P&G's New CEO: Business As Usual

Posted by: Roger Crockett on June 10, 2009

McDonald_Bob_large.jpg Okay, it’s finally official. Procter & Gamble confirmed today that renowned chief executive A.G. Lafley will pass the baton to current COO Robert A. McDonald. McDonald takes over July 1, the beginning of Procter’s new fiscal year. In a highly structured, sub-30-minute conference call with Wall Street analysts, Lafley said, “We’re obviously in the midst of a challenging economic environment, but we still believe this is the right time for a well-planned and well-disciplined management transition.”

Well, A.G., it’s not perfectly clear that investors agree. P&G shares were down about 20 cents in midday trading. That’s no avalanche, but it suggests the outside world looks at this succession a bit differently than the Procter board and even most employees.

Outsiders view Lafley as an icon. As management gurus such as Warren G. Bennis have suggested, if there were a mountain with the busts of CEOs carved into it, Lafley would be there alongside Jack Welch, Bill Gates and Henry Ford. For onlookers, there’s little comfort in swallowing Lafley’s move.

Inside P&G, on the other hand, this is business as usual. Lafley is respected and admired for his outstanding stewardship of the company, but he’s largely viewed as one of the team, not some untouchable. “Inside P&G he’s just A.G.,” a relaxed leader who rarely wears a tie in the office and who is known to hold meetings in his house, says John Lilly, a private equity deal consultant who worked at P&G for 22 years before leaving in 1997. “This is not an organization that tends to get caught up in its own system,” Lilly adds.

During the conference call, Lafley reminded listeners that this transition has been systematic, by the book—like dozens of CEO handoffs the company has done in years past. When Lafley was named chief in 2000, former star CEO John Pepper remained as chairman until 2002, when Lafley assumed the role. By one estimate there have been separate chair and chief executive roles during the transition of six of the last nine (non-family) CEOs at P&G. So like Pepper before him, look for Lafley to serve as chairman for two years, or as he jokes, “as long as the board and Bob can tolerate me.”

As for McDonald, he’s already pretty comfortable in his own shoes. I’ve met with the man, and frankly, he seemed rather CEO-ish even before today. Remember, he’s been “training” for this job for years. And as co-architect of P&G’s current strategy, the workforce is intimately familiar with him. So this year and next will be years of “continuity… with change,” he told investors. Faced with this historic recession, McDonald’s challenge is huge. But like a true Proctoid, don’t think he’ll stray far from the script—except for focusing a bit more on emerging markets and simplifying the organization’s structure to be more nimble. In his mind, that is what it will take to “reach a billion more of [the world’s 6.8 billion] consumers in the decade ahead,” McDonald says. Let the new era begin.

Reader Comments

Warren

October 7, 2009 11:30 AM

A.G. Lafley is indeed considered by outsiders as somewhat of an icon. He has done a lot for the company and it did not surprise me that there was a fluctuation in stock prices as a result of the change in leadership.

Investment Advisor Toronto

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