a time when Rosenfeld provided helpful insight into a business she had once managed. When the executive offered to return the favor, Rosenfeld took a pass.
In 2001 Rosenfeld suffered her first big professional setback when a contemporary, Betsy D. Holden, was appointed co-chief executive alongside Roger Deromedi. Rosenfeld stayed on almost two more years, then left to join Frito-Lay, a Kraft rival more global in its outlook and more local in its decision making. "Irene thought about the marketing agenda and innovation much more aggressively" than the company was used to, says Indra Nooyi, the CEO of PepsiCo, which owns Frito-Lay. "She was fearless in what she did."
"Rewire for Growth"
Rosenfeld gave every impression that she was committed to Frito-Lay for the long term. But when Kraft asked her to return as CEO in June 2006, she jumped. The dual leader experiment had failed; Kraft was faltering amid high commodity prices, increasing competition from private labels, and a misplaced focus on cost-cutting. She told Kraft's nearly 100,000 employees that the company had lost its heart and soul and needed to "rewire for growth." In a speech at Cornell in 2007, Rosenfeld described her return to Kraft. "The staff was tired, raw, disillusioned," she told the audience. "My slogan was, 'let's get growing.' It's not a warm and fuzzy strategy." She replaced half of her executive team and half of those in the next two levels down. She reorganized the structure of the company, changed how people receive their bonuses, and told everyone "to stop apologizing for our categories and make them more relevant." She concluded her talk, "Sometimes I lie awake thinking, 'Should we?' And then I think, 'How can we not?'"
Rosenfeld wasn't alone in wanting change-activist investor Nelson Peltz was demanding it. She learned that engagement and conciliation were the best ways to handle powerful dissenters. When Peltz pushed her to sell some brands, she did, unloading Veryfine fruit juice and Post cereals. And when she asked him not to purchase more than 10% of the company, he agreed.
Peltz was also a big investor in Cadbury Schweppes, and he persuaded the British food giant to sell its soft drink division in 2008 and become purely a candy company. That would set the stage for Rosenfeld's eventual hostile takeover bid and provide Cadbury its philosophical defense: It didn't want to lose focus on its core business by becoming part of a conglomerate.
As the Great Recession took hold, Kraft should have thrived. But even though consumers ate at home more often and ingredient prices fell, the company was forced to cut prices to compete with private label products. Kraft stock, which went public at $31 a share in 2001, fell as low as $21 last March. (It has been hovering at about $29 this year.) The company introduced items such as Bagelfuls, bagels stuffed with Philadelphia cream cheese. The products did well, but not well enough to have a major impact. Rosenfeld also devoted considerable resources to creating premium toppings for Kraft's DiGiorno frozen pizza and frequently pointed to the brand's success.
With the recession abating, Rosenfeld started thinking of ways to transform the company. "She wanted to capture the imagination of the world about what Kraft could be," says Shelly Lazarus, chairperson of ad agency Ogilvy Mather Worldwide, which works with Kraft. Rosenfeld began studying the possibility of buying Cadbury, which sells Trident gum and chocolate in 60 countries and has sales of about $8 billion. It's a fast-growing global business with high profit margins.
Eventually she fixed on a price, and in early August decided to approach Cadbury Chairman Roger Carr with an offer. On August 28 she met with Carr in London to lay out her plan. "She was brisk, efficient, delivered her proposal and left quite quickly," says Carr. The two haven't spoken since, he says.
They have, however, exchanged a few letters. In the first, which Carr sent to Rosenfeld the next week, he called the offer "derisory." Then on Labor Day, Rosenfeld announced Kraft's bid in a news release on the corporate Web site, hoping to win over shareholders directly. She spoke to several British newspapers about her admiration for Cadbury and the great promise of a merger. In a video interview posted on the Kraft site, she expressed her enthusiasm for Cadbury's products in a way only a marketer could appreciate: "I am a heavy, heavy user of Trident gum and, on a seasonal basis, I love those Cadbury eggs." But after receiving no encouragement from the candy maker, Rosenfeld launched a hostile bid on November 9. "We believe that our proposal offers the best immediate and long-term value for Cadbury's shareholders and for the company itself compared with any other option currently available, including Cadbury remaining independent," she wrote in the formal offer.
Meanwhile Rosenfeld was juggling another deal that would determine how much Kraft could spend for Cadbury. In early 2009 Nestlé made a surprise offer to buy DiGiorno and the rest of Kraft's pizza business. Rosenfeld concluded that selling the unit made sense: Frozen pizza wouldn't do well outside of North America, and within the company it was an isolated brand. Next she had to persuade the board. "It was a difficult decision. But once we got our heads around the strategic and financial rationale for the deal, it became clear," says Perry Yeatman, a Kraft spokes-woman. Closing the sale proved difficult; it wasn't until January 5 that Kraft announced it would sell the pizza business to Nestlé for $3.7 billion. Some investors thought the price was too low. But the deal would give Rosenfeld the cash she'd need to pursue Cadbury. And there was another benefit: Nestlé, Kraft's main rival for Cadbury, said it wouldn't bid.
Whatever sense of relief Rosenfeld might have felt didn't last long. On the same day, Buffett went public with his concerns, calling Rosenfeld's proposal to issue more shares a "blank check." He noted that while the company had bought back shares at a price of $33 apiece in 2007, it would be selling the new shares for the Cadbury transaction for far less. He did say, though, that he would support an offer that "does not destroy value for Kraft shareholders." Other investors share Buffett's skepticism. "What is she wasting our money for?" asks John Kornitzer, founder of Kornitzer Capital Management in Shawnee Mission, Kansas. "To chase after these guys is ridiculous." Alice Schroeder, a former Wall Street analyst and author of a biography of Buffett who also writes a column for Bloomberg News, says even if Rosenfeld had consulted with Buffett it might serve his purposes to take a public stand. He can take credit for reining her in and defending shareholders. "No matter how this turns out, Warren looks great," she says.
Rosenfeld, however, is under attack from all sides. On January 12 Carr released a stinging "defense document" on Cadbury's Web site, saying "the bid is even more unattractive today than it was when Kraft made its formal offer." Kraft called the argument "underwhelming." Carr responds, "I think the clarity with which we reviewed Kraft's own record must have been disturbing for them and illuminating for our shareholders."
Kraft shareholders will vote on whether to issue more stock on February 1; the next day Cadbury stockholders will vote on the offer. Rosenfeld spent January 12 with Cadbury investors in the United States before jetting to London to talk with Cadbury shareholders there. Some refused her visit, says Carr. While Rosenfeld remains determined to make Kraft bigger and more global, finding a price for Cadbury that works for everyone might be impossible. "Rosenfeld has made it clear that she's disciplined, that she won't overpay," says Donald Yacktman, president of Yacktman Asset Management, a longtime investor. "I guess we'll find out how much she really means what she says."
Do you think Rosenfeld is a transformational leader? If so, in what ways has she been a transformational leader? If not, why not?
Source: S. Berfield and M. Arndt, "Kraft's Sugar Rush," http://www.businessweek.com/magazine/content/10_04/b4164036495789.htm, January 14, 2010. Reprinted from January 14, 2010 issue of Bloomberg Businessweek by special permission, copyright © 2010 by Bloomberg L.P.

