P&G’s new, old boss has the skills P&G needs to face its demons

Procter & Gamble’s new, old boss, A.G. Lafley has a reputation for focusing on innovation and putting the consumer first. P&G will be hoping that with his skills and experience, Lafley will be able to work his magic again as it battles shrinking market share and sluggish growth.

PG

Timings wise it’s a surprise move, but investors have been calling for change for more than a year. On an analysts call a year ago, investors rounded on McDonald for not delivering in his capacity as CEO reporting lacklustre sales and profit gains at P&G compared with rivals in the FMCG space.

McDonald had become a victim of the cult of CEO personality. Where the success of businesses such as Apple are intertwined with the personality of the CEO Steve Jobs, when investors turn against the CEO as they did on McDonald it can start to cloud the business.

Compared with Unilever’s Paul Polman, who himself spent 27 years at P&G before joining its rival the same year McDonald took the helm at P&G, who is almost universally seen as an inspirational powerhouse of a leader – McDonald struggled to get Wall Street on side which is a significant barrier to progress.

Forbes’ contributor Steve Denning wrote an interesting blog in January about the reversal of perceptions of P&G and Unilever amongst analysts in recent years. He discussed how five years ago P&G was seen as the dominant force in the market and Unilever the poor sibling, but that now it’s the other way around.

Lafley’s time as CEO between 2000 and 2009, however is seen as a time of strength for P&G. He presided over it reaching its all time high share price and is lauded for being one of the all time great CEOs.

Back then was parachuted into the role to clean up the mess left behind by his own predecessor Durk Jager. Jager’s 18-month stint as CEO was seen by many as turbulent and resulted in P&G share price dropping 50 per cent in just six months.

Lafley stepped into the mix, soothed Wall Street and turned around the company. His focus was on premium products, innovation and putting the consumer first – a combination that is exactly what P&G needs to be focusing on now.

His philosophy was to move away from commoditisation and selling low-grade FMCG products by focusing on premium products that really stood apart from anything other firms could produce so the company benefited from better profit margins.

Lafley seems to be planning to stick to the strategic direction set out by McDonald a year ago. The $10bn cost cutting and efficiency drive included plans to make $1bn of efficiency savings in marketing spend. McDonald also outlined plans to triple the rate of innovation and focus on bigger, more game changing innovations to boost productivity and profit.

While his intention appears to be to build on this strategy it would be surprising if he didn’t make some changes to the management team or the way the strategy is to be executed. Under McDonald’s efficiency drives, P&G reported culled more than 6,000 marketers globally.

Since his own background is in marketing and brand management, it’s not too far a stretch to assume Lafley might take steps to reverse that decision.

A.G. Lafley’s full memo to P&G staff:

Dear P&Gers,

Today I am rejoining P&G. I’m looking forward to working with all of you again, to do what we do best and what matters most — win with consumers.
I want to thank Bob McDonald for his 33 years of service to the Company, and for his leadership. I’ve known Bob his entire career, and he has real passion for doing what is right and for improving the lives of consumers around the world.

I also want to thank P&Gers for the work you’re doing to win with consumers. I want to assure you that we will build on the business momentum behind the current growth strategies:

Strengthening core developed market business.
Maintaining strong developing market momentum.
Building and leveraging a strong innovation pipeline.
Driving cost savings and productivity improvements.

I will be getting up to speed on the business in the next several weeks. In the meantime, here are a few of my core beliefs:

The consumer is boss — at the heart of everything we do.
We create and build brands that improve consumers’ lives.
Innovation is our lifeblood.

Every P&Ger is an owner and a leader — we are one team, with one dream, collaborating internally and competing externally.

I look forward to working with you in the days and weeks ahead.
Best,
A.G.

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