P&G: New and Improved
How A.G. Lafley is revolutionizing a bastion of corporate conservatism
By: Robert Berner
July 7, 2003
It's Mother's Day, and Alan G. "A.G." Lafley, chief executive of Procter & Gamble Co., is meeting with the person he shares time with every Sunday evening -- Richard L. Antoine, the company's head of human resources. Lafley doesn't invite the chief financial officer of the $43 billion business, nor does he ask the executive in charge of marketing at the world's largest consumer-products company. He doesn't invite friends over to watch The Sopranos, either. No, on most Sunday nights it's just Lafley, Antoine, and stacks of reports on the performance of the company's 200 most senior executives. This is the boss's signature gesture. It shows his determination to nurture talent and serves notice that little escapes his attention. If you worked for P&G, you would have to be both impressed and slightly intimidated by that kind of diligence.
On this May evening, the two executives sit at the dining-room table in Antoine's Cincinnati home hashing over the work of a manager who distinguished himself on one major assignment but hasn't quite lived up to that since. "We need to get him in a position where we can stretch him," Lafley says. Then he rises from his chair and stands next to Antoine to peer more closely at a spreadsheet detailing P&G's seven management layers. Lafley points to one group while tapping an empty water bottle against his leg. "It's not being felt strongly enough in the middle of the company," he says in his slightly high-pitched voice. "They don't feel the hot breath of the consumer."
If they don't feel it yet, they will. Lafley, who took over when Durk I. Jager was pressured to resign in June, 2000, is in the midst of engineering a remarkable turnaround. The first thing Lafley told his managers when he took the job was just what they wanted to hear: Focus on what you do well -- selling the company's major brands such as Tide, Pampers, and Crest -- instead of trying to develop the next big thing.
Now, those old reliable products have gained so much market share that they are again the envy of the industry. So is the company's stock price, which has climbed 58%, to $92 a share, since Lafley started, while the Standard & Poor's 500-stock index has declined 32%. Banc of America analyst William H. Steele forecasts that P&G's profits for its current fiscal year, which ended June 30, will rise by 13%, to $5.57 billion, on an 8% increase in sales, to $43.23 billion. That exceeds most rivals'. Volume growth has averaged 7% over the past six quarters, excluding acquisitions, well above Lafley's goal and the industry average.
The conventional thinking is that the soft-spoken Lafley was exactly the antidote P&G needed after Jager. After all, Jager had charged into office determined to rip apart P&G's insular culture and remake it from the bottom up. Instead of pushing P&G to excel, however, the torrent of proclamations and initiatives during Jager's 17-month reign nearly brought the venerable company to a grinding halt.
Enter Lafley. A 23-year P&G veteran, he wasn't supposed to bring fundamental change; he was asked simply to restore the company's equilibrium. In fact, he came in warning that Jager had tried to implement too many changes too quickly (which Jager readily admits now). Since then, the mild-mannered 56-year-old chief executive has worked to revive both urgency and hope: urgency because, in the previous 15 years, P&G had developed exactly one successful new brand, the Swiffer dust mop; and hope because, after Jager, employees needed reassurance that the old ways still had value. Clearly, Lafley has undone the damage at P&G.
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