Question 6

Kraft's Sugar Rush
I rene Rosenfeld hasn't been around Kraft Foods' suburban Chicago headquarters much lately. The door to her wood-paneled office is kept closed. Her desk is bare. Rosenfeld has grabbed her leather folders of meticulously compiled research and is traveling to London and around the United States in Kraft's Gulfstream jet. These trips weren't supposed to be urgent or secretive, but they've become both as Rosenfeld scrambles to reassure shareholders that her surprising $17 billion hostile bid to buy British candy maker Cadbury will be good for them.
Rosenfeld, 56, has led Kraft since 2006 and has worked there for almost her entire professional life. She can be pretty persuasive. Early on she told her bosses that commercials for Kool-Aid should be aimed at kids (not mothers) and that Jell-O could be made modern with new flavors. In the late 1990s she turned around Kraft's business in Canada; troubled as it was when she arrived, the first thing she had to do was show skeptical colleagues that an American could understand Canadian consumers. As chief executive, she has won most employees' cooperation for a wrenching reorganization. "When she is trying to persuade you of something, she will be relentless in coming back with facts and showing you she has the support of other people," says John Bowlin, who ran Kraft North America in the mid-1990s. "She will be totally emotionally and intellectually committed to her idea."
Now Rosenfeld must summon all of her powers as she takes on her biggest marketing challenge yet: selling the Cadbury deal to shareholders. Her task is all the more difficult because she has alienated her biggest shareholder and one of the world's most influential investors, Warren Buffett.
So confident was Rosenfeld of the deal's potential to transform Kraft into a global juggernaut that she told investors on December 18 she planned to issue new stock to help pay for the purchase. The subtext: She might be willing to raise her original $17 billion bid, which Cadbury management had complained was too low. But Buffett didn't like the idea of paying more. On January 5 he issued a press release warning Rosenfeld not to sell more stock or increase her price, even if other bidders emerge. It was an unusually public smackdown for an investor used to operating behind closed doors. Rosenfeld and Buffett declined to comment.
Now, to save the deal, Rosenfeld is traveling the world to placate two groups of shareholders: Kraft's, who are increasingly worried that she'll pay too much, and Cadbury's, who are being told she's offering too little. She has until January 19 to make her final offer and until February 2 to persuade them all. Win or lose, says former Kraft CEO Robert S. Morrison, the Cadbury affair "will be defining for her career."
Kraft is the world's No. 2 food company after Nestlé, selling $42 billion worth of Kraft Macaroni Cheese, Oreos, Oscar Mayer cold cuts, and hundreds of other brands each year. It is the product of two decades of deal making. Philip Morris International, seeking to broaden its reach beyond cigarettes, bought General Foods (which had among its brands Jell-O, Minute Rice, and Kool-Aid) in 1985, succeeded in a hostile takeover of Kraft in 1988, merged the two companies by 1995, and five years later bought Nabisco.
Midnight Brainstorming
During the 1980s General Foods, which was based in Westchester County, New York, had a reputation as an intellectually challenging workplace where debate was encouraged. It was here, in 1981, that Rosenfeld got her start in market research. She had spent most of the previous decade at Cornell University completing an undergraduate degree in psychology, an MBA, and a PhD in marketing and statistics. Her thesis adviser, Vithala R. Rao, recalls that even though she was working and pregnant she was determined to finish her dissertation on how consumers make decisions about purchases. "She knew a PhD would give her an edge in the business world," says Rao. "And her husband was getting one. They were a little competitive."
When Rosenfeld presented her bosses at General Foods with research showing that Kool-Aid should be marketed directly to kids, the pitch won her a job working on the brand full-time. It was an unexpected turn for a researcher. After a presentation at one of her first meetings with Grey Advertising, Rosenfeld was so excited that she applauded. Back then, junior employees were expected to stay silent. "We were all so shocked and amused by her reaction," says Carol Herman, who worked at Grey and remains a close friend of Rosenfeld's.
As Rosenfeld came up through the ranks at General Foods and Kraft-eventually overseeing the Nabisco integration and serving as president of Kraft North America-she developed a reputation as a tough and insistent boss. She would call people with ideas, however big or small, late into the night. Conversations about kids turned into discussions about Kraft products. "I can't tell you how many midnight talks we had about Minute Rice and Stove Top stuffing," says Herman, who worked on various accounts for Kraft through the 1990s. Says James M. Kilts, a former Kraft president who later ran Gillette, "Irene didn't need a lot of advice. That's why I liked her. She was giving me the right answers." Yet her intensity and self-confidence didn't always endear her to colleagues. One former executive recalls a time when Rosenfeld provided helpful insight into a business she had once managed. When the executive offered to return the favor, Rosenfeld took a pass.
In 2001 Rosenfeld suffered her first big professional setback when a contemporary, Betsy D. Holden, was appointed co-chief executive alongside Roger Deromedi. Rosenfeld stayed on almost two more years, then left to join Frito-Lay, a Kraft rival more global in its outlook and more local in its decision making. "Irene thought about the marketing agenda and innovation much more aggressively" than the company was used to, says Indra Nooyi, the CEO of PepsiCo, which owns Frito-Lay. "She was fearless in what she did."
"Rewire for Growth"
Rosenfeld gave every impression that she was committed to Frito-Lay for the long term. But when Kraft asked her to return as CEO in June 2006, she jumped. The dual leader experiment had failed; Kraft was faltering amid high commodity prices, increasing competition from private labels, and a misplaced focus on cost-cutting. She told Kraft's nearly 100,000 employees that the company had lost its heart and soul and needed to "rewire for growth." In a speech at Cornell in 2007, Rosenfeld described her return to Kraft. "The staff was tired, raw, disillusioned," she told the audience. "My slogan was, 'let's get growing.' It's not a warm and fuzzy strategy." She replaced half of her executive team and half of those in the next two levels down. She reorganized the structure of the company, changed how people receive their bonuses, and told everyone "to stop apologizing for our categories and make them more relevant." She concluded her talk, "Sometimes I lie awake thinking, 'Should we?' And then I think, 'How can we not?'"
