What Does A.G. Lafley’s Return Mean for P&G and Its Retail Partners?

Discussion
May 29, 2013

Procter & Gamble is the latest company to go the "Meet the new boss, Same as the old boss" route as it announced last week it was bringing back former CEO A.G. Lafley to run the company following the resignation of Bob McDonald.

Mr. McDonald wrote a letter to P&G employees explaining that he decided to step down to remove "distractions" caused by ongoing criticism of the company’s performance during his tenure along with speculation about his job security.

Some shareholders, most notably Bill Ackman of Pershing Square Capital Management, have expressed unhappiness with P&G’s performance. In an interview with CNBC last October, Mr. Ackman said the consumer products giant had "stumbled" under Mr. McDonald.

Mr. Lafley returns to P&G as its chairman, president and CEO. He held the CEO job from 2000 to 2009. Interestingly, despite criticism of Mr. McDonald, Mr. Lafley wrote a letter to employees claiming the company would "build on the business momentum behind the current growth strategies."

There’s no doubt that Mr. Lafley faces numerous challenges as he takes over. The company has lost share in key categories as consumers have engaged in trading down to mid-tier and value-priced brands. P&G has been criticized for focusing on line extensions of core brands rather than true innovation. A Bloomberg News report pointed out that P&G hasn’t had a $1 billion new launch since Swiffer hit the market ten years ago.

Under Mr. McDonald, P&G has been engaged in cutting $10 billion in costs. Mr. Ackman referred to P&G’s corporate structure as "very fat and very bloated" when he spoke with CNBC last year.

What do you see as the key challenges and opportunities for Procter & Gamble as A.G. Lafley begins his second go-around as CEO? What will Mr. Lafley’s return mean for P&G, its rivals and retail trade partners?

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11 Comments on "What Does A.G. Lafley’s Return Mean for P&G and Its Retail Partners?"


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Dave Wendland
Guest
8 years 11 months ago

Challenges? Regaining P&G’s powerful foothold in the market and igniting confidence among employees, trade partners, and consumers.

Opportunities? I’m partial to the healthcare side of P&G’s business and see tremendous upside potential.

Welcome back, Mr. Lafley!

Ian Percy
Guest
8 years 11 months ago

Don’t know much about P&G or Lafley. But I do know a little about leadership. This situation doesn’t seem to have much energy around it, more desperation. Running back to what you know cannot take you into the future—and it certainly won’t lead to innovation. Looks like P&G is stuck in “solving problems” when it should be “seeing possibilities.”

Dr. Peter Robertson, IMHO, has the wisest insights into leadership and I recommend his book, titled “Always Change a Winning Team.” Among many points he describes the kind of leader needed at each stage of the organization’s life cycle. We’ve all seen that the leader who births the enterprise is rarely the one to build it. The leader who helped mature the enterprise is rarely the one to transform it. And so on.

The mistake we make, Robertson says, is that we hire for the life cycle stage we’re in…instead of the one ahead. When you hire into the stage behind you, you’re in deep trouble.

Ryan Mathews
Guest
8 years 11 months ago
First of all A.G. is a Lee Iacocca-like figure, human oil on the troubled corporate waters. His return will most importantly assure the troops—and the investors—that calm order has been restored. Next he is an expert in picking up the pieces of past administrations. I continue to think that Durk Jager was the pivotal figure in P&G’s transformation, but he was also a polarizing leader. A.G. followed him and suddenly all the change associated with Durk seemed perfectly rational and non-threatening. A.G. is also a past master of deviating from the P&G culture without destroying it. He is seen as an innovator who is not afraid to go outside the company for a better idea if that’s where it lives. He has a relaxed management style which ought to play well inside and outside the corporate offices. The opportunities are obvious but the challenges are profound. P&G has often erred in its efforts to anticipate the American and global zeitgeist, letting its vision of alpha brands cloud its perception of beta markets. The world has… Read more »
Gordon Arnold
Guest
8 years 11 months ago
Procter & Gamble is suffering from what many other big 20th century companies are failing to do. It is and has been for over a decade necessary to effectively move into the 21st century world economy via digital age methods. Additionally, management skills for operating in a hostile economy while moving into these new markets is of at least equal importance. Slashing the costs of goods and services by eliminating “very fat and bloated” operations costs is typical of what today’s business gurus are capable of planning and executing. These narrow minded plans and drastic executions usually kill not just outmoded jobs they kill loyal and talented employee careers and the company as well. The task at hand is finding a way to increase sales throughout the world and not just the lower 48. Retail executives taking this challenge head on and winning find even more resentment than do the failures we see here. Apple corporation is a good example of an American company continuing to stumble in both the market and press here in… Read more »
Al McClain
Guest
Al McClain
8 years 11 months ago

