The Issue: A.G. Lafley's Judgment Call

A.G. Lafley, Chairman and CEO of Procter&Gamble, skipped over 78 general managers with more seniority in making a key staff appointment without even consulting the rest of his management team. Lafley says “there was almost a revolt” over his decision. What could Lafley do to win back the support of his team and engage them in a process that was just about completed?

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A.G. Lafley A.G. Lafley became chairman and CEO of Procter & Gamble Co. (PG) in June, 2000, with a mandate to quiet things down. He took over the consumer products giant when Durk I. Jager was pressured to resign after a tumultuous 17-month stint. At P&G, the thinking was that Jager had pushed too hard, too fast, to rip apart the insular culture and remake the company from the bottom up. The troops rebelled, and Jager found himself out of a job. Lafley, a 23-year P&G veteran, was being asked to restore equilibrium.

The soft-spoken executive was in San Francisco on June 6, 2000, celebrating his 30th wedding anniversary when he got the call from a key board member. Back at P&G headquarters in Cincinnati, a boardroom coup unprecedented in the company's history had taken place. Lafley jumped at the chance. He never hid the fact that he wanted to run P&G one day. Or if not the company, then a company. The idea of going elsewhere was almost anathema, as like almost all P&Gers, Lafley has never worked anywhere else. After graduating from Hamilton College in 1969, he pursued a doctorate in medieval and Renaissance history at the University of Virginia. But he dropped out in this first year to join the Navy. He served in Japan, where he got his first experience as a merchandiser, supplying Navy retail stores. When his tour of duty ended in 1975, he enrolled in the MBA program at Harvard Business School. And from there, he went directly to P&G.

When he was hired as a brand assistant for Joy dish detergent in 1977 at age 29, he was older than most of his colleagues, and he worried that his late start might hinder his career. Twice within a year in the early 1980s, Lafley quit. “Each time, I talked him back only after drinking vast amounts of Drambuie,” says Thomas A. Moore, his boss at the time. On the second occasion, then-CEO John Smale met with Lafley. Without making any promises, Smale says he told Lafley that “we thought there was no limit on where he was going to go.”

Sure enough, Lafley climbed quickly to head P&G's soap and detergent business, where he introduced Liquid Tide in 1984. A decade later, he was promoted to head the Asian division. In 1998, Lafley returned to Cincinnati to run P&G's North American operations.

Along the way, he developed a reputation as a boss who gave his staff plenty of responsibility and helped shape decisions by asking a series of keen questions—a process he calls “peeling the union.” And he retained a certain humility. “People wanted him to succeed,” says Virginia Lee, a former P&Ger who worked for Lafley.

So it was especially shocking to his senior management team when early in his tenure as CEO he skipped over 78 general managers to name Deborah A.Henretta the new head of P&G’s then-troubled North American baby-care division. Even more surprising, Lafley chose Henretta without even consulting his top executive team. Lafley determined that P&G was “technically competent in baby care” but that “our problem was on the consumer and market side.” The business needed a new strategy; one that would be formulated and implemented by a transformational leader, recruited from outside the division. “I wanted someone who had not spent a minute in baby care to go in,” he said. “I wanted a good leader, and an outstanding consumerist and brand person.”

Rather than mobilize a search team, Lafley and Dick Antoine, head of HR, assembled a list of candidates, with Henretta at the top. In making the decision without the help of his top team members, Lafley lost the chance to get them aligned behind Henretta, who would need their cooperation. Lafley wasn't sensitive to either the politics involved or the feelings of the senior executives who had their own candidates to put forward.

Lafley informed his key colleagues of the decision early in the day. By 3 p.m., “the revolt was well underway.” Realizing that he had made a mistake, he called the team together and asked each of them to explain why his or her candidate was a better choice than Deb.