Rosenfeld wasn't alone in wanting change-activist investor Nelson Peltz was demanding it. She learned that engagement and conciliation were the best ways to handle powerful dissenters. When Peltz pushed her to sell some brands, she did, unloading Veryfine fruit juice and Post cereals. And when she asked him not to purchase more than 10% of the company, he agreed.
Peltz was also a big investor in Cadbury Schweppes, and he persuaded the British food giant to sell its soft drink division in 2008 and become purely a candy company. That would set the stage for Rosenfeld's eventual hostile takeover bid and provide Cadbury its philosophical defense: It didn't want to lose focus on its core business by becoming part of a conglomerate.
As the Great Recession took hold, Kraft should have thrived. But even though consumers ate at home more often and ingredient prices fell, the company was forced to cut prices to compete with private label products. Kraft stock, which went public at $31 a share in 2001, fell as low as $21 last March. (It has been hovering at about $29 this year.) The company introduced items such as Bagelfuls, bagels stuffed with Philadelphia cream cheese. The products did well, but not well enough to have a major impact. Rosenfeld also devoted considerable resources to creating premium toppings for Kraft's DiGiorno frozen pizza and frequently pointed to the brand's success.
With the recession abating, Rosenfeld started thinking of ways to transform the company. "She wanted to capture the imagination of the world about what Kraft could be," says Shelly Lazarus, chairperson of ad agency Ogilvy Mather Worldwide, which works with Kraft. Rosenfeld began studying the possibility of buying Cadbury, which sells Trident gum and chocolate in 60 countries and has sales of about $8 billion. It's a fast-growing global business with high profit margins.
Eventually she fixed on a price, and in early August decided to approach Cadbury Chairman Roger Carr with an offer. On August 28 she met with Carr in London to lay out her plan. "She was brisk, efficient, delivered her proposal and left quite quickly," says Carr. The two haven't spoken since, he says.
They have, however, exchanged a few letters. In the first, which Carr sent to Rosenfeld the next week, he called the offer "derisory." Then on Labor Day, Rosenfeld announced Kraft's bid in a news release on the corporate Web site, hoping to win over shareholders directly. She spoke to several British newspapers about her admiration for Cadbury and the great promise of a merger. In a video interview posted on the Kraft site, she expressed her enthusiasm for Cadbury's products in a way only a marketer could appreciate: "I am a heavy, heavy user of Trident gum and, on a seasonal basis, I love those Cadbury eggs." But after receiving no encouragement from the candy maker, Rosenfeld launched a hostile bid on November 9. "We believe that our proposal offers the best immediate and long-term value for Cadbury's shareholders and for the company itself compared with any other option currently available, including Cadbury remaining independent," she wrote in the formal offer.
Meanwhile Rosenfeld was juggling another deal that would determine how much Kraft could spend for Cadbury. In early 2009 Nestlé made a surprise offer to buy DiGiorno and the rest of Kraft's pizza business. Rosenfeld concluded that selling the unit made sense: Frozen pizza wouldn't do well outside of North America, and within the company it was an isolated brand. Next she had to persuade the board. "It was a difficult decision. But once we got our heads around the strategic and financial rationale for the deal, it became clear," says Perry Yeatman, a Kraft spokes-woman. Closing the sale proved difficult; it wasn't until January 5 that Kraft announced it would sell the pizza business to Nestlé for $3.7 billion. Some investors thought the price was too low. But the deal would give Rosenfeld the cash she'd need to pursue Cadbury. And there was another benefit: Nestlé, Kraft's main rival for Cadbury, said it wouldn't bid.
Whatever sense of relief Rosenfeld might have felt didn't last long. On the same day, Buffett went public with his concerns, calling Rosenfeld's proposal to issue more shares a "blank check." He noted that while the company had bought back shares at a price of $33 apiece in 2007, it would be selling the new shares for the Cadbury transaction for far less. He did say, though, that he would support an offer that "does not destroy value for Kraft shareholders." Other investors share Buffett's skepticism. "What is she wasting our money for?" asks John Kornitzer, founder of Kornitzer Capital Management in Shawnee Mission, Kansas. "To chase after these guys is ridiculous." Alice Schroeder, a former Wall Street analyst and author of a biography of Buffett who also writes a column for Bloomberg News, says even if Rosenfeld had consulted with Buffett it might serve his purposes to take a public stand. He can take credit for reining her in and defending shareholders. "No matter how this turns out, Warren looks great," she says.
Rosenfeld, however, is under attack from all sides. On January 12 Carr released a stinging "defense document" on Cadbury's Web site, saying "the bid is even more unattractive today than it was when Kraft made its formal offer." Kraft called the argument "underwhelming." Carr responds, "I think the clarity with which we reviewed Kraft's own record must have been disturbing for them and illuminating for our shareholders."
Kraft shareholders will vote on whether to issue more stock on February 1; the next day Cadbury stockholders will vote on the offer. Rosenfeld spent January 12 with Cadbury investors in the United States before jetting to London to talk with Cadbury shareholders there. Some refused her visit, says Carr. While Rosenfeld remains determined to make Kraft bigger and more global, finding a price for Cadbury that works for everyone might be impossible. "Rosenfeld has made it clear that she's disciplined, that she won't overpay," says Donald Yacktman, president of Yacktman Asset Management, a longtime investor. "I guess we'll find out how much she really means what she says."
How would you describe the personal leadership style of Irene Rosenfeld?