A.G. Lafley has a well deserved stellar reputation, but the world has changed since “the first moment of truth.” The internet and mobile have changed those moments, and brand loyalty has eroded, as consumers have realized that store brands are often equivalent or even better than big brands. Meanwhile, P&G has launched line extensions such as Head & Shoulders with Old Spice, which I thought was a joke when I first saw it. Hopefully, A.G. can get the company back to bigger ideas than combining a dandruff shampoo with a low-end scent.

Zel Bianco
Guest
8 years 11 months ago

P&G has the opportunity to grow categories, which is what every retailer is looking for right now. Now running $10 billion dollars leaner, there’s great opportunity to enhance their categories by expanding their reach into to mid-tier and value-priced brands, which as the articles note is a key market for consumers. The challenge will be to revert an almost 200 year old company to think more categorically instead of being primarily brand focused. As generations become more savvy and less brand-loyal, adaptation is key to survival and growth.

Gene Hoffman
Guest
Gene Hoffman
8 years 11 months ago

P&G’s five biggest challenges are: 1) to prepare an internal executive to become the next P&G CEO after this second “Lafley Fix;” 2) to stop erosion of market share in some of its key brands; 3) to quickly create its next billion dollar brand; 4) stop concentrating of cost reduction and resume P&G’s great, but currently less potent, innovative product development and marketing skills; and 5) work cohesively as possible to eliminate any real or perceived distractions caused by Bill Ackman … even if he might be correct. And how will P&G do those things?

P&G has had a “hit and miss” type of CEO progression. This reflects upon its board. In 2000, A.G. Lafley was brought into Cincinnati to provide mission clarity and give vibrant leadership to the diverse P&G environment that covers many frequently used product categories throughout the world … and he did. And once again that’s exactly what P&G needs today.

Let’s hope AG’s retirement since 2009 hasn’t dulled his skill in winning with vision and integrity.

Roger Saunders
Guest
8 years 11 months ago
Pogo said it so very well, “We have met the enemy, and he is us.” P&G has great brands, great people, and a broad customer base. In that regard, they begin with a favorable position. Lafley will have to help P&G cut through their own bureaucracy. That will need to: Make people accountable, and let them make decisions, as opposed to management by committee. Provide associates (and subsequently through to their retail customers), the technology tools to deal with “Big Data.” McDonald told the company that they had to move to a digital workplace within 5 years—he forgot to tell them how. Resurrect Lafley’s early calls to Innovation in all areas of the business—product, operations, channel development, etc. Make some people changes to whomever are protecting the bureaucracy — that’s a challenge P&G cannot achieve stronger profitability merely by cutting expenses. They have to shift those expenses to more productive tools. Find the new CEO either from within the ranks of P&G, or outside, within the next 12 months—this is the highest priority. P&G will… Read more »
Stephen Bosch
Guest
Stephen Bosch
8 years 11 months ago

A.G. Lafley has proven that he is one of the most talented corporate leaders of his generation. There is no doubt that he has already put together key action plans. I’m sure he will focus on innovation (in process, product and consumer interception.) It will be very interesting to watch how he evolves the business to address ever-shifting consumer lifestyles, need-states, and paths to purchase.

Janet Dorenkott
Guest
Janet Dorenkott
8 years 11 months ago

A.G. Lafley is a strong leader and visionary. That said, McDonald came on as company leader during a very sluggish economy. Let’s face it, 2009 to the beginning of 2013 has been difficult for most companies. Cost cutting has also been required during this time by most large companies. Lafley comes back during a time when the economy is improving and costs have been cut by $10 billion. Add his leadership skills to the mix, and it’s hard to see how P&G can fail.

Kai Clarke
Guest
8 years 11 months ago

Layers of management, political positioning and excess corporate fat are a key issue in the P&G turnaround. Add to this: new product introductions, value product positioning, and products which better represent consumer needs (rather than P&G wants). These are critical components to a successful company.

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