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Things Don't Always Go Better with Coke

Newsletter • volume 5 • number 1

Hiring flawed candidates with the expectation that they will improve once they are on the job can be a big mistake. For proof of this, consider Coca-Cola, one of the great high flyers of the 90s. Although Coke had a 50 percent share of the world soft-drink market in 1997, the company found itself in deep trouble after the death of its highly respected chairman, Roberto Goizueta.

Mr. Goizueta was replaced by his second-in-command, Douglas Ivester, an astute financial strategist who was responsible for much of Coke's success. Unfortunately, although he excelled under Goizueta, Ivester seemed to make nothing but mistakes when he became chairman.

Individually, none of Ivester's missteps was egregious, but taken together they revealed a man who lacked insight, judgment, and tact. Among other things, Ivester unwisely and insensitively demoted the chief of Coke's Africa division, bungled the 1999 Belgium contamination scare, alienated the entire European Union with his ill-advised attempts to buy European companies, and triggered a public relations nightmare by going public with his plan for Coke machines that would charge more for sodas in hot weather.

In December 1999, Ivester announced he was stepping down after only 2 years at the helm. Coke's directors were understandably relieved. Yet they had been among Ivester's biggest boosters just a few years earlier when they selected him as the company's new CEO in a record 15 minutes. At the time, even Warren Buffett, whose Berkshire Hathaway is Coke's biggest shareholder, also expressed "nothing but confidence" in him.

Even Ivester's fans knew that he was "rough around the edges," that he often came off as ruthless, and that he lacked Mr. Goizueta's diplomacy and refinement. Company insiders assumed he would "grow into the more statesman-like role of chairman."

The point is, people seldom change significantly. This means interviewers need to be very clear about what they are looking for in a candidate, and should never assume that a problematic candidate will change once they are in the new job.

Ivester's only mistake was to remain the person he had always been.