Question 7

Discuss why managers might want to change the behaviors they engage in, given their situation, their subordinates, and the nature of the work being done. Do you think managers can readily change their leadership behaviors? Why or why not?

Question 8

Go to the website of the Center for Creative Leadership( www.ccl.org ). Spend some time browsing through the site to learn more about this organization, which specializes in leadership. Then click on "Customized Services" and then Coaching Services." Read about the different coaching programs and options the center provides. How do you think leaders might benefit from coaching? What kinds of leaders/managers may find coaching especially beneficial? Do you think coaching services such as those provided by the Center for Creative Leadership can help leaders become more effective? Why or why not?

Question 9

Improving Leadership Effectiveness
Form groups of three to five people, and appoint one member as the spokesperson who will communicate your findings and conclusions to the class when called on by the instructor. Then discuss the following scenario:
You are a team of human resource consultants who have been hired by Carla Caruso, an entrepreneur who has started her own interior decorating business. A highly competent and creative interior decorator, Caruso has established a working relationship with most of the major home builders in her community. At first she worked on her own as an independent contractor. Then because of a dramatic increase in the number of new homes being built, she became swamped with requests for her services and decided to start her own company.
She hired a secretary-bookkeeper and four interior decorators, all of whom are highly competent. Caruso still does decorating jobs herself and has adopted a hands-off approach to leading the four decorators who report to her because she feels that interior design is a very personal, creative endeavor. Rather than pay the decorators on some kind of commission basis (such as a percentage of their customers' total billings), she pays them a premium salary, higher than average, so they are motivated to do what's best for a customer's needs and not what will result in higher billings and commissions.
Caruso thought everything was going smoothly until customer complaints started coming in. The complaints ranged from the decorators' being hard to reach, promising unrealistic delivery times, and being late for or failing to keep appointments to their being impatient and rude when customers had trouble making up their minds. Caruso knows her decorators are competent and is concerned that she is not effectively leading and managing them. She wonders, in particular, if her hands-off approach is to blame and if she should change the manner in which she rewards or pays her decorators. She has asked for your advice.
Would you advise Caruso to try to engage in transformational leadership in this situation? If not, why not? If so, what steps would you advise her to take?

Question 10

Describe the steps managers can take to increase their power and ability to be effective leaders.

Question 11

Analyzing Failures of Leadership
Think about a situation you are familiar with in which a leader was very ineffective. Then answer the following questions:
What signs, if any, did this leader show of being a transformational leader?

Question 12

M anagers who verbally criticize their subordinates, put them down in front of their coworkers, or use the threat of job loss to influence behavior are exercising coercive power. Some employees subject to coercive power believe that using it is unethical.
Either alone or in a group, think about the ethical implications of the use of coercive power.

Question 13

Discuss why substitutes for leadership can contribute to organizational effectiveness.

Question 14

Improving Leadership Effectiveness
Form groups of three to five people, and appoint one member as the spokesperson who will communicate your findings and conclusions to the class when called on by the instructor. Then discuss the following scenario:
You are a team of human resource consultants who have been hired by Carla Caruso, an entrepreneur who has started her own interior decorating business. A highly competent and creative interior decorator, Caruso has established a working relationship with most of the major home builders in her community. At first she worked on her own as an independent contractor. Then because of a dramatic increase in the number of new homes being built, she became swamped with requests for her services and decided to start her own company.
She hired a secretary-bookkeeper and four interior decorators, all of whom are highly competent. Caruso still does decorating jobs herself and has adopted a hands-off approach to leading the four decorators who report to her because she feels that interior design is a very personal, creative endeavor. Rather than pay the decorators on some kind of commission basis (such as a percentage of their customers' total billings), she pays them a premium salary, higher than average, so they are motivated to do what's best for a customer's needs and not what will result in higher billings and commissions.
Caruso thought everything was going smoothly until customer complaints started coming in. The complaints ranged from the decorators' being hard to reach, promising unrealistic delivery times, and being late for or failing to keep appointments to their being impatient and rude when customers had trouble making up their minds. Caruso knows her decorators are competent and is concerned that she is not effectively leading and managing them. She wonders, in particular, if her hands-off approach is to blame and if she should change the manner in which she rewards or pays her decorators. She has asked for your advice.
Analyze the sources of power that Caruso has available to her to influence the decorators. What advice can you give her to either increase her power base or use her existing power more effectively?

Question 15

Describe what transformational leadership is, and explain how managers can engage in it.

Question 16

Analyzing Failures of Leadership
Think about a situation you are familiar with in which a leader was very ineffective. Then answer the following questions:
What kinds of behaviors did this leader engage in? Were they appropriate for the situation? Why or why not?

Question 17

Discuss why some people still think that men make better managers than women even though research indicated that men and women are equally effective as managers and leaders.

Question 18

Kraft's Sugar Rush
I rene Rosenfeld hasn't been around Kraft Foods' suburban Chicago headquarters much lately. The door to her wood-paneled office is kept closed. Her desk is bare. Rosenfeld has grabbed her leather folders of meticulously compiled research and is traveling to London and around the United States in Kraft's Gulfstream jet. These trips weren't supposed to be urgent or secretive, but they've become both as Rosenfeld scrambles to reassure shareholders that her surprising $17 billion hostile bid to buy British candy maker Cadbury will be good for them.
Rosenfeld, 56, has led Kraft since 2006 and has worked there for almost her entire professional life. She can be pretty persuasive. Early on she told her bosses that commercials for Kool-Aid should be aimed at kids (not mothers) and that Jell-O could be made modern with new flavors. In the late 1990s she turned around Kraft's business in Canada; troubled as it was when she arrived, the first thing she had to do was show skeptical colleagues that an American could understand Canadian consumers. As chief executive, she has won most employees' cooperation for a wrenching reorganization. "When she is trying to persuade you of something, she will be relentless in coming back with facts and showing you she has the support of other people," says John Bowlin, who ran Kraft North America in the mid-1990s. "She will be totally emotionally and intellectually committed to her idea."
Now Rosenfeld must summon all of her powers as she takes on her biggest marketing challenge yet: selling the Cadbury deal to shareholders. Her task is all the more difficult because she has alienated her biggest shareholder and one of the world's most influential investors, Warren Buffett.
So confident was Rosenfeld of the deal's potential to transform Kraft into a global juggernaut that she told investors on December 18 she planned to issue new stock to help pay for the purchase. The subtext: She might be willing to raise her original $17 billion bid, which Cadbury management had complained was too low. But Buffett didn't like the idea of paying more. On January 5 he issued a press release warning Rosenfeld not to sell more stock or increase her price, even if other bidders emerge. It was an unusually public smackdown for an investor used to operating behind closed doors. Rosenfeld and Buffett declined to comment.
Now, to save the deal, Rosenfeld is traveling the world to placate two groups of shareholders: Kraft's, who are increasingly worried that she'll pay too much, and Cadbury's, who are being told she's offering too little. She has until January 19 to make her final offer and until February 2 to persuade them all. Win or lose, says former Kraft CEO Robert S. Morrison, the Cadbury affair "will be defining for her career."
Kraft is the world's No. 2 food company after Nestlé, selling $42 billion worth of Kraft Macaroni Cheese, Oreos, Oscar Mayer cold cuts, and hundreds of other brands each year. It is the product of two decades of deal making. Philip Morris International, seeking to broaden its reach beyond cigarettes, bought General Foods (which had among its brands Jell-O, Minute Rice, and Kool-Aid) in 1985, succeeded in a hostile takeover of Kraft in 1988, merged the two companies by 1995, and five years later bought Nabisco.
Midnight Brainstorming
During the 1980s General Foods, which was based in Westchester County, New York, had a reputation as an intellectually challenging workplace where debate was encouraged. It was here, in 1981, that Rosenfeld got her start in market research. She had spent most of the previous decade at Cornell University completing an undergraduate degree in psychology, an MBA, and a PhD in marketing and statistics. Her thesis adviser, Vithala R. Rao, recalls that even though she was working and pregnant she was determined to finish her dissertation on how consumers make decisions about purchases. "She knew a PhD would give her an edge in the business world," says Rao. "And her husband was getting one. They were a little competitive."
When Rosenfeld presented her bosses at General Foods with research showing that Kool-Aid should be marketed directly to kids, the pitch won her a job working on the brand full-time. It was an unexpected turn for a researcher. After a presentation at one of her first meetings with Grey Advertising, Rosenfeld was so excited that she applauded. Back then, junior employees were expected to stay silent. "We were all so shocked and amused by her reaction," says Carol Herman, who worked at Grey and remains a close friend of Rosenfeld's.
As Rosenfeld came up through the ranks at General Foods and Kraft-eventually overseeing the Nabisco integration and serving as president of Kraft North America-she developed a reputation as a tough and insistent boss. She would call people with ideas, however big or small, late into the night. Conversations about kids turned into discussions about Kraft products. "I can't tell you how many midnight talks we had about Minute Rice and Stove Top stuffing," says Herman, who worked on various accounts for Kraft through the 1990s. Says James M. Kilts, a former Kraft president who later ran Gillette, "Irene didn't need a lot of advice. That's why I liked her. She was giving me the right answers." Yet her intensity and self-confidence didn't always endear her to colleagues. One former executive recalls a time when Rosenfeld provided helpful insight into a business she had once managed. When the executive offered to return the favor, Rosenfeld took a pass.
In 2001 Rosenfeld suffered her first big professional setback when a contemporary, Betsy D. Holden, was appointed co-chief executive alongside Roger Deromedi. Rosenfeld stayed on almost two more years, then left to join Frito-Lay, a Kraft rival more global in its outlook and more local in its decision making. "Irene thought about the marketing agenda and innovation much more aggressively" than the company was used to, says Indra Nooyi, the CEO of PepsiCo, which owns Frito-Lay. "She was fearless in what she did."
"Rewire for Growth"
Rosenfeld gave every impression that she was committed to Frito-Lay for the long term. But when Kraft asked her to return as CEO in June 2006, she jumped. The dual leader experiment had failed; Kraft was faltering amid high commodity prices, increasing competition from private labels, and a misplaced focus on cost-cutting. She told Kraft's nearly 100,000 employees that the company had lost its heart and soul and needed to "rewire for growth." In a speech at Cornell in 2007, Rosenfeld described her return to Kraft. "The staff was tired, raw, disillusioned," she told the audience. "My slogan was, 'let's get growing.' It's not a warm and fuzzy strategy." She replaced half of her executive team and half of those in the next two levels down. She reorganized the structure of the company, changed how people receive their bonuses, and told everyone "to stop apologizing for our categories and make them more relevant." She concluded her talk, "Sometimes I lie awake thinking, 'Should we?' And then I think, 'How can we not?'"
Rosenfeld wasn't alone in wanting change-activist investor Nelson Peltz was demanding it. She learned that engagement and conciliation were the best ways to handle powerful dissenters. When Peltz pushed her to sell some brands, she did, unloading Veryfine fruit juice and Post cereals. And when she asked him not to purchase more than 10% of the company, he agreed.
Peltz was also a big investor in Cadbury Schweppes, and he persuaded the British food giant to sell its soft drink division in 2008 and become purely a candy company. That would set the stage for Rosenfeld's eventual hostile takeover bid and provide Cadbury its philosophical defense: It didn't want to lose focus on its core business by becoming part of a conglomerate.
As the Great Recession took hold, Kraft should have thrived. But even though consumers ate at home more often and ingredient prices fell, the company was forced to cut prices to compete with private label products. Kraft stock, which went public at $31 a share in 2001, fell as low as $21 last March. (It has been hovering at about $29 this year.) The company introduced items such as Bagelfuls, bagels stuffed with Philadelphia cream cheese. The products did well, but not well enough to have a major impact. Rosenfeld also devoted considerable resources to creating premium toppings for Kraft's DiGiorno frozen pizza and frequently pointed to the brand's success.
With the recession abating, Rosenfeld started thinking of ways to transform the company. "She wanted to capture the imagination of the world about what Kraft could be," says Shelly Lazarus, chairperson of ad agency Ogilvy Mather Worldwide, which works with Kraft. Rosenfeld began studying the possibility of buying Cadbury, which sells Trident gum and chocolate in 60 countries and has sales of about $8 billion. It's a fast-growing global business with high profit margins.
Eventually she fixed on a price, and in early August decided to approach Cadbury Chairman Roger Carr with an offer. On August 28 she met with Carr in London to lay out her plan. "She was brisk, efficient, delivered her proposal and left quite quickly," says Carr. The two haven't spoken since, he says.
They have, however, exchanged a few letters. In the first, which Carr sent to Rosenfeld the next week, he called the offer "derisory." Then on Labor Day, Rosenfeld announced Kraft's bid in a news release on the corporate Web site, hoping to win over shareholders directly. She spoke to several British newspapers about her admiration for Cadbury and the great promise of a merger. In a video interview posted on the Kraft site, she expressed her enthusiasm for Cadbury's products in a way only a marketer could appreciate: "I am a heavy, heavy user of Trident gum and, on a seasonal basis, I love those Cadbury eggs." But after receiving no encouragement from the candy maker, Rosenfeld launched a hostile bid on November 9. "We believe that our proposal offers the best immediate and long-term value for Cadbury's shareholders and for the company itself compared with any other option currently available, including Cadbury remaining independent," she wrote in the formal offer.
Meanwhile Rosenfeld was juggling another deal that would determine how much Kraft could spend for Cadbury. In early 2009 Nestlé made a surprise offer to buy DiGiorno and the rest of Kraft's pizza business. Rosenfeld concluded that selling the unit made sense: Frozen pizza wouldn't do well outside of North America, and within the company it was an isolated brand. Next she had to persuade the board. "It was a difficult decision. But once we got our heads around the strategic and financial rationale for the deal, it became clear," says Perry Yeatman, a Kraft spokes-woman. Closing the sale proved difficult; it wasn't until January 5 that Kraft announced it would sell the pizza business to Nestlé for $3.7 billion. Some investors thought the price was too low. But the deal would give Rosenfeld the cash she'd need to pursue Cadbury. And there was another benefit: Nestlé, Kraft's main rival for Cadbury, said it wouldn't bid.
Whatever sense of relief Rosenfeld might have felt didn't last long. On the same day, Buffett went public with his concerns, calling Rosenfeld's proposal to issue more shares a "blank check." He noted that while the company had bought back shares at a price of $33 apiece in 2007, it would be selling the new shares for the Cadbury transaction for far less. He did say, though, that he would support an offer that "does not destroy value for Kraft shareholders." Other investors share Buffett's skepticism. "What is she wasting our money for?" asks John Kornitzer, founder of Kornitzer Capital Management in Shawnee Mission, Kansas. "To chase after these guys is ridiculous." Alice Schroeder, a former Wall Street analyst and author of a biography of Buffett who also writes a column for Bloomberg News, says even if Rosenfeld had consulted with Buffett it might serve his purposes to take a public stand. He can take credit for reining her in and defending shareholders. "No matter how this turns out, Warren looks great," she says.
Rosenfeld, however, is under attack from all sides. On January 12 Carr released a stinging "defense document" on Cadbury's Web site, saying "the bid is even more unattractive today than it was when Kraft made its formal offer." Kraft called the argument "underwhelming." Carr responds, "I think the clarity with which we reviewed Kraft's own record must have been disturbing for them and illuminating for our shareholders."
Kraft shareholders will vote on whether to issue more stock on February 1; the next day Cadbury stockholders will vote on the offer. Rosenfeld spent January 12 with Cadbury investors in the United States before jetting to London to talk with Cadbury shareholders there. Some refused her visit, says Carr. While Rosenfeld remains determined to make Kraft bigger and more global, finding a price for Cadbury that works for everyone might be impossible. "Rosenfeld has made it clear that she's disciplined, that she won't overpay," says Donald Yacktman, president of Yacktman Asset Management, a longtime investor. "I guess we'll find out how much she really means what she says."
What are Rosenfeld's sources of power?

Question 19

Imagine that you are working in an organization in an entry level position after graduation and have come up with what you think is a great idea for improving a critical process in the organization that relates to your job. In what ways might your supervisor encourage you to implement your idea? How might your supervisor discourage you from even sharing your idea with others?

Question 20

Think of specific situations in which it might be especially important for a manager to engage in consideration and in initiating structure.

Question 21

Interview an actual manager to find out how the three situational characteristics that Fiedler identified affect his or her ability to provide leadership.

Question 22

M anagers who verbally criticize their subordinates, put them down in front of their coworkers, or use the threat of job loss to influence behavior are exercising coercive power. Some employees subject to coercive power believe that using it is unethical.
To what extent do managers and organizations have an ethical obligation to put limits on the amount of coercive power that is exercised?

Question 23

Find a company that has dramatically turned around its fortunes and improved its performance. Determine whether a transformational manager was behind the turnaround and, if one was, what this manager did.

Question 24

Improving Leadership Effectiveness
Form groups of three to five people, and appoint one member as the spokesperson who will communicate your findings and conclusions to the class when called on by the instructor. Then discuss the following scenario:
You are a team of human resource consultants who have been hired by Carla Caruso, an entrepreneur who has started her own interior decorating business. A highly competent and creative interior decorator, Caruso has established a working relationship with most of the major home builders in her community. At first she worked on her own as an independent contractor. Then because of a dramatic increase in the number of new homes being built, she became swamped with requests for her services and decided to start her own company.
She hired a secretary-bookkeeper and four interior decorators, all of whom are highly competent. Caruso still does decorating jobs herself and has adopted a hands-off approach to leading the four decorators who report to her because she feels that interior design is a very personal, creative endeavor. Rather than pay the decorators on some kind of commission basis (such as a percentage of their customers' total billings), she pays them a premium salary, higher than average, so they are motivated to do what's best for a customer's needs and not what will result in higher billings and commissions.
Caruso thought everything was going smoothly until customer complaints started coming in. The complaints ranged from the decorators' being hard to reach, promising unrealistic delivery times, and being late for or failing to keep appointments to their being impatient and rude when customers had trouble making up their minds. Caruso knows her decorators are competent and is concerned that she is not effectively leading and managing them. She wonders, in particular, if her hands-off approach is to blame and if she should change the manner in which she rewards or pays her decorators. She has asked for your advice.
Given what you have learned in this chapter (for example, from the behavior model and path-goal theory), does Caruso seem to be performing appropriate leader behaviors in this situation? What advice can you give her about the kinds of behaviors she should perform?

Question 25

Find an example of a company that has dramatically turned around its fortunes and improved its performance. Determine whether a transformational manager was behind the turnaround and what this manager did.

Question 26

Analyzing Failures of Leadership
Think about a situation you are familiar with in which a leader was very ineffective. Then answer the following questions:
From what you know, do you think this leader was a task-oriented leader or a relationship-oriented leader? How favorable was this leader's situation for leading?

Question 27

Kraft's Sugar Rush
I rene Rosenfeld hasn't been around Kraft Foods' suburban Chicago headquarters much lately. The door to her wood-paneled office is kept closed. Her desk is bare. Rosenfeld has grabbed her leather folders of meticulously compiled research and is traveling to London and around the United States in Kraft's Gulfstream jet. These trips weren't supposed to be urgent or secretive, but they've become both as Rosenfeld scrambles to reassure shareholders that her surprising $17 billion hostile bid to buy British candy maker Cadbury will be good for them.
Rosenfeld, 56, has led Kraft since 2006 and has worked there for almost her entire professional life. She can be pretty persuasive. Early on she told her bosses that commercials for Kool-Aid should be aimed at kids (not mothers) and that Jell-O could be made modern with new flavors. In the late 1990s she turned around Kraft's business in Canada; troubled as it was when she arrived, the first thing she had to do was show skeptical colleagues that an American could understand Canadian consumers. As chief executive, she has won most employees' cooperation for a wrenching reorganization. "When she is trying to persuade you of something, she will be relentless in coming back with facts and showing you she has the support of other people," says John Bowlin, who ran Kraft North America in the mid-1990s. "She will be totally emotionally and intellectually committed to her idea."
Now Rosenfeld must summon all of her powers as she takes on her biggest marketing challenge yet: selling the Cadbury deal to shareholders. Her task is all the more difficult because she has alienated her biggest shareholder and one of the world's most influential investors, Warren Buffett.
So confident was Rosenfeld of the deal's potential to transform Kraft into a global juggernaut that she told investors on December 18 she planned to issue new stock to help pay for the purchase. The subtext: She might be willing to raise her original $17 billion bid, which Cadbury management had complained was too low. But Buffett didn't like the idea of paying more. On January 5 he issued a press release warning Rosenfeld not to sell more stock or increase her price, even if other bidders emerge. It was an unusually public smackdown for an investor used to operating behind closed doors. Rosenfeld and Buffett declined to comment.
Now, to save the deal, Rosenfeld is traveling the world to placate two groups of shareholders: Kraft's, who are increasingly worried that she'll pay too much, and Cadbury's, who are being told she's offering too little. She has until January 19 to make her final offer and until February 2 to persuade them all. Win or lose, says former Kraft CEO Robert S. Morrison, the Cadbury affair "will be defining for her career."
Kraft is the world's No. 2 food company after Nestlé, selling $42 billion worth of Kraft Macaroni Cheese, Oreos, Oscar Mayer cold cuts, and hundreds of other brands each year. It is the product of two decades of deal making. Philip Morris International, seeking to broaden its reach beyond cigarettes, bought General Foods (which had among its brands Jell-O, Minute Rice, and Kool-Aid) in 1985, succeeded in a hostile takeover of Kraft in 1988, merged the two companies by 1995, and five years later bought Nabisco.
Midnight Brainstorming
During the 1980s General Foods, which was based in Westchester County, New York, had a reputation as an intellectually challenging workplace where debate was encouraged. It was here, in 1981, that Rosenfeld got her start in market research. She had spent most of the previous decade at Cornell University completing an undergraduate degree in psychology, an MBA, and a PhD in marketing and statistics. Her thesis adviser, Vithala R. Rao, recalls that even though she was working and pregnant she was determined to finish her dissertation on how consumers make decisions about purchases. "She knew a PhD would give her an edge in the business world," says Rao. "And her husband was getting one. They were a little competitive."
When Rosenfeld presented her bosses at General Foods with research showing that Kool-Aid should be marketed directly to kids, the pitch won her a job working on the brand full-time. It was an unexpected turn for a researcher. After a presentation at one of her first meetings with Grey Advertising, Rosenfeld was so excited that she applauded. Back then, junior employees were expected to stay silent. "We were all so shocked and amused by her reaction," says Carol Herman, who worked at Grey and remains a close friend of Rosenfeld's.
As Rosenfeld came up through the ranks at General Foods and Kraft-eventually overseeing the Nabisco integration and serving as president of Kraft North America-she developed a reputation as a tough and insistent boss. She would call people with ideas, however big or small, late into the night. Conversations about kids turned into discussions about Kraft products. "I can't tell you how many midnight talks we had about Minute Rice and Stove Top stuffing," says Herman, who worked on various accounts for Kraft through the 1990s. Says James M. Kilts, a former Kraft president who later ran Gillette, "Irene didn't need a lot of advice. That's why I liked her. She was giving me the right answers." Yet her intensity and self-confidence didn't always endear her to colleagues. One former executive recalls a time when Rosenfeld provided helpful insight into a business she had once managed. When the executive offered to return the favor, Rosenfeld took a pass.
In 2001 Rosenfeld suffered her first big professional setback when a contemporary, Betsy D. Holden, was appointed co-chief executive alongside Roger Deromedi. Rosenfeld stayed on almost two more years, then left to join Frito-Lay, a Kraft rival more global in its outlook and more local in its decision making. "Irene thought about the marketing agenda and innovation much more aggressively" than the company was used to, says Indra Nooyi, the CEO of PepsiCo, which owns Frito-Lay. "She was fearless in what she did."
"Rewire for Growth"
Rosenfeld gave every impression that she was committed to Frito-Lay for the long term. But when Kraft asked her to return as CEO in June 2006, she jumped. The dual leader experiment had failed; Kraft was faltering amid high commodity prices, increasing competition from private labels, and a misplaced focus on cost-cutting. She told Kraft's nearly 100,000 employees that the company had lost its heart and soul and needed to "rewire for growth." In a speech at Cornell in 2007, Rosenfeld described her return to Kraft. "The staff was tired, raw, disillusioned," she told the audience. "My slogan was, 'let's get growing.' It's not a warm and fuzzy strategy." She replaced half of her executive team and half of those in the next two levels down. She reorganized the structure of the company, changed how people receive their bonuses, and told everyone "to stop apologizing for our categories and make them more relevant." She concluded her talk, "Sometimes I lie awake thinking, 'Should we?' And then I think, 'How can we not?'"
Rosenfeld wasn't alone in wanting change-activist investor Nelson Peltz was demanding it. She learned that engagement and conciliation were the best ways to handle powerful dissenters. When Peltz pushed her to sell some brands, she did, unloading Veryfine fruit juice and Post cereals. And when she asked him not to purchase more than 10% of the company, he agreed.
Peltz was also a big investor in Cadbury Schweppes, and he persuaded the British food giant to sell its soft drink division in 2008 and become purely a candy company. That would set the stage for Rosenfeld's eventual hostile takeover bid and provide Cadbury its philosophical defense: It didn't want to lose focus on its core business by becoming part of a conglomerate.
As the Great Recession took hold, Kraft should have thrived. But even though consumers ate at home more often and ingredient prices fell, the company was forced to cut prices to compete with private label products. Kraft stock, which went public at $31 a share in 2001, fell as low as $21 last March. (It has been hovering at about $29 this year.) The company introduced items such as Bagelfuls, bagels stuffed with Philadelphia cream cheese. The products did well, but not well enough to have a major impact. Rosenfeld also devoted considerable resources to creating premium toppings for Kraft's DiGiorno frozen pizza and frequently pointed to the brand's success.
With the recession abating, Rosenfeld started thinking of ways to transform the company. "She wanted to capture the imagination of the world about what Kraft could be," says Shelly Lazarus, chairperson of ad agency Ogilvy Mather Worldwide, which works with Kraft. Rosenfeld began studying the possibility of buying Cadbury, which sells Trident gum and chocolate in 60 countries and has sales of about $8 billion. It's a fast-growing global business with high profit margins.
Eventually she fixed on a price, and in early August decided to approach Cadbury Chairman Roger Carr with an offer. On August 28 she met with Carr in London to lay out her plan. "She was brisk, efficient, delivered her proposal and left quite quickly," says Carr. The two haven't spoken since, he says.
They have, however, exchanged a few letters. In the first, which Carr sent to Rosenfeld the next week, he called the offer "derisory." Then on Labor Day, Rosenfeld announced Kraft's bid in a news release on the corporate Web site, hoping to win over shareholders directly. She spoke to several British newspapers about her admiration for Cadbury and the great promise of a merger. In a video interview posted on the Kraft site, she expressed her enthusiasm for Cadbury's products in a way only a marketer could appreciate: "I am a heavy, heavy user of Trident gum and, on a seasonal basis, I love those Cadbury eggs." But after receiving no encouragement from the candy maker, Rosenfeld launched a hostile bid on November 9. "We believe that our proposal offers the best immediate and long-term value for Cadbury's shareholders and for the company itself compared with any other option currently available, including Cadbury remaining independent," she wrote in the formal offer.
Meanwhile Rosenfeld was juggling another deal that would determine how much Kraft could spend for Cadbury. In early 2009 Nestlé made a surprise offer to buy DiGiorno and the rest of Kraft's pizza business. Rosenfeld concluded that selling the unit made sense: Frozen pizza wouldn't do well outside of North America, and within the company it was an isolated brand. Next she had to persuade the board. "It was a difficult decision. But once we got our heads around the strategic and financial rationale for the deal, it became clear," says Perry Yeatman, a Kraft spokes-woman. Closing the sale proved difficult; it wasn't until January 5 that Kraft announced it would sell the pizza business to Nestlé for $3.7 billion. Some investors thought the price was too low. But the deal would give Rosenfeld the cash she'd need to pursue Cadbury. And there was another benefit: Nestlé, Kraft's main rival for Cadbury, said it wouldn't bid.
Whatever sense of relief Rosenfeld might have felt didn't last long. On the same day, Buffett went public with his concerns, calling Rosenfeld's proposal to issue more shares a "blank check." He noted that while the company had bought back shares at a price of $33 apiece in 2007, it would be selling the new shares for the Cadbury transaction for far less. He did say, though, that he would support an offer that "does not destroy value for Kraft shareholders." Other investors share Buffett's skepticism. "What is she wasting our money for?" asks John Kornitzer, founder of Kornitzer Capital Management in Shawnee Mission, Kansas. "To chase after these guys is ridiculous." Alice Schroeder, a former Wall Street analyst and author of a biography of Buffett who also writes a column for Bloomberg News, says even if Rosenfeld had consulted with Buffett it might serve his purposes to take a public stand. He can take credit for reining her in and defending shareholders. "No matter how this turns out, Warren looks great," she says.
Rosenfeld, however, is under attack from all sides. On January 12 Carr released a stinging "defense document" on Cadbury's Web site, saying "the bid is even more unattractive today than it was when Kraft made its formal offer." Kraft called the argument "underwhelming." Carr responds, "I think the clarity with which we reviewed Kraft's own record must have been disturbing for them and illuminating for our shareholders."
Kraft shareholders will vote on whether to issue more stock on February 1; the next day Cadbury stockholders will vote on the offer. Rosenfeld spent January 12 with Cadbury investors in the United States before jetting to London to talk with Cadbury shareholders there. Some refused her visit, says Carr. While Rosenfeld remains determined to make Kraft bigger and more global, finding a price for Cadbury that works for everyone might be impossible. "Rosenfeld has made it clear that she's disciplined, that she won't overpay," says Donald Yacktman, president of Yacktman Asset Management, a longtime investor. "I guess we'll find out how much she really means what she says."
What behaviors does Rosenfeld appear to engage in?

Question 28

For your current job or for a future job that you expect to hold, describe what your supervisor could do to strongly motivate you to be a top